KluwerArbitration

Document information
Preface
Publication Preface
International Commercial This book aspires to provide a comprehensive study of contemporary international commercial
Arbitration: Commentary and arbitration. It focuses on the law and practice of international arbitration in the world's
Materials (Second Edition) leading arbitral centers, with especial emphasis on Europe and North America.
Why does one write about or study international commercial arbitration? Arbitration is an
Bibliographic reference important means of resolving transnational disputes, which warrants attention if nothing else
because of its contemporary and increasing practical significance. Nonetheless, arbitration is
'Preface', in Gary B. Born , not in any sense the dominant mechanism for international dispute resolution. Negotiations
International Commercial and litigation in national courts continue to be used to resolve vastly more international
Arbitration: Commentary and disputes than is arbitration.
Materials (Second Edition),
2nd edition (© Kluwer Law Nevertheless, international arbitration merits particular scholarly interest because it
International; Kluwer Law illustrates the complexities of contemporary international society and provides a leading
International 2001) pp. xxi - example of a sophisticated mechanism for consensually dealing with those complexities.
xxii Beyond its practical importance, international arbitration is worthy of attention because it
involves a framework of international rules and institutions which – with remarkable success –
provide a fair, neutral, expert, durable, and efficient means for resolving difficult transnational
problems.
These rules have evolved over time, in multiple countries, through the joint efforts of public
and private actors. While the latter have supplied the driving and dominant force for the
successful development of international commercial arbitration, governments have
contributes materially by ensuring the recognition and enforceability of private agreements.
The resulting legal framework for international commercial arbitration has achieved
progressively greater practical success and acceptance in all regions of the world and virtually
all political quarters. The study of this example provides useful lessons for other fields of
international society and law.
International Commercial Arbitration is intended to meet the needs of both practitioners
(including external legal advisers as well as internal corporate and government lawyers) and
law school communities. Thus, it includes extensive commentary, which introduces and
explains the law and practice of international commercial arbitration. In addition, the book
P "XXI" includes excerpts of leading texts on international commercial arbitration, such as treaties,
P "XXII" legislation, arbitral awards, judicial decisions, and institutional arbitration rules, together
with questions and notes suitable for classroom instruction.
International Commercial Arbitration is divided into three Parts. Part I examines the
international arbitration agreement, which provides the legal and practical foundation for
almost all international arbitrations. Part II addresses the international arbitral process, which
are the heart of any commercial arbitration. Part III discusses international arbitral awards,
which are the ultimate test of any arbitral process.
Throughout all three Parts, the focus is on international standards and practices. Particular
attention is devoted to the United Nations Convention on Recognition and Enforcement of
Foreign Arbitral Awards (and to other multilateral and bilateral treaties dealing with
international arbitration). Almost equal attention is devoted to the UNCITRAL Model Law on
International Commercial Arbitration and other contemporary national arbitration legislation.
Finally, each Part also considers the role of various institutional arbitration rules and
frequently-adopted forms of arbitration agreements.
Like international commercial arbitration itself, this book is a work in progress. It is the second
edition of a work in a complex field, which is evolving in response to changing conditions. The
book inevitably will require correction, clarification, and, most importantly, further
development in future editions. Suggestions towards this end are welcomed.
I gratefully acknowledge the assistance of my colleagues, students, clients, and competitors,
rendered over the course of many years. Any list of acknowledgments would fail properly to
attribute the enormous credit due to those who have assisted. In particular, however, I
acknowledge the dedication, care, and ingenuity of Elke Jenner and Fransje de Jong-Kok, as well
as Sally Laichena, Omma Velada, Barbara Bozward, and the research of Joe Profaizer, Steve
Finizio, Wendy Miles, Rachael Kent, Gabrielle Nater-Bass, Susan Franck, Susie Williams, and
others. As always, John Berger provided invaluable editorial advice and unending supplies of
patience.
Gary Born
December 2000
P "XXII"
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Chapter 1. Introduction', in
Gary B. Born , International
Commercial Arbitration:
Commentary and Materials
(Second Edition), 2nd edition
(© Kluwer Law International;
Kluwer Law International
2001) pp. 1 - 52
P "1"
P "2"
P "2" peculiar uncertainties of transnational litigation. These uncertainties can include protracted
P "3" jurisdictional disputes, expensive parallel proceedings, and choice-of-law debates.
KluwerArbitration
Chapter 1. Introduction
1 Introduction
A. What Is International Arbitration?
International arbitration is a means by which international disputes can be definitively
resolved, pursuant to the parties' agreement, by independent, non-governmental decision-
makers. There are almost as many other definitions of international arbitration as there are
commentators on the subject. (1)
1. Defining Characteristics of Commercial Arbitration
Commercial arbitration is common in both international and domestic contexts. In each, it has
several defining characteristics. First, arbitration is generally consensual – in most cases, the
parties must agree to arbitrate their differences. Second, arbitrations are resolved by non-
governmental decision-makers – arbitrators do not act as state judges or government agents,
but are private persons ordinarily selected by the parties. Third, arbitration produces a
binding award, which is capable of enforcement through national courts – not a mediator's or
conciliator's non-binding recommendation. Finally, arbitration is comparatively flexible, as
contrasted to most court procedures.
In many circumstances, national law permits parties to agree upon the arbitral procedures
that will govern the resolution of their dispute. As a consequence, the procedural conduct of
arbitrations can vary dramatically across industrial sectors, (2) arbitral institutions, (3)
geographic regions, (4) and categories of disputes. In particular fields, or individual cases,
parties may agree upon procedural rules that are tailor-made for their individual needs.
Aside from specialized fields, commercial arbitration often bears broad resemblances to
commercial litigation in national courts: arbitration will frequently involve the submission of
written pleadings and legal argument (often by lawyers), the presentation of documentary
evidence and oral testimony, the application of “law” (in the form of judicial precedents and
statutes), and the rendition of a reasoned, binding award. Nevertheless, in practice, arbitral
procedures are usually less formal than litigation, particularly on issues such as pleadings and
evidence. (5) Arbitration often lacks various characteristics that are common in national court
litigation, including broad discovery, summary disposition procedures, and appellate review.
In smaller matters, domestic arbitrations are frequently conducted without the participation
of legal advisers, before a lay-arbitrator, according to highly informal procedures.
2. Special Characteristics of International Commercial Arbitration
International commercial arbitration is similar in important respects to domestic arbitration.
As in domestic matters, international arbitration is a consensual means of dispute resolution,
by a non-governmental decision-maker, that produces a legally-binding and enforceable
ruling. In addition, however, international arbitration has several characteristics that
distinguish it from domestic arbitration.
Most importantly, international arbitration is designed and accepted particularly to assure
parties from different jurisdictions that their disputes will be resolved neutrally. Among other
things, the parties usually seek an independent decision-maker, detached from the courts,
governmental institutions, and cultural biases of either party. They also ordinarily contemplate
the arbitrator's application of internationally-neutral procedural rules, rather than a particular
national legal regime.
In addition, international arbitration is frequently regarded as a means of mitigating the
International arbitration seeks to avoid these uncertainties by designating a single, exclusive
dispute resolution mechanism for settling the parties' disagreements. Moreover, international
arbitration awards are often more readily enforceable in jurisdictions other than their place of
origin than national court judgments. (6)
3. Legal Framework for International Commercial Arbitration
Although international arbitration is a consensual means of dispute resolution, it has binding
effect only by virtue of a complex framework of national and international law. As we discuss
below, international conventions, national arbitration legislation, and institutional arbitration
rules provide a specialized legal regime for most international arbitrations. This legal regime
enhances the enforceability of both arbitration agreements and arbitral awards, and seeks to
insulate the arbitral process from interference by national courts or other governmental
authorities.
On the most universal level, the United Nations Convention on Recognition and Enforcement of
Foreign Arbitral Awards (the “New York Convention”) has been ratified by more than 120
 nations, including all significant trading states and most major developing states. The
Convention obliges member states to recognize and enforce both international commercial
arbitration agreements and awards, subject to limited exceptions. (7) Other international
conventions impose comparable obligations on member states with respect to particular
categories of disputes or with respect to particular bilateral or regional relationships. (8)
In addition, most developed trading states (and many other countries) have enacted national
arbitration legislation that provides for the enforcement of international arbitration
agreements and awards, that limits judicial interference in the arbitration process, and that
P "3" authorises specified judicial support for the arbitral process. (9) National arbitration
P "4" legislation typically affirms the capacity of parties to enter into valid and binding
agreements to arbitrate future commercial disputes, provides mechanisms for the
enforcement of such arbitration agreements (through orders to stay litigation or (less
frequently) to compel arbitration), and requires the recognition and enforcement of arbitration
awards. (10) In addition, most modern arbitration legislation narrowly limits the power of
national courts to interfere in the arbitration process, either when arbitral proceedings are
pending or in reviewing ultimate arbitration awards. (11) In many cases, national arbitration
statutes also authorize limited judicial assistance to the arbitral process. This assistance can
include selecting arbitrators or arbitral situses, enforcing a tribunal's orders with respect to
evidence-taking or discovery, and granting provisional relief in aid of arbitration. (12)
In recent years, there have been a number of efforts to harmonize national laws relating to
international arbitration. The UNCITRAL Model Law on International Commercial Arbitration is
the leading example. (13) About twenty nations (not including the United States) have adopted
the Model Law to date, and others are considering it. Similarly, national and international bar
associations have produced rules or codes of conduct dealing with various arbitration-related
subjects, such as evidence-taking in arbitration, organizing arbitral proceedings, and the ethics
of arbitrators. (14)
4. Institutional Arbitration Rules
International commercial arbitration frequently occurs pursuant to institutional arbitration
rules, which are often incorporated by reference into parties' arbitration agreements. The
leading international arbitration institutions include the International Chamber of Commerce,
the London Court of International Arbitration, and the American Arbitration Association, each
of which has adopted its own set of rules governing the procedural aspects of arbitration. (15)
P "4" These institutions, as well as another several dozen or so less widely-known bodies, supervise
P "5" international arbitrations when parties agree to dispute resolution under their auspices. In
addition, the UNCITRAL Commercial Arbitration Rules are widely used in so-called ad hoc (or
non-institutional) arbitrations. (16)
5. International Arbitration Agreements
International commercial arbitration is almost always consensual: (17) arbitration generally
occurs only pursuant to an arbitration agreement between the parties. (18) Most arbitration
agreements are included as standard clauses in commercial contracts, which provide for the
arbitration of any dispute relating to the contract that may arise in the future between the
parties. It is also possible, although much less common, for parties to an existing dispute to
agree to settle that disagreement through arbitration (even where no pre-existing arbitration
clause existed). (19)
International arbitration agreements can, and should, address a number of potentially
significant issues. (20) These include the situs of the arbitration, the applicable institutional or
other procedural rules, the method of selecting the arbitrators (or an appointing authority), the
number of arbitrators, the applicable substantive law, and the language of the arbitration. (21)
A carefully-drafted arbitration agreement can address these (and other) issues, and provide
the parties with a relatively efficient dispute resolution mechanism tailored to their particular
needs. A poorly-drafted arbitration agreement can plant the seeds for disputes over
jurisdiction and other matters, impose unworkable or undesirable procedures, and may be
unenforceable. (22)
6. Enforceability of International Arbitration Agreements
Disputes frequently arise over the validity and interpretation of international arbitration
agreements. Leading international arbitration conventions and national law provide for the
P "5" presumptive enforceability of arbitration agreements. Nonetheless, parties may resist
P "6" enforcement of an international arbitration agreement on both familiar contract law principles
and arbitration-specific grounds.
Among other things, the validity of arbitration agreements can ordinarily be challenged under
generally-applicable contract law principles for defects in formation, lack of capacity, fraud or
fraudulent inducement, unconscionability, illegality, and waiver. All of these grounds raise
both substantive issues (i.e., is a particular agreement unconscionable) and choice of law
questions (i.e., what law governs the issue of unconscionability). (23) Choice of law complexities
in international arbitration can, regrettably, have a labyrinthine aspect. (24)
The enforcement of international arbitration agreements may also be resisted on certain
arbitration-specific grounds. Most importantly, under virtually all national laws, certain
categories of disputes or claims are “non-arbitrable” – not capable of settlement by
arbitration (as opposed to litigation in national courts or before other governmental agencies).
(25) The categories of claims that are non-arbitrable vary from country to country, but generally
involve claims under statutory protections (e.g., competition or antitrust law, employee or
 consumer protections, security laws) or matters of public policy. The New York Convention and
other international arbitration conventions recognize and permit these non-arbitrability
exceptions, at least within limits. (26)
Institutional arbitration rules and national law in most developed jurisdictions (including the
United States) recognize the principle that arbitration agreements are “separable” from the
underlying contract in which they appear. (27) According to the so-called separability doctrine,
an arbitration agreement is presumptively distinct and independent from the parties'
underlying contract, and is supported by the separate consideration of the parties' exchange
of promises to arbitrate. As a consequence, challenges to the formation, validity, or legality of
the underlying contract generally do not affect the validity of the arbitration agreement. The
separability doctrine plays an important role in limiting the bases for challenging arbitration
agreements before both national courts and arbitral tribunals.
Finally, disputes over the formation, validity or scope of international arbitration agreements
present questions of competence and forum selection. Most developed national arbitration
statutes and institutional arbitration rules provide that, in certain circumstances and subject
to later judicial review, arbitrators may exercise the power to decide disputes over the
formation, validity or interpretation of arbitration agreements; this reflects the so-called
P "6" “competence-competence” or “Kompetenz-Kompetenz” doctrine. (28) Where disputes
P "7" concerning international arbitration agreements are not decided by arbitral tribunals,
questions arise as to which national court is competent to resolve such disputes. (29)

B. An Overview of the Advantages and Disadvantages of International Arbitration

The popularity of arbitration as a means for resolving international commercial disputes has
increased significantly over the past several decades. (30) This popularity reflects important
advantages of international arbitration as a means of resolving international commercial
disputes. Despite these advantages, however, international arbitration also has significant
shortcomings. These strengths and weaknesses are summarized below. (31)
First, international arbitration is often perceived as ensuring a genuinely neutral decision-
maker in disputes between parties from different countries. International disputes inevitably
involve the risk of litigation before a national court of one of the parties, which may be biased,
parochial, or unattractive for some other reason. Moreover, outside an unfortunately limited
number of industrialized nations, local court systems simply lack the competence, experience,
resources, and traditions of even-handedness satisfactorily to resolve many international
commercial disputes.
International arbitration offers a theoretically competent decision-maker satisfactory to the
parties, who is, in principle, independent of either party or any national or international
governmental authority. On the other hand, private arbitrators can have financial, personal, or
professional relations with one party (or its counsel). In the eyes of some observers, this poses
the risk of even greater partiality than the favoritism or parochialism of local courts. (32)
Second, a carefully-drafted arbitration clause generally permits the resolution of disputes
between the parties in a single forum pursuant to an agreement that most national courts are
bound by international treaty to enforce. This mitigates the expense and uncertainty of
multiple judicial proceedings in different national courts. (33)
P "7"
P "8"
On the other hand, incomplete or otherwise defective arbitration clauses can result in judicial
and arbitral proceedings where the scope or enforceability of the provision, as well as the
merits of the parties' dispute, must be litigated. Moreover, even well-drafted arbitration
agreements cannot entirely exclude the expense and delay of a litigant determined to
confound the arbitral process.
Third, arbitration agreements and arbitral awards are generally (but not always) more easily
and reliably enforced in foreign states than forum selection clauses or foreign court judgments.
(34) As described elsewhere, some 120 nations have acceded to the New York Convention,
which obliges contracting states to enforce arbitration agreements and awards (subject to
specified, limited exceptions). (35) In contrast, there are no world-wide treaties relating to
either forum selection agreements or judicial judgments. (36) The perceived ease of
enforceability of arbitral awards has contributed to fairly substantial voluntary compliance
with arbitral awards, although there is little empirical data comparing such compliance with
that applicable to judicial judgments.
In some developing and other countries, there has been a perception that international
commercial arbitration was developed by, and was biased in favor of, Western commercial
interests. (37) As a consequence, national law in many countries was historically hostile towards
international arbitration. (38) In some states, this remains the case today. Hostile or simply
archaic national law can therefore still pose significant obstacles to the effective enforcement
of international arbitration agreements and awards. In general, this hostility has waned
somewhat over the past decade, with many states acceding to the New York Convention and
enacting “pro-arbitration” legislation. (39)
P "8"
P "9" Fourth, arbitration tends to be procedurally less formal and rigid than litigation in national
courts. As a result, parties have greater freedom to agree on neutral and appropriate
procedural rules, set realistic timetables, select technically expert and neutral decision-
makers, involve corporate management in dispute-resolution, and the like. On the other hand,
the lack of a detailed procedural code or decision-maker with direct coercive authority may
permit party misconduct or create opportunities for an even greater range of procedural
 disputes between the parties. (40)
Fifth, international arbitration typically involves less extensive discovery than is common in
litigation in some national courts (particularly common law jurisdictions). This is generally
attractive to international businesses because of the attendant reduction in expense, delay,
and disclosure of business secrets.
Sixth, international arbitration is usually more confidential than judicial proceedings – as to
submissions, evidentiary hearings, and final awards. (41) This protects business and
commercial confidences and can facilitate settlement by reducing opportunities and
incentives for public posturing. On the other hand, few arbitrations are entirely confidential,
with disclosures often occurring by means of judicial enforcement actions, unilateral party
action, regulatory inquiries, or otherwise.
Seventh, the existence of an arbitration clause, a workable arbitral procedure, and an
experienced arbitral tribunal may create incentives for settlement or amicable conciliation.
The cooperative elements that are required to constitute a tribunal and agree upon a
procedural framework can sometimes help foster a climate conducive to settlement. Indeed,
parties sometimes agree to conciliation (rather than, or in addition to, binding arbitration) or
to arbitration ex aequo et bono (not based on the strict application of law) (42) in a deliberate
effort to foster settlement. On the other hand, where relations are irrevocably soured, the need
for some measure of cooperation between the parties in conducting the arbitration can permit
party misconduct greatly to impede dispute resolution.
Finally, arbitration is often lauded as a prompt, inexpensive means of dispute resolution. (43)
That can sometimes be the case, but international arbitration is also frequently criticized as
P "9" both slow and expensive. (44) The difficulties in scheduling hearing dates (with busy
P "10" arbitrators, lawyers, and clients in different countries), the need to agree upon various
procedural steps, and other factors often give international arbitrations a fairly stately pace.
Nonetheless, national court proceedings are also often slow, and the existence of appellate
review (and possible re-trials) introduces additional delays not ordinarily encountered in
arbitration.
Likewise, although sometimes advertised on grounds of economy, even its proponents rightly
acknowledge that “[i]nternational arbitration is an expensive process.” (45) Both private
arbitrators (unlike judges) and arbitral institutions (unlike most courts) must be paid by the
parties. And there is a perception that some institutional fees, charged for “administrative”
services, are unnecessarily high. (46) Nonetheless, these expenses generally will be less than
the legal fees and other costs required for lengthy appellate proceedings or (in some
jurisdictions) discovery.
Given (or perhaps despite) this background, it is not difficult to find enthusiastic proponents of
the arbitral process:
In th[e] realm of international commercial transactions, arbitration has become the preferred
method of dispute resolution. Arbitration is preferred over judicial methods of dispute
resolution because the parties have considerable freedom and flexibility with regard to choice
of arbitrators, location of the arbitration, procedural rules for the arbitration, and the
substantive law that will govern the relationship and rights of the parties. (47)
Equally vigorous are some critics, including those who regard arbitration as “the slower, more
expensive alternative,” (48) or conclude that “arbitration sometimes involves perils that even
surpass the ‘perils of the seas.’” (49)
In fact, the truth is less clear-cut, and lies somewhere between these extremes: “The more
enthusiastic of [its] sponsors have thought of arbitration as a universal panacea. We doubt
P "10" whether it will cure corns or bring general beatitude. Few panaceas work as well as advertised.”
P "11" (50) At bottom, if generalizations must be made, international arbitration is much like
democracy; it is nowhere close to ideal, but it is generally better than the existing alternatives.
To those who have experienced it, litigation of complex international disputes in national
courts is often distinctly unappealing. Despite the daunting procedural complexities and other
uncertainties, arbitration often offers the least ineffective way to finally settle the contentious
disputes that arise when international transactions go awry. (51)

C. An Overview of Leading International Arbitration Institutions and Rules

International arbitration can be either “institutional” or “ad hoc.” There are important
differences between these alternatives.
1. Institutional Arbitration
A number of organizations, located in different countries, provide institutional arbitration
services. As indicated above, the best-known international arbitration institutions are the
International Chamber of Commerce (“ICC”), the American Arbitration Association (“AAA”), and
the London Court of International Arbitration (“LCIA”). Each of these organizations is described
below. (52)
These (and other) arbitral institutions have promulgated sets of procedural rules that apply
where parties have agreed to arbitration pursuant to such rules. (53) Among other things,
institutional rules set out the basic procedural framework and timetable for the arbitration
process. Institutional rules also typically authorize the host arbitral institution to select
arbitrators in particular disputes (that is, to serve as “appointing authority”), to resolve
challenges to arbitrators, to designate the place of arbitration, to fix or influence the fees
payable to the arbitrators, and (sometimes) to review the arbitrator's awards to reduce the risk
 of unenforceability on formal grounds. Each arbitral institution has a staff (with the size varying
significantly from one institution to another) and a decision-making body. Of course, arbitral
institutions charge an administrative fee, which can sometimes be substantial, for rendering
these various services; this fee is in addition to compensation paid by the parties to the
arbitrators.
It is fundamental that arbitral institutions do not themselves arbitrate the merits of the
P "11" parties' dispute. This is the responsibility of the particular individuals selected as arbitrators.
P "12" Arbitrators are virtually never employees of the arbitral institution, but instead are private
persons selected by the parties. If parties cannot agree upon an arbitrator, most institutional
rules provide that the host institution will act as an “appointing authority,” which chooses the
arbitrators in the absence of the parties' agreement.
2. Ad Hoc Arbitration
Ad hoc arbitrations are not conducted under the auspices or supervision of an arbitral
institution. Instead, parties simply agree to arbitrate, without designating any institution to
administer their arbitration. Ad hoc arbitration agreements will often choose an arbitrator or
arbitrators, who is to resolve the dispute without institutional supervision or assistance. The
parties will sometimes also select a preexisting set of procedural rules designed to govern ad
hoc arbitrations. For international commercial disputes, the United Nations Commission on
International Trade Law (“UNCITRAL”) has published a commonly-used set of such rules. (54)
Where ad hoc arbitration is chosen, parties usually will (and certainly should) designate an
“appointing authority,” (55) that will select the arbitrator(s) if the parties cannot agree. If the
parties fail to select an appointing authority, then the national arbitration statutes of many
nations permit national courts to appoint arbitrators. (56)
3. Relative Advantages and Disadvantages of Institutional and Ad Hoc Arbitration
Both institutional and ad hoc arbitration have strengths. Institutional arbitration is conducted
according to a standing set of procedural rules and supervised, to a greater or lesser extent, by
a professional staff. This reduces the risks of procedural breakdowns, particularly at the
beginning of the arbitral process, and of technical defects in the arbitral award. The
institution's involvement can be particularly constructive on issues relating to the
appointment of arbitrators, the resolution of challenges to arbitrators, and the arbitrators'
fees. Less directly, the institution lends its standing to any award that is rendered, which may
enhance the likelihood of voluntary compliance and judicial enforcement.
On the other hand, ad hoc arbitration is typically more flexible, less expensive (since it avoids
sometimes substantial institutional fees), and more confidential than institutional arbitration.
Moreover, the growing size and sophistication of the international arbitration bar, and the
efficacy of the international legal framework for commercial arbitration, have partially
P "12" reduced the relative advantages of institutional arbitration. Nonetheless, many experienced
P "13" international practitioners prefer the more structured, predictable character of institutional
arbitration, at least in the absence of unusual circumstances arguing for an ad hoc approach.
4. Leading Arbitral Institutions
Different arbitral institutions offer somewhat different products. As noted above, the ICC, the
LCIA, and the AAA are presently the leading international arbitral institutions. Each of these
institutions, as well as several other important international arbitral institutions, is briefly
described below.
a. International Chamber of Commerce International Court of Arbitration (57)
The ICC's International Court of Arbitration was established in Paris in 1923. The ICC remains the
world's leading international commercial arbitration institution, and has less of a national
character than any other arbitral institution. Its annual case-load was well above 300 cases per
year during the 1980s and early 1990s, and it now exceeds 500 cases per year. (58) Most of these
cases are international disputes, many involving very substantial sums. The ICC's case-load
involves parties from around the world, with Western European parties being involved in less
than 50% of all ICC cases in many recent years.
The ICC has promulgated the ICC Rules of Arbitration (“ICC Rules”), which were most recently
revised in 1998, as well as the ICC Rules of Optional Conciliation. (59) Under the ICC Rules, the
ICC is extensively involved in the administration of individual arbitrations. Among other things,
the ICC is responsible for service of the Request for Arbitration and other preliminary
submissions on the parties; (60) fixing and receiving payment of advances on costs by the
parties at the outset of an arbitration; (61) confirming the parties' nominations of arbitrators;
(62) appointing arbitrators if a party defaults or if the parties are unable to agree upon a
P "13" presiding arbitrator or sole arbitrator; (63) considering challenges to the independence of
P "14" arbitrators; (64) in certain cases, reviewing so-called “Terms of Reference,” which define the
issues and procedures for the arbitration; (65) reviewing a tribunal's award for formal defects;
(66) and fixing the arbitrator's compensation. (67)
The ICC's International Court of Arbitration (“ICC Court”) is responsible for most significant
administrative decisions in ICC arbitrations. The ICC Court is not, in fact, a “court,” and does not
itself decide substantive legal disputes or act as an arbitrator. Rather, the ICC Court acts in a
supervisory and appointing capacity under the ICC Rules. (68) The ICC Court is supported by a
sizeable legal and administrative staff of some twenty persons, of more than ten nationalities,
organized as a Secretariat. The Secretariat is substantially involved in the day-to-day
management of arbitrations, as detailed above.
 In appointing and confirming arbitrators, (69) the ICC Court considers “the prospective
arbitrator's nationality, residence and other relationships with the countries of which the
parties or the other arbitrators are nationals and the prospective arbitrator's availability and
ability to conduct the arbitration.” (70) The ICC Court's appointments of arbitrators are
generally based upon recommendations made by a neutral “national committee,” which is
usually a business or similar organization in a specific country. Currently, more than 60
countries have ICC National Committees.
ICC arbitrations can be (and are) sited almost anywhere in the world. In 1997, for example, ICC
arbitrations were conducted in more than 35 different countries. By far the most common
situses for ICC arbitrations are France, Switzerland, England, other Western European states,
and the United States. (71)
The ICC Rules set out schedules of administrative costs and arbitrators' fees. Both are based
upon the amount in dispute, with the arbitrators' fees being fixed by the ICC Court, within a
prescribed range, in light of the difficulty of the case, the expedition of proceeding, the
P "14" amount in dispute, and other factors. (72) The ICC Rules also provide for “advances on costs” to
P "15" be paid by the parties at the outset of the arbitral proceedings, designed to secure payment
of future administrative costs and arbitrators' fees. (73)
The ICC's Rules have sometimes been criticized as expensive and cumbersome. (74) The 1998
amendments to the Rules reflected a concerted, and promising, effort to meet these charges.
Despite criticism, the ICC clearly remains the institution of last resort for most sophisticated
commercial users.
b. London Court of International Arbitration
The LCIA is, by some accounts, the second most popular European arbitration institution. Its
annual caseload, which is increasing, has reached about 50 disputes per year. Founded in 1892,
the LCIA has made a determined, and generally successful, effort in recent years to overcome
perceptions that it is an exclusively English organization. Among other things, it has appointed
two successive non-English presidents, and its vice-presidents include non-English
practitioners.
The LCIA administers a set of arbitration rules, the London Court of International Arbitration
Rules (“LCIA Rules”), which were extensively revised in 1998. (75) Although identifiably English in
drafting style and procedural approach, the LCIA Rules generally provide a sound, neutral
basis for international dispute resolution. Broadly speaking, LCIA arbitrations are administered
in a less comprehensive fashion than ICC cases. Among other things, the LCIA Rules contain no
Terms of Reference procedure and do not provide for administrative review of draft awards.
In contrast to most other institutional rules, the LCIA Rules set out the powers of an LCIA
arbitral tribunal in some detail. (76) The powers to order discovery (77) and security for legal
costs (i.e., a deposit or bank guarantee securing the estimated amounts which an unsuccessful
claimant would be liable to reimburse to a successful respondent for its costs of legal
representation) (78) are prominently included among the arbitrators' powers.
The LCIA's appointments of arbitrators are drawn largely from the English bar and retired
judiciary, particularly in cases governed by English law. The LCIA fixes the arbitrators' fees
P "15" according to the time expended by the arbitrators at the hourly rate agreed by the arbitrators
P "16" with the parties. (79) The LCIA provides a scale of customary fees for arbitrators, to assist in
fixing rates. The LCIA's administrative fees are calculated based upon the time spent by LCIA
personnel (currently £150/hour for the Registrar and £75/hour for the Secretariat).
Most LCIA arbitrations are sited in London. In the absence of agreement by the parties to the
contrary, London will ordinarily be selected by the LCIA as the arbitral situs. (80)
c. American Arbitration Association (81)
The AAA was founded in 1926 (three years after the ICC) and is based in New York, with nearly 40
regional offices throughout the United States. The AAA is the leading U.S. arbitral institution,
and handles what it describes as the largest number of arbitral disputes in the world. It
administers more than 60,000 arbitrations or other forms of alternative dispute resolution
each year, with specialized rules for numerous different industries. Nonetheless, only a few of
these disputes are “international.” Although its methods for identifying “international” disputes
are sometimes questioned, the AAA claims a caseload of some 400 international disputes per
year.
The primary arbitration rules promulgated by the AAA are the AAA Commercial Arbitration
Rules. (82) These rules are widely used in domestic arbitrations between businesses in the
United States. In 1991, the AAA promulgated the AAA International Arbitration Rules designed
specifically for international arbitrations. (83) The rules are based principally on the UNCITRAL
Arbitration Rules (discussed below), (84) and were intended to permit a maximum of flexibility
and a minimum of administrative supervision. They were most recently revised in April 1997.
Numerous other sets of AAA arbitration rules also exist, including rules for specialized types of
disputes, and can be selected in the parties' arbitration agreement.
Under the 1997 version, the AAA International Arbitration Rules provide the applicable set of
AAA arbitration rules in “international” disputes (except where the parties have otherwise
agreed). (85) This alters the pre-1997 position, in which the primarily domestic AAA Commercial
Arbitration Rules provided the fall-back rules when parties to international agreements had
agreed to AAA arbitration without designating a particular set of rules.
P "16" Under all versions of AAA rules, the AAA administrative staff plays a less significant supervisory
P "16"
P "17" role than does the ICC Secretariat. Among other things, the AAA does not receive or serve
initial notices or requests for arbitration; does not require or review a Terms of Reference; does
not review draft awards; and plays a less significant role in setting the arbitrators' fees.
The AAA's appointments of arbitrators are generally based on a list procedure, whereby names
drawn from the AAA's files are presented to the parties for expressions of preference. Although
the AAA's lists are heavily domestic in character, it increasingly seeks to appoint arbitrators
with international experience in appropriate cases. To that end, the AAA reports that it has
enhanced the quality of its international panel of arbitrators.
The AAA's administrative charges are based on the amount in dispute. With respect to the
arbitrators' fees, the AAA case administrator will initially attempt to broker an agreement
between the proposed arbitrators and the parties on a basis for compensation. Failing such
agreement, the AAA will fix the arbitrators' fees after considering the arbitrators' hourly rates,
the amount in dispute, and the complexity of the dispute.
Non-U.S. parties are often reluctant to agree to arbitration under AAA rules, fearing parochial
predisposition and unfamiliarity with international practice. The AAA is working to overcome
this image. In addition to upgrading its approach to selecting arbitrators, the AAA has
concentrated the handling of all international cases in an “International Center” in New York,
staffed by specialized attorneys with language skills. It remains to be seen how these efforts
will be received.
d. International Center for Settlement of Investment Disputes (86)
The International Center for the Settlement of Investment Disputes (“ICSID”) administers
arbitrations conducted pursuant to the ICSID Convention. ICSID is located in Washington, D.C.,
where it operates under World Bank auspices.
As discussed below, the ICSID Convention provides a specialized arbitration regime for certain
“investment disputes” between states and foreign investors. (87) Before adopting an ICSID
arbitration clause or commencing an ICSID arbitration, care should be taken to ensure that the
Convention's jurisdictional limits are satisfied (e.g., that the relevant foreign state has ratified
the ICSID Convention and that an “investment dispute” would be involved). If these limits are
satisfied, parties must consider whether ICSID arbitration is suitable for their needs.
Sophisticated users have been reluctant to embrace ICSID arbitration because of uncertainties
about jurisdictional limits, appointment procedures for arbitrators, and the risk of internal
review. With respect to the final point, the annulment of two ICSID awards by appellate panels
has provoked concerns among foreign investors. (88)
P "17"
P "18"
e. Stockholm Chamber of Commerce Arbitration Institute
Founded in Stockholm in 1917, the Stockholm Chamber of Commerce Arbitration Institute
(“SCC”) developed into a substantial forum for disputes involving parties from the USSR and
China during the 1970s and 1980s. The SCC typically appoints members of the Swedish bar, with
international experience, or former Swedish judges, as arbitrators. SCC arbitrations are usually
sited in Sweden, although other situses can be chosen.
f. Singapore International Arbitration Centre
The Singapore International Arbitration Centre (“SIAC”) was established in 1990, principally for
disputes arising out of construction, shipping, banking, and insurance. The SIAC Rules are
based largely on the UNCITRAL Arbitration Rules. The SIAC has not yet won broad favor among
sophisticated users, in part because of historic perceptions of an interventionist attitude of
local courts. (89) There are signs that this disfavor is waning, especially in conjunction with
concerns about Hong Kong as an arbitral situs.
g. Hong Kong International Arbitration Centre
The Hong Kong International Arbitration Centre (“HKIAC”) was established in 1985 and had
developed into Asia's leading international arbitration institution prior to departure of the
British administration. The HKIAC's Rules are based on the UNCITRAL Arbitration Rules,
although parties are free to agree upon alternative procedural regimes. The HKIAC still enjoys a
substantial case-load (approximately 200 disputes annually in recent years), but many users
are now reluctant to designate it in new agreements. Concerns about future stability and
judicial independence in Hong Kong are typically cited.
h. World Intellectual Property Organization
The Arbitral Centre of the World Intellectual Property Organization (“WIPO”) was established in
Geneva, Switzerland in 1994. WIPO and the WIPO Arbitration Rules are designed particularly for
intellectual property disputes, although other types of controversies are not excluded from
their facilities. WIPO's Arbitration Rules contain detailed provisions dealing with issues that
P "18" are of particular importance in intellectual property disputes. These include provisions
P "19" relating to discovery, disclosure and protection of trade secrets, and confidentiality of
arbitral proceedings. As yet, WIPO has had insufficient opportunity to establish a track record
with respect to its selection of arbitrators and/or administration of arbitral proceedings.
i. German Institution of Arbitration
The German Institution of Arbitration (“Deutsche Institution für Schiedgerichts-barkeit” or
“DIS”) was originally founded in 1920. It has since 1992 incorporated the arbitration institutions
 of the former German Democratic Republic, and provides nationwide arbitration services in
Germany. The DIS Arbitration Rules (published in English translation as well as an authoritative
German text) are intended for both national and international arbitrations. A majority of the
DIS's caseload consists of domestic disputes, although Germany's recent enactment of the
UNCITRAL Model Law is expected to attract greater international usage.

D. An Introduction to International Treaties and Conventions Concerning

International Commercial Arbitration
International businesses and industrialized trading nations have long sought to establish a
stable, predictable legal environment in which international commercial arbitrations can be
conducted. Because national arbitration laws have historically varied considerably from state
to state, substantial uncertainties often attend the enforcement of international arbitral
agreements and awards. To reduce these uncertainties, major trading nations have entered
into international treaties and conventions designed to facilitate the transnational
enforcement of arbitration awards and agreements.
International agreements concerning commercial arbitration originally took the form of
bilateral treaties. (90) Later, multilateral conventions sought to facilitate international
arbitration by encouraging the recognition of arbitration agreements and awards. The first such
arrangement in the contemporary era was the Montevideo Convention, signed in 1889 by
various Latin American states. (91) Like other early efforts in the field, the Montevideo
Convention attracted few signatories and had little practical impact.
P "19"
P "20"
1. Geneva Protocol of 1923 and Geneva Convention of 1927
In the early 1920s, at the behest of the International Chamber of Commerce, the Geneva
Protocol of 1923 was negotiated and adopted under the auspices of the League of Nations. (92)
The Protocol was ultimately ratified by the United Kingdom, Germany, France, Japan, India,
Brazil, and about a dozen other nations. Although the United States did not ratify the Protocol,
the nations that did so represented a very significant portion of the international trading
community at the time.
The Geneva Protocol's primary focus was to require the enforcement of arbitration agreements
(with respect to both existing and future disputes). (93) In addition, the Protocol also sought to
facilitate the enforceability of arbitral awards, although it addressed only the enforcement of
awards within the state where they were made. (94)
The Protocol was augmented by the Geneva Convention for the Execution of Foreign Arbitral
Awards of 1927. (95) The Geneva Convention expanded the enforceability of arbitration awards
rendered pursuant to arbitration agreements subject to the Geneva Protocol. It did so by
requiring the enforcement of such awards within any contracting state (rather than only within
the state where they were made).
The Geneva Protocol and Convention were major early steps towards an effective international
framework for commercial arbitration. Nevertheless, both agreements were subject to
significant limitations on their scope and were not widely ratified. More important, because of
a relative dearth of international commercial arbitrations at the time, neither agreement
received frequent application nor had extensive practical effect.
2. The New York Convention (96)
P "20" The successor to the Geneva Protocol and the Geneva Convention was the United Nations
P "21" Convention on the Recognition and Enforcement of Foreign Arbitral Awards. (97) Often
referred to as the “New York Convention,” the treaty is by far the most significant contemporary
international agreement relating to commercial arbitration. The New York Convention is
reproduced in Appendix B.
The Convention was signed in 1958 in New York after lengthy negotiations under U.N. auspices.
(98) The Convention is widely regarded as “the cornerstone of current international commercial
arbitration.” (99) In the apt words of Judge Stephen Schwebel, former President of the
International Court of Justice, “It works.” (100)
The Convention was designed to “encourage the recognition and enforcement of commercial
arbitration agreements in international contracts and to unify the standards by which
agreements to arbitrate are observed and arbitral awards are enforced in the signatory
nations.” (101) In broad outline, the Convention: (a) requires national courts to recognize and
enforce foreign arbitral awards, subject to specified exceptions; (102) (b) requires national
courts to recognize the validity of arbitration agreements, subject to specified exceptions;
(103) and (c) requires national courts to refer parties to arbitration when they have entered into
a valid agreement to arbitrate that is subject to the Convention. (104)
The New York Convention made significant improvements in the regime of the Geneva Protocol
and Geneva Convention of 1927. Particularly important was the New York Convention's shifting
of the burden of proving the validity or invalidity of arbitral awards to the party resisting
enforcement and its recognition of substantial party autonomy with respect to choice of
P "21" arbitral procedures and applicable law. In the words of the President of the U.N. Conference on
P "22" the Convention:
[I]t was already apparent that the document represented an improvement on the Geneva
Convention of 1927. It gave a wider definition of the awards to which the Convention applied; it
reduced and simplified the requirements with which the party seeking recognition or
 enforcement of an award would have to comply; it placed the burden of proof on the party
against whom recognition or enforcement was invoked; it gave the parties greater freedom in
the choice of the arbitral authority and of the arbitration procedures; it gave the authority
before which the award was sought to be relied upon the right to order the party opposing the
enforcement to give suitable security. (105)
At least as important to the Convention's success was timeliness. It became available in the
1960s and 1970s, as world trade and investment began significantly to expand. With this
expansion came substantially greater numbers of international commercial disputes – and
arbitrations – which gave practical utility to the Convention.
Despite its contemporary significance, the New York Convention initially attracted relatively
few signatories. The Convention was drafted at the United Nations Conference on Commercial
Arbitration held in New York in 1958. Twenty-six of the forty-five countries participating in the
Conference ratified the Convention. Many other nations, including the United Kingdom,
Sweden, and most Latin American and African states, failed to ratify the Convention for some
time thereafter. The United States also did not initially ratify the Convention, nor did it do so
for some time. (106)
Over time, states from all regions of the globe reconsidered their position, (107) and today
some 120 nations have ratified the Convention. The Convention's parties include all major
trading states and many Latin American, African, Asian, Middle Eastern, and former socialist
states. (108) During the past decade, numerous states (including a number in the Middle East
and Latin America) have departed from long traditions of distrust of international arbitration,
and ratified the Convention. In ratifying the Convention, many states have attached
reservations that can have significant consequences in private disputes. (109)
P "22"
P "23" Article VII(1) of the New York Convention specifically provides that the Convention does not
affect the validity of any bilateral or other multilateral arrangements concerning the
recognition and enforcement of foreign arbitral awards (except the Geneva Protocol and
Geneva Convention). (110) That has been interpreted by many national courts in a “pro-
enforcement” fashion, to permit agreements and awards to be enforced under either the
Convention or another treaty (if that treaty is by its terms applicable). (111)
In virtually all countries, the New York Convention has been implemented through national
legislation. (112) The practical effect of the Convention is therefore dependent on both the
content of such national legislation and the interpretation given by national courts to the
Convention and national implementing legislation. (113)
An important aim of the Convention's drafters was uniformity: they sought to establish a single,
stable set of international legal rules for the enforcement of arbitral agreements and awards.
The fulfilment of that aim is dependent upon the willingness of national legislatures and
courts, in different signatory states, to adopt uniform interpretations of the Convention. In
general, however, national courts have performed adequately, but no better, in arriving at
uniform interpretations of the Convention. (114)
3. The Inter-American Convention on International Commercial Arbitration (115)
After the pioneering Montevideo Convention in 1889, much of South America effectively turned
its back on international commercial arbitration. Only Brazil ratified the Geneva Protocol of
1923, and even it did not adopt the Geneva Convention. South American states were very
reluctant to ratify the New York Convention, for the most part only beginning to do so in the
1980s.
P "23" Nevertheless, in 1975 the United States and most South American nations negotiated the Inter-
P "24" American Convention on International Commercial Arbitration, also known as the “Panama
Convention.” (116) The United States ratified the Convention in 1990; other parties include
Mexico, Venezuela, Columbia, Chile, Ecuador, Peru, Costa Rica, El Salvador, Guatemala,
Honduras, Panama, Paraguay, and Uruguay. The Inter-American Convention is similar to the
New York Convention in many respects. Among other things, it provides for the general
enforceability of arbitration agreements and arbitral awards, subject to specified exceptions
similar to those in the New York Convention.
The Inter-American Convention introduces a significant innovation, not present in the New York
Convention, by providing that, where the parties have not expressly agreed to any institutional
or other arbitration rules, the rules of the “Inter-American Commercial Arbitration Commission”
(“IACAC”) will govern. (117) In turn, the Commission has adopted rules that are almost identical
to the UNCITRAL Arbitration Rules. (118) Less desirably, the Panama Convention also departs
from the New York Convention by omitting provisions dealing expressly with judicial
proceedings brought in national courts in breach of an arbitration agreement.
4. The ICSID Convention (119)
The International Center for the Settlement of Investment Disputes (“ICSID”) is a specialized
arbitration institution, established pursuant to the so-called “Washington Convention” of 1965.
(120) ICSID was established at the initiative of the International Bank for Reconstruction and
Development, and is based at the World Bank's Washington headquarters.
P "24"
P "25"
The ICSID Convention is designed to facilitate the settlement of a limited range of “investment
disputes” that the parties have specifically agreed to submit to ICSID. (121) Investment
disputes are defined as controversies that arise out of an “investment” and involve a signatory
state or designated state entity (but not merely a private entity headquartered or based in a
 signatory state) and a national of another signatory state. (122) As to such disputes, the
Convention provides both conciliation (123) and arbitration procedures.
The Convention contains a number of unusual provisions relating to international arbitration.
First, the Convention provides that, absent agreement by the parties, ICSID arbitrations are
governed by the law of the state that is party to the dispute (including its conflicts rules) “and
such rules of international law as may be applicable.” (124) In contrast, neither the New York
nor Panama Conventions contains comparable substantive choice of law provisions.
Second, ICSID awards are theoretically directly enforceable in signatory states, without any
method of review in national courts. (125) There has thus far been very little experience with
judicial enforcement of ICSID awards.
Third, when a party challenges an ICSID award, the Convention empowers the Chairman of the
Administrative Council of ICSID to appoint an ad hoc committee to review, and possibly annul,
awards; if an award is annulled it may be resubmitted to a new arbitral tribunal. (126) The
ICSID annulment mechanism has been vigorously criticized, on the grounds that it permits
politicized appellate review. (127)
Nearly 100 countries, from all geographical regions of the world, have ratified the ICSID
Convention. Until relatively recently, however, relatively few cases had been brought under the
Convention. ICSID's caseload is gradually increasing, particularly as a consequence of
arbitrations brought pursuant to bilateral investment treaties or investment protection
legislation. (128)
Unfortunately, the prospects for greatly-increased usage of the ICSID Convention have been
threatened by the annulment of several ICSID awards by ad hoc panels assigned to review
awards. (129) In addition, uncertainty as to the jurisdictional scope of the Convention and the
Convention's appointment mechanism for arbitrators have led many to question ICSID's
usefulness as a means of dispute resolution.
P "25"
P "26"
5. Iran-United States Claims Tribunal (130)
The Iran-United States Claims Tribunal is one of the most ambitious international claims
commissions. (131) The Tribunal was established pursuant to the so-called Algiers Accords,
which resolved some of the legal disputes arising from the Iranian seizure of U.S. hostages
during President Carter's administration. (132) Pursuant to the Accords, litigation in national
courts concerning defined claims between U.S. and Iranian entities was suspended. A nine-
person tribunal was established in the Hague, with defined jurisdiction over claims arising
from U.S.-Iran hostilities; three tribunal members were appointed by the United States, three
by Iran, and three from other states. The tribunal adopted the UNCITRAL Arbitration Rules (with
some modifications) and has issued a substantial number of decisions (many of which are
published). (133)
6. Bilateral Investment Treaties or Investment Protection Agreements (134)
Bilateral investment treaties (“BITs”) or investment protection agreements (“IPAs”) became
common during the 1980s and 1990s, as a means of encouraging capital investment in
developing markets. Capital-exporting states (including the United States, most Western
European states, and Japan) have entered into numerous BITs or IPAs with countries in
developing regions. A recent tally indicated that more than 1,300 BITS are presently operative.
(135)
Many BITs contain provisions dealing with the enforceability of international arbitration
agreements and awards. In addition, some BITs contain provisions which permit foreign
investors to require international arbitration of certain categories of disputes – including in the
absence of an arbitration agreement in the contract(s) giving rise to the dispute. The
possibility of “arbitration without privity” is an important option in some international
commercial disputes, which counsels careful attention to applicable BITs. (136)
P "26"
P "27"
7. Bilateral Friendship, Commerce and Navigation Treaties
A number of nations have entered into bilateral treaties dealing principally with commercial
relations and incidentally with international arbitration. These treaties generally provide for
the reciprocal recognition of arbitral awards made in the territory of the contracting states. For
example, the United States has included an article relating to arbitration in many of its
bilateral Friendship, Commerce and Navigation treaties. (137)
U.S. and other FCN provisions regarding arbitration are often drafted along the following lines:
Contracts entered into between nationals or companies of either party and nationals or
companies of the other party that provide for settlement by arbitration of controversies shall
not be deemed unenforceable within the territories of such other party merely on the grounds
that the place designated for arbitration proceedings is outside such territories or that the
nationality of one or more of the arbitrators is not that of such other party. Awards duly
rendered pursuant to any such contracts which are final and enforceable under the laws of the
place where rendered shall be deemed conclusive in enforcement proceedings brought before
the courts of competent jurisdiction of either party, and shall be entitled to be declared
enforceable by such courts, except where found contrary to public policy. (138)
Such provisions have been interpreted liberally by national courts. (139)
 E. National Legislation Concerning International Commercial Arbitration
1. Relevance of National Arbitration Legislation
As we have seen, international arbitration is facilitated by the New York Convention and other
international conventions and treaties. Equally important, however, are national arbitration
statutes and national judicial precedent interpreting these statutes. This legislation typically
P "27" both implements the Convention (where it applies) and addresses the numerous issues not
P "28" touched by it. National arbitration legislation often has vitally important impacts on the
successful resolution of disputes by international arbitration.
Among other things, national arbitration (or related) statutes typically address each of the
topics identified below.
a.
The Arbitration Agreement
• whether an arbitration agreement is valid and whether this question is for resolution by a
national court or the arbitral tribunal (Chapters 2 and 3);
• what law (or laws) will apply to the parties' arbitration agreement (Chapters 2 and 3);
• the interpretation of an arbitration agreement, and whether this question is for resolution
by a national court or the arbitral tribunal (Chapter 4);
• how an arbitration agreement will be enforced and what impact it will have on judicial
proceedings in national courts (Chapters 2 and 3);
• whether certain claims or disputes are “non-arbitrable,” and therefore subject to
resolution only in national courts (Chapter 3); and
• specialized issues arising in connection with international arbitration agreements in U.S.
courts (Chapter 5).

b.
The Arbitration Proceedings
• how arbitral proceedings will be conducted, including whether national courts will order
evidence-taking or discovery in aid of arbitration (Chapter 6);
• what law (or laws) will apply to the parties' substantive claims and the arbitration
proceedings (Chapter 7);
• the selection and removal of arbitrators (Chapter 9);
• the selection of an arbitral situs will be selected (Chapter 8); and
• multi-party issues, including joinder, consolidation, and intervention (Chapter 10).

c.
The Arbitration Award
• the presumptive enforceability of international arbitral awards (Chapter 12);
• when an international arbitral award can be denied recognition (Chapter 12);
P "28" • the differences between vacating an arbitral award and refusing to recognise an award
P "29" (Chapter 11);
• whether and how a foreign arbitral award will be enforced in U.S. courts (Chapter 13);
• the availability of provisional relief (Chapter 14);

2. Less Supportive National Arbitration Legislation

Many nations historically regarded international commercial arbitration with a mixture of
suspicion and hostility. (140) That was particularly true of various parts of Latin America and
the Middle East, (141) as well as developing countries elsewhere. (142) This hostility arose from
reluctance to compromise principles of national sovereignty and from perceptions concerning
the fairness, neutrality, and efficacy of contemporary international commercial arbitration.
(143) Although historic distrust for international arbitration has waned, it continues to influence
legislation, judicial decisions, and other actions in many states.
Against this background, contemporary arbitration legislation in many foreign states does not
provide effective enforcement of arbitration agreements; such provisions are either revocable
at will or unenforceable in broad categories of disputes. (144) Similarly, in a number of states,
international arbitral awards are subject to either de novo judicial review or to similarly
rigorous scrutiny on other grounds. (145) Finally, some national courts have been prepared to
interfere in the international arbitral process – for example, by purporting to remove
arbitrators, to resolve “preliminary” issues, to bar foreign lawyers from appearing, or to enjoin
arbitrations. (146)
During the last decade, a number of states which historically distrusted international
arbitration have ratified the New York Convention and/or enacted legislation supportive of the
arbitral process. These include Russia, India, China, Saudi Arabia, Argentina, Algeria, Bahrain,
 Tunisia, Nigeria, Peru, and Venezuela. Although there is often little practical experience with
the application of arbitration statutes in such states, these statutes have the potential for
providing a more stable, predictable framework for international arbitration. Unfortunately,
P "29" even where national law is superficially supportive of the international arbitral process, many
P "30" national courts have displayed a readiness to hold arbitration agreements or awards
invalid, particularly when requested to do so by local individuals, companies, or state entities.
3. Supportive National Arbitration Legislation
Despite the hostility to international arbitration in some parts of the world, most states in
Europe, North America, and parts of Asia have adopted legislation that provides effective and
stable support for the arbitral process. In particular, England, Switzerland, the United States,
Canada, France, Sweden, Belgium, the Netherlands, Austria, Germany, and Italy have enacted
arbitration statutes that ensure the basic enforceability of arbitration agreements and awards
with minimal judicial interference in the arbitral process. We briefly outline the UNCITRAL
Model Law and the English, French, and Swiss international arbitration statutes below.
a. UNCITRAL Model Law
In 1985, the United Nations Commission on International Trade Law (“UNCITRAL”) promulgated
the Model Law on International Commercial Arbitration. The UNCITRAL Model Law is
reproduced as Appendix F. The Model Law is a leading example of legislation that is
supportive of the international arbitration process.
The Model Law, containing 36 articles, deals comprehensively with the issues that arise in
national courts in connection with international arbitration. Among other things, the law
contains provisions concerning the enforcement of arbitration agreements (Articles 7-9),
appointment of and challenges to arbitrators (Articles 10-15), jurisdiction of arbitrators (Article
16), provisional measures (Article 17), conduct of the arbitral proceedings (including language,
situs, and procedures) (Articles 18-26), evidence-taking and discovery (Article 27), applicable
law (Article 28), awards (Articles 29-33), setting aside or vacating awards (Article 34), and
recognition and enforcement of awards, including bases for nonrecognition (Articles 35-36).
The Model Law represents a significant further step, beyond the New York Convention, towards
the development of a predictable international legal framework for commercial arbitration.
Like the New York Convention, the Model Law's efficacy is ultimately dependent upon its
interpretation and application by national courts. But the law goes beyond the Convention by
prescribing in significantly greater detail the legal framework for international arbitration, by
clarifying points of ambiguity or disagreement under the Convention, and by establishing
directly applicable national legislation. In particular, the Model Law makes clear the grounds
for vacating international arbitral awards (147) and defines the (limited) scope of national
P "30" court interference in, and assistance to, the arbitral process. (148) At least as important, the
P "31" Model Law has set the agenda for reform of arbitration statutes, even in states (like England
and Switzerland) where it has not been adopted.
The Model Law has been adopted by a dozen or so nations, including Australia, Bermuda,
Bulgaria, Canada, Cyprus, Germany, Hong Kong, Mexico, New Zealand, Nigeria, the Russian
Federation, Scotland, Singapore, and Tunisia. It has also been adopted by several U.S. states,
including California, Connecticut, Oregon, and Texas. Other nations are considering its
adoption.
b. England
Arbitration in England is presently governed by the English Arbitration Act, 1996. (149) The Act is
based roughly on the UNCITRAL Model Law, but has a number of formal and substantive
idiosyncracies. The 1996 Act was adopted following an extensive consultation process with both
English and foreign sources. (150)
The Arbitration Act, 1996 was preceded by three Arbitration Acts, enacted in 1950, 1975, and
1979. The Arbitration Act, 1979 established a relatively effective regime for international
arbitrations in England. (151) Agreements to arbitrate were prima facie enforceable in England
and English courts imposed few “non-arbitrability” constraints. Moreover, although not
formally accepting the “separability” doctrine, English courts did not in fact permit challenges
to the parties' underlying contract to interfere unduly with the arbitral process. (152) At least
after 1979, English courts also generally applied highly deferential standards of review to
international arbitral awards. (153)
The Arbitration Act, 1996 significantly improved the legislative framework for international
P "31" arbitration in England. (154) The Act compiled all English legislative provisions relating to
P "32" arbitration into a single codification, based in part on the UNCITRAL Model Law. (155) The
1996 Act provides expressly for the validity of written (and some other) arbitration agreements
(as to both existing and future disputes) and for the stay of court proceedings concerning
claims subject to valid arbitration agreements. (156) The Act also provides expressly for the
“separability” of arbitration agreements. (157) The Act does not address the subject of
nonarbitrable issues, and there is little English precedent dealing with the topic.
With respect to arbitral awards made in England, the Act provides for the confirmation of
awards, subject only to limited exceptions. The Act's grounds for vacating awards concern lack
of jurisdiction (of the arbitral tribunal), “serious irregularity,” and limited appeals on points of
law. (158) The Act also provides for the recognition and enforcement of foreign arbitral awards,
primarily by incorporating the provisions of the New York Convention. (159)
The 1996 Act contains a number of provisions granting arbitrators broad freedom in conducting
 arbitral proceedings, with a minimum of judicial interference. This freedom includes wide
authorization with respect to procedural and evidentiary matters, (160) appointment of
experts, (161) ordering the payment of security for the costs of the arbitration, (162) and
ordering conservatory or provisional measures. (163) Among other things, it is now clear that
arbitrators conducting arbitral proceedings sited in England do not need to apply local rules of
English civil procedure. The Act also provides for English judicial assistance to arbitrations
sited in England, including in taking evidence (164) and appointing or removing arbitrators.
(165)
c. France
P "32" International arbitration in France is governed by decrees promulgated on May 14, 1980 and
P "33" May 12, 1981. (166) The 1981 Decree provides for the enforceability of arbitration agreements
as to both existing and future disputes. (167) The 1981 Decree impliedly recognizes the
separability doctrine, (168) and expressly grants arbitrators the power to decide challenges to
their jurisdiction. (169) If claims which are subject to an arbitration agreement are brought in
French courts, the Decree provides for dismissal of the judicial proceedings (except where the
arbitration agreement is “manifestly null”). (170) The non-arbitrability doctrine has not been
invoked to any significant extent by French courts (except in bankruptcy, labor, and consumer
matters).
French courts generally permit the parties to an arbitration agreement substantial autonomy
with respect to choice of law, procedural rules, selection of arbitrators, and the like. (171) As in
England, French law expressly provides that arbitrators are not bound by local rules of civil
procedure applicable in French courts. (172) The 1981 Decree also grants arbitrators the power
to order the production of evidence from the parties. (173)
The 1981 Decree reformed French law relating to judicial recognition and enforcement of
international arbitration awards. Among other things, the decree permits actions in French
courts to annul arbitral awards made in France, provided that the parties have not waived
their rights to appeal; where such a waiver exists, awards may be challenged only on limited
grounds (substantially similar to those in the New York Convention). (174) The 1981 Decree
provides for the recognition and enforcement of foreign arbitral awards on grounds parallel to
those set forth in the New York Convention. (175) French law also permits court-ordered
provisional measures in aid of arbitration. (176)
d. Switzerland
International arbitration in Switzerland is governed primarily by a chapter of the federal Swiss
Law on Private International Law, which entered into effect in 1989. (177) Under Swiss law,
P "33" international arbitration agreements are readily enforced. The Swiss Law on Private
P "34" International Law (“SPIL”) expressly recognizes the separability doctrine and (unusually)
provides expressly that international arbitration agreements will be enforced if they are valid
under the laws of either (a) Switzerland, or (b) the state whose law would otherwise apply to
the arbitration agreement under Swiss conflict of laws principles. (178) The SPIL also generally
permits arbitral tribunals to resolve jurisdictional challenges in the first instance (179) and
allows for arbitrability of a wide range of disputes. (180)
Under the SPIL, the parties' freedom to agree upon the applicable procedural and substantive
law is expressly recognized. (181) Judicial interference by Swiss courts in the arbitration
process (other than regarding provisional measures and evidence-taking in aid of a tribunal) is
limited. (182)
Swiss courts will recognize and enforce foreign arbitral awards without substantial judicial
review, subject only to the limits of the New York Convention. (183) As to arbitral awards made
in Switzerland, actions to vacate or annul are also limited, again to grounds paralleling those
in the New York Convention. (184) Parties can agree to exclude even this review of international
arbitral awards, provided that none of the parties is domiciled in Switzerland. (185)
4. Introduction to the Federal Arbitration Act and Other Sources of U.S. Law Concerning
International Commercial Arbitration (186)
In the United States, most important issues relating to international arbitration agreements
and arbitral awards are governed primarily by federal (rather than state) law. Unfortunately,
there are several distinct, but overlapping, sources of U.S. federal law that are potentially
applicable to an international arbitration agreement, award, or proceeding. Additionally,
although limited, the role of state law in the enforcement of international arbitration
agreements is both potentially important and uncertain. As a consequence, parties in U.S.
courts to disputes concerning an international arbitration are often confronted with a
P "34" procedural and substantive maze of applicable laws that is some distance removed from the
P "35" often-repeated promise that international arbitration provides a simple, efficient, and
predictable dispute-resolution mechanism. (187)
a. Historic Unenforceability of Arbitration Agreements in the United States
Until well into the 20th century, U.S. courts were hostile towards arbitration. Like English
courts, American judges refused to grant specific enforcement of arbitration agreements, (188)
and permitted their revocation at any time. (189) This grudging approach towards arbitration
agreements reflected a variety of factors, including concern about private agreements
“ousting” the courts of jurisdiction, scepticism about the adequacy and fairness of the arbitral
process, and suspicions that arbitration agreements were often the product of unequal
bargaining power. (190)
 In 1920, New York enacted an arbitration statute designed to reverse common law hostility to
arbitration and to render arbitration agreements enforceable in New York courts. (191) The New
P "35" York statute provided a model for what became federal legislation dealing with arbitration –
P "36" the Federal Arbitration Act (“FAA”). (192) The FAA was strongly supported by the business
community, which saw litigation as increasingly expensive, slow, and unreliable. (193) With
virtually no opposition or amendments, the bill that became the FAA was unanimously
adopted in 1925 by both the House of Representatives and the Senate. (194)
b. The Federal Arbitration Act
The FAA currently consists of three chapters: (a) the “domestic” FAA, 9 U.S.C. §§1-16, applicable
to agreements and awards affecting either interstate or foreign commerce; (b) the New York
Convention's implementing legislation, 9 U.S.C. §§201-210, applicable only to awards and
agreements falling within the New York Convention; and (c) the Inter-American Arbitration
Convention's implementing legislation, 9 U.S.C. §§301-07, applicable only to awards falling
under the Inter-American Convention. (195) The entire FAA is reproduced as Appendix D. The Act
is remarkably brief and relatively poorly-drafted.
The centerpiece of the FAA is §2, which provides that arbitration agreements involving
interstate and foreign commerce (196) “shall be valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of any contract.” (197) Sections 3 and
4 of the Act provide the principal mechanisms for enforcing §2's general rule that arbitration
agreements are valid. Section 3 requires “any court of the United States” to stay proceedings
before it, if they involve issues that are “referable to arbitration,” while §4 requires “United
States district court[s]” to issue orders compelling arbitration of such issues. (198)
Other sections of the FAA address different aspects of the arbitral process. Section 5 grants
district courts the power to appoint arbitrators if the parties either have not done so or have
agreed upon an appointment procedure which proves unworkable. (199) Section 7 of the Act
permits district courts to issue compulsory process to assist arbitral tribunals in taking
P "36" evidence. (200) In turn, §§9, 10, and 11 of the FAA provide that, subject to specified exceptions,
P "37" arbitration awards shall be enforceable. These sections also set forth procedures for
confirming, vacating, or correcting arbitral awards subject to the Act. (201)
It is notable how many subjects are not directly addressed by the FAA. The statute does not
expressly deal with such matters as the separability doctrine, the allocation of competence
between U.S. courts and arbitrators to resolve disputes over arbitration agreements,
challenging arbitrators, provisional relief, selecting an arbitral situs, the conduct of arbitral
proceedings, interlocutory judicial review, and choice of law. Notable also is the relative
brevity of the FAA on most critical issues which it does address, such as the grounds and
procedures for challenging either arbitration agreements or arbitral awards.
After U.S. ratification of the New York Convention in 1970, Congress enacted amendments to the
FAA, in a second chapter to the Act, implementing the Convention. (202) In ratifying the New
York Convention, Congress was motivated (as with the domestic FAA in 1925) by a desire for
more efficient dispute resolution:
[I]t is important to note that arbitration is generally a less costly method of resolving disputes
than is full-scale litigation in the courts. To the extent that arbitration agreements avoid
litigation in the courts, they produce savings not only with the parties to the agreement but
also for the taxpayers – who must bear the burden for maintaining our court system. (203)
In addition, Congress sought to facilitate the development of a stable and effective system of
international commercial dispute-resolution, on which U.S. companies expanding into global
markets could rely. (204)
Like the original domestic Act, the FAA's second chapter is remarkably brief. It provides that
arbitration agreements and awards shall be enforceable, (205) and contains provisions
authorizing U.S. courts to compel arbitration in foreign arbitral situses. In addition, the
amendments expand federal subject matter jurisdiction and removal authority in cases falling
under the Convention. (206)
In 1990, the United States enacted implementing legislation for the Inter-American Convention
on International Commercial Arbitration, codified as a third chapter to the FAA. (207) The
P "37" chapter incorporates much of the New York Convention's implementing legislation, (208)
P "38" adding provisions to deal with the Inter-American Commercial Arbitration Commission's
rules, (209) and the relationship between the New York and Inter-American Conventions. (210)
Like the domestic FAA, at the heart of third chapter are provisions requiring the enforcement of
specified arbitration agreements and awards, together with very briefly-described procedures
for doing so. (211)
There is considerable “overlap” among the various sources of U.S. federal law affecting
international arbitration agreements and awards. Arbitral awards and agreements falling
under the New York Convention are of course governed by both the Convention and the second
chapter of the FAA (which implements the Convention). In addition, however, these awards and
agreements are potentially governed by the first, “domestic” chapter of the FAA, to the extent
it is not “in conflict” with the Convention. (212) In addition to their express terms, the FAA and
New York Convention have provided the basis for a fairly expansive federal common law of
arbitration. (213) That body of law is of uncertain scope, but clearly extends to such subjects,
discussed below, as the interpretation and validity of international arbitration agreements
and the availability of provisional relief in connection with arbitrations. (214)
Despite the poor drafting and ad hoc origins of the FAA's three chapters, U.S. courts have
 generally interpreted the Act in a fashion supportive of the international arbitral process. With
respect to arbitration agreements, U.S. courts have fairly clearly embraced the separability
doctrine, (215) have defined the allocation of competence between courts and arbitrators to
decide disputes over the formation, validity, and interpretation of arbitration agreements,
(216) and have strongly affirmed the presumptive validity of arbitration agreements, subject
only to limited exceptions. (217) With respect to the arbitral process, U.S. courts have
emphasized the parties' freedom to agree upon arbitration rules and procedures, (218) the
arbitrator's discretion in presiding over the arbitral process, (219) and the limited scope for
P "38" interlocutory judicial review of the arbitrator's decisions. (220) Finally, with respect to arbitral
P "39" awards, U.S. courts have held that such awards are presumptively valid and enforceable,
subject only to specified exceptions. (221) For the most part, U.S. courts have been even more
supportive of the international arbitral process than of domestic arbitrations. (222)
c. U.S. State Arbitration Laws
In addition to the overlapping provisions of the New York and Inter-American Conventions and
the three chapters of the FAA, U.S. state law also bears on international arbitration issues in
U.S. courts. As explored below, the Supreme Court has held that the domestic FAA does not
“occupy the entire field” relating to arbitration. (223) At least domestically, issues concerning
the formation and validity of arbitration agreements are governed primarily by generally-
applicable state contract law. (224) In contrast, there is substantial lower court and other
authority holding that federal common law, derived from the New York Convention, governs the
formation and validity of international arbitration agreements. (225) In both domestic and
international contexts, it is settled that the FAA and federal law generally provide the
exclusive standards for confirming and vacating arbitral awards. (226)
State law is applicable to arbitration agreements and awards when – but only when – the
Convention and FAA (and the federal common law derived from both sources) are inapplicable.
That may be the case, for example, because the agreement or award does not affect interstate
or foreign commerce. State law may also be applicable to issues bearing on arbitration that
federal statutory and common law do not directly or indirectly address. As discussed in detail
below, that may include the formation of arbitration agreements and the availability of court-
assisted discovery, provisional relief, or consolidation. (227)
Every state of the Union has adopted legislation dealing with commercial arbitration. (228)
Many states have enacted some version of the “Uniform Arbitration Act.” First proposed in 1924
by the Conference of Commissioners on Uniform State Laws, the current version of the Act was
adopted by the Conference in 1955 and amended in 1956. (229)
P "39"
P "40"
The Uniform Arbitration Act has been enacted in some 26 states, (230) and has influenced other
arbitration legislation. The Uniform Arbitration Act is substantially similar to the FAA. Among
other things, it requires specific enforcement of arbitration agreements (as to both existing and
future disputes) (231) and provides for the recognition and enforcement of arbitral awards with
only limited judicial review.
Nevertheless, a number of U.S. states have not adopted the Uniform Act, nor followed its
generally “pro-arbitration” lead. Several state statutes do not permit arbitration of various
categories of claims, such as tort, real property, and insurance claims. (232) Other U.S. states
have enacted legislation requiring that arbitration clauses be conspicuously identified (e.g.,
printed in capital letters, placed on the front of any contract, etc.). (233) And some state
statutes do not provide for the same general rule of enforceability and limited judicial review
of arbitral awards that the FAA and Uniform Act require. (234)
In addition, particularly in recent years, several U.S. states have enacted legislation expressly
P "40" designed to fill gaps left in the U.S. federal framework for international arbitration. (235) In
P "41" particular, California, Colorado, Florida, Texas, Maryland, Hawaii, Georgia, North Carolina,
Ohio, Oregon, and Connecticut have adopted statutes purporting to deal comprehensively with
the subject of international arbitration. (236) The extent to which these statutes are preempted
by the FAA and federal common law principles remains unclear. To date, however, state law
has played a distinctly secondary role in the international arbitral process. (237)
There is, unfortunately, one potential exception to this general rule – the Supreme Court's
decision in Volt Information Sciences, Inc. v. Board of Trustees, (238) discussed in detail below.
There, a choice-of-law clause in the parties' contract was interpreted, in vaguely-defined
circumstances, to incorporate state procedural rules relating to arbitration, and the FAA was
held not to preempt this result. Several subsequent U.S. Supreme Court decisions, (239) and
most lower court decisions (240) have interpreted Volt narrowly, but it continues to have the
potential to produce unwarranted confusion in international arbitrations in the United States.

F. Choice of Law in International Commercial Arbitration

Parties frequently agree to arbitration to avoid the jurisdictional and choice of law
uncertainties that arise when international disputes are litigated in national courts. (241)
Unfortunately, as detailed below, international arbitration can produce its own set of complex,
often unpredictable choice of law issues.
1. Importance of Choice of Law Issues in International Arbitration
Choice of law issues play an important role in international commercial arbitration. It is
necessary at the outset to distinguish between four separate choice of law issues that can arise
P "41" in connection with an international arbitration: (a) the substantive law governing the merits of
P "41"
P "42" the parties' underlying contract and other claims; (b) the substantive law governing the
parties' arbitration agreement; (c) the procedural law applicable to the arbitration
proceedings (also called the “curial law” or the “lex arbitri”); and (d) the conflict of law rules
applicable to select each of the foregoing laws. (242) Although not common, it is possible for
each of these four issues to be governed by a different national (or other) law.
Each of the foregoing choice of law issues can have a vital influence on international arbitral
proceedings. Different national laws provide different – sometimes dramatically different –
rules applicable at different stages of the arbitral process. Understanding which national rules
will potentially be applicable can therefore be critical.
2. Law Applicable to the Substance of the Parties' Dispute
The parties' underlying dispute will ordinarily (243) be resolved under the rules of substantive
law of a particular national legal system. In the first instance, it will usually be the arbitrators
who determine the substantive law applicable to the parties' dispute. (244) As discussed in
detail below, international arbitrators typically give effect to the parties' agreements
concerning applicable substantive law (“choice-of-law clauses”). (245) The principal exception
is where mandatory national laws or public policies purport to override private contractual
arrangements. (246)
Where the parties have not agreed upon the substantive law governing their dispute, the
arbitral tribunal must select such a law. In so doing, the tribunal will usually (but not always)
refer to some set of national conflict of laws rules. These varying approaches to the choice of
substantive law in international arbitration are summarized here and examined in detail
below. (247)
Although the historical practice was to apply the national conflict of laws rules of the arbitral
situs, more recent practice is diverse. Some tribunals and commentators adhere to the
traditional approach, while others look to the conflicts rules of all states having a connection
P "42" with the dispute. (248) Additionally, some authorities appear to be moving towards recognition
P "43" of an international body of conflict of laws rules. (249) There is also authority supporting an
arbitral tribunal's “direct” application of substantive rules of law, purportedly without prior
recourse to any set of conflict of laws rules. (250) The development of bodies of international
substantive rules dealing with commercial matters has facilitated this development. (251)
3. Law Applicable to the Arbitration Agreement
As discussed elsewhere, arbitration agreements are regarded under most national laws and
institutional arbitration rules as “separable” from the underlying contract in which they
appear. (252) One consequence of this is that the parties' arbitration agreement may be
governed by a different national law than that applicable to the underlying contract. This can
occur either by the parties' express choice of law or by the application of conflict of laws rules
(which theoretically may select different substantive laws for the parties' arbitration
agreement and their underlying contract).
As described below, four alternatives for the law governing an arbitration agreement are of
particular importance: (a) the law chosen by the parties to govern the arbitration agreement
itself; (b) the law of the arbitral situs; (c) the law governing the parties' underlying contract; and
(d) the law of the forum in which judicial enforcement of the agreement is sought (for example,
the FAA in a U.S. court). (253) In the absence of a choice by the parties, arbitral tribunals and
national courts tend to apply the law of the arbitral situs.
4. Procedural Law Applicable to the Arbitration Proceedings
The arbitration proceedings themselves are also subject to legal rules. The law governing the
arbitral proceedings is variously referred to as the procedural law of the arbitration, the curial
law, the lex arbitri, or the loi de l'arbitrage. (254)
Among other things, the procedural law applicable to an arbitration typically deals with such
issues as the appointment and qualifications of arbitrators, the qualifications and professional
responsibilities of parties' legal representatives, the extent of judicial intervention in the
arbitral process, the procedural conduct of the arbitration, and the form of any award.
Different national laws take significantly different approaches to these various issues. In some
P "43" countries, national law imposes significant limits or requirements on the conduct of the
P "44" arbitration (255) and local courts have broad powers to supervise arbitral proceedings. (256)
Elsewhere, and in most developed jurisdictions, local law affords international arbitrators
virtually unfettered freedom to conduct the arbitral process – subject only to basic
requirements of procedural regularity (“due process” or “natural justice”). (257)
In most cases, the procedural law applicable to the arbitral proceedings will be the law of the
arbitral situs – the place where the parties have agreed that the arbitration will be seated and
that arbitral hearings are conducted. (258) Parties nonetheless have the power, under many
developed legal systems, to agree to the application of a different procedural law than that of
the arbitral situs. This seldom occurs in practice, and the effects of such an agreement are
uncertain. (259)
5. Choice of Laws Rules Applicable in International Arbitration
Selecting each of the bodies of law identified in the foregoing three sections – the laws
applicable to the merits of the underlying dispute, to the arbitration agreement, and to the
arbitration proceedings – ordinarily requires application of conflict of laws rules. In order to
select the substantive law governing the parties' dispute, for example, the arbitral tribunal
 must often apply a conflict of laws system. And, just as different states have different rules of
substantive law, they also have different conflict of laws rules. An international arbitral
tribunal must therefore decide at the outset what set of conflicts rules to apply.
The actual practice of arbitral tribunals in selecting the law applicable to each of the foregoing
issues varies significantly. Approaches include application of (a) the arbitral situs' conflict of
laws rules, (b) “international” conflict of laws rules, (c) successive application of the conflict of
laws rules of all interested states, and (d) “direct” application of substantive law (without any
express conflicts analysis). We examine these various approaches in detail below. (260)

G. International Efforts at Harmonization of Arbitration Statutes and Rules

A number of efforts have been undertaken to harmonize substantive and procedural standards
P "44" applicable in international arbitrations. These efforts have sought to clarify areas of
P "45" uncertainty under the New York Convention or national arbitration statutes. Further
harmonization can be anticipated as international commercial arbitration becomes
increasingly prevalent.
1. UNCITRAL Model Law on International Commercial Arbitration (261)
A leading effort towards harmonization in the field of international commercial arbitration is
the United Nations Commission on International Trade Law (“UNCITRAL”) Model Law on
International Commercial Arbitration. The UNCITRAL Model Law was adopted by a resolution of
UNCITRAL in Vienna in 1985 and by a U.N. General Assembly resolution later the same year.
(262) The Model Law is designed to be implemented by national legislatures, with the objective
of further harmonizing the treatment of international commercial arbitration in different
countries. The Model Law is reproduced as Appendix F and is briefly described above. (263)
2. UNCITRAL Arbitration Rules (264)
At least as significant to the development of the international arbitral regime as the UNCITRAL
Model Law are the UNCITRAL Arbitration Rules. The UNCITRAL Rules were promulgated by
Resolution 31/98, adopted by the General Assembly of the United Nations on December 15,
1976. (265) They are excerpted in Appendix G.
The UNCITRAL Arbitration Rules were designed for use in ad hoc international arbitrations.
P "45" When they were adopted in 1976, the UNCITRAL Rules were the only set of rules available
P "46" specifically for that purpose, although alternatives now exist. (266) Under the Rules, the
Secretary General of the Permanent Court of Arbitration serves as appointing authority, (267)
unless the parties agree to the contrary. (268)
The objective of the UNCITRAL Rules was to create a relatively predictable and stable
procedural framework for international arbitrations without stifling the informal and flexible
character of such dispute resolution mechanisms. The Rules aimed to satisfy common law, civil
law, and other jurisdictions, as well as capital-importing and capital-exporting interests.
Foreign states, which generally will have supported the Rules in the United Nations debates,
often find it difficult to object to their use in an arbitration agreement or arbitral proceeding.
The UNCITRAL Rules have contributed significantly to the harmonization of international
arbitration procedures. That is reflected in part by the readiness of the AAA and the IACAC to
base the AAA International Rules and IACAC Rules substantially on the UNCITRAL Rules. Other
institutional rules, including the LCIA Rules, have also drawn on the UNCITRAL Rules.
3. IBA Rules on the Taking of Evidence in International Commercial Arbitration (269)
In 1983, the International Bar Association adopted the “Supplementary Rules Governing the
Presentation and Reception of Evidence in International Commercial Arbitration.” The Rules
attempted to provide a blend of civil law and common law approaches to the subjects of
discovery and evidentiary presentations in arbitration. The Rules were revised in 1999, and
retitled the IBA “Rules on the Taking of Evidence in International Commercial Arbitration.” The
1999 IBA Rules are excerpted in Appendix N, and discussed elsewhere. (270) The Rules are
intended principally for contractual incorporation into parties' arbitration agreements, but
they are also sometimes the basis for an arbitral tribunal's procedural rulings.
4. ABA/AAA Code of Ethics and IBA Ethics in International Arbitration (271)
P "46" In 1980, a joint committee of the American Bar Association and American Arbitration
P "47" Association adopted the ABA/AAA Code of Ethics. (272) The Code sought to provide ethical
guidelines, focussing particularly on issues of bias and partiality, for arbitrators. Consistent
with historic practice in the United States, the Code set different ethical standards for party-
appointed and “neutral” arbitrators. (273) In 1990, however, the American Bar Association
recommended amendment of the Code of Ethics to provide for the neutrality and impartiality
of all members of the arbitral panel (unless otherwise agreed). The American Bar Association is
presently considering revisions to the Code of Ethics.
In 1987, the International Bar Association adopted “Ethics for International Arbitration,”
excerpted in Appendix O. Derived in substantial part from the ABA/AAA Code, the IBA effort
sought to establish uniform ethical standards for application to international arbitrators.
Unlike the original ABA/AAA Code, the IBA Ethics applied the same standards to party-
appointed and neutral arbitrators. The IBA Ethics are influential guidelines in international
arbitration practice.
5. UNCITRAL Notes on Organizing Arbitral Proceedings
 In 1996, UNCITRAL published the “UNCITRAL Notes on Organizing Arbitral Proceedings.” (274)
The UNCITRAL Notes are non-binding guidelines for arbitrators and parties designed to identify
issues that frequently arise in the course of international arbitrations. Among other things, the
UNCITRAL Notes briefly discuss procedural rules, communications, written submissions,
evidence, witnesses, and hearings. The UNCITRAL Notes are reproduced in Appendix Q.
P "47"
P "48"
H. Sources of Information About International Arbitration
One of the perceived benefits of international arbitration is its confidentiality. (275) Most
international arbitral awards remain confidential (276) and some are not reasoned. (277)
Although it has benefits, the confidentiality of the arbitral process is at the same time an
obstacle to practitioners, decision-makers, and academics who require relevant precedent.
Nevertheless, there are a variety of sources of information about international commercial
arbitration with which both practitioners and academics should be familiar. (278)
1. ICCA Yearbook of Commercial Arbitration
The Yearbook of Commercial Arbitration is published annually by the International Council for
Commercial Arbitration. The Yearbook contains excerpts of arbitration awards, national
legislative developments, judicial decisions, and other materials relevant to international
arbitration. The Yearbook is an invaluable reference tool. In addition to its role as an
important source of otherwise confidential arbitral awards, the Yearbook catalogues materials
under the various articles of the New York Convention and collects significant national
legislative developments and judicial decisions in the arbitration field.
2. Mealey's International Arbitration Report
Since 1986, Mealey Publications has published a monthly summary of recent judicial decisions
concerning international arbitration and arbitral awards. The International Arbitration Report
is a source of timely information (with a recently-introduced email service) and provides full-
text copies of significant awards and decisions. The Report's primary focus is U.S., but it
increasingly includes authorities from other jurisdictions.
3. Collections of ICC Arbitral Awards
P "48" Three collections of ICC arbitral awards rendered between 1974 and 1995 have recently been
P "49" published. The collections cover awards made between 1974-85, 1986-90, and 1991-1995. (279)
In addition, the ICC has published a collection of procedural decisions in ICC arbitrations
between 1993 and 1996. (280) Each collection includes excerpts or summaries of approximately
150 ICC arbitral awards, in both French and English. The excerpts are edited to avoid
identifying the parties to the dispute. Many of the awards were previously published in the
Yearbook of Commercial Arbitration or Journal du Droit International (Clunet), but the
collections are a convenient reference source. The ICC promises comparable collections in the
future.
4. International Legal Materials
Sponsored by the American Society of International Law, the International Legal Materials are
published six times each year. They contain a wide range of international legal documents, and
do not focus specifically on arbitration. They are, however, a useful source of significant
developments – legislative, judicial, and otherwise – in the arbitration field.
5. Commentary on International Chamber of Commerce Arbitration
International Chamber of Commerce Arbitration is authored by three experienced practitioners
– Larry Craig, Rusty Park, and Jan Paulsson. The book is a comprehensive work on ICC
arbitration, which was first published in 1984, and significantly revised and updated in 1996.
The work is useful to any practitioner in an ICC arbitration, and contains commentary on the ICC
rules, with shrewd practical observations.
More recently, Yves Derains and Eric Schwartz (both of whom held the distinguished office of
Secretary General of the ICC International Court of Arbitration) published A Guide to the New
ICC Rules of Arbitration. The work is thoroughly researched and provides valuable practical
guidance.
6. A. Redfern & M. Hunter, International Commercial Arbitration
The leading European commentary on international commercial arbitration, Law and Practice
of International Commercial Arbitration, is in its third edition. Authored by two respected
English practitioners, the book is required reading for any lawyer involved in international
arbitration.
P "49"
P "50"
7. Arbitration International
“Arbitration International” is a quarterly journal, published since 1985 by the Chartered Institute
of Arbitrators in London. It provides commentary on international commercial arbitration, with
a particular focus on Europe and England.
8. Journal du Droit International
Published in French, the Journal du Droit International reprints excerpts and summaries of
 arbitral awards. The Journal is a significant source of extracts of otherwise unavailable arbitral
awards.
9. Domke on Commercial Arbitration
The leading U.S. work on domestic arbitration has been Domke on Commercial Arbitration. First
published in 1968, with a predominantly domestic focus, the work has been updated, with
efforts to look beyond U.S. shores. For U.S. practitioners, it can be a useful initial reference
source.
10. MacNeil, Speidel, and Stipanowich, Federal Arbitration Law
This multi-volume, loose-leaf work comprehensively discusses historical and contemporary
aspects of federal arbitration law in the United States. The focus is principally domestic, with
almost exclusive reliance on U.S. judicial decisions. Federal Arbitration Law is a useful
reference source for U.S. practioners and academics.
11. A. van den Berg, The New York Convention of 1958 and G. Gaja, The New York Convention
Dr. Albert van den Berg's The New York Convention of 1958 is the leading work on the New York
Convention. The author is a distinguished Dutch academic and practitioner, and his work
assembles in a single source detailed commentary and materials relating to the New York
Convention. Although the book's effort to annotate the Convention's various articles with
judicial decisions is now dated, it remains required reading on the subject.
Gaja's work on The New York Convention is an exhaustive compilation of the materials relevant
to the negotiation and drafting of the Convention. Ideal for detailed research on particular
aspects of the Convention, the book provides the successive drafts of the Convention, the
comments and questions of participating states, and various interim reports.
P "50"
P "51"
12. H. Holtzmann & J. Neuhaus, Guide to the UNCITRAL Model Law on International Commercial
Arbitration
Howard Holtzmann and Joseph Neuhaus have contributed a painstaking study of the UNCITRAL
Model Law and its history. Particularly as the Model Law gains in adherence, the Guide will
become a standard reference source for practitioners and courts.

I. Overview of Organization
This book is organized into three Parts. Part I examines international arbitration agreements.
(281) It discusses the separability doctrine, the allocation of competence between national
courts and arbitrators to decide disputes over arbitration agreements, choice of law issues, the
applicability of international instruments (principally the New York Convention) and national
arbitration legislation to international arbitration agreements, the presumptive enforceability
of international arbitration agreements, the grounds for challenging the validity of
international arbitration agreements, the non-arbitrability doctrine, and the interpretation of
arbitration clauses.
Part II discusses the legal and practical aspects of international arbitration proceedings. (282)
It examines the choice of the procedural law governing an arbitration, the adoption of
procedural rules in an arbitration, evidence-taking and “discovery,” interference by national
courts in international arbitral proceedings, selection and challenge of arbitrators, selection of
the arbitral situs, and multi-party issues.
Part III considers international arbitration awards. (283) It examines the differences between
setting aside and refusing to vacate arbitral awards, issues of forum selection, the presumptive
enforceability of international arbitral awards, the grounds for refusing to recognise arbitral
awards, preclusion, attorneys' fees, interest, and provisional measures.
P "51"

References
1) See, e.g., A. Redfern & M. Hunter, Law and Practice of International Commercial Arbitration
3 (2d ed. 1991) (“two or more parties, faced with a dispute which they cannot resolve for
themselves, agreeing that some private individual will resolve it for them and if the
arbitration runs its full course ... it will not be settled by a compromise, but by a
decision.”); de Vries, International Commercial Arbitration: A Contractual Substitute for
National Courts, 57 Tulane L. Rev. 42, 42-43 (1982) (“a mode of resolving disputes by one or
more persons who derive their power from the agreement of the parties and whose
decision is binding upon them”); M. Reisman, L. Craig, W. Park & J. Paulsson, International
Commercial Arbitration xxviii (1997) (“a contractual method for the relatively private
settlement of disputes”); Wetter, The Legal Framework of International Arbitral Tribunals –
Five Tentative Markings, in International Contracts 271, 274 (1981) (“voluntary submission
by parties to a special kind of private litigation which is accepted, tolerated and
sanctioned by public international law and the laws of most civilized jurisdictions”);
Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974) (“an agreement to arbitrate before a
specified tribunal [is], in effect, a specialized kind of forum-selection clause that posits
not only the situs of suit but also the procedure to be used in resolving the dispute”).
2) In a number of industries, specialized arbitral regimes provide well-established means of
dispute resolution. Examples include maritime, commodities, construction, and labor
arbitration. See, e.g., D. Johnson, International Commodity Arbitration (1991); F. Rose,
International Commercial and Maritime Arbitration (1988); AAA, Business Arbitration – What
You Need to Know (1992) (providing descriptions and bibliographies for construction,
textile, apparel, and insurance arbitrations).
3) See infra pp. 13-19.
4) See infra pp. 27-41.
5) Arbitration can also involve extremely summary procedures, such as those in “fast-track”
or “documents only” proceedings. In the latter, no oral evidence or hearings are
permitted, with the parties relying entirely on written submissions and evidence.
6) The existence of various international agreements – such as the New York Convention –
providing for the recognition and enforcement of foreign arbitral awards facilitates the
enforceability of such awards. See infra pp. 19-27. Many states have entered into bilateral
or regional treaty regimes (such as the Brussels Convention) which give some foreign court
judgments a high degree of enforceability. In contrast, the United States is not a party to
any international convention or bilateral treaty relating to the enforcement of foreign
court judgments. See G. Born, International Civil Litigation in United States Courts 938-39
(3d ed. 1996).
7) The New York Convention is reproduced in Appendix B and is discussed in detail below.
See infra pp. 19-23.
8) Other significant international agreements concerning arbitration include the Inter-
American Convention on International Commercial Arbitration of 1975, see Appendix C and
infra pp. 23-24; the Convention on the Settlement of Investment Disputes of 1965, see infra
pp. 24-26; the 1961 European Convention on International Commercial Arbitration, see
Appendix A; and bilateral treaties, see infra pp. 26-27.
9) Under the laws of many countries, international arbitration does not include contractual
dispute resolution of issues of pure fact – such as valuation of property, verification of
compliance with engineering specifications, or determination of conformity of goods with
contract terms. Civil law states in particular distinguish between arbitration proper and
the processes of valuation or appraisal. (Arbitration proper is referred to in Germany as
Schiedsgerichtsbarkeit, in France as arbitrage, and in Italy as arbitrato rituale. Valuation,
appraisal and similar proceedings are referred to in Germany as Schiedsgutachten, in
Italy as arbitraggio and in the Netherlands as bindend advies.) These forms of dispute
resolution usually fall outside local arbitration statutes, and do not necessarily enjoy the
judicial and legal support provided by such statutes. De Vries, International Commercial
Arbitration: A Contractual Substitute for National Courts, 57 Tulane L. Rev. 42, 48 (1982).
10) See infra pp. 27-41.
11) See infra pp. 461-68.
12) See infra pp. 27-31, 495-514, 580-609, 629-38.
13) The UNCITRAL Model Law is discussed below, see infra pp. 30-31, 45, and reproduced in
Appendix F.
14) The International Bar Association's Rules on the Taking of Evidence in International
Commercial Arbitration are discussed below, infra pp. 46-47 and reproduced in Appendix
N. The UNCITRAL Notes on Organizing Arbitral Proceedings are discussed below, infra pp.
48-49, and reproduced in Appendix Q. The IBA's Ethics for International Arbitrators are
discussed below, infra pp. 47, 626-28, 875-77, and reproduced in Appendix O.
15) The ICC, AAA Commercial Arbitration, and LCIA Rules are reproduced in Appendices J, K,
and L. Each institution is described below. See infra pp. 13-17.
16) The UNCITRAL Rules are reproduced in Appendix G. See infra pp. 45-46.
17) E.g., United Steelworkers of America v. Warrior and Gulf Navigation Co., 363 U.S. 574, 582
(1960) (“arbitration is a matter of contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed to so submit”); infra pp. 155-67.
18) There is a small, but important, category of cases in which international arbitrations may
result without a consensual agreement, by virtue of provisions in international investment
protection or other conventions or legislation. See infra pp. 191-95.
19) An agreement concerning the arbitration of existing disputes is also called a submission
agreement or a “compromis.”
20) For commentary on drafting international arbitration agreements, see J. Barist,
Commercial Arbitration Law and Clauses: A Drafter's Guide (1994); Bond, How to Draft an
Arbitration Clause (Revisited), 1 ICC Ct. Bull. 14 (1990); G. Born, International Arbitration and
Forum Selection Agreements (1999). A selection of commonly-used model international
arbitration clauses is included in Appendix P.
21) See G. Born, International Arbitration and Forum Selection Agreements (1999).
22) For examples of poorly-drafted arbitration clauses, see infra pp. 186-87.
23) The enforceability of international arbitration agreements is a complex topic, which is
discussed in detail below. See infra pp. 55-295.
24) These choice of law complexities are discussed in detail below. See infra pp. 95-117.
25) The “non-arbitrability” doctrine is discussed in detail below. See infra pp. 243-294.
26) See infra pp. 157-61, 243.
27) See UNCITRAL Model Law Article 16(1); infra pp. 55-74.
28) The allocation of authority between national courts and arbitral tribunals and the
“competence-competence” doctrine are explored below. See infra pp. 74-95.
29) Issues of forum selection (as between different national courts) in disputes over the
formation, validity, and interpretation of arbitration agreements are discussed below.
See infra pp. 398-405.
30) For example, the world's leading international arbitral institution – the International
Chamber of Commerce – handled requests for 32 arbitrations in 1956, 210 arbitrations in
1976, 337 arbitrations in 1992, 452 arbitrations in 1997, and 529 arbitrations in 1999. See
infra pp. 13-15. Likewise, in 1980, the American Arbitration Association administered 101
international arbitrations; in 1991, it administered 226 such arbitrations; and in 1997 the
AAA reportedly administered approximately 400 international arbitrations. See infra pp.
16-17. See generally Aksen, International Arbitration – Its Time Has Arrived, 14 Case Western
Reserve J. Int'l L. 247 (1982); Stein & Wotman, International Commercial Arbitration in the
1980s, 38 Bus. Law. 1685 (1983).
31) For a more complete review, see G. Born, International Arbitration and Forum Selection
Agreements (1999).
32) The ethical obligations of arbitrators and grounds for challenging arbitrators for bias are
discussed below. See infra pp. 638-51, 859-80.
33) See Kerr, International Arbitration v. Litigation, 1980 J. Bus. L. 164 (“in international cases,
where jurisdictional problems are bound to arise in the event of dispute, the practice of
incorporating arbitration clauses into contracts is becoming almost universal”); Rhodes &
Sloan, The Pitfalls of International Commercial Arbitration, 17 Vand. J. Transnat'l L. 19
(1984).
34) If it can be enforced, a carefully-drafted forum selection clause choosing a national court
to resolve all the parties' disputes may achieve many of the benefits of an arbitration
clause. However, forum selection clauses do not enjoy the essentially global protection
which the New York Convention (and other international instruments) gives to
international arbitration agreements. Some states have entered into bilateral or regional
treaty arrangements (e.g., the Brussels and Lugano Conventions) which impose
international obligations to enforce forum selection clauses. See G. Born, International
Arbitration and Forum Selection Agreements (1999). The United States is not party to any
such arrangement.
35) See infra pp. 20-23, 157-61.
36) Nonetheless, bilateral treaties and regional agreements like the Brussels Convention
provide significant advantages in enforcing both forum selection agreements and
national court judgments.
37) See, e.g., Kassis, The Questionable Validity of Arbitration and Awards Under the Rules of the
International Chamber of Commerce, 6 J. Int'l Arb. 79 (1989); Paulsson, Third World in
International Investment Arbitration, 2 ICSID Rev. 19 (1987); Sornarajah, The UNCITRAL
Model Law: A Third World Viewpoint, 6 J. Int'l Arb. 7 (1989); Shihata, Obstacles Facing
International Arbitration, 4 Int'l Tax & Bus. Law. 209, 209 (1986) (“[i]t is no secret that
developing countries often see international arbitration as a process administered ... by
nationals of the developed countries”); Asouzu, African States and the Enforcement of
Arbitral Awards: Some Key Issues, 15 Arb. Int'l 1 (1999); D. Shea, The Calvo Clause (1956).
38) See infra pp. 29-30, 156-57.
39) See infra pp. 27-34, 156-67, 191-95.
40) Fletcher, Unrealized Expectations – The Root of Procedural Confusion in International
Arbitrations, 2 J. Int'l Arb. 7 (1985); Leahy & Pierce, Sanctions to Control Party Misbehavior in
International Arbitration, 26 Va. J. Int'l L. 292 (1986); Donahey, Defending the Arbitration
Against Sabotage, 1 J. Int'l Arb. 93 (1996).
41) UNCITRAL Rules Article 32(5); ICC Rules Article 21(3); AAA International Rules Articles 21(4)
& 28(5); LCIA Rules Article 30.
42) See infra p. 557.
43) E.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 628 (1985) (a
party agreeing to arbitration “trades the procedures and opportunity for review of the
courtroom for the simplicity, informality, and expedition of arbitration”); McDonald v. City
of West Branch, 466 U.S. 284, 292 (1984).
44) Layton, Arbitration in International Commercial Agreements: The Noose Draws Tighter, 9
Int'l Law. 741, 745 (1975); Lyons, Arbitration: The Slower, More Expensive Alternative, The
American Lawyer 107 (Jan./Feb. 1985); Blue Tee Corp. v. Koehring Co., 999 F.2d 633 (2d Cir.
1993) (“This appeal ... makes one wonder about the alleged speed and economy of
arbitration in resolving commercial disputes”).
45) Wetter, The Present Status of the International Court of Arbitration of the ICC: An Appraisal,
1 Am. Rev. Int'l Arb. 91, 103 (1990). See Kerr, International Arbitration v. Litigation, 1980 J.
Bus. L. 164, 164-65, 175-78 (“Arbitral tribunals have to be paid, whereas court fees are
often negligible. In important cases, three arbitrators, or two and an umpire, are usually
preferred to a single arbitrator, and this greatly adds to the costs and complexities. If the
arbitrators are busy men, as they usually are, arbitration can be much more protracted
than litigation ...”).
46) See infra p. 15.
47) Buchanan, Public Policy and International Commercial Arbitration, 26 Am. Bus. L.J. 511, 512
(1988). See Aksen, The Need to Utilize International Arbitration, 17 Vand. J. Trans. L. 11, 11
(1984).
48) Lyons, Arbitration: The Slower, More Expensive Alternative, The American Lawyer 107
(Jan./Feb. 1985). For realistic, but less critical, views of international arbitration, see
Karrer, Arbitration Saves! Costs: Poker and Hide-and-Seek, 3 J. Int'l Arb. 35 (1986); Kerr,
International Arbitration v. Litigation, 1980 J. Bus. L. 164.
49) In re Canadian Gulf Line, 98 F.2d 711, 714 (2d Cir. 1938).
50) Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978, 987 n.32 (2d Cir. 1942). See
also Bell Canada v. ITT Telecommunications Corp., 563 F.Supp. 636 (S D.N.Y. 1983)
(“Arbitration is not a oneway street. It has its drawbacks as well as advantages”).
51) For more detailed analysis of when arbitration is desirable, see G. Born, International
Arbitration and Forum Selection Agreements 1-14 (1999).
52) For brief descriptions of major international arbitration institutions, see G. Born,
International Arbitration and Forum Selection Agreements 44-55 (1999); von Mehren, Rules
of Arbitral Bodies Considered From a Practical Point of View, 9 J. Int'l Arb. 105 (1992);
Blessing, The Major Western and Soviet Arbitration Rules, 6 J. Int'l Arb. 7 (1989); Tiefenbrun,
A Comparison of International Arbitral Rules, 15 Boston C. Int'l & Comp. L. Rev. 25 (1992).
53) The incorporation of institutional arbitration rules is discussed below, see infra p. 329.
54) For a discussion of the UNCITRAL Rules, which are reproduced in Appendix G, see infra pp.
45-46.
55) Most leading arbitration institutions (including the ICC, the AAA, and the LCIA) will act as
an appointing authority, for a fee, in ad hoc arbitrations.
56) See infra pp. 629-38.
57) For commentary on the ICC, see Y. Derains & E. Schwarz, A Guide to the New ICC Rules of
Arbitration (1998); ICC, Guide to ICC Arbitration (1994); D. Hascher, Collection of Procedural
Decisions in ICC Arbitrations 1993-1996 (1997); W. Craig, W. Park & J. Paulsson, International
Chamber of Commerce Arbitration (2d ed. 1990); W. Craig, W. Park & J. Paulsson, Annotated
Guide to the 1998 ICC Arbitration Rules (1998); Bond, The Present Status of the International
Court of Arbitration of the ICC: A Comment on an Appraisal, 1 Am. Rev. Int'l Arb. 108 (1990);
Cohn, The Rules of Arbitration of the International Chamber of Commerce, 14 Int'l & Comp.
L.Q. 132 (1965); Wetter, The Present Status of the International Court of Arbitration of the
ICC: An Appraisal, 1 Am. Rev. Int'l Arb. 91 (1990).
58) ICC Ct. Bull. (May 1993); ICC Ct. Bull. (April 2000).
59) The ICC's Rules are reprinted in Appendix K.
60) ICC Rules Articles 4(5) & 5(4).
61) ICC Rules Article 30.
62) ICC Rules Articles 7-9.
63) ICC Rules Article 9.
64) ICC Rules Article 11.
65) ICC Rules Article 18.
66) ICC Rules Article 27.
67) ICC Rules Article 31.
68) ICC Rules Article 1(2). The Court acts pursuant to internal rules governing its conduct. See
ICC, Internal Rules of the International Court of Arbitration, Appendix K.
69) Bond, The Experience of the ICC in the Confirmation/ Appointment Stage of an Arbitration, in
The Arbitral Process and the Independence of Arbitrators 9 (ICC 1991); Hascher, ICC Practice
in Relation to the Appointment, Confirmation, Challenge and Replacement of Arbitrators,
6(2) ICC Ct. Bull. 4 (1995).
70) ICC Rules Article 9(1). Even where the parties' arbitration agreement allows a party to
appoint an arbitrator (as typically occurs with three-person tribunals), the party's
appointment must be “confirmed” by the Court ICC Rules Articles 8 & 9. In practice, a
party's appointment is seldom rejected by the Court, save in cases involving a lack of
independence.
71) Verbist, The Practice of the ICC International Court of Arbitration With Regard to the Fixing
of the Place of Arbitration, 12 Arb. Int'l 347 (1996); Jarvin, The Place of Arbitration: A Review
of the ICC Court's Guiding Principles and Practices When Fixing the Place of Arbitration, 7 ICC
Ct. Bull. 55 (1996).
72) ICC Rules, Appendix III, Article 2.
73) ICC Rules Article 30.
74) See Wetter, The Present Status of the International Court of Arbitration of the ICC: An
Appraisal, 1 Am. Rev. Int'l Arb. 91 (1990); Schwartz, The Costs of ICC Arbitration, in ICC,
International Court of Arbitration Bulletin (May 1993); W. Craig, W. Park & J. Paulsson,
International Chamber Of Commerce Arbitration 38-45 (2d ed. 1990) (attempting to counter
criticisms); Buehler, Costs in ICC Arbitration: A Practitioner's View, 3 Am. Rev. Int'l Arb. 116
(1992).
75) The current LCIA Rules are reproduced in Appendix L.
76) LCIA Rules Articles 14, 15, 19, 20, 21, & 22.
77) LCIA Rules Articles 22.1(d) & (e).
78) LCIA Rules Article 25.2.
79) LCIA Rules Article 28.1.
80) LCIA Rules Article 16.1.
81) For commentary on the AAA, see AAA, Business Arbitration – What You Need to Know (1992).
82) These are contained in Appendix J.
83) These are reprinted in Appendix I. The AAA's International Rules were preceded by a set
of “Supplementary Procedures for International Commercial Arbitration,” adopted in
1982. The AAA Supplementary Procedures continue to be used in international cases in
which the parties have selected AAA Commercial Arbitration Rules (as opposed to AAA
International Rules).
84) See infra pp. 45-46.
85) AAA International Rules Article 1(1).
86) For commentary on ICSID and the ICSID Convention, see infra pp. 24-26.
87) See infra pp. 24-26.
88) See infra pp. 25-26.
89) See infra pp. 514-21.
90) Bilateral treaties relating to international commercial arbitration continue to be
significant today. Many countries have entered into a number of friendship, commerce,
and navigation treaties that contain provisions relating to the mutual recognition and
enforcement of arbitration agreements and awards. See infra pp. 26-27. Likewise,
numerous states have entered into bilateral investment treaties, which address issues
relating to international arbitration. See infra pp. 27, 191-95.
91) Treaty concerning the Union of South American States in Respect of Procedural Law,
signed at Montevideo, January 11, 1889.
92) Geneva Protocol on Arbitration Clauses of 1923, 27 League of Nations Treaty Series 158
(1924). See A. van den Berg, The New York Convention of 1958 6-7, 113-118 (1981); Nussbaum,
Treaties on Commercial Arbitration – A Test of International Private-Law Legislation, 56
Harv. L. Rev. 219, 220-22 (1942).
93) The Geneva Protocol applied only to agreements “between parties subject respectively to
the jurisdiction of different contracting states.” In addition, Article I of the Protocol
applied only to disputes concerning contracts “relating to commercial matters or to any
other matter capable of settlement by arbitration.” The language presaged the
“commercial relationship” and arbitrability requirements of the New York Convention. See
infra pp. 117-54.
94) Geneva Protocol Article I.
95) Convention for the Execution of Foreign Arbitral Awards, signed at Geneva, September 26,
1927, 92 League of Nations Treaty Series 302 (1929-30). See A. van den Berg, The New York
Convention of 1958 6-7, 113-118 (1981).
96) The standard reference works on the Convention are A. van den Berg, The New York
Convention of 1958 (1981) and G. Gaja, The New York Convention (Dobbs Ferry 1978-80).
97) United Nations Convention on the Recognition and Enforcement of Foreign Arbitral
Awards is reprinted at 9 U.S.C.A. §201, and in Martindale-Hubbell.
98) For a brief summary of these negotiations, see A. van den Berg, The New York Convention of
1958 1-10 (1981). For a useful collection of the travaux préparatoires, see G. Gaja, The New
York Convention (Dobbs Ferry 1978-80).
The Convention is set forth in English, French, Spanish, Russian, and Chinese texts, all of
which are equally authentic. New York Convention Article XVI.
99) A. van den Berg, The New York Convention of 1958 1 (1981). See also Mustill, Arbitration:
History and Background, 6 J. Int'l Arb. 43 (1989) (“most effective instance of international
legislation in the entire history of commercial law”); A. Redfern & M. Hunter, International
Commercial Arbitration 131 (2d ed. 1991) (“most important convention of modern times in
the field of international commercial arbitration”); Wetter, The Present Status of the
International Court of Arbitration of the ICC: An Appraisal, I Am. Rev. Int'l Arb. 91, 93 (1990)
(“single most important pillar on which the edifice of international arbitration rests”).
100) Schwebel, A Celebration of the United Nations New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, 12 Arb. Int'l 83, 85 (1996).
101) Scherk v. Alberto-Culver Co., 417 U.S. 506, 502 n.15 (1974). See also A. van den Berg, The New
York Convention of 1958 1-3 (1981).
102) New York Convention Articles III and V. “Recognition” of an arbitral award refers to giving
preclusive effect to the award, usually to bar relitigation of the claims that were
arbitrated; “enforcement” refers to the invocation of coercive judicial remedies to fulfil
the arbitral award. See infra pp. 704-11.
103) New York Convention Article II(1). For a detailed discussion of this provision, see infra pp.
155-61.
104) New York Convention Article II(3).
105) U.N. Doc. E/CONF. 26/SR.25 at 2 (1958).
106) In the United States, historic distrust of arbitration and the domestic debate over the
appropriate scope of the federal treaty power and the authority of the several states led
to an initial recommendation from the U.S. delegation against ratifying the Convention.
Springer, The United Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, 3 Int'l Law. 320 (1969); Czysak & Sullivan, American Arbitration Law and the
UN Convention, 13 Arb. J. 197 (1958).
107) In 1970, the United States reconsidered its position and acceded to the Convention. See
Quigley, Accession by the United States to the United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049 (1961); Message
from the President on the Convention on the Recognition and Enforcement of Foreign
Arbitral Awards, S. Exec. Doc. E. 90th Cong., 2d Sess. 18 (1968).
108) See Appendix B and 9 U.S.C.A. §201 for a list of states that have ratified the Convention.
109) See 9 U.S.C.A. §201, for excerpts of some of the member states' reservations. These
reservations frequently deal with reciprocity and limiting the Convention's applicability
to disputes arising from “commercial” relations.
110) Article VII(1) of the Convention provides:
The provisions of the present Convention shall not ... deprive any interested party of any
right he may have to avail himself of an arbitral award in the manner and to the extent
allowed by the law or treaties of the country where such award is sought to be relied
upon.
111) See infra p. 159.
112) The International Council for Commercial Arbitration publishes an annual Yearbook on
Commercial Arbitration, see infra p. 48 that identifies and excerpts national arbitration
legislation implementing the New York Convention, as well as national court decisions
applying various provisions of the Convention.
113) See infra pp. 791-92.
114) P. Sanders, Commentary, I Y.B. Comm. Arb. 207 (1976); II Y.B. Comm. Arb. 254 (1977); IV Y.B.
Comm. Arb. 231 (1979).
115) For commentary, see Garro, Enforcement of Arbitration Agreements and Jurisdiction of
Arbitral Tribunals in Latin America, 1 J. Int'l Arb. 293 (1984); Holtzman, The United States
Becomes a Party to the Inter-American Convention on International Commercial Arbitration,
XVI Y.B. Comm. Arb. 419 (1991); van den Berg, The New York Convention 1958 and the
Panama Convention 1975 Redundancy or Compatibility, 5 Arb. Int'l 214 (1989).
116) Inter-American Convention on International Commercial Arbitration, signed in Panama on
January 30, 1975. The Convention is reprinted in Appendix C, at 9 U.S.C.A. §301, and III Y.B.
Comm. Arb. 15 (1978).
117) The Inter-American Commercial Arbitration Commission was established in 1934 by the
predecessor to the Organization of American States. IACAC is composed of national
sections in about a dozen nations; the AAA is the U.S. national section. IACAC's
administrative headquarters is located in OAS facilities in Washington, D.C., and is
overseen on a day-to-day basis by a Director General.
118) The IACAC Rules are reproduced in Appendix M.
119) For commentary, see Broches, The Convention on the Settlement of Investment Disputes:
Some Observations on Jurisdiction, 5 Colum. J. Transnat'l L. 263 (1966); Broches, Settlement
of Disputes Arising out of Investment in Developing Countries, 11 Int'l Bus. Law. 206 (1983);
Delaume, ICSID Arbitration: Practical Considerations, 1 J. Int'l Arb. 101 (1984); Lalive, The
First “World Bank” Arbitration, 51 B.Y.I.L. 123 (1980); Nurick & Schnably, The First ICSID
Conciliation: Tesoro Petroleum Corporation v. Trinidad and Tobago, 1 Foreign Inv. L.J. 340,
349 (1986); Rand, Hornick and Friedland, ICSID's Emerging Jurisprudence: The Scope of
ICSID's Jurisdiction, 19 N.Y.U. J. Int'l L. & Pol. 33 (1986); Schmidt, Arbitration Under the
Auspices of the International Centre for Settlement of Investment Disputes, 17 Harv. Int'l L. J.
90 (1976); Shihata, Foreign Investment, The Settlement of Disputes Regarding Foreign
Investment: The Role of the World Bank, with Particular Reference to ICSID and MIGA, 1 Am.
U.J. Int'l L. & Pol. 97 (1986); Soley, ICSID Implementation: An Effective Alternative to
International Conflict, 19 Int'l Law. 521 (1985); Vuylsteke, Foreign Investment Protection and
ICSID Arbitration, 4 Ga. J. Int'l & Comp. L. 343 (1974).
120) Convention on the Settlement of Investment Disputes Between States and Nationals of
Other States, produced at Washington, D.C., March 18, 1965. The Convention is reprinted at
575 U.N.T.S. 160 (No. 8359) (1966), and at 4 Int'l Legal Mat. 532 (1965). See also 22 U.S.C.
§§1650 and 1650(a) (1966).
121) ICSID Convention Article 25(1).
122) See Reisman, The Breakdown of the Control Mechanism in ICSID Arbitration, 1989 Duke L. J.
739; Broches, The Convention on the Settlement of Investment Disputes: Some Observations
on Jurisdiction, 5 Colum. J. Transnat'l L. 263 (1966); Rand, Hornick and Friedland, ICSID's
Emerging Jurisprudence: The Scope of ICSID's Jurisdiction, 19 N.Y.U. J. Int'l L. & Pol. 33 (1986).
123) ICSID Convention Articles 28-35. See Nurick & Schnably, The First ICSID Conciliation: Tesoro
Petroleum Corporation v. Trinidad and Tobago, 1 Foreign Inv. L.J. 340, 349 (1986).
124) ICSID Convention Article 42.
125) ICSID Convention Articles 53-54.
126) ICSID Convention Article 52.
127) E.g., Redfern, ICSID – Losing Its Appeal?, 3 Arb. Int'l 98 (1987).
128) See infra pp. 26-27, 191-95.
129) E.g., Redfern, ICSID – Losing Its Appeal?, 3 Arb. Int'l 98 (1987).
130) For commentary, see R. Khan, The Iran-United States Claims Tribunal: Controversies, Cases,
and Contribution (1990); R. Lillich, The Iran-United States Claims Tribunal 1981-83 (1984); J.
Westberg, International Transactions and Claims Involving Government Parties: Case Law of
the Iran-United States Claims Tribunal (1991).
131) Bilateral claims commissions to resolve claims of nationals of one state against another
state have frequently been established, particularly following armed conflicts, between
European and American states.
132) See 1 Iran-United States Claims Tribunal Reports 2.
133) The decisions are important precedents on issues of both substantive international law
and arbitral procedure. They are available from the Iran-United States Claims Tribunal
Reports and Mealey's Iranian Assets Litigation Reporter.
134) For commentary, see Onegbu, BITS and ICC Arbitration – Portent of A New Wave, 16 J. Int'l
Arb. 93 (1999); Paulsson, Arbitration Without Privity, 10 ICSID L. Rev. 232 (1995); ICSID,
Bilateral Investment Treaties, 1959-1996 Doc. ICSID/17 (30 May 1997).
135) Parra, The Role of ICSID in the Settlement of Investment Disputes, 16 ICSID News (1999).
136) See infra pp. 191-95.
137) See 1 U.S.T. 785 (Ireland); 5 U.S.T. 1829 (Greece); 5 U.S.T. 550 (Israel); T.I.A.S. No. 4685 (Italy);
T.I.A.S. No. 4797 (Denmark); 4 U.S.T. 2063 (Japan); 7 U.S.T. 1839 (Germany); 8 U.S.T. 899 (Iran);
9 U.S.T. 449 Nicaragua); 8 U.S.T. 2043 (Netherlands); 8 U.S.T. 2217 (Korea); 12 U.S.T. 110
(Pakistan); 11 U.S.T. 2398 (France); 14 U.S.T. 1284 (Belgium); 4 U.S.T. 251 (Luxembourg); 18
U.S.T. 1 (Togo); 9 U.S.T. 5843 (Thailand).
138) Treaty of Friendship, Commerce and Navigation, Oct. 29, 1954, United States-West
Germany, 7 U.S.T. 1840, 1845, Article 6(2), T.I.A.S. No. 3593.
139) Von Engelbrechten v. Galvononi and Nevy Bros., 300 N.Y.S.2d 239 (N.Y. Civ. Ct. 1969), aff'd,
307 N.Y.S.2d 381 (App. Div. 1970).
140) As discussed below, that was historically the case in the United States and England. See
infra pp. 156-57. It continues to be the case in some U.S. states, see infra pp. 248-49, and
abroad.
141) Naón, Arbitration in Latin America, 5 Int'l Arb. 137 (1989); S. Saleh, Commercial Arbitration in
the Arab Middle East 49-50 (1984); El-Ahdah, Enforcement of Arbitral Awards in the Arab
Countries, 11 Arb. Int'l 169 (1995); Asouzu, African States and the Enforcement of Arbitral
Awards: Some Key Issues, 15 Arb. Int'l 1 (1999).
142) Kassis, The Questionable Validity of Arbitration and Awards Under the Rules of the
International Chamber of Commerce, 6 J. Int'l Arb. 79 (1989); Sornarajah, The UNCITRAL
Model Law A Third World Viewpoint, 6 J. Int'l Arb. 7 (1989).
143) See authorities cited supra note 142.
144) See infra pp. 161-65.
145) See infra pp. 780-83, 791-94.
146) See infra pp. 432, 514-21, 643-51.
147) UNCITRAL Model Law Articles 34-36.
148) UNCITRAL Model Law Article 5.
149) Arbitration Act, 1996.
150) Saville, The Origin of the New English Arbitration Act 1996: Reconciling Speed with Justice in
the Decision-making Process, 13 Arb. Int'l 237 (1997).
151) For commentary on English arbitration law prior to 1996, see A. Redfern & M. Hunter,
International Commercial Arbitration (2d ed. 1991); M. Mustill & S. Boyd, Commercial
Arbitration (2d ed. 1989).
152) Ashville Investments v. Elmer Contractors [1988] 2 Lloyd's L. Rep. 73 (Ct. App. 1987); Samuel,
Separability in English Law, 3 J. Int'l Arb. 95 (1986).
153) Prior to 1979, English courts could set aside an award on the grounds that it contained
errors of fact or law. Moreover, under the former “case stated” procedure, English courts
could determine preliminary points of law. The 1979 English Arbitration Act altered both
of these features of English law, and replaced them with a limited right of appeal to the
High Court Arbitration Act, 1979, §1.
154) There is extensive commentary on the English Arbitration Act 1996. See, e.g., R. Merkin,
Arbitration Act 1996 – An Annotated Guide (1996); B. Harris, R. Planterose & J. Tecks, The
Arbitration Act 1996: A Commentary (1996); Special Section, English Arbitration Act 1996, 8
Am. Rev. Int'l Arb. 1 (1997).
155) See, Departmental Advisory Committee on Arbitration Law, 1996, Report on the Arbitration
Bill (February 1996), reprinted in 13 Arb. Int'l 275 (1997).
156) Arbitration Act 1996, §§5, 6 & 9.
157) Arbitration Act 1996, §7. The Act specifically provides that arbitral tribunals may rule on
their own jurisdiction. Arbitration Act 1996, §30(1).
158) Arbitration Act 1996, §§67-69.
159) Arbitration Act 1996, §§100-04.
160) Arbitration Act 1996, §34(1).
161) Arbitration Act 1996, §37.
162) Arbitration Act 1996, §38(3).
163) Arbitration Act 1996, §§38(4) & 39.
164) Arbitration Act 1996, §44.
165) Arbitration Act 1996, §§16, 18, 19, & 24.
166) The two decrees added Articles 1442-1507 to the French Code of Civil Procedure. See A.
Redfern & M. Hunter, The Law and Practice of International Commercial Arbitration
Appendix 17 (2d ed. 1990). and VII Y.B. Comm. Arb. 271 (1982), for English translations. Like
most other developed trading states, France has ratified the New York Convention.
167) French Code of Civil Procedure Article 1458 & 1466.
168) French Code of Civil Procedure Article 1443.
169) French Code of Civil Procedure Article 1466.
170) French Code of Civil Procedure Article 1458.
171) French Code of Civil Procedure Articles 1443, 1460, 1494, & 1496.
172) French Code of Civil Procedure Article 1460.
173) French Code of Civil Procedure Article 1460.
174) French Code of Civil Procedure Articles 1481-1484.
175) French Code of Civil Procedure Articles 1498-1507.
176) French Code of Civil Procedure Article 1457.
177) The Swiss Law on Private International Law is excerpted in Appendix H. For commentary,
see M. Patocchi, A. Bucher & P. Tschanz, International Arbitration in Switzerland (1988); P.
Lalive, The New Swiss Law on International Arbitration, 4 Arb. Int'l 2 (1988). Switzerland is a
party to the New York Convention.
178) Swiss Law on Private International Law Article 178(2) & (3).
179) Swiss Law on Private International Law Article 186.
180) Swiss Law on Private International Law Article 177.
181) Swiss Law on Private International Law Articles 182 & 187.
182) Swiss Law on Private International Law Articles 183, 184, & 185.
183) Swiss Law on Private International Law Article 194.
184) Swiss Law on Private International Law Article 190.
185) Swiss Law on Private International Law Article 192.
186) Commentary on international arbitration in the United States is underdeveloped; for the
leading offerings, see G. Wilner, Domke on Commercial Arbitration: The Law and Practice of
Commercial Arbitration (1984 and 1992 Rev. Ed.); F. Kellor, American Arbitration: Its History,
Functions and Achievements (1948); A. Lowenfeld, International Litigation and Arbitration
(1992); I. MacNeil, R. Speidel & T Stipanowich, Federal Arbitration Law (1994).
187) For a detailed discussion of the respective roles of federal and state law in international
arbitration in the United States, see infra pp. 114-17, 331-407.
188) U.S. courts traditionally awarded only nominal damages for breaches of arbitration
agreements. E.g., Finance Co. v. Board of Ed. of Rochester, 190 N.Y. 76 (1907); Wood v.
Humphrey, 114 Mass. 185 (1973) (“It has been long settled that agreements to arbitrate
which entirely oust the courts of jurisdiction will not be supported either at law or in
equity”).
189) Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109, 121-22 (1924); Tobey v. County of Bristol, 23
Fed.Cas. 1313 (C.C. D. Mass. 1845). See Kulukundis Shipping Co. v. Amtorg Trading Corp., 126
F.2d 978 (2d Cir. 1942), for a detailed (and influential) historical review of the
enforceability of arbitration agreements at common law. See also infra pp. 156-57.
190) S. Rep. No. 536, 68th Cong., 1st Sess. 2-3 (1924) (citing “[judges'] jealousy of their rights as
courts, coupled with the fear that if arbitration agreements were to prevail and be
enforced, the courts would be ousted of much of their jurisdiction”); Joint Hearings on S.
1005 and H.R. 646 Before the Subcommittee of the Committees on the Judiciary, 68th
Cong., 1st Sess. 21 (1924); Tobey v. County of Bristol, 23 Fed.Cas. 1313 (C.C.D. Mass. 1845).
Some traced concerns of this nature to the desire of the common law judges to prevent
competition – particularly competition for fees–from arbitrators:
The doctrine had its origin in the interests of the judges. There was no disguising the fact
that, as formerly, the emoluments of the judges depended mainly, or almost entirely,
upon fees, and as they had no fixed salaries, there was great competition to get as much
as possible of litigation into Westminster Hall.... And they had great jealousy of
arbitrations whereby Westminster Hall was robbed of those cases which came not into
Kings Bench...
Scott v. Avery, 25 L.J.Ex. 308, 313 (H.L. 1856).
191) N.Y. Arbitration Law, L. 1920, C. 275, Consol. c. 72.
192) An American Bar Association committee prepared the initial draft of what was then called
the “United States Arbitration Act.” That bill was first introduced in Congress in 1922. S.
4214, 67th Cong., 4th Sess., 64 Cong. Rec. 732 (1922); H.R. 13522, 67th Cong, 4th Sess., 64
Cong. Rec. 797 (1922). The Senate Judiciary Committee held hearings on the bill in 1923. See
Hearings on S. 4213 and S. 4214 Before the Subcommittee of the Senate Committee on the
Judiciary, 67th Cong., 4th Sess. (1923). Joint congressional hearings on the bill were held in
1924. Joint Hearings on S. 1005 and H.R. 646 Before the Subcommittee of the Committees
on the Judiciary, 68th Cong. 1st Sess. (1924).
193) S. Rep. No. 536, 68th Cong., 1st Sess. 3 (1924); Committee on Commerce, Trade and
Commercial Law, The United States Arbitration Act and its Application, 11 A.B.A.J. 153, 155-6
(1925).
194) Supporters of the FAA stated on numerous occasions, without contradiction, that support
for the legislation was universal. Hearings on S. 4213 and S. 4214 Before the Subcommittee
of the Senate Committee on the Judiciary, 67th Cong., 4th Sess. 3, 5, 17, 21 (1923).
195) Federal Arbitration Act, ch. 392, §1, 62 Stat. 669 (1947) (as codified at 9 U.S.C. §§1-16).
196) The FAA applies to arbitration agreements and awards affecting either interstate or
foreign commerce. 9 U.S.C. §1; infra pp. 124-26, 388-88. These jurisdictional grants have
been interpreted expansively. The FAA's focus was principally domestic, although it also
expressly applies to “foreign commerce.” 9 U.S.C. §1.
197) 9 U.S.C. §2. For detailed discussion of §2 and its “savings clause,” see infra pp. 331-58.
198) 9 U.S.C. §§3-4. For a detailed discussion of §§3 and 4 see infra pp. 357-58, 386-91, 396-98.
199) See infra pp. 629-38.
200) 9 U.S.C. §7; infra pp. 469-95.
201) 9 U.S.C. §§9, 10, 11; infra pp. 881-900.
202) 9 U.S.C. §§201-210.
203) 116 Cong. Rec. 22,732-33 (daily ed. July 24, 1970) (Hamilton Fish) See also Id. at 22,731
(Andrew Jacobs); Fuller Co. v. Compagnie des Bauxites Guiness, 421 F.Supp. 938, 947 (W.D.
Pa. 1976).
204) S. Rep. No. 702, 91st Cong., 2d Sess. 1-2 (1970); Aksen, American Arbitration Accession Arrives
in the Age of Aquarius, 3 Sw. U.L. Rev. 1 (1971).
205) 9 U.S.C. §§201, 206, 207.
206) 9 U.S.C. §§203, 205; infra pp. 380-85.
207) 9 U.S.C. §§301-308; infra pp. 391-92.
208) 9 U.S.C. §302.
209) 9 U.S.C. §§303 & 306.
210) 9 U.S.C. §305.
211) 9 U.S.C. §§202, 206 & 207 and 302, 303 & 304; infra pp. 380-85, 391-92.
212) That is because of §208, discussed below. Section 208 of the FAA provides that the
domestic FAA “applies to actions and proceedings brought under this chapter to the
extent that [the domestic FAA] is not in conflict with this chapter or the convention as
ratified by the United States.” It is also because awards and agreements subject to the
New York Convention will usually fall within the jurisdictional grant of §1 of the FAA, which
covers “foreign” commerce. See 9 U.S.C. §1. Note, however, that an agreement or award
between non-U.S. parties, involving wholly non-U.S. conduct and disputes, with a non-U.S.
arbitral forum, might not fall within the jurisdictional grant of section 1. See infra pp. 388-
89. As we will see below, it is not always clear whether precedents developed under the
domestic FAA are applicable under the Act's second chapter.
213) Southland Corp. v. Keating, 465 U.S. 1 (1984); Moses Cone Mem. Hosp. v. Mercury Constr.
Corp., 460 U.S. 1 (1983); Prima Paint Corp. v. Floor & Conklin Mfg. Co., 388 U.S. 395 (1967).
214) See infra pp. 113-17, 311-18, 331-58.
215) See infra pp. 71, 348-49.
216) See infra pp. 88-93.
217) See infra pp. 155-67, 349-58.
218) See infra pp. 426-27, 443-44, 473.
219) See infra pp. 444-45, 473-74.
220) See infra pp. 461-68.
221) See infra pp. 779-96.
222) See infra pp. 157-59, 165-66.
223) See Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. 468, 477 (1989) (“The FAA
contains no express pre-emptive provision, nor does it reflect a congressional intent to
occupy the entire field of arbitration. But even when Congress has not completely
displaced state regulation in an area, state law may nonetheless be preempted to the
extent that it actually conflicts with federal law”).
224) Perry v. Thomas, 482 U.S. 483 (1987); First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938
(1995); Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265 (1995); infra pp. 114-47, 331-53.
225) See infra pp. 113-17, 353-56.
226) See infra pp. 898-99.
227) See infra pp. 331-58.
228) See the list of state arbitration statutes in AAA, The International Arbitration Kit 103 (1993).
229) Lerner, The Uniform Arbitration Act: 25-Year Retrospective. N.Y.L.J. p. 1 (July 9, 1981); Pirsig,
The New Unform Arbitration Act, 11 Bus. Law. 44 (1956); Pirsig, Some Comments on
Arbitration Legislation and the Uniform Act, 10 Vand. L. Rev. 685 (1957); Report of the
National Conference of Commissioners on Uniform State Laws, 50 A.B.A.J. 134, 134-62
(1925).
230) These include Alaska, Arizona, Arkansas, Colorado, Delaware, District of Columbia,
Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine,
Maryland, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Mexico, North
Carolina, North Dakota, Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas,
Vermont, Virginia, and Wyoming.
231) The National Conference of Commissioners on Uniform Laws originally opposed the
enforceability of arbitration agreements applicable to future disputes. Report of the
National Conference of Commissioners on Uniform State Laws, 50 A.B.A.J. 134, 134-62
(1925). As initially adopted, the Uniform Act was confined to agreements covering existing
disputes. Id. at 591.
232) E.g., Ark. Stat. Ann. §34-511 (Supp. 1983) (tort claims); Ohio Rev. Code Ann. §2711.01 (1981)
(real property disputes); Ky Rev. Stat. §417.050 (Supp. 1984) (insurance disputes). These
state rules are preempted by the FAA in almost all circumstances. See infra pp. 113-17,
331-58.
233) See, e.g., Cal. Civ. Proc. Code §1295(b) (West 1999) (requiring special notice of arbitration
clauses in medical services contracts); Cal. Civ. Proc. Code. §1298 (West 1999) (requiring
special notice of arbitration clauses in real property contracts); Mo. Ann. Stat. §435.400
(Vernon 1999) (requiring notice of arbitration clause to appear in ten point capital letters
before signature line); S.C. Code Ann. §15-48-10 (Law. Co-op. 1999) (requiring front-page
notice of arbitration clause in all but employment contracts, lawyer/client and
doctor/patient pre-arrangements, and personal injury claims). These state law rules are
also pre-empted by the FAA in almost all cases. See Doctor's Assoc. Inc. v. Casarotto, 517
U.S. 681 (1996) (holding that a state statute requiring special notice for arbitration clauses
was pre-empted by the FAA); Morrison v. Colo. Permanente Medical Group, 983 F.Supp. 937
(D. Colo. 1997) (state notice requirement for medical malpractice arbitration clauses pre-
empted by FAA). These state law rules are also preempted by the FAA in almost all cases.
See infra pp. 331-58.
234) Ga Code Ann §7-111 (Supp. 1984); Neb. Rev. Stat. §25-2115 (1979); Pa. Cons. Stat. Ann. tit. 42,
§7302(d)(2) (1982).
235) See Brunel, A Proposal to Adopt UNCITRAL's Model Law on International Arbitration as
Federal Law, 25 Tex Int'l L.J. 43 (1990); Garvey & Heffelfinger, Towards Federalizing U.S.
International Commercial Arbitration Laws, 25 Int'l Law. 209 (1991); McClendon, State
International Arbitration Laws. Are They Needed or Destrable, 1 Am Rev. Int'l Arb. 245, 250
(1990); Walker, Trends in State Legislation Governing International Arbitrations, 17 N.C.J. Int'l
L. & Comp. Reg. 419 (1992); Note. State International Arbitration Statutes and the U.S.
Arbitration Act: Unifying the Availability of Interim Relief. 13 Fordham Int'l L.J. 604 (1989).
236) Florida International Arbitration Act, 38 Fla. Stat. Ann. §684 (West); Cal. C.C.P. §1297.11 et
seq.; Texas General Arbitration Act, Tex. Rev. Civ. Stat. Ann. Articles 249-1 through 249-43;
P.A. No. 89-179, 1990 Conn. Gen. Stat. Ann. Appendix pamphlet 30-37; Ga. Code Ann. §§9-9-
30 through 9-9-43; Haw. Rev. Stat. §§658D-1 through 658D-9 (Supp. 1989); Maryland
International Commercial Arbitration Act, Md. Cts. & Jud. Proc. Code Ann. §§3-2B-01
through 3-2B-09.
237) As discussed elsewhere, generally applicable state law provides most basic rules of
contract law governing the formation of domestic arbitration agreements; federal
common law principles appear to apply to the formation and validity of international
arbitration agreements subject to the New York and Inter-American Conventions. See infra
pp. 113-17, 349-56. State law can, of course, also provide the substantive rules governing
the merits of the parties' dispute.
238) 489 U.S. 468 (1989), excerpted and discussed at infra pp. 358-80.
239) Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995); Doctor's Associates Inc. v.
Casarotto, 517 U.S. 681 (1996); infra pp. 358-80.
240) See infra pp. 358-80.
241) See supra pp. 1-3; Scherk v. Alberto-Culver Co., 417 U.S. 506, 516-17 (1974) (“A contractual
provision specifying in advance the forum in which disputes shall be litigated and the law
to be applied is... an almost indispensable precondition to achievement of the
orderliness and predictability essential to any international business transaction.”).
242) For a more detailed discussion, see infra pp. 95-117, 411-33, 523-71
243) Parties sometimes agree to permit arbitrators to resolve their dispute without reference
to law, that is, ex aequo et bono or as amiable compositeur. See infra p. 557. Most
institutional arbitration rules will permit such arbitrations, although the enforceability of
resulting awards under particular national law may be unclear. See Id.
244) Leading institutional arbitration rules provide the arbitral tribunal with the power to
decide what substantive law governs the dispute. See UNCITRAL Rules Article 33; ICC Rules
Article 17(1); AAA International Rules Article 29; infra pp. 536-42.
245) UNCITRAL Rules Article 33(1); ICC Rules Article 17(1); AAA International Rules Article 29,
infra pp. 542-57.
246) The role of national and international public policy in arbitration gives rise to
particularly complex choice of law issues. See infra pp. 558-71.
247) See infra pp. 526-42.
248) See infra pp. 529-32, 536-40.
249) See infra pp. 539-40.
250) E.g., ICC Rules Article 17(1); infra p. 541.
251) The Convention on the International Sales of Goods and the UNIDROIT Principles of
International Commercial Contracts are leading examples of this trend.
252) See supra p. 8 and infra pp. 55-74.
253) See infra pp. 95-117 for a detailed discussion of the choice of law applicable to the
arbitration agreement.
254) See infra pp. 411-33 for a detailed discussion of the choice of law applicable to the
arbitration proceedings.
255) For example, foreign lawyers may not be permitted to appear in arbitrations conducted
on national territory, see infra pp. 514-21, arbitrators may be prohibited from ordering
discovery, administering oaths, or granting provisional relief, see infra pp. 473-74, or
detailed procedural requirements may be mandatorily applicable, see infra pp. 443-44.
256) See infra pp. 428-49.
257) The United States, England, Switzerland, and France generally fall within this latter
category.
258) See infra pp. 430-32. Parties sometimes agree that hearings may be conducted
somewhere other than the arbitral situs, for convenience, but this in principle is not
thought to change the procedural law governing the arbitration. See infra p. 429.
259) See infra pp. 430-32.
260) See infra pp. 95-117, 411-33, 523-71.
261) See H. Holtzmann & J. Neuhaus, Guide to the UNCITRAL Model Law on International
Commercial Arbitration (1989); Broches, Commentary on the UNCITRAL Model Law on
International Commercial Arbitration (1990); Kavass & Liivak, Model Law of International
Commercial Arbitration: A Documentary History (1985); Davenport, The UNCITRAL Model
Law on International Commercial Arbitration: The Users' Choice, 4 Arb. Int'l 69 (1988); Kerr,
Arbitration and the Courts: The UNCITRAL Model Law, 34 Int'l & Comp. L.Q. 1 (1985);
Sornarajah, The UNCITRAL Model Law A Third World Viewpoint, 6 J. Int'l Arb. 7 (1989);
Broches, The 1985 UNCITRAL Model Law on International Commercial Arbitration: An
Exercise in International Legislation, 18 Neth. Y.B. Int'l L. 3 (1987); Herrmann, The UNCITRAL
Model Law – Its Background, Salient Features, and Purposes, 1 Arb. Int'l (1985).
262) Resolution No. 40/72 of the U.N. General Assembly, dated December 11, 1985.
263) See supra pp. 30-31.
264) For commentary, see I. Dore, Arbitration and Conciliation Under the UNCITRAL Rules: A
Textual Analysis (1986); J. van Hof, Commentary on the UNCITRAL Arbitration Rules (1991);
Sanders, Commentary on UNCITRAL Arbitration Rules, II Y. B. Comm. Arb. 172 (1977); Baker &
Davis, The UNCITRAL Arbitration Rules in Practice (Kluwer 1992); J. Dietz, Development of the
UNCITRAL Arbitration Rules, 27 Am. J. Comp. L. 449 (1979); P. Sanders, Procedures and
Practices under the UNCITRAL Rules, 27 Am. J. Comp. L. 453 (1979).
265) Report of the United Nations Commission on International Trade Law, 40 U.N. GAOR Supp.
(No. 17), Annex I, U.N. Doc. A/40/17 (1985), reprinted in 24 Int'l Leg. Mat. 1302 (1985) and in II
Y.B. Comm. Arb. 161 (1977).
266) The CPR Institute for Dispute Resolution published in 1992 a set of “Rules and
Commentary for Non-Administered Arbitration of International Disputes.” The Permanent
Court of Arbitration has promulgated the “Permanent Court of Arbitration Optional Rules
for Arbitrating Disputes Between Two Parties of Which Only One is a State.”
267) UNCITRAL Rules Article 7.
268) The parties can select an arbitral institution (like the ICC, AAA, or LCIA) as appointing
authority without adopting that institutions rules. Alternatively, a designated individual
or office-holder may be selected. See infra pp. 615-17.
269) For commentary, see the authorities cited infra pp. 484-85.
270) See infra pp. 484-85.
271) For commentary, see the authorities cited infra pp. 626-28.
272) The ABA/AAA Code of Ethics is excerpted in X Y.B. Comm. Arb. 131 (1985).
273) See infra pp. 626-28 for a discussion of traditional differences in U.S. and Western
European approaches to standards of neutrality for party-appointed arbitrators.
274) Report of the United Nations Commission in International Trade Law on the Work of its
29th Session, Official Records of the General Assembly, Fifty-First Session, Supplement 17
(A/51/17), XXVII UNCITRAL Y.B. II (1996).
275) See supra p. 11.
276) See supra p. 11.
277) See infra pp. 794-95.
278) There is extensive commentary on international arbitration. For bibliographies, see, e.g.,
L. Brown, Selected Bibliography of International Commercial Arbitration: 1970-1978 (1978); F.
Sander & F. Snyder, Alternative Methods of Dispute Settlement – A Selected Bibliography
(ABA 1979 & 1982 Rev); Hiramoto, A Path to Resources on International Commercial
Arbitration 1980-1986, 4 Int'l Tax & Bus. Law 297 (1986); Pechota, Commercial Arbitration: An
International Bibliography (1992).
279) S. Jarvin & Y. Derains, Collection of ICC Arbitral Awards 1974-1985 (1990); S. Jarvin, Y.
Derains, & J. Arnaldez, Collection of ICC Arbitral Awards 1986-1990 (1994); J. Arnaldez, Y.
Derains & D. Hascher, Collection of ICC Arbitral Awards 1990-1995 (1997).
280) D. Hascher, Collection of Procedural Decisions in ICC Arbitration 1993-1996 (1997).
281) See infra pp. 55-407.
282) See infra pp. 409-700.
283) See infra pp. 701-980.
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part One - International
Arbitration Agreements', in
Gary B. Born , International
Commercial Arbitration:
Commentary and Materials
(Second Edition), 2nd edition
(© Kluwer Law International;
Kluwer Law International
2001) pp. 53 - 54
P "53"
P "54"
P "54"
KluwerArbitration
Part One - International Arbitration Agreements
Part One: International Arbitration Agreements
The foundation for almost every international arbitration is an international arbitration
agreement. Absent a valid agreement to arbitrate, there is generally no basis for requiring
arbitration or for enforcing an arbitral award against a party. (1)
International arbitration agreements can be drafted in countless different ways. Typically, an
arbitration agreement will be a provision in an underlying commercial contract, calling for
arbitration of any future disputes relating to the contract. (2) Such a provision can be either
short and standarized or longer and tailor-made for a particular transaction. As a model of
brevity, if not prudence, European commentators cite a clause that provided “English law–
arbitration, if any, London according ICC Rules.” (3) A U.S. counterpart read: “Arbitration; if
required in New York City.” (4)
At the opposite end of the spectrum are multi-paragraph arbitration provisions, recommended
by assiduous practitioners for inclusion in commercial contracts, or specially-drafted for a
particular transaction. It is also possible for entire agreements to be devoted exclusively to
the arbitration of disputes under a related commercial contract or series of contracts. (5)
Falling between these extremes are model clauses promulgated by the ICC, LCIA, AAA, and
other international arbitration institutions. These standard formulae are all broadly similar
(and are reproduced in Appendix P).
Whatever form they take, international arbitration agreements are vitally important to the
international arbitral process. Properly drafted, they can pave the way for a relatively smooth
and efficient arbitration; less carefully drafted they can give rise to a host of legal and
practical issues. The Chapters which follow in this Part explore these issues.
Chapter 2 provides an introduction to basic legal principles relating to the interpretation and
enforcement of international arbitration agreements. The Chapter begins with an examination
of the separability doctrine, which provides that arbitration clauses are presumptively
“separable” from the underlying commercial agreements in which they appear. Chapter 2 then
considers the related subject of the allocation of competence between arbitral tribunals and
national courts for the interpretation and enforcement of international arbitration agreements.
Next, the Chapter explores the choice of law issues which are raised by international
arbitration agreements. Finally, Chapter 2 discusses the applicability of the New York
Convention, other international arbitration conventions and national arbitration statutes to
international arbitration agreements.
Chapter 3 examines the formation and validity of international arbitration agreements. It first
discusses the presumptive validity and enforceability of international arbitration agreements,
under both international arbitration instruments and most developed national arbitration
legislation. The Chapter also addresses the more important bases for challenging the validity
of international arbitration agreements, again under both international and national
instruments.
Chapter 4 discusses the interpretation of international arbitration agreements. It focusses
particularly on disputes about the scope of such agreements, before both arbitral tribunals
and national courts. Chapter 4 also considers other issues of interpretation, including the
distinction between mandatory and permissive arbitration agreements and the incorporation
of arbitration agreements and institutional arbitration rules.
Finally, in Chapter 5, we consider various procedural issues raised by litigation over
international arbitration agreements in United States courts. These include the respective
roles of state and federal law in enforcing arbitration agreements in the United States and the
procedural avenues that are available for enforcing international arbitration agreements in
the U.S. courts.
References
1) See infra pp. 155-67. There are a few instances where arbitration of international disputes
may be compelled even absent an arbitration agreement, typically by virtue of
international investor protection treaties. See infra pp. 191-95.
2) It is also possible for parties to an existing dispute, not otherwise subject to arbitration, to
agree to submit that dispute to arbitration. The agreement doing so is typically a stand-
alone arbitration agreement, often called a “submission agreement.” See, for example, the
model submission agreement, excerpted in G. Born, International Arbitration and Forum
Selection Agreements Exhibit B (1999).
3) Arab African Energy Corp. Ltd v. Olieprodukten Nederland BV [1983] 2 Lloyd's Rep. 419.
4) Oriental Commercial and Shipping Co. v. Rosseel, NV, 609 F.Supp. 75 (S.D.N.Y. 1985). See also
Bauer International Corp. v. Etablissements Soules & Cie., 303 N.Y.S. 2d 884 (1969)
(“Arbitration in New York”); Schulze and Burch Biscuit Co. v. Tree Top, Inc., 831 F.2d 709, 715-16
(7th Cir. 1987) (“All disputes under this transaction shall be arbitrated in the usual manner”).
5) This typically occurs in complex transactions with multiple parties and multiple
agreements, where a single, unified dispute resolution scheme is desired.
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part One : Chapter 2.
Enforcement and
Interpretation of
International Arbitration
Agreements: Basic
Principles', in Gary B. Born ,
International Commercial
Arbitration: Commentary and
Materials (Second Edition),
2nd edition (© Kluwer Law
International; Kluwer Law
International 2001) pp. 55 -
154
KluwerArbitration
Part One : Chapter 2. Enforcement and Interpretation of
International Arbitration Agreements: Basic Principles
2 Enforcement and Interpretation of International Arbitration Agreements:
Basic Principles
International arbitration agreements are deceptive creatures. Although often brief, and
superficially simple, they can raise complex legal issues. This Chapter provides an introduction
to four basic issues which are central to the enforcement and interpretation of international
arbitration agreements.
First, the Chapter examines the separability doctrine, which provides that arbitration clauses
are “separable” from the underlying commercial agreements in which they appear. Second, we
consider the competence and respective roles of arbitral tribunals and national courts in
enforcing and interpreting international arbitration agreements. Third, the Chapter explores
the choice of law issues raised by international arbitration agreements. Fourth, we consider the
jurisdictional issues which arise in determining whether the New York Convention (and other
international arbitration instruments) and national arbitration legislation are applicable to an
international arbitration agreement.
A. Separability of the Arbitration Agreement (1)
P "55" In the international context, arbitration clauses are generally deemed to be presumptively
P "56" “separable” or “severable” from the underlying contract within which they are found. The
“separability doctrine” is specifically provided for by leading institutional arbitration rules, (2)
and by national arbitration legislation or judicial decisions from many jurisdictions, (3)
including the United States. (4)
The separability doctrine provides that an arbitration agreement, even though included in and
related closely to an underlying commercial contract, is a separate and autonomous
agreement. According to a leading international arbitral award: “The principle ... of the
autonomy or the independence of the arbitration clause ... has been upheld by several
decisions of international case law.” (5) The analytical rationale for the separability doctrine is
that the parties' agreement to arbitrate consists of promises that are distinct and independent
from the underlying contract: “the mutual promises to arbitrate [generally] form the quid pro
quo of one another and constitute a separable and enforceable part of the agreement.” (6)
For reasons explored below, the separability doctrine is generally (and correctly) regarded as
having highly important consequences for the arbitral process: “Acceptance of [the] autonomy
of the international arbitration clause is a conceptual cornerstone of international arbitration.”
(7) Among other things, the separability doctrine is generally understood as implying the
continued validity of an arbitration clause (notwithstanding defects in the parties' underlying
contract), and as permitting the application of different substantive laws to the parties'
arbitration agreement and underlying contract.
P "56" The following materials introduce the separability doctrine. Reproduced below are relevant
P "57" sections from the UNCITRAL Model Law, the Swiss Law on Private International Law, the
English Arbitration Act, 1996, and the Federal Arbitration Act (“FAA”), as well as provisions from
the UNCITRAL, ICC, and LCIA arbitration rules. Also excerpted below is the award of a Soviet
arbitral tribunal in All-Union Export-Import Association v. JOC Oil Ltd, which deals rigorously
with the separability doctrine and related issues. Finally, the U.S. Supreme Court's decision in
Prima Paint Co. v. Conklin Mfg Co., (8) one of the seminal treatments of the separability
doctrine by a national court, is also reproduced below.
UNCITRAL MODEL LAW
Articles 7, 8 & 16 [excerpted below at pp. 1013, 1014, 1016]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Articles 178 & 186 [excerpted below at pp. 1033, 1034]
ENGLISH ARBITRATION ACT, 1996
Sections 6 & 7
6(1). In this Part an “arbitration agreement” means an agreement to submit to arbitration
present or future disputes (whether they are contractual or not).
6(2). A reference in an agreement to a written form of arbitration clause or to a document
containing an arbitration clause constitutes an arbitration agreement if the reference is such
as to make that clause part of the agreement.
7. Unless otherwise agreed by the parties, an arbitration agreement which forms or was
intended to form part of another agreement (whether or not in writing) shall not be regarded as
invalid, non-existent or ineffective because that other agreement is invalid, or did not come
into existence or has become ineffective, and it shall for that purpose be treated as a distinct
 agreement.
FEDERAL ARBITRATION ACT
9 United States Code §§2, 3 and 4 [excerpted below at pp. 999-1000]
P "57"
P "58"
NEW YORK CONVENTION
Articles II & V(1)(a) [excerpted below at pp. 987-988]
UNCITRAL ARBITRATION RULES
Article 21 [excerpted below at p. 1027]
INTERNATIONAL CHAMBER OF COMMERCE ARBITRATION RULES (1988 VERSION)
Article 8(1), 8(3) & 8(4)
8(1). Where the parties have agreed to submit to arbitration by the International Chamber of
Commerce, they shall be deemed thereby to have submitted ipso facto to the present Rules....
8(3). Should one of the parties raise one or more pleas concerning the existence or validity of
the agreement to arbitrate, and should the International Court of Arbitration be satisfied of the
prima facie existence of such an agreement, the Court may, without prejudice to the
admissibility or merits of the plea or pleas, decide that the arbitration shall proceed. In such a
case any decision as to the arbitrator's jurisdiction shall be taken by the arbitrator himself.
8(4). Unless otherwise provided, the arbitrator shall not cease to have jurisdiction by reason of
any claim that the contract is null and void or allegation that it is inexistent provided that he
upholds the validity of the agreement to arbitrate. He shall continue to have jurisdiction, even
though the contract itself may be inexistent or null and void, to determine the respective
rights of the parties and to adjudicate upon their claims and pleas.
INTERNATIONAL CHAMBER OF COMMERCE ARBITRATION RULES (1998 VERSION)
Article 6 [excerpted below at p. 1061]
LCIA RULES (1998 VERSION)
Article 23 [excerpted below at p. 1083]
P "58"
P "59"
ALL-UNION EXPORT-IMPORT ASSOC. SOJUZNEFTEEXPORT (MOSCOW) v. JOC OIL, LTD
Arbitration No. 109/1980, Foreign Trade Arbitration Commission at The USSR Chamber of
Commerce and Industry, Moscow (July 9, 1984)
[Sojuznefteexport (the “Association” or “SNE”) was a foreign trade organization established
under the laws of the former Union of Soviet Socialist Republics (“USSR”). In 1976, SNE entered
into various agreements to sell quantities of oil to JOC Oil Limited (“JOC”), a Bermuda company.
The purchase agreements incorporated SNE's standard conditions, which contained the
following arbitration clause:
All disputes or differences which may arise out of this contract or in connection with it are to
be settled, without recourse to the general Courts of law, in the Commission of the U.S.S.R.
Chamber of Commerce and Industry in Moscow [“FTAC”], in conformity with the rules of
procedure of the above Commission.
JOC took delivery of 33 oil shipments (worth approximately $100 million) without paying for
them. Following JOC's non-payment, SNE initiated arbitration under the arbitration clause set
forth above. JOC replied, in part, by claiming that the purchase agreement had not been
executed by two authorized representatives of SNE and accordingly was void under Soviet law.
JOC also alleged that, as a consequence, the arbitral tribunal lacked competence to adjudicate
the dispute because the arbitration clause was void. SNE claimed that the sales agreement
was not void and that, even if it were, the arbitration clause was separable and the law
applicable to that agreement did not require two signatures to be valid.]
1. The Foreign Trade Arbitration Commission has confirmed the agreement of the parties as to
the material law to be applied to the dispute between them. As this law, the parties have
agreed upon Soviet law. The Commission has therefore decided the dispute being guided by
the corresponding provisions of the Fundamentals of Civil Legislation of the USSR and of the
Union Republics of 1961 and the Civil Code of the RSFSR of 1964....
2. According to Article 27 of the Civil Procedural Code of the RSFSR in cases contemplated by
law of International Treaty, a dispute arising out of civil legal relationships, by agreement of
the parties can be referred for resolution by an arbitration body the Maritime Arbitration
Commission or the Foreign Trade Arbitration Commission at the Chamber of Commerce and
P "59" Industry of the USSR. As stated in the statute on the Foreign Trade Arbitration Commission at
P "60" the Chamber of Commerce and Industry of the USSR, confirmed by the Decree of the
Presidium of the Supreme Soviet of the USSR of the 16th April 1975, this Commission is a
permanently functioning arbitration court and decides disputes arising from contractual and
other civil legal relationships, arising between the subjects of law of different countries in
relation to the implementation of foreign trade and of other international economic
relationships. The Commission considers disputes where there is a written agreement between
the Parties to submit for its decision a dispute which has arisen or which may arise....
The Rules ... envisage different types of written agreements of the parties as to the submission
 of a dispute to the FTAC and do not require that this agreement be expressed in an
independent document signed by the parties. The Rules also do not require fulfillment of those
requirements which Soviet civil law, in accordance with articles 45 and 565 of the [Civil Code],
require for the conclusion of a foreign trade transaction of which one party is a Soviet
Organization. This provision of the Rules does not depart from paragraph 2, article II of the New
York Convention in which it is stated that an agreement, establishing the arbitration procedure
for hearing disputes, “shall include an arbitral clause in a contract or an arbitration agreement,
signed by the parties or contained in an exchange of letters or telegrams.” ...
All this allows the Commission to recognize the arbitration clause contained in the contract
signed in the name of the Association “Sojuznefteexport” by the Chairman of the Association
V.E. Merkulow and in the name of the firm “JOC Oil” by John Deuss as a written agreement
satisfying the requirements of the law – the Statute on the Foreign Trade Arbitration
Commission and its Rules as to the form of concluding such an agreement.
So far as the dispute is concerned which arose during the proceedings concerning the inter-
relationship of the contract which established the rights and duties of the parties arising out of
the sale of oil and oil products (the material-legal contract) and the arbitration agreement (the
arbitration clause), that is to say as to whether the agreement is independent (autonomous) in
relation to the contract independently of the decision as to the question of the validity or
invalidity of the contract, the Commission has come to the following conclusion. In the Rules of
the FTAC there are no direct references to the fact that an arbitration agreement (arbitration
clause) is autonomous in relation to the contract. But the above analysis of the Statute of the
FTAC and of its Rules which have defined the competence of the Commission, and also the
practice of the Commission, allows the conclusion to be drawn that the independence of an
arbitration clause is not subject to doubt. Thus, in the ruling of the FTAC on the 29th January
1974, taken on hearing a dispute between a Soviet and an Indian organization, the arbitration
agreement is treated as a procedural contract and not as an element (condition) of a material-
legal contract (Arbitration Practice of the FTAC, Moscow 1979, part VII, page 68). The subject of
P "60" an arbitration agreement (clause) is distinguished from the subject of a material-legal contract
P "61" (of the contract of purchase and sale). The subject of the agreement is the obligation of the
parties to submit the examination of a dispute between a plaintiff and defendant to
arbitration (the FTAC) at the place where it sits, that is to say in Moscow, having excluded by
that very fact the possibility of the resolution of the dispute in a state court.
Predominant in the literature is the recognition of the autonomy of an arbitration agreement,
its independence in relation to the contract. Such is the point of view of the overwhelming
majority of Soviet authors who have expressed themselves on this subject. The opinion of
Soviet scholars are not unanimous but the Arbitration Commission considers as correct the
opinion of those scholars, and this opinion is dominant, who recognize the autonomy of an
arbitration clause, since this opinion relies upon the propositions of Soviet law cited above,
from which there flows its autonomy as an independent procedural agreement....
The principle of the independence of an arbitration clause (in relation to the contract, to which
the said clause relates), is now predominant both in doctrine as well as in practice. In a
developed form, this principle has received its expression in the Arbitration Rules of UNCITRAL
(Article 21.2) developed by the United Nations Commission on International Trade Law ...
Taking into account the cited facts and observations as to the nature of an arbitration
agreement (clause), the Commission has come to the conclusion that, by virtue of its
procedural content and independently of the form of its conclusion, it is autonomous in
relation to the material-legal contract. An arbitration clause, included in a contract, means
that there are regulated in it relationships different in legal nature, and that therefore the
effect of the arbitration clause is separate from the effect of the remaining provisions of the
foreign trade contract.
The requirements, laid down for the recognition of the validity of the two contracts, which differ
in their legal nature, need not coincide. Different also are the consequences of the recognition
of these contracts as invalid. An arbitration agreement can be recognized as invalid only in the
case where there are discovered in it defects in will (mistake, fraud and so on), the breach of
the requirements of the law relating to the content and the form of an arbitration agreement
which has been concluded. Such circumstances leading to the invalidity of an arbitration
agreement do not exist and neither one of the parties stated its invalidity referring to such
circumstances. [JOC Oil] considers the arbitration agreement as invalid for other reasons
asserting that it is a component part of a contract which, in its opinion, as a whole (together
with the arbitration clause) is invalid.
From this there follows the incorrectness in the objections relating to the fact that the New York
Convention is applicable only to arbitration agreements on the basis of disputes arising out of
specific contracts and therefore is inapplicable to contracts recognized as invalid. In article II
of the said Convention there is envisaged the enforcement of arbitral awards in relation to
P "61" disputes which arise and can arise also in connection with other specific legal relationships,
P "62" the object of which can be the subject of arbitration proceedings. This means, that since in
connection with the invalidity of a contract, the applicable law envisages legal consequences,
which are determined by a different non-contractual legal relationship but are connected with
the invalid contract, the arbitrators have the right to examine the dispute and to rule upon it.
Proceeding from the above analysis of the Soviet material and procedural legislation
applicable to the dispute in question, the Commission has recognized that an arbitration
agreement (arbitration clause) is a procedural contract, independent from the material-legal
contract and that therefore the question as to the validity or invalidity of this contract does not
affect the agreement of the parties about the submission of the existing dispute to the
 jurisdiction of the FTAC. The Commission has come to the conclusion that the arbitration clause
contained in the contract is valid and therefore in accordance with the right assigned to it has
recognized itself as competent to hear the dispute as to its essence and to rule upon it.
3. The Commission has examined further the application of the representatives of the firm “JOC
Oil” as to recognizing as invalid the contract of 17th November 1976 from which the dispute has
arisen and has satisfied this application in view of the failure to observe the procedure for its
signing (article 14 of the Fundamentals, article 45 of the [Civil Code]). [The tribunal concluded
that the sales agreement was invalid because of failure to respect the two-signature rule for
foreign trade organizations.]
4. On the question of the consequences of recognizing the contract of the 17th November 1976
as invalid, the representatives of the parties as pointed out in the deposition of the facts of the
case, proceeded from a different approach to the question as to whether the recognition of the
contract as invalid had any legal consequences and in the case of a positive answer to this
question, as to what these consequences are.
In examining this question, the Commission established that according to article 14 of the
Fundamentals (article 48 of the [Civil Code]) under an invalid transaction each of the parties is
obligated to return to the other party everything received under the transaction and if it is
impossible to return what has been received in kind, to reimburse its value in money if other
consequences of the invalidity of the transaction are not set out in the law, that is to say
bilateral (mutual) restitution must be effected.
The Arbitration Commission has confirmed further that, the recognition of the transaction as
invalid does not mean that such a transaction does not give rise to any legal consequences,
that it is nothing, legally amounting to a nullity, as asserted by the defendant on the main
claim. As is evident from the content of article 48 of the [Civil Code], a court or arbitration
tribunal in the event of a dispute must discuss the question of the consequences of the
invalidity of a transaction and rule upon the same.
The assertion of the representatives of the Firm that the recognition of the contract as invalid
P "62" must result in the refusal of the Arbitration Tribunal to hear the case on the basis that there
P "63" has not arisen a legal relationship envisaged by the contract, is mistaken. It contradicts
Soviet law applicable in this case, the practice of its application and the very concept of a
transaction. In reality, a transaction, being a legal fact, is not always confined only to the
expression of the will of the parties, directed to the achievement of a legal result, but gives
rise, in the event of the breach of the requirements of the law, in relations to the content and
form of the transaction, to other consequences envisaged by the law.
[The arbitral tribunal held that, although the underlying sales contract was void, Soviet
principles of restitution applied. Under these principles, the tribunal awarded SNE the value
of the oil shipped to JOC Oil, at the then-prevailing international oil prices. It also awarded
SNE lost profits realized by JOC Oil (in an amount equal to market interest rates. This produced
an award of approximately $200 million in SNE's favor.]
[After the arbitral award was made in JOC Oil, Sojuznefteexport sought to enforce it in Bermuda.
The first instance court denied recognition on various grounds, including that the arbitral
tribunal lacked jurisdiction. The court held that “based on the Tribunal's finding that the
underlying contract was invalid ab initio, then under both Soviet and English law there never
was any contract between the parties from the very onset; so that there never was an
arbitration clause or agreement which could be submitted to arbitration.”Sojuznefteexport v.
JOC Oil Co., 2 Mealey's Int'l Arb. Rep. 400, 486 (1987) (Supreme Court of Bermuda 1987). This
judgment was reversed on appeal. 4 Mealey's Int'l Arb. Rep. B1 (1989) (Court of Appeal of
Bermuda 1989).]
PRIMA PAINT CORP. v. FLOOD & CONKLIN MANUFACTURING CO.
388 U.S. 395 (U.S. Supreme Court 1967)
JUSTICE FORTAS. This case presents the question whether the federal court or an arbitrator is to
resolve a claim of “fraud in the inducement,” under a contract governed by the [FAA] of 1925,
where there is no evidence that the contracting parties intended to withhold that issue from
arbitration....
[Flood & Conklin Manufacturing Company (“F&C”) entered into a Consulting Agreement with
Prima Paint Corporation (“Prima Paint”); at about the same time, Prima Paint also purchased
F&C's paint business. The Consulting Agreement obligated F&C to assist Prima Paint's
exploitation of the paint business, and forbid it from competing with that business. The
agreement contained what the Court termed “a broad arbitration clause,” which provided:
P "63" “Any controversy or claim arising out of or relating to this Agreement, or the breach thereof,
P "64" shall be settled by arbitration in the City of New York, in accordance with the rules then
obtaining of the American Arbitration Association ...”
One week after the Consulting Agreement was executed, F&C filed a bankruptcy petition. Prima
Paint thereafter withheld amounts payable under the agreement and notified F&C that it had
breached the contract by fraudulently representing that it was solvent. F&C then served a
notice of intention to arbitrate. Prima Paint responded by filing suit in federal district court,
seeking to rescind the Consulting Agreement on grounds of fraudulent inducement. F&C moved
to stay the judicial action pending arbitration.]
The District Court granted F&C's motion to stay the action pending arbitration, holding that a
charge of fraud in the inducement of a contract containing an arbitration clause as broad as
this one was a question for the arbitrators and not for the court. For this proposition it relied on
 Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir. 1959), cert. dismissed, 364
U.S. 801 (1960). The Court of Appeals for the Second Circuit dismissed Prima Paint's appeal. It
held that the contract in question evidenced a transaction involving interstate commerce; that
under the controlling Robert Lawrence Co. decision a claim of fraud in the inducement of the
contract generally – as opposed to the arbitration clause itself – is for the arbitrators and not
for the courts; and that this rule – one of “national substantive law” – governs even in the face
of a contrary state rule. (9) We agree, albeit for somewhat different reasons, and we affirm the
decision below.
The key statutory provisions are §§2, 3, and 4 of the [FAA]. Section 2 provides that a written
provision for arbitration “in any maritime transaction or a contract evidencing a transaction
involving commerce ... shall be valid, irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract.” Section 3 requires a federal court in
which suit has been brought “upon any issue referable to arbitration under an agreement in
writing for such arbitration” to stay the court action pending arbitration once it is satisfied that
the issue is arbitrable under the agreement. Section 4 provides a federal remedy for a party
“aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written
agreement for arbitration,” and directs the federal court to order arbitration once it is satisfied
that an agreement for arbitration has been made and has not been honored....
[The Court first determined that the contract in question is within the jurisdictional scope of §1
of the FAA.] We turn to the central issue in this case: whether a claim of fraud in the inducement
of the entire contract is to be resolved by the federal court, or whether the matter is to be
referred to the arbitrators. The courts of appeals have differed in their approach to this
P "64" question. The view of the Court of Appeals for the Second Circuit, as expressed in this case and
P "65" in others, is that – except where the parties otherwise intend – arbitration clauses as a
matter of federal law are “separable” from the contracts in which they are embedded, and that
where no claim is made that fraud was directed to the arbitration clause itself, a broad
arbitration clause will be held to encompass arbitration of the claim that the contract itself
was induced by fraud. (10) The Court of Appeal for the First Circuit, on the other hand, has taken
the view that the question of “severability” is one of state law, and that where a State regards
such a clause as inseparable a claim of fraud in the inducement must be decided by the court.
Lummus Co. v. Commonwealth Oil Ref. Co., 280 F.2d 915, 923-924 (1st Cir.), cert. denied, 364 U.S.
911 (1960).
With respect to cases brought in federal court involving maritime contracts or those evidencing
transactions in “commerce,” we think that Congress has provided an explicit answer. That
answer is to be found in §4 of the Act, which provides a remedy to a party seeking to compel
compliance with an arbitration agreement. Under §4, with respect to a matter within the
jurisdiction of the federal courts save for the existence of an arbitration clause, the federal
court is instructed to order arbitration to proceed once it is satisfied that “the making of the
agreement for arbitration or the failure to comply [with the arbitration agreement] is not in
issue.” Accordingly, if the claim is fraud in the inducement of the arbitration clause itself – an
issue which goes to the “making” of the agreement to arbitrate – the federal court may proceed
to adjudicate it. (11) But the statutory language does not permit the federal court to consider
claims of fraud in the inducement of the contract generally. Section 4 does not expressly relate
to situations like the present in which a stay is sought of a federal action in order that
arbitration may proceed. But it is inconceivable that Congress intended the rule to differ
depending upon which party to the arbitration agreement first invokes the assistance of a
federal court. We hold, therefore, that in passing upon a §3 application for a stay while the
parties arbitrate, a federal court may consider only issues relating to the making and
performance of the agreement to arbitrate. In so concluding, we not only honor the plain
meaning of the statute but also the unmistakably clear congressional purpose that the
arbitration procedure, when selected by the parties to a contract, be speedy and not subject
to delay and obstruction in the courts.
There remains the question whether such a rule is constitutionally permissible. The point is
made that, whatever the nature of the contract involved here, this case is in federal court
P "65" solely by reason of diversity of citizenship, and that since the decision in Erie R. Co. v.
P "66" Tompkins, 304 U.S. 64 (1938), federal courts are bound in diversity cases to follow state rules
of decision in matters which are “substantive” rather than “procedural,” or where the matter is
“outcome determinative.” Guaranty Trust Co. v. York, 326 U.S. 99 (1945). The question in this
case, however, is not whether Congress may fashion federal substantive rules to govern
questions arising in simple diversity cases. See Bernhardt v. Polygraphic Co., supra, at 202, and
concurring opinion, at 208. Rather, the question is whether Congress may prescribe how federal
courts are to conduct themselves with respect to subject matter over which Congress plainly
has power to legislate. The answer to that can only be in the affirmative. And it is clear beyond
dispute that the [FAA] is based upon and confined to the incontestable federal foundations of
“control over interstate commerce and over admiralty.” H.R. Rep. No. 96, 68th Cong., 1st Sess., 1
(1924); S. Rep. No. 536, 68th Cong., 1st Sess., 3 (1924). (12)
In the present case no claim has been advanced by Prima Paint that F&C fraudulently induced
it to enter into the agreement to arbitrate “[a]ny controversy or claim arising out of or relating
to this Agreement, or the breach thereof.” This contractual language is easily broad enough to
encompass Prima Paint's claim that both execution and acceleration of the consulting
agreement itself were procured by fraud. Indeed, no claim is made that Prima Paint ever
intended that “legal” issues relating to the contract be excluded from arbitration, or that it was
not entirely free so to contract. Federal courts are bound to apply rules enacted by Congress
with respect to matters – here, a contract involving commerce – over which it has legislative
power. The question which Prima Paint requested the District Court to adjudicate preliminarily
 to allowing arbitration to proceed is one not intended by Congress to delay the granting of a §3
stay. Accordingly, the decision below dismissing Prima Paint's appeal is affirmed.
JUSTICE HARLAN. In joining the Court's opinion I desire to note that I would also affirm the
judgment below on the basis of Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d
Cir. 1959), cert. dismissed, 364 U.S. 801 (1960).
JUSTICE BLACK, with whom JUSTICE DOUGLAS and JUSTICE STEWART join, dissenting.... 35 years
after the passage of the [FAA] the Second Circuit [in Robert Lawrence] completely rewrote it.
Under its new formulation, §2 now makes arbitration agreements enforceable “save upon such
grounds as exist at federal law for the revocation of any contract.” And under §4, before
enforcing an arbitration agreement, the district court must be satisfied that “the making of the
agreement for arbitration, as a matter of federal law, is not in issue.” And then when Judge
Medina [who authored Robert Lawrence] turned to the task of “the formulation of the principles
P "66" of federal substantive law necessary for this purpose, he formulated the separability rules
P "67" which the Court today adopts – not because §4 provided this rule as an “explicit answer,” not
because he looked to the intention of the parties, but because of his notion that the
separability rule would further a “liberal policy of promoting arbitration.”
Today, without expressly saying so, the Court does precisely what Judge Medina did in Robert
Lawrence. It is not content to hold that the Act does all it was intended to do: make arbitration
agreements enforceable in federal courts if they are valid and legally existent under state law.
The Court holds that the Act gives federal courts the right to fashion federal law, inconsistent
with state law, to determine whether an arbitration agreement was made and what it means.
Even if Congress intended to create substantive rights by passage of the Act, I am wholly
convinced that it did not intend to create such a sweeping body of federal substantive law
completely to take away from the States their power to interpret contracts made by their own
citizens in their own territory....

Notes on the Separability Doctrine

1. The separability doctrine. As the materials excerpted above illustrate, the separability
doctrine is widely accepted in most jurisdictions. For authorities recognizing the doctrine, see
Judgment of Cour de Cassation of Republic of France of 7 May 1973, Recueil Dalloz Jr. 545 (1963);
Judgment of 24 February 1994, XXII Y.B. Comm. Arb. 682 (Paris Cour d'Appel) (1997) (“In
international commercial arbitration, the principle of the autonomy of the arbitration
agreement is a principle of general application, being an international substantive rule
consecrating the legality of the arbitration agreement, beyond all reference to a system of
conflict of laws.”); Judgment of 21 December 1999, No. 1786 (Court of Appeal, Bologna)(“the
arbitral clause is autonomous with respect to the contract – so that the nullity of the latter
does not automatically affect the former”); Judgment of 2 July 1981, No. 4279 (Supreme Court of
Italy) (arbitration clause is “not affected by any nullity and, therefore, bar the admissibility
before the court, of an action aimed at having a contract declared null and void because its
subject matter is unlawful”); Judgment of the Supreme Court of the Federal Republic of Germany
of 27 February 1970, 53 BGHZ 315; Preliminary Award of 14 January 1982, XI Y.B. Comm. Arb. 97, 102
(1986) (“The autonomy of an arbitration clause is a principle of international law that has been
consistently applied in decisions rendered in international arbitrations, in the writings of the
most qualified publicists on international arbitration, in arbitration regulations adopted by
international organizations and in treaties”); Preliminary Award of 14 January 1982, XI Y.B.
Comm. Arb. 97, 102 (1986) (“It is a generally recognized principle of the law of international
arbitration that arbitration clauses continue to be operative, even though an objection is
raised by one of the parties that the contract containing the arbitration clause is null and
void”); AB Norrkopings Trikafabrik v. AB Per Persson, NJA 1936, 521 (Supreme Court of Sweden)
(upholding separability doctrine); Interim Award in ICC Case No. 7263 of 1994, XXII Y.B. Comm.
Arb. 92, 100 (1997) (“adopting the principle of severability of the arbitral clause from the
contract as a whole” based on Swiss Law on Private International Law and ICC Rules); Final
Award in ICC Case No. 8938 of 1996, XXIVa Y.B. Comm. Arb. 174, 176 (1999) (“the arbitral clause is
autonomous and juridically independent from the main contract in which it is contained either
directly or by reference”); Societe Gosset v. Societe Carapelli, [1963] D. Jur. 545 (Cour de
Cassation) (“In matters of international arbitration, the arbitration agreement, concluded
separately or included in the legal act to which it is related, always has, except in exceptional
circumstances, a complete juridical autonomy excluding it from being affected by an eventual
invalidity of that act”).
2. Consequences of the separability doctrine. What are the consequences of concluding, like the
various national arbitration statutes and other materials excerpted above, that an arbitration
agreement is “separable” from the parties' underlying contract? Briefly consider the following
possibilities, to which we return in subsequent sections.
 (a) The invalidity of the parties' underlying contract does not necessarily invalidate their
arbitration agreement. One consequence of the separability principle is that a party's
challenge to the validity of the parties' underlying agreement does not necessarily affect
P "67" the arbitration agreement. Because challenges to the underlying contract are not
P "68" regarded as throwing the arbitration agreement's validity into question, an arbitral
tribunal can consider the challenges to the validity of the underlying contract without
controversy about its own legitimacy and jurisdiction.
Consider the analysis, from two rather different perspectives, of the Soviet arbitral
tribunal in JOC Oil and the U.S. Supreme Court in Prima Paint. Both the arbitral tribunal
and the court held that a claim that the parties' underlying agreement was invalid did
not provide grounds for challenging the “separable” arbitration clause contained within
the underlying agreement. Consider also how the national arbitration statutes and
institutional arbitration rules set forth above address this issue. What effect, if any, does
the invalidity of the parties' underlying contract have on their arbitration agreement
under these authorities?

(b) The invalidity of the parties' arbitration agreement does not necessarily affect the
underlying contract. Conversely, where the parties' arbitration agreement is itself either
invalid or illegal, the separability doctrine provides that this does not necessarily infect
the validity of the underlying contract. The underlying contract can continue to be
enforced, generally in national courts, without regard to the unenforceability of the
arbitration clause.
(c) The separability doctrine implies the arbitrator's power to consider his own jurisdiction.
Many national arbitration statutes and institutional arbitration rules link the separability
doctrine with the principle that the arbitrator has jurisdiction to decide his own
jurisdiction. This doctrine is sometimes referred to as the “competence-competence” or
“Kompetenz-Kompetenz” doctrine. See infra pp. 74-95.
Consider how the arbitration statutes and institutional arbitration rules excerpted above
deal with an arbitrator's power to consider his own jurisdiction. See UNCITRAL Model Law
Article 16(1); ICC Rules Article 6; UNCITRAL Rules Article 21. Commentators also frequently
regard the separability and competence doctrines as related. S. Schwebel, International
Arbitration: Three Salient Problems 2-3 (1987); Nussbaum, The “Separability Doctrine” in
American and Foreign Arbitration, 17 N.Y.U. L. Rev. 609 (1940). But see infra p. 87.

(d) The law governing the arbitration clause may be different from that governing the
underlying contract. An arbitration agreement can be governed by a different national
law, or different substantive legal rules, from that applicable to the parties' underlying
contract. See infra pp. 95-117. One explanation for this result is the separability doctrine,
which postulates two separate agreements, which can readily be governed by two
different sets of laws.
Consider Article 178(2) of the Swiss Law on Private International Law. What does Article
178(2) provide with respect to the law governing an arbitration agreement? Consider also
the award in JOC Oil. What substantive legal rules applied to the parties' underlying
foreign trade contract? to their arbitration agreement? Note the following comment by
the JOC Oil tribunal: “An arbitration clause, included in a contract, means that there are
regulated in it relationships different in legal nature, and that therefore the effect of the
arbitration clause is separate from the effect of the remaining provisions of the foreign
trade contract. The requirements, laid down for the recognition of the validity of the two
contracts, which differ in this legal nature, need not coincide.”
In Prima Paint, what laws governed the parties' underlying contract and the arbitration
agreement? Did the same law apply to each? To what kinds of agreements does the FAA
apply?

(e) The arbitration clause may survive termination or expiry of the underlying agreement.
Parties not infrequently commence arbitral proceedings after their underlying contract
has expired or been terminated. In most jurisdictions, including the United States, there
is no general obstacle to this, provided that the claims arise from conduct during the
term of the agreement (or during the term of specific provisions that survived the
agreement). See infra pp. 323-24. Although not always directly attributed to the
separability doctrine, that doctrine is one explanation for an arbitration clause's survival
after termination of the underlying agreement.
(f) The invalidity of the parties' underlying contract may not deprive an arbitral award of
validity. Another possible consequence of the separability doctrine is that, if an arbitral
tribunal or court concludes that the parties' entire underlying contract was void, that
conclusion would not necessarily deprive the parties' arbitration agreement – and hence,
in a Catch-22 turn, the arbitrators' award – of validity. Nussbaum, The “Separability
Doctrine” in American and Foreign Arbitration, 17 N.Y.U. L. Rev. 609, 609 (1940) (reasoning
that, if “the destruction of [the underlying] transaction carries over to the arbitration
agreement, the arbitrators are deprived of their jurisdiction, and an award already
rendered would lose all legal effect.”); Teledyne, Inc. v. Kone Corp., 892 F.2d 1404, 1410 (9th
Cir. 1990).
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3. Rationales for the separability doctrine. What is the basis for the separability doctrine – the
parties' intent, the command of national law or the New York Convention, the needs of the
international legal system, or something else?
(a) Parties' express agreement as basis for separability doctrine. One possible source for the
separability doctrine is the parties' express agreement. This occurs most frequently
where an arbitration agreement incorporates institutional rules – like the UNCITRAL or
ICC arbitration rules – which expressly provide that an arbitration clause is separable
from the parties' underlying contract. Consider ICC Rules Article 6, UNCITRAL Rules Article
21, and LCIA Rules Article 23. Do these provisions clearly establish the separability
doctrine? Are there differences between the various statements of the doctrine in each
set of rules?
(b) Parties' implied agreement as basis for separability doctrine. The separability doctrine can
also be justified on grounds of party intent even where institutional rules (and the
arbitration agreement itself) do not expressly provide for such a result. Why would
parties generally intend their arbitration clause to be “separable”? Consider the practical
consequences of not accepting the separability doctrine. What would happen if every
challenge to the continuing validity of an arbitration agreement also resulted in a
challenge to the validity of the parties' arbitration agreement?
It is often argued that: (a) parties to arbitration agreements generally “intend to require
arbitration of any dispute not otherwise settled, including disputes over the validity of
the contract or treaty”; (b) without the separability doctrine, “it would always be open to
a party to an agreement containing an arbitration clause to vitiate its arbitration
obligation by the simple expedient of declaring the agreement void”; and (c) “the very
concept and phrase ‘arbitration agreement’ itself imports the existence of a separate or
at any rate separable agreement, which is or can be divorced from the body of the
principal agreement if needs be.” S. Schwebel, International Arbitration: Three Salient
Problems 3-6 (1987). Is this a persuasive basis for concluding that parties ordinarily intend
their arbitration clause to be separable?
Consider the following explanation of the separability doctrine in Harbour Assurance Co.
(UK) v. Kansa Gen. Int'l Ins. Co. 1 Lloyds Rep. 81 (Q.B. 1992):
First, there is the imperative of giving effect to the wishes of the parties unless there are
compelling reasons of principle why it is not possible to do so.... Secondly, if the
arbitration clause is not held to survive the invalidity of the contract, a party is afforded
the opportunity to evade his obligation to arbitrate by the simple expedient of alleging
that the contract is void. In such cases courts of law then inevitably become involved in
deciding the substance of a dispute. Moreover, in international transactions where the
neutrality of the arbitral process is highly prized, the collapse of this consensual method
of dispute resolution compels a party to resort to national courts where in the real world
the badge of neutrality is sometimes perceived to be absent. For parties the perceived
effectiveness of the neutral arbitral process is often a vital condition in the process of
negotiation of the contract. If that perception is absent, it will often present a formidable
hurdle to the conclusion of the transaction. A full recognition of the separability principle
tends to facilitate international trade.
Is this persuasive?

(c) National law as basis for separability doctrine. Article 16(1) of the UNCITRAL Model Law,
Article 178(3) of the Swiss Law on Private International Law, and §§6 and 7 of the English
Arbitration Act, 1996, specifically provide that an arbitration clause is separable from the
underlying contract in which it appears. Compare the language of each provision. How do
they differ?
Consider §§2, 3, and 4 of the FAA. Do these provisions address the question whether an
arbitration clause is a separable agreement? Consider the interpretation of the FAA
adopted in Prima Paint. What role does the FAA's text have in the Court's analysis?
 (d) “Procedural” character of arbitration agreement. Many authorities rely on the “procedural”
character of the dispute resolution provisions of an arbitration agreement to justify its
“separable” or “independent” nature. Consider the arbitral tribunal's analysis in JOC Oil.
What were the stated reasons, under Soviet law, for treating an arbitration agreement as
separable? What does the Soviet arbitral tribunal mean by a “material-legal” contract
and a “procedural” arbitration agreement?
Compare the differences in the nature of the obligations imposed by a foreign trade
P "69" contract (i.e., to buy and sell oil) and an arbitration agreement (i.e., to resolve disputes
P "70" by arbitration). Is it likely that the parties would have regarded these two sets of
obligations as separable? Why? Compare the following reasoning in Westacre Investments
Inc. v. Jugoimport-SDPR Holdings Co. 4 All ER 570 [1998]:
These characteristics of an arbitration agreement which are in one sense independent of
the underlying or substantive contract have often led to the characterisation of an
arbitration agreement as a “separate contract.” For an agreement to arbitrate within an
underlying contract is in origin and function parasitic. It is ancillary to the underlying
contract for its only function is to provide machinery to resolve disputes as to the primary
and secondary obligations arising under that contract. The primary obligations under the
agreement to arbitrate exist only for the purpose of informing the parties by means of an
award what are their rights and obligations under the underlying contract.
Why, in fact, should arbitration clauses be regarded as “separable” or “independent” from
the agreements in which they appear? Consider again the distinction between “material-
legal” and “procedural” agreements in JOC Oil. Is this persuasive?
Are not the “procedural” or “dispute resolution” provisions of arbitration clauses
intimately interrelated to the “substantive” terms of underlying agreements? What
aspects of an arbitration clause suggest that parties would likely regard it as
independent or separable from their underlying agreement?

(e) New York Convention as basis for separability doctrine. Consider Article II of the New York
Convention. Compare Article V(1)(a). Does either provision require recognition of the
separability doctrine? Does Article V(1)(a) presume the separability of arbitration
agreements, by contemplating the application of a specific national law to the
arbitration agreement itself (as distinct from the underlying contract)? What role did the
New York Convention play in the JOC Oil tribunal's analysis? Suppose that Prima Paint had
involved an international arbitration agreement, subject to the New York Convention.
Would Article II or Article V(1)(a) have required the case to have been decided in the way
that it was? National courts have not considered this issue in any detail. Compare A. van
den Berg, The New York Convention of 1958 145-46 (1981) (Convention is “indifferent” as to
existence of separability doctrine) with S. Schwebel, International Arbitration: Three
Salient Problems 22 (1987) (Convention adopts separability doctrine “by implication”).
(f) Needs of the international legal system as basis for separability doctrine. Aside from
reliance on particular institutional rules, arbitration agreements, or statutory provisions
of national law, rationales for the separability doctrine rest heavily on practical
considerations. Thus, it is said, the separability doctrine is necessary in order to prevent
challenges to the existence, validity, or continued effect of an underlying contract from
derailing the arbitral process. Why exactly is this so? Would it not be possible, even
absent the separability doctrine, for an arbitrator to rule on claims that the contract
containing the arbitration clause was invalid? Isn't the real issue the power of an arbitral
tribunal to consider challenges to its own jurisdiction?
Recall the promise of international commercial arbitration to provide a neutral,
competent, and reliable means of international dispute resolution. What would parties
likely intend – and what ought they to intend – with respect to the separability doctrine if
they enter into international arbitration agreements with this goal in mind?

4. Criticism of rationales for the separability doctrine. Although the separability doctrine is
widely accepted, it is also subject to non-trivial criticisms. Parties not infrequently deny the
very existence of the underlying contract containing an arbitration clause. For example,
suppose that a party denies that it executed or otherwise assented to the underlying contract.
How can the separability doctrine aid in arguments that the arbitration clause, contained in
that contract, is nonetheless valid and binding on that party? If a party claims that there
simply never was an underlying contract – of any sort – doesn't this challenge necessarily also
apply to the arbitration clause contained in the contract?
Consider again the tribunal's analysis in JOC Oil. The arbitrators concluded that the parties'
underlying foreign trade contract was invalid because it failed to satisfy a Soviet “two-
signature” requirement. Nonetheless, the tribunal also held that the parties' arbitration
agreement was valid. How did it justify this conclusion?
Consider Article 178(3) of the Swiss Law on Private International Law and §7 of the English
Arbitration Act. How do these provisions deal with claims that no underlying contract exists?
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P "71"
With this background, commonsense response to the separability doctrine might run along the
following lines:
[I]f an agreement contains an obligation to arbitrate disputes arising under it, but the
 agreement is invalid or no longer in force, the obligation to arbitrate disappears with the
agreement of which it is a part. If the agreement was never entered into at all, its arbitration
clause never came into force. If the agreement was not validly entered into, then, prima facie,
it is invalid as a whole, as must be all of its parts, including its arbitration clause.
S. Schwebel, International Arbitration: Three Salient Problems 1 (1987). Why is this not irrefutable
logic? Surely, if the parties' alleged contract was never in fact agreed to, then none of it –
arbitration clause included – is binding on the “parties.” Before finally making up your mind,
wait until you have examined the materials below, see infra pp. 167-231.
5. JOC Oil's approach to the separability doctrine. The award in JOC Oil is a leading example of
application of the separability doctrine. What was the practical importance of the tribunal's
adoption of the separability doctrine? Restate in your own words the tribunal's statement of
the separability doctrine. Does it differ from that in Article 16 of the UNCITRAL Model Law,
Article 178(3) of the Swiss Law on Private International Law, or §§6 and 7 of English Arbitration
Act?
6. Prima Paint's approach to the separability doctrine.Prima Paint is routinely cited as support
for the proposition that, under the FAA, an arbitration clause is separable from the underlying
agreement which contains it. See infra pp. 202-08, 348-49. Where precisely in the Prima Paint
opinion does the Supreme Court “adopt” the separability doctrine? Consider carefully the
language of §§2, 3 and 4. Does anything in these provisions require application of the
separability doctrine?
Compare the analysis of the separability doctrine in Prima Paint with that in JOC Oil. Are there
differences in the two analyses?
7. Current status of the separability doctrine under the FAA. As discussed in detail below, the
separability doctrine is now recognized as a well-settled rule of federal law in the United
States under the FAA. See infra pp. 202-08, 348-49; Teledyne, Inc. v. Kone Corp., 892 F.2d 1404,
1410 (9th Cir. 1989); Peoples Security Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809 (4th Cir.
1989); Union Mutual Stock Life Ins. Co. v. Beneficial Life Insurance Co., 774 F.2d 524, 529 (1st Cir.
1985).
8. Common applications of the separability doctrine. The separability doctrine is frequently
applied in cases where one party attacks the formation or validity of an arbitration clause
based upon a challenge to the underlying contract containing the clause. The most common
applications of the separability doctrine are summarized here, and explored in greater detail
below. See infra pp. 167-231.
(a) Fraud and fraudulent inducement of underlying contract. Parties frequently object to the
validity of arbitration clauses on the grounds that they were fraudulently induced into
entering into the underlying contract, or that outright fraud was committed with respect
to the underlying contract. In general, as Prima Paint illustrates, national courts and
arbitral tribunals have invoked the separability doctrine in holding that an arbitration
clause is not affected by claims that the underlying contract was fraudulently induced.
See infra pp. 195-208. Is it sensible to conclude, as Prima Paint did, that an arbitration
clause is valid even if it was part of a fraudulently procured contract?
Where parties allege that the underlying contract was the result of outright fraud (e.g.,
forgery of a signature), rather than fraudulent inducement (e.g., misrepresentation about
future conduct), national courts have been less willing to apply the separability doctrine
to insulate the arbitration clause from challenge. See infra pp. 206-07. Is this approach
sensible? Suppose that one party forges another party's signature on a contract. Is there
any serious basis for concluding that an arbitration clause in the contract is nonetheless
valid? Suppose that the forgery is denied by its alleged perpetrator, and a determination
must be made whether the claims are well-founded: who should make the
determination? the arbitral tribunal or a national court?

(b) Illegality of underlying contract. A common ground for resisting an arbitration agreement
is the alleged illegality of the parties' underlying contract. Courts in some developed
states, and most arbitral tribunals, have applied the separability doctrine to reject such
challenges. See infra pp. 208-16. Is this a sensible result? Suppose that gambling contracts
are unlawful. Would an arbitration clause contained in such a contract still be valid in a
P "71" dispute between the two gamblers? What about contracts to divide the proceeds of theft
P "72" or to procure a violent crime?
(c) Defects in formation of underlying contract. Parties can challenge the validity of
arbitration agreements on the grounds that the parties' underlying contract was not
validly formed. The JOC Oil case illustrates this, with one party claiming that the parties'
underlying contract was invalid because it failed to satisfy a requirement under Soviet
law of two signatures. Alternatively, there may have been formal defects in the underlying
contract, a lack of consideration, or one party may deny that it ever assented to a
particular contract. See infra pp. 167-91. How should the separability doctrine apply to
these various issues?
 (d) Unconscionability of underlying contract. Parties occasionally challenge arbitration
agreements on the grounds that the underlying contract was unconscionable. Most
national courts and arbitral tribunals have relied on the separability doctrine to
conclude that such challenges do not affect an arbitration clause contained in the
contract. See infra pp. 217-31. Is this a sensible result? If a party misused its superior
economic or other power to compel another to accept unfair price and other terms, why
should the “agreement's” arbitration clause be preserved?
(e) Lack of capacity to make underlying contract. A common ground for challenging
arbitration agreements is one party's alleged lack of capacity to have concluded the
underlying agreement. See infra pp. 231-39. To what extent should the separability
doctrine apply to these challenges? If an underlying contract was executed by an
individual without legal capacity, how can the arbitration agreement contained in the
agreement be valid?
(f) Waiver of right to arbitrate. Most national legal systems provide that a party may waive its
right to arbitrate by pursuing other remedies (particularly litigation in national courts).
See infra pp. 239-42. Do claims of waiver implicate the separability doctrine? How are
waiver claims different from the other grounds for challenging arbitration agreements
outlined above?
9. Law governing international arbitration agreements. As discussed in detail below, the
substantive law applicable to the formation, validity, and interpretation of an arbitration
agreement may be different from the substantive law governing the parties' underlying
commercial agreement. See infra pp. 95-117.
(a) Possibility of different national laws governing arbitration clauses and underlying contract.
When might the parties have intended their arbitration agreement to be governed by one
law and their underlying agreement by another? Suppose that an agreement between a
German and an English company does not contain a choice-of-law provision, but provides
for arbitration in Switzerland. Would the law governing the underlying agreement be the
same as that governing the arbitration clause? See infra pp. 95-117.
Consider again the excerpts from the UNCITRAL Model Law, the Swiss Law on Private
International Law, the English Arbitration Act, and the FAA. Do any of these statutes
address the question of what law applies to an arbitration clause? We consider the choice
of law applicable to an arbitration agreement in detail below. See infra pp. 95-117.

(b) The New York Convention's rules of substantive law applicable to arbitration agreements.
Consider Article II of the New York Convention. What substantive rules does it adopt with
respect to arbitration agreements? Note the requirement in Article II(1) that Contracting
States “recognize an agreement in writing under which the parties undertake to submit to
arbitration.” Note also the obligation in Article II(3) that Contracting States refer parties
to arbitration agreements to arbitration unless they find “that the said agreement is null
and void, inoperative or incapable of being performed.” Do these provisions state
substantive rules of law, applicable to arbitration agreements? We consider these rules in
greater detail below. See infra pp. 113-17.
(c) Pro-arbitration national rules of substantive contract law applicable specifically to
arbitration agreements. As discussed in detail below, some nations have adopted rules of
substantive law, applicable specifically to arbitration agreements, designed to facilitate
the enforcement of such agreements. Consider the text of Article 178 of the Swiss Law on
Private International Law. Note that Article 178 of the Swiss statute goes a substantial
distance towards prescribing a specialized set of substantive rules governing
international arbitration agreements. Compare the approach of Article 178 of the Swiss
Law on Private International Law with that of Article 16 of the UNCITRAL Model Law and §7
of the English Arbitration Act. Do the UNCITRAL Model Law and English Arbitration Act
adopt any particular substantive rules of law applicable to the validity of arbitration
agreements?
Consider the approach of the JOC Oil tribunal to the substantive rules governing the
validity of international arbitration agreements. Are these rules harder or easier to satisfy
than the rules governing underlying foreign trade contracts? Compare the analysis in
Prima Paint. The approach under the FAA and other national arbitration legislation is
explored below. See infra pp. 182-86.
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P "73"

(d) Anti-arbitration national rules of substantive contract law applicable specifically to

arbitration agreements. As discussed in detail below, some nations have adopted rules of
substantive law, applicable specifically to arbitration agreements, designed to render
such agreements difficult to enforce. See infra pp. 156-57. Note, for present purposes, that
these “anti-arbitration” rules rest (ironically) on the separability doctrine, treating
arbitration clauses as separable from underlying contracts. Suppose that an arbitration
clause is rendered invalid by such legislation. Does the remainder of the parties' contract
survive? Note that the dispute resolution provisions of international agreements are often
intensively-negotiated (and sometimes are deal-breakers).
 (e) Desirability of specialized rules of substantive contract law applicable to arbitration
agreements. Is it appropriate to apply to arbitration agreements the same rules of
contract law that apply to the underlying contract (e.g., the Vienna Convention on the
International Sale of Goods or the U.S. Uniform Commercial Code to sales contracts;
banking law to financial transactions)? In many cases, specialized rules of substantive
contract law, which are applicable to particular underlying transactions, are not well-
suited to arbitration agreements. What about generally-applicable rules of national
contract law, which apply to agreements not governed by specialized legal regimes? Are
these generally-applicable substantive rules appropriate for arbitration agreements?
What substantive rules of law do the JOC Oil award and the Prima Paint opinion apply to
arbitration agreements?
(f) Law applicable to separability of arbitration clause. What law applies to determine
whether or not an arbitration clause is separable? the law governing the underlying
contract? the law governing the arbitration agreement? the law of the enforcement
forum? For one of the few authorities expressly addressing this issues, see
Sojuznefteexport v. JOC Oil Co., 2 Mealey's Int'l Arb. Rep. 400 (1987) (Supreme Court of
Bermuda 1987) (considering law applicable to separability of arbitration clause; holding
that issue is governed by law applicable to arbitration agreement).
10. The separability doctrine can generally be varied by agreement. Suppose that parties agree
expressly that an arbitration clause is not separable from their underlying contract. Is there
anything that would forbid such an agreement?
Consider the excerpted provisions of the UNCITRAL Model Law, the Swiss Law on Private
International Law, the English Arbitration Act, and the FAA. Do any of these statutory provisions
require application of the separability doctrine? Compare Article 178(3) of the Swiss Law on
Private International Law and §7 of the English Arbitration Act.
When might parties agree that their arbitration clause is not separable from their underlying
agreement? Suppose that parties wished the relatively consensual process of arbitration to
apply while they continued to cooperate under the terms of their underlying agreement, but
that they wanted to be free to litigate once the underlying contract was itself challenged.
Should the parties be forbidden from excluding the separability doctrine in these
circumstances?
11. The “separability presumption.” In the absence of clear evidence on the topic of
separability, should an arbitration agreement be presumptively separable or presumptively
not separable? How does the national arbitration legislation excerpted above resolve this
issue? How does Prima Paint resolve the question? It is well-settled, under the FAA, that
arbitration agreements are presumptively separable. See supra pp. 71-72. It is also generally
well-settled that parties can agree under the FAA to override this presumption (although they
virtually never do). See infra p. 206.
In fact, should not the so-called “separability doctrine” be referred to as the “separability
presumption”? Note that this description would explain both the proper rationale for treating
arbitration clauses as separable and for permitting parties to rebut the presumption of
separability.
12. Claim for rescission or termination of underlying contract containing arbitration clause does
not ordinarily affect validity of arbitration agreement. Most national courts have held that an
agreement to arbitrate is not rendered invalid by a claim that the underlying contract has
been rescinded; rather, under the separability doctrine, claims regarding the termination of
the underlying agreement are presumptively for the arbitral tribunal. For U.S. decisions, see
Unionmutual Stock Life Ins. Co. of America v. Beneficial Life Ins. Co., 774 F.2d 524, 528-29 (1st Cir.
1985); Commonwealth Edison Co. v. Gulf Oil Corp., 541 F.2d 1263 (7th Cir. 1976); Hart Enterprises
International, Inc. v. Anhui Provincial Import & Export Corp., 888 F.Supp. 587 (S.D.N.Y. 1995)
(rejecting argument that arbitration clause was inapplicable because parties had settled
dispute, where settlement agreement was not performed); Banque de Paris et des Pays-Bas v.
P "73" Amoco Oil Co., 573 F.Supp. 1464 (S.D.N.Y. 1983) (“the issue of the continuing validity of the
P "74" contract is for the arbitrator to decide”); Annotation, Violation or Repudiation of Contract as
Affecting Right to Enforce Arbitration Clause Therein, 3 A.L.R.2d 378. Compare Virginia Carolina
Tools, Inc. v. Int'l Tool Supply, Inc., 793 F.Supp. 664 (W.D.N.C. 1992), aff'd, 984 F.2d 113 (1993) (court
holds that arbitration clause was no longer effective because underlying option contract had
expired).
For other national court decisions and arbitral awards rejecting arguments that termination of
the underlying contract affected an arbitration clause contained in that contract, see Award of
23 June 1973, Court of Arbitration at the Bulgarian Chamber of Commerce and Industry, Kluwer
Law International Arbitration CD ROM (“The fact that the contract was terminated cannot
render inoperative the arbitration agreement concluded between the parties for the resolution
of disputes arising out of this contract”); Judgment of 13 September 1999, Kluwer Law
International Arbitration CD ROM (Supreme Court of British Columbia) (adopting “principle of
separability” and rejecting claim that termination of underlying contract rendered arbitration
clause null and void); Judgment of 28 October 1993, No. 10704/93 (Supreme Court of Italy) (“the
agreement to arbitrate contained in an arbitral clause in a contract is an independent
agreement; its validity and efficacy must be ascertained independently of the validity and
efficacy of the contract”); Judgment of 29 October 1993, No. 389 of 1993 (Supreme Court of
Queensland) (arbitration clause “is generally intended by the parties to be enforceable
notwithstanding termination of the agreement”); Final Award in ICC Case No. 7626 of 1995, XXII
Y.B. Comm. Arb. 132, 137 (1997) (“under Indian law – as under most systems of law – an
 arbitration clause constitutes a separate and autonomous agreement between the parties,
which survives any termination of the main agreement in which it is contained, unless the
arbitration agreement itself is expressly terminated”).
13. Claim of alleged failure of consideration for underlying agreement does not affect validity of
arbitration agreement. Courts have also considered claims that an arbitration clause is
unenforceable because the underlying contract lacked consideration or mutuality. These
arguments have usually been rejected. See Lawrence v. Comprehensive Business Services Co.,
833 F.2d 1159 (5th Cir. 1987) (considering and rejecting claim of lack of mutuality); Erving v.
Virginia Squires Basketball Club, 468 F.2d 1064 (2d Cir. 1972) (rejecting lack of mutuality claim);
Hellenic Lines v. Louis Dreyfus Corp., 372 F.2d 753 (2d Cir. 1967); Axtell v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 744 F.Supp. 194 (E.D. Ark. 1990) (claims that underlying contract lacked
consideration are for arbitrators); Seymour v. Gloria Jean's Coffee Bean Franchising Corp., 732
F.Supp. 988, 995-6 (D. Minn. 1990) (considering but rejecting alleged lack of mutuality); Gramling
v. Food Mach. & Chem. Corp., 151 F.Supp. 853 (W.D.S.C. 1957); Exercycle Corp. v. Maratta, 314
N.Y.S.2d. 353 (Ct. App. 1961) (alleged lack of mutuality is for arbitrators to decide). Compare Hull
v. Norcom, Inc., 750 F.2d 1547 (11th Cir. 1985), rehearing denied, 757 F.2d 287 (1986) (no
consideration because only one party was bound to arbitrate), infra pp. 229-30.

B. Allocation of Authority to Decide Disputes Over the Interpretation and

Enforceability of International Arbitration Agreements (13)
P "74" Related to the separability doctrine is the allocation of authority between arbitrators and
P "75" national courts to decide disputes over the interpretation and enforceability of arbitration
agreements. That is, “who decides” disputes over the formation, validity or interpretation of
arbitration agreements? In particular, are such disputes resolved by arbitrators or by national
courts?
1. Possible Procedural Settings of Challenges to International Arbitration Agreements
Disputes over the enforceability or interpretation of an arbitration agreement can arise in a
variety of different circumstances. First, when an adverse party attempts to commence
arbitration, a party may refuse by inaction to honor the arbitration clause, simply by not
participating in the arbitral process. If this occurs, the meaning or enforceability of the clause
may be raised by the party pursuing arbitration in a judicial action seeking an order to compel
arbitration. (14) Alternatively, the arbitral tribunal may proceed to a final default award (either
expressly or impliedly confirming its own jurisdiction). (15) The meaning and enforceability of
the parties' arbitration agreement may thereafter be raised by the losing party in either a
defense to judicial enforcement of the award brought by the prevailing party or in a judicial
action to vacate or annul the award. (16)
Second, one party may commence litigation concerning the parties' underlying dispute in
national courts in derogation of the arbitration agreement. It may do so either concurrently
with the other party's effort to initiate arbitration or before any effort to invoke arbitration has
occurred. In either event, the meaning or enforceability of the parties' arbitration agreement is
likely to arise in a motion to suspend or stay judicial proceedings pending arbitration. (17) The
interpretation or validity of the parties' arbitration agreement may also be simultaneously
presented to the arbitral tribunal, if one has been constituted.
Third, both parties may participate in the arbitration process and forego litigation in national
courts. Nevertheless, one party may choose to argue to the arbitral tribunal that it lacks
jurisdiction over some or all of the claims before it. The tribunal will generally hear argument
P "75" on that issue and render an interim jurisdictional award. (18) Assuming that the tribunal
P "76" upholds its jurisdiction, the unsuccessful party can then seek to vacate or annul the
jurisdictional award (or a final award, dealing inter alia with jurisdiction) in a national court.
(19)
Finally, the parties can arbitrate the merits of their dispute, with one party attempting to
reserve its rights as to jurisdiction. Once a final arbitral award is rendered, the losing party
may seek to vacate or annul the award; alternatively, it may refuse to honor the award and the
prevailing party will be required to seek judicial enforcement. Subject to claims that
jurisdictional objections have been waived, the proceedings to vacate or enforce the final
award may raise issues relating to the enforceability of the underlying arbitration agreement.
(20)
2. Selected Materials on the Allocation of Authority Between Courts and Arbitrators to Decide
Disputes Over the Interpretation or Enforceability of International Arbitration Agreements
Most of the foregoing scenarios raise issues regarding the respective roles of courts and
arbitrators in determining challenges to international arbitration agreements. Excerpted
below are materials addressing this subject.
Consider in particular the excerpts from the UNCITRAL Model Law, the Swiss Law on Private
International Law, the French Code of Civil Procedure, the FAA, and the European Convention on
International Commercial Arbitration. Consider also the excerpts from the UNCITRAL and ICC
arbitration rules. For a representative example of an arbitral tribunal's approach to challenges
to its jurisdiction, read the Final Award in ICC Case No. 5294 of 22 February 1988. (21) Finally, also
excerpted below is the decision of the U.S. Supreme Court in First Options of Chicago v. Kaplan,
which considers the question of “who decides” challenges to arbitration agreements under the
FAA. (22)
UNCITRAL MODEL LAW
 Articles 7, 8 & 16 [excerpted below at pp. 1013, 1014, 1016]
P "76"
P "77"
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Articles 178 & 186 [excerpted below at pp. 1033-34]
FRENCH CODE OF CIVIL PROCEDURE
Book IV, Articles 1458 & 1466
Article 1458. Whenever a dispute submitted to an arbitral tribunal by virtue of an arbitration
agreement is brought before a court of the [French Republic], such court shall decline
jurisdiction.
If the arbitral tribunal has not yet been seized of the matter, the court should also decline
jurisdiction unless the arbitration agreement is manifestly null.
In neither case may the court determine its lack of jurisdiction on its own motion.
Article 1466. If one of the parties contests, before the arbitrator, the latter's jurisdiction
whether in principle or scope, it is for the arbitrator to decide on the validity or scope of his
mission.
FEDERAL ARBITRATION ACT
9 United States Code §§2-4 [excerpted below at pp. 999-1000]
1961 EUROPEAN CONVENTION ON INTERNATIONAL COMMERCIAL ARBITRATION
Article V(3)
V(3). Subject to any subsequent judicial control provided for under the lex fori, the arbitrator
whose jurisdiction is called into question shall be entitled to proceed with the arbitration, to
rule on his own jurisdiction, and to decide upon the existence or validity of the arbitration
agreement or of the contract of which the agreement forms part.
INTERNATIONAL CHAMBER OF COMMERCE ARBITRATION RULES (1998 VERSION)
Article 6 [excerpted below at p. 1061]
P "77"
P "78"
UNCITRAL ARBITRATION RULES
Article 21 [excerpted below at p. 1027]
FINAL AWARD IN ICC CASE NO. 5294 OF 22 FEBRUARY 1988
XIV Y.B. Comm. Arb. 137 (1989) (©)
KARRER, ARBITRATOR. [A Danish contractor entered into an agreement with an Egyptian sub-
contractor for the construction of an abattoir. Disputes arose and the Danish contractor
commenced an ICC arbitration. The Egyptian subcontractor did not formally respond to the
Request for Arbitration or participate in the arbitral proceedings. Its Egyptian counsel did send
various communications to the arbitrator, which raised jurisdictional objections to the arbitral
proceedings. The arbitrator made the following final award.]
Since Zurich is the place of the arbitration, the procedure is governed by the ICC Rules and the
Zurich Rules of Civil Procedure.... Since this arbitration was ... commenced before 1 July 1985, it
is still the former Zurich law (more particularly Sections 238-257 of the Zurich Rules of Civil
Procedure as enacted on 13 June 1976) which governs. This is of practical importance mainly
because of the necessity of a formally separate award on jurisdiction with a different type of
appeal than against the award on the merits. The decision on his own – disputed – jurisdiction
is to be taken by the arbitrator himself. (Section 241 Zurich Rules of Civil Procedure and Article
8(3) ICC Rules.) (23)
The arbitration clause invoked by claimant is contained in Article 14 of the Agreement between
the parties of 9 March 1983 and reads as follows:
Any disputes and deviations which cannot be solved amicably between the parties shall be
resolved and settled by arbitration under the rules of conciliation and arbitration of the
International Chamber of Commerce, Zurich, Switzerland, in accordance with Swiss law of the
Canton of Zurich.
P "78" This clause could, in and of itself, give rise to a doubt inasmuch as it refers to the rules of
P "79" conciliation and arbitration of the “International Chamber of Commerce, Zurich,
Switzerland”: the International Chamber of Commerce has its seat in Paris and there is no
International Chamber of Commerce in Zurich.
For a correct construction of the clause, its background must be considered. The Agreement
between the parties of 9 March 1983 was intimately connected with the main contract between
claimant and the Egyptian [employer] of 26 March 1983 ...; the latter formed an ‘integral part’ of
the former ... and was, therefore known to both parties. The main contract contains, as Annex F,
also an arbitration clause (which runs to one and a half pages). It provides for arbitration in
Zurich with application of Swiss laws, but by an ad hoc arbitral tribunal of three members, the
election of which is carefully described. Article 14 of the Agreement between the parties which
is relevant differs clearly in providing for “arbitration under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce, Zurich”; i.e., for institutional, rather
than ad hoc arbitration, but it also refers to Swiss law “of the Canton of Zurich.” The term “Rules
 of Conciliation and Arbitration” is generally used distinctively for the arbitration rules of the –
only – International Chamber of Commerce (with seat in Paris), which is also widely known
throughout the world for its arbitration organization. The rules of the local Zurich Chamber of
Commerce are, on the other side, known as “rules of mediation and arbitration.” Under these
circumstances it must be concluded that the true meaning of the clause applicable here in an
arbitration in Zurich under the ICC Rules with Swiss/Zurich law applicable to the substance of
the case. This construction is concordant with at least one decision of a Zurich court and with
other ICC cases, where similar clauses had been construed to refer to arbitrations taking place
in Zurich under the Rules of the ICC (in Paris). The organization of the present arbitration
(introduction of the action by claimant with the ICC Court of Arbitration and the appointment
by the ICC Court of Arbitration of an Arbitrator for an arbitration to be held in Zurich) conforms
exactly to the clause.
Defendant also appears to take the view that the arbitration clause is deficient and violates
Egyptian “ordre public” by not appointing the arbitrator itself. The exact argument does not
appear directly from the writings addressed to the arbitrator by defendant, but obliquely in a
copy of a request by defendant to Egyptian Court.... There, defendant claims that the
arbitration clause in case is invalid because it does not comply with Article 502(3) of the
Egyptian Code of Civil Procedure, which provides that arbitrators should be appointed and
named in the agreement on arbitration or in a separate agreement. (24)
P "79"
P "80"
It is undoubtedly true that, in the present case, the arbitration clause did not nominate the
arbitrator directly but only provided for ICC arbitration, and that the arbitrator was – pursuant
to the ICC Rules – nominated by the ICC. This does not, however, make the arbitration clause
invalid. It is not governed by Egyptian law, but by the lex fori of the arbitrator.... It may be
noted that also under Article 22 of the Egyptian Civil Code ... the law applicable to the arbitral
procedure will be the law of the place where the arbitration is held. (25) Under the applicable
procedural law (ICC Rules and Zurich Code of Civil Procedure in the 1976 version) it is self-
evident that the agreement to arbitrate is binding even without nomination of the arbitrators
by the parties in that agreement; this results already from the detail provisions as to the
nomination of arbitrators after a controversy has arisen and to the procedure to be followed
when one party refuses to nominate an arbitrator and/or if the parties' nominated arbitrators
cannot agree on a third arbitrator.
It should also be noted that on 26 April 1982 the Egyptian Cour de Cassation (in Case No. 714 of
the judicial year 47) held that Article 502(3) of the Egyptian Code of Civil Procedure could not
be used in the case of an agreement to arbitrate in England and that, furthermore, a foreign
law which was different from Article 502(3) Egyptian Code of Civil Procedure would not violate
public policy (and would therefore not be unenforceable in Egypt) under Article 28 of the
Egyptian Civil Code. Defendant's point of view that the arbitration clause is invalid for not
confirming to Article 502(3) of the Egyptian Code of Civil Procedure is, therefore, unfounded.
Already by telex of 20 November 1985, Mr. [A], on behalf of the defendant, informed the
arbitrator that defendant had introduced an action to declare the arbitration clause void
introduced at the [Egyptian court] and requested a suspension of the arbitration until a
decision of that litigation in Egypt. By telex of 29 January 1987, Mr. [B], on behalf of defendant,
referred to a Court Order by the [Egyptian Court] ordering the holding of all arbitration
procedures until a decision in a further procedure in the same court.
No order of any Egyptian Court was actually ever notified or submitted to the arbitrator either
directly or by either of the parties. This is, however, immaterial. As the arbitrator pointed out
already in his telex of 21 November 1985 to Mr. [A] (with copy to the claimant), court
proceedings in Egypt did and do not have any direct influence on the present arbitration
proceedings, since Egyptian Courts would not have jurisdiction of either these proceedings or
the arbitrator. They certainly do not have any influence on the arbitrator's jurisdiction in the
present case.
Based on the foregoing considerations, the result is that there is a valid arbitration agreement
for ICC arbitration in Zurich and that, therefore, the arbitrator has jurisdiction. This is to be
recorded in a formally separate award....
P "80"
P "81"
FIRST OPTIONS OF CHICAGO, INC. v. KAPLAN
514 U.S. 938 (U.S. Supreme Court 1995)
JUSTICE BREYER. In this case we consider a question about how courts should review certain
matters under the [FAA, including] how a district court should review an arbitrator's decision
that the parties agreed to arbitrate a dispute ...
The case concerns several related disputes between, on one side, First Options of Chicago, Inc.,
a firm that clears stock trades on the Philadelphia Stock Exchange, and, on the other side,
three parties: Manuel Kaplan; his wife Carol Kaplan; and his wholly owned investment
company, MK Investments, Inc. (MKI), whose trading account First Options cleared. The disputes
center around a “workout” agreement, embodied in four separate documents, which governs
the “working out” of debts to First Options that MKI and the Kaplans incurred.... In 1989, after
entering into the agreement, MKI lost an additional $1.5 million. First Options then took control
of, and liquidated, certain MKI assets; demanded immediate payment of the entire MKI debt;
and insisted that the Kaplans personally pay any deficiency. When its demands went
unsatisfied, First Options sought arbitration....
 MKI, having signed the only workout document (out of four) that contained an arbitration
clause, accepted arbitration. The Kaplans, however, who had not personally signed that
document, denied that their disagreement with First Options was arbitrable and filed written
objections to that effect with the arbitration panel. The arbitrators decided that they had the
power to rule on the merits of the parties' dispute, and did so in favor of First Options. The
Kaplans then asked the Federal District Court to vacate the arbitration award, see 9 U.S.C. §10,
and First Options requested its confirmation, see §9. The court confirmed the award.
Nonetheless, on appeal the Court of Appeals for the Third Circuit agreed with the Kaplans that
their dispute was not arbitrable; and it reversed the District Court's confirmation of the award
against them.
The Court of Appeals said that courts “should independently decide whether an arbitration
panel has jurisdiction over the merits of any particular dispute.” 19 F.3d at 1509 (emphasis
added). First Options asked us to decide whether this is so (i.e., whether courts, in “reviewing
the arbitrators' decision on arbitrability, should “apply a de novo standard of review or the
more deferential standard applied to arbitrators' decisions on the merits”) when the objecting
party submitted the issue to the arbitrators for decision.
The ... question – the standard of review applied to an arbitrator's decision about arbitrability
– is a narrow one. To understand just how narrow, consider three types of disagreement present
in this case. First, the Kaplans and First Options disagree about whether the Kaplans are
personally liable for MKI's debt to First Options. Second, they disagree about whether they
P "81" agreed to arbitrate the merits. That disagreement is about the arbitrability of the dispute.
P "82" Third, they disagree about who should have the primary power to decide the second matter.
Does that power belong primarily to the arbitrators (because the court reviews their
arbitrability decision deferentially) or to the court (because the court makes up its mind about
arbitrability independently)? We consider here only this third question.
Although the question is a narrow one, it has a certain practical importance. That is because a
party who has not agreed to arbitrate will normally have a right to a courts decision about the
merits of its dispute (say, as here, its obligation under a contract). But, where the party has
agreed to arbitrate, he or she, in effect, has relinquished much of that right's practical value.
The party still can ask a court to review the arbitrators' decision, but the court will set that
decision aside only in very unusual circumstances. See, e.g., 9 U.S.C. §10 (award procured by
corruption, fraud, or undue means; arbitrator exceeded his powers); Wilko v. Swan, 346 U.S. 427,
436-437 (1953) (parties bound by arbitrator's decision not in “manifest disregard” of the law),
overruled on other grounds, Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477
(1989). Hence, who – court or arbitrator – has the primary authority to decide whether a party
has agreed to arbitrate can make a critical difference to a party resisting arbitration.
We believe the answer to the “who” question (i.e., the standard-of-review question) is fairly
simple. Just as the arbitrability of the merits of a dispute depends upon whether the parties
agreed to arbitrate that dispute, see, e.g., Mastrobuono v. Shearson Lehman Hutton, Inc., 514
U.S. ···,··· (1995); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626 (1985),
so the question “who has the primary power to decide arbitrability” turns upon what the
parties agreed about that matter. Did the parties agree to submit the arbitrability question
itself to arbitration? If so, then the court's standard in reviewing the arbitrator's decision about
that matter should not differ from the standard courts apply when they review any other
matter that parties have agreed to arbitrate. See AT&T Technologies, Inc, v. Communications
Workers, 475 U.S. 643, 649 (1986) (parties may agree to arbitrate arbitrability); Steelworkers v.
Warrior & Gulf Navigation Co., 363 U.S. 574, 583, n.7 (1960) (same). That is to say, the court should
give considerable leeway to the arbitrator, setting aside his or her decision only in certain
narrow circumstances. See, e.g., 9 U.S.C. §10. If, on the other hand, the parties did not agree to
submit the arbitrability question itself to arbitration, then the court should decide that
question just as it would decide any other question that the parties did not submit to
arbitration, namely independently. These two answers flow inexorably from the fact that
arbitration is simply a matter of contract between the parties; it is a way to resolve those
disputes – but only those disputes – that the parties have agreed to submit to arbitration.
We agree with First Options, therefore, that a court must defer to an arbitrator's arbitrability
decision when the parties submitted that matter to arbitration. Nevertheless, that conclusion
does not help First Options win this case. That is because a fair and complete answer to the
standard-of-review question requires a word about how a court should decide whether the
P "82" parties have agreed to submit the arbitrability issue to arbitration. And, that word makes clear
P "83" that the Kaplans did not agree to arbitrate arbitrability here. When deciding whether the
parties agreed to arbitrate a certain matter (including arbitrability), courts generally (though
with a qualification we discuss below) should apply ordinary state-law principles that govern
the formation of contracts. The relevant state law here, for example, would require the court to
see whether the parties objectively revealed an intent to submit the arbitrability issue to
arbitration. See, e.g., Estate of Jesmer v. Rohlev, 609 N.E.2d 816, 820 (Ill. 1993) (law of the state
whose law governs the workout agreement); Burkett v. Allstate Ins., Co., 534 A.2d 819, 823-824
(Pa. 1987) (law of the state where the Kaplans objected to arbitrability).
This Court, however, has (as we just said) added an important qualification, applicable when
courts decide whether a party has agreed that arbitrators should decide arbitrability: Courts
should not assume that the parties agreed to arbitrate arbitrability unless there is “clea[r] and
unmistakabl[e]” evidence that they did so. AT&T Technologies, 475 U.S. at 649; see Warrior &
Gulf, 363 U.S. at 583, n.7. In this manner the law treats silence or ambiguity about the question
“who (primarily) should decide arbitrability” differently from the way it treats silence or
ambiguity about the question “whether a particular merits-related dispute is arbitrable
because it is within the scope of a valid arbitration agreement” – for in respect to this latter
 question the law reverses the presumption. See Mitsubishi Motors, 473 U.S. at 626 (“[A]ny doubts
concerning the scope of arbitrable issues should be resolved in favor of arbitration”).
But this difference in treatment is understandable. The latter question arises when the parties
have a contract that provides for arbitration of some issues. And, given the law's permissive
policies in respect to arbitration, one can understand why the law would insist upon clarity
before concluding that the parties did not want to arbitrate a related matter. On the other
hand, the former question – the “who (primarily) should decide arbitrability” question – is
rather arcane. A party often might not focus upon that question or upon the significance of
having arbitrators decide the scope of their own powers. And, given the principle that a party
can be forced to arbitrate only those issues it specifically has agreed to submit to arbitration,
one can understand why courts might hesitate to interpret silence or ambiguity on the “who
should decide arbitrability” point as giving the arbitrators that power, for doing so might too
often force unwilling parties to arbitrate a matter they reasonably would have thought a judge,
not an arbitrator, would decide.
On the record before us, First Options cannot show that the Kaplans clearly agreed to have the
arbitrators decide (i.e., to arbitrate) the question of arbitrability. First Options relies on the
Kaplans' filing with the arbitrators a written memorandum objecting to the arbitrators'
jurisdiction. But merely arguing the arbitrability issue to an arbitrator does not indicate a clear
willingness to arbitrate that issue, i.e., a willingness to be effectively bound by the arbitrator's
decision on that point. To the contrary, insofar as the Kaplans were forcefully objecting to the
arbitrators deciding their dispute with First Options, one naturally would think that they did
P "83" not want the arbitrators to have binding authority over them. This conclusion draws added
P "84" support from (1) an obvious explanation for the Kaplans' presence before the arbitrators (i.e.,
that MKI, Mr. Kaplan's wholly owned firm, was arbitrating workout agreement matters); and (2)
Third Circuit law that suggested [at the time] that the Kaplans might argue arbitrability to the
arbitrators without losing their right to independent court review.
First Options makes several counterarguments: (1) that the Kaplans had other ways to get
independent court decision on the question of arbitrability without arguing the issue to the
arbitrators (e.g., by trying to enjoin the arbitration, or by refusing to participate in the
arbitration, and then defending against a court petition First Options would have brought to
compel arbitration, see 9 U.S.C. §4); (2) that permitting parties to argue arbitrability to an
arbitrator without being bound by the result would cause delay and waste in the resolution of
disputes; and (3) that the [FAA] therefore requires a presumption that the Kaplans agreed to be
bound by the arbitrators' decision, not the contrary. The first of these points, however, while
true, simply does not say anything about whether the Kaplans intended to be bound by the
arbitrators' decision. The second point, too, is inconclusive, for factual circumstances vary too
greatly to permit a confident conclusion about whether allowing the arbitrator to make an
initial (but independently reviewable) arbitrability determination would, in general, slow
down the dispute resolution process. And, the third point is legally erroneous, for there is no
strong arbitration-related policy favoring First Options in respect to its particular argument
here. After all, the basic objective in this area is not to resolve disputes in the quickest manner
possible, no matter what the parties' wishes, but to ensure that commercial arbitration
agreements, like other contracts, “‘are enforced according to their terms,’”Mastrobuono, 514
U.S. at ··· (quoting Volt Information Sciences, 489 U.S. at 479), and according to the intentions of
the parties, Mitsubishi Motors, 473 U.S. at 626. That policy favors the Kaplan, not First Options.
We conclude that, because the Kaplans did not clearly agree to submit the question of
arbitrability to arbitration, the Court of Appeals was correct in finding that the arbitrability of
the Kaplan/First Options dispute was subject to independent review by the courts.
Notes on Allocation of Authority to Decide Disputes Over the Interpretation or Enforceability of
International Arbitration Agreements
1. Importance of national arbitration statute in arbitral situs to arbitral proceedings involving
disputes over the validity or applicability of arbitration agreements. Consider the tribunal's
award in ICC Case No. 5294. Note in particular the arbitrators' care in ascertaining what the
local arbitration statute (i.e., at that time, the Zurich Rules of Civil Procedure) provided with
respect to the handling of jurisdictional issues by an arbitral tribunal. This approach is
common practice in international arbitration. Why, in an international arbitration, do
arbitrators care what the arbitration statute in the arbitral situs says about their power to
make jurisdictional decisions?
2. Importance of arbitration agreement and applicable institutional rules to arbitral
proceedings involving disputes over the validity or applicability of arbitration agreements. The
award in ICC Case No. 5294 also illustrates the importance of the parties' arbitration
agreement, including any applicable institutional arbitration rules which it incorporates, to a
P "84" tribunal's handling of jurisdictional disputes. The parties' agreement, or rules incorporated
P "85" into it, may prescribe rules regarding the handling of jurisdictional challenges. What
institutional rules were incorporated in ICC Case No. 5294, and what did they say about
jurisdictional challenges?
3. Arbitrators' power under leading institutional arbitration rules to decide disputes over the
validity or applicability of arbitration agreements. Almost all institutional rules grant
arbitrators broad power to consider and decide challenges to their own jurisdiction. Consider
ICC Rules Article 6, UNCITRAL Arbitration Rules Article 21, and LCIA Rules Article 23. Compare
the specific text in each of these sets of institutional arbitration rules. How clear is it under
each provision that an arbitral tribunal may consider and decide its own jurisdiction? Do any of
these rules address the allocation of competence between arbitral tribunals and national
courts? Should they?
 4. Arbitrators' willingness to decide disputes over the interpretation or enforceability of
international arbitration agreements: the competence-competence doctrine. As a practical
matter, international arbitrators typically conclude (absent clear agreement to the contrary)
that they have the power to consider and decide the extent of their own jurisdiction. In
addition to the JOC Oil award and the decision in ICC Case No. 5294, see Final Award in Case No.
3896 of 1982, X Y.B. Comm. Arb. 47 (1985); Final Award in Case No. 5485 of 18 August 1987, XIV Y.B.
Comm. Arb. 156, 159 (1989) (“in international commercial arbitration the arbitrators have the
authority to determine their own jurisdiction”); TOPCO/Calasiatic v. Libya, Nov. 27, 1975
Preliminary Award, reprinted in I J.G. Wetter, The International Arbitral Process 441 (1979)
(“International case law has continuously confirmed that arbitrators are necessarily the judges
of their own jurisdiction ...”); Judgment of 24 February 1994, XXII Y.B. Comm. Arb. 682 (Paris Cour
d'Appel) (1997) (“In international matters, the arbitrator has jurisdiction to decide on his own
jurisdiction with respect to the arbitrability of the dispute in light of international public
policy”); Final Award in ICC Case No. 8938 of 1996, XXIVa Y.B. Comm. Arb. 174, 176 (1999) (“The
principle of ‘competence-competence’ is widely recognized by doctrine and jurisprudence”);
ICC Case No. 6268 of 1990, XVI Y.B. Comm. Arb. 119, 122 (1991) (“In accord with the familiar
principle of Kompetenz-Kompetenz, Art. 8(3) of the ICC Rules gives this tribunal authority to
determine its own jurisdiction.”); ICC Case No. 6162 of 1990, XVII Y.B. Comm. Arb. 153 (1990); ICC
Case No. 4695 of 1984, XI Y.B. Comm. Arb. 149 (1986); ICC Case No. 4381 of 1986, 1986 Journal du
droit international 1103 (1986); Final Award in ICC Case No. 5460 of 1987, reprinted in S. Jarvin, Y.
Derains & J. Arnaldez, Collection of ICC Arbitral Awards, 1986-1990, at 136-42 (1994) (arbitral
tribunal has competence under ICC rules to consider own jurisdiction); Award in ICC Case No.
4862 of 1986, reprinted in S. Jarvin, Y. Derains & J. Arnaldez, Collection of ICC Arbitral Awards,
1986-1990, at 508-09 (1994) (arbitral tribunal has competence under ICC Rules to consider own
jurisdiction).
As discussed above, the principle that arbitrators have jurisdiction to consider challenges to
the validity or applicability of arbitration agreements is sometimes referred to as the
“competence-competence” or “Kompetenz-Kompetenz” doctrine. See supra pp. 8-9; Wetter, The
Importance of Having A Connection, 3 Arb. Int'l 329 (1987); Goldman, The Complementary Roles of
Judges and Arbitrators in Ensuring That International Commercial Arbitration is Effective, in Sixty
Years of ICC Arbitration – A Look at the Future 255, at 263 (1984); S. Schwebel, International
Arbitration: Three Salient Problems 1-60 (1987). As the name suggests, the competence-
competence doctrine refers to the arbitrators' jurisdiction to determine their own jurisdiction.
5. Possible variations of competence-competence doctrine. A number of constructions of the
competence-competence doctrine are possible. These are outlined below.
(a) Arbitrators' power to continue with arbitral proceedings despite one party's challenge to
arbitration agreement. At a minimum, the competence-competence doctrine permits an
arbitrator to continue with the arbitration of a dispute, notwithstanding a party's claim
that the arbitration agreement is invalid. That is, the mere existence of a jurisdictional
challenge does not automatically deprive the arbitrator of jurisdiction under the
contested arbitration agreement. For example, the arbitrators in JOC Oil, ICC Case No.
5294, and First Options went ahead with the arbitral proceedings notwithstanding
objections to their jurisdiction. What alternative approach might exist? How sensible
would this approach be?
(b) Arbitrators' concurrent power to rule on challenge to arbitration agreement, subject to
subsequent judicial review. Somewhat more broadly, the competence-competence
doctrine could permit arbitrators to consider challenges to their jurisdiction in the
arbitral proceedings. That is, arbitrators would be permitted to consider and make
awards on the formation, validity, and scope of the parties' arbitration agreement. Again,
P "85" this is what transpired in JOC Oil, ICC Case No. 5294, and First Options. Consider the
P "86" following explanation of this result:
It is not the law that arbitrators, if their jurisdiction is challenged or questioned, are
bound immediately to refuse to act until their jurisdiction has been determined by some
court which has power to determine it finally. Nor is it the law that they are bound to go
on without investigating the merits of the challenge and to determine the matter in
dispute, leaving the question of their jurisdiction to be held over until it is determined by
some Court which had power to determine it. They might then be merely wasting their
time and everybody else's. They are not obliged to take either of those courses. They are
entitled to inquire into the merits of the issue as to whether they have jurisdiction or not,
not for the purpose of reaching any conclusion which will be binding upon the parties –
because that they cannot do – but for the purpose of satisfying themselves as a
preliminary matter about whether they ought to go on with the arbitration or not.
Christopher Brown Ltd v. Genossenschaft Osterreichisher Waldbesitzer
Holzwirtschaftsbetriebe 1 Q.B. 8, 12-13 (1954).
Despite the arbitrators' power to rule on jurisdictional challenges, either party to the
arbitration would be free to seek either immediate or subsequent judicial resolution of
the jurisdictional challenge. (In the event of concurrent arbitral and judicial proceedings,
each decision-maker (i.e., arbitrator and court) could consider the desirability of staying
its own proceedings.) In the event of an arbitral award on the subject of jurisdiction
(either interim or final), the arbitrator's ruling would be subject to judicial review under
otherwise-applicable standards of review.
 (c) Arbitrators' exclusive power to rule preliminarily on challenge to arbitration agreement,
subject to subsequent judicial review. Even more broadly, the competence-competence
doctrine could grant an arbitral tribunal exclusive power to preliminarily consider and
rule on challenges to its jurisdiction. Under this construction, national courts would be
precluded from considering challenges to an arbitration agreement until the relevant
arbitral tribunal had done so. After the arbitrators had made an award on jurisdiction
(interim or final), the award would be subject to judicial review under otherwise-
applicable standards of review. Alternatively, no judicial review of a jurisdictional ruling
by the tribunal would be permitted until a final award on the merits was made by the
tribunal (even if jurisdictional issues were decided in an interim award).
(d) Arbitrators' exclusive power to decide challenges to arbitration agreement. Most broadly,
the competence-competence doctrine could mean that the arbitral tribunal possessed
exclusive power to consider and decide challenges to its jurisdiction, subject to little or
no judicial review. That is, national courts would be precluded from considering a
challenge to an arbitration agreement, until an arbitral award was made on the
challenge. Thereafter, judicial review would be available only on the highly-deferential
grounds applicable in many jurisdictions to non-jurisdictional arbitral awards. See infra
pp. 797-814. Alternatively, no judicial review would be permitted.
6. Appropriate allocation of power between arbitrators and courts in deciding disputes over
validity or applicability of arbitration agreements. What is the appropriate allocation of
responsibility between courts and arbitrators with respect to jurisdictional issues?
(a) Relevant criteria for allocation of power between arbitrators and courts. Why should
arbitrators be permitted even to consider, much less decide, their own jurisdiction? What
are the advantages and disadvantages of such consideration? If arbitrators are permitted
to consider their jurisdiction, then what role should national courts play with respect to
jurisdictional issues? Should courts always be open to a party that wishes an immediate
judicial resolution of jurisdictional issues? Should arbitrators be required immediately to
render an interim award on jurisdiction? If so, should interlocutory judicial review be
immediately available? And, if interlocutory judicial review is available, what effect
should the review process have on the ongoing arbitration (of the merits of the parties'
dispute)?
(b) Relevance of parties' arbitration agreement to appropriate allocation of power between
arbitrators in deciding challenges to arbitration agreements. What role should the parties'
arbitration agreement play in defining the allocation of power between national courts
and arbitrators in deciding challenges to arbitration agreements? That is, should parties
be free to agree to arbitrate issues of arbitrability? Why or why not? Is there an argument
that arbitration agreements should not be valid insofar as questions of arbitrability are
concerned? State the argument. Compare the Court's analysis in First Options. Is there an
P "86" argument that agreements to arbitrate issues of arbitrability should be treated no
P "87" differently from other arbitration agreements?
(c) Relationship between standard of judicial review and allocation of power between
arbitrators and courts in deciding disputes over validity or applicability of arbitration
agreements. In considering how challenges to the validity, formation or scope of an
arbitration agreement should be handled, it is important to take into account the role of
national courts in reviewing any determination by an arbitral tribunal. Suppose that a
national court exercises essentially de novo power to review an arbitral tribunal's
jurisdictional rulings. Does this argue for interlocutory judicial review of the arbitrators'
jurisdictional awards? Why? Suppose that a national court largely defers to an arbitral
tribunal's jurisdictional rulings. How does this affect the timing of judicial review?
7. Relationship between separability doctrine and arbitrators' powers to rule on their own
jurisdiction. Is there a necessary relationship between the separability doctrine and the
principle that arbitrators may rule on their own jurisdiction? Could one exist without the other?
Put differently, if a party challenges an arbitrator's jurisdiction, could the arbitrator decide
whether he has jurisdiction even if the parties' arbitration agreement is not separable? Note
that the UNCITRAL Model Law and the institutional arbitration rules excerpted above treat
these issues as closely-related. Compare Park, Determining Arbitral Jurisdiction: Allocation of
Tasks Between Courts and Arbitrators, 8 Am. Rev. Int'l Arb. 133, 142-43 (1997):
Competence-Competence analysis should not be confused with the principle of ‘separability’
..., by which the validity of an arbitration clause is determined independently from the validity
of the basic commercial contract in which it is encapsulated.... Separability ... says nothing
about the validity of the arbitration clause itself. The fact that an arbitration clause might be
valid notwithstanding infirmities in other contract terms does not mean that the clause
necessarily will be valid, or that an arbitrator's erroneous decision on the clause's validity will
escape judicial scrutiny. Separability and competence-competence intersect only in the sense
that arbitrators who rule on their own jurisdiction (like courts deciding whether to allow an
arbitration to go forward) will look to the arbitration clause alone, not to the entirety of the
contract.
Is this persuasive? See also Svenlov, What Isn't, Ain't, 25 J. World Trade 37 (1991) (“The
competence-competence problem is distinct from the issue of separability”).
8. Arbitrators' personal interest in outcome of disputes over validity or applicability of
arbitration agreements. Arbitrators are not national court judges; they are usually private
practitioners, of some sort, engaged in the business of providing legal services for a fee. Often,
 they face significant financial and competitive pressures to earn more money and handle more
cases. That is true for many arbitrators suitable for international commercial disputes.
On the other hand, it is recognized in many nations that judges and other governmental
authorities ought not have a personal financial interest in the outcome of their official
decisions. Cf. Tumey v. Ohio, 273 U.S. 510 (1927) (due process clause requires vacating conviction
where judge's income was affected by outcome of case). Suppose that a judge's compensation
depended on how he decided an issue. Would that be just?
How does the foregoing affect your analysis of the appropriate allocation of power between
arbitrators and national courts to consider jurisdictional challenges? Consider the following:
Our deference to arbitrators has gone beyond the bounds of common sense. I cannot
understand the process of reasoning by which any court can leave to the unfettered discretion
of an arbitrator the determination of whether there is any duty to arbitrate. I am even more
mystified that a court could permit such unrestrained power to be exercised by the very
person who will profit by deciding that an obligation to arbitrate survives, thus ensuring his
own business. It is too much to expect even the most fair-minded arbitrator to be impartial
when it comes to determining the extent of his own profit. We do not let judges make decisions
which fix the extent of their fees, see Tumey v. Ohio, 273 U.S. 510 (1927). How, then, can we shut
our eyes to the obvious self-interest of an arbitrator?
Ottley v. Sheepshead Nursing Home, 688 F.2d 883, 898 (2d Cir. 1982) (Newman, J., dissenting). See
also Trafalgar Shipping Co. v. Int'l Milling Co., 401 F.2d 568, 573 (2d Cir. 1968) (“Moreover, it is not
P "87" likely that arbitrators can be altogether objective in deciding whether or not they ought to hear
P "88" the merits. Once they have bitten into the enticing fruit of controversy, they are not apt to
stay the satisfying of their appetite after one bite”).
What response is there to this? What if parties agree to such an arrangement? Will parties
select arbitrators who are known to make their decisions based on their financial self-interest?
9. Practical importance of allocation of jurisdictional competence over disputes concerning
arbitration agreements. The First Options opinion observes that the allocation of jurisdictional
competence over “questions of arbitrability” has “a certain practical importance.” That is a
considerable understatement. Consider the following: (a) arbitrators are compensated by the
efforts that they devote to resolving a dispute, supra pp. 87-88; (b) under some national laws
and arbitral regimes, arbitrators customarily render “Solomonic” decisions, rather than crisp
legal judgments; (c) arbitrators generally possess substantial discretion over the timing of their
decisions about arbitrability, including over the question whether to combine jurisdictional
rulings with decisions on the merits of the parties' dispute, see infra pp. 88-89; and (d)
arbitrators' decisions on disputes over arbitration agreements may be subject to highly
deferential judicial review, see infra pp. 797-814. Consider how these various factors affect
litigation strategy and likely outcomes.
10. Allocation of power to decide disputes over the validity or applicability of arbitration
agreements under the UNCITRAL Model Law. Consider the allocation of jurisdictional
competence to decide disputes over the validity or applicability of the arbitration agreements
under Article 16 of the UNCITRAL Model Law.
(a) Arbitrators' power to consider disputes over the validity or applicability of arbitration
agreements. Article 16 of the UNCITRAL Model Law expressly authorizes arbitrators to
consider and make awards regarding their own jurisdiction. This is a consistent feature of
most developed arbitration legislation. What alternatives might be adopted? Does Article
16 depend upon whether the parties have agreed to confer such authority on the
arbitrators? What if the parties expressly agree that the arbitrators shall not have such
power? Should this agreement be respected?
(b) Obligation to present challenges to the validity or applicability of arbitration agreements
promptly. Article 16(2) requires that any challenge to the arbitral tribunal's jurisdiction be
raised promptly. What is the purpose of this requirement?
(c) Immediate interlocutory judicial review of arbitral awards on jurisdiction. Article 16(3)
provides for an immediate interlocutory appeal to local courts from a tribunal's
jurisdictional ruling. Is it wise to permit interlocutory judicial appeals on jurisdictional
issues? How does Article 16(3) deal with the problem of potential delays in the arbitral
process, resulting from judicial consideration of jurisdictional issues? What standard of
review will be applied to a tribunal's award when a court hears an interlocutory appeal
from a jurisdictional ruling?
(d) Arbitrators' discretion over timing of awards on jurisdiction. Finally, note that Article 16(3)
does not require an arbitral tribunal to rule immediately upon challenges to its
jurisdiction. A tribunal can reserve decision on such questions until its final award on the
merits. In that event, what avenue(s) exist for judicial determination of jurisdictional
issues?
Why should an arbitral tribunal be given the discretion to reserve jurisdictional issues
until its final award on the merits? Note that this will oblige the party challenging the
arbitral tribunal's jurisdiction to go to the expense of presenting its case to the tribunal
on the merits. Note also that, as a practical matter, the vast majority of all disputes will
settle before a final decision on the merits by the tribunal. How does this affect analysis?

11. Allocation of power to decide disputes over arbitration agreements under the Swiss Law on
Private International Law. Consider the allocation of jurisdictional competence to decide
 disputes over arbitration agreements under Article 186 of the Swiss Law on Private
International Law.
(a) Arbitrators' power to consider disputes over arbitration agreements. Like Article 16 of the
UNCITRAL Model Law, Article 186 of the Swiss Law on Private International Law provides
that the arbitral tribunal shall have the power to consider and make awards on its own
jurisdiction.
(b) Immediate interlocutory judicial review of arbitral awards on jurisdiction. As under Article
16(3) of the UNCITRAL Model Law, an arbitral award on jurisdiction is immediately
appealable to Swiss courts. See Swiss Law on Private International Law, Article 190(2)(b).
(c) Arbitrators' discretion over timing of awards on jurisdiction. Unlike the UNCITRAL Model
Law, Article 186(3) of the Swiss Law on Private International Law requires arbitrators “as a
P "88" rule” to make a preliminary award on issues of their jurisdiction. Why would a legislature
P "89" impose such a limitation on the arbitrators' otherwise broad discretion over
procedural issues? What are the respective costs and benefits of this “rule”? When might
exceptions to the rule be warranted? Note that Article 186(3) gives arbitrators discretion
to proceed to hear a dispute on the merits, preventing (or at least impeding) any
jurisdictional dispute from being judicially-reviewed until after a final award is made.
(d) Possibility of interlocutory judicial consideration of disputes over arbitration agreements.
What possibilities exist under the Swiss Law on Private International Law for interlocutory
judicial consideration of disputes over arbitration agreements (other than under Article
190)? Suppose one party sues in local courts on the merits of the allegedly arbitrable
dispute. Suppose one party seeks an injunction from a Swiss court against the arbitration
proceeding.
12. Allocation of power to decide disputes over arbitration agreements under the French Code of
Civil Procedure. Consider Articles 1458 and 1466 of the French Code of Civil Procedure.
(a) Arbitrators' power to consider disputes over arbitration agreements. Again, like other
developed arbitration legislation, Article 1466 expressly authorizes the arbitral tribunal
to rule on its own jurisdiction.
(b) Exclusivity of arbitrators' power to preliminarily consider disputes over arbitration
agreements. Article 1458 provides that French courts must decline jurisdiction over
disputes that have already been submitted to arbitration – apparently without any
inquiry into the formation, validity or scope of an arbitration agreement. Moreover, even
if a dispute has not yet been submitted to arbitration, French courts must decline
jurisdiction if the dispute is subject to an arbitration agreement that is not “manifestly
null.”
Is this a sensible procedural approach? Are there any comparable provisions in the
UNCITRAL Model Law or the Swiss Law on Private International Law? Should arbitral
tribunals be granted the exclusive authority to consider objections to their jurisdiction,
prior to any judicial consideration of the issue? If so, should there be any requirements
applicable to the timing of a tribunal's consideration of jurisdictional issues?

(c) Timing of arbitrators' decision on jurisdictional issues. Do Articles 1458 and 1466 impose
any limits on the timing of an arbitral tribunal's jurisdictional awards?
13. Little guidance in text of the FAA as to respective roles of courts and arbitrators in deciding
disputes over arbitration agreements. Consider §§2, 3, 4, and 203 of the FAA. What do these
provisions indicate regarding the allocation of power to consider disputes over arbitration
agreements?
Do §§2, 3, 4, and 203 of the FAA state that arbitrators may rule on disputes over the formation,
validity, and scope of arbitration agreements? Do they state that courts must make such
rulings? Does anything in the FAA address questions of the arbitrator's competence, timing of
arbitral awards, and timing of judicial review (as other leading arbitration legislation does)?
In the absence of detailed guidance from the FAA, U.S. courts were historically divided over the
extent to which an arbitrator had the authority to rule on his own jurisdiction under the FAA. As
detailed below, this uncertainty was largely resolved in the United States by the Supreme
Court's decision in First Options of Chicago, Inc. v. Kaplan. See infra pp. 90-93.
14. Power of arbitrators under FAA to consider and make awards on disputes over arbitration
agreements. Even before the First Options opinion, U.S. courts uniformly held, or assumed, that
arbitral tribunals possessed the power under the FAA to consider challenges to their own
jurisdiction, and to make awards on those challenges. As with other leading national
arbitration statutes, nothing in the FAA prevents a tribunal from preliminarily considering
whether an arbitration agreement is valid or applicable the parties' dispute, provided that
such issues fall within the scope of the arbitration agreement or are submitted by the parties
to the tribunal. The Supreme Court recently reaffirmed this. See First Options of Chicago, Inc. v.
Kaplan, 514 U.S. 938 (1995) (Court adopts approach of “allowing the arbitrator to make an initial
(but independently reviewable) arbitrability determination”).
Nonetheless, as discussed below, the FAA also permits parties to seek injunctive relief against
ongoing arbitrations or to commence litigation on an allegedly arbitrable dispute. This
litigation can have the effect of provoking an immediate judicial resolution of challenges to the
jurisdiction of an arbitral tribunal. See infra pp. 399, 406-07.
 (a) Historic U.S. authority requiring independent judicial determination of disputes over
formation, validity, and legality of arbitration agreements. Historically, most U.S. courts
held that disputes over arbitration agreements were for independent judicial resolution.
Interpreting §301(a) of the Labor Management Relations Act, the Supreme Court held in
AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 649 (1986),
that “the question of arbitrability – whether [an] agreement creates a duty for the parties
to arbitrate a particular grievance – is undeniably an issue for judicial determination.”
P "89" Recounting its decision in John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 547 (1964),
P "90" the Court said elsewhere in AT&T Technologies:
The “threshold question” there was whether the court or an arbitrator should decide if
arbitration provisions in a ... contract survived a corporate merger so as to bind the
surviving corporation. The Court [in John Wiley] answered that there was “no doubt” that
this question was for the courts. “Under our decisions, whether or not the company was
bound to arbitrate, as well as what issues it must arbitrate, is a matter to be determined
by the Court on the basis of the contract entered into by the parties.” ... The duty to
arbitrate being of contractual origin, a compulsory submission to arbitration cannot
precede judicial determination that the collective bargaining agreement does in fact
create such a duty.
See also Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241 (1962) (“whether or not the
company was bound to arbitrate, as well as what issues it must arbitrate, is a matter to
be determined by the Court on the basis of the contract entered into by the parties”).
Historically, most lower court decisions under the FAA expressly or impliedly reached the
same conclusion as AT&T Technologies, requiring independent judicial resolution of
claims that an arbitration agreement itself was not properly formed, invalid, or illegal.
See Moseley v. Electronic & Missile Facilities, Inc., 374 U.S. 167 (1963); David L. Threlkeld &
Co. v. Metallgesellschaft Ltd, 923 F.2d 245 (2d Cir. 1991); International Ass'n of Machinists
etc. v. General Electric Co., 865 F.2d 902, 904 (7th Cir. 1989) (“the arbitrator is not the judge
of his own authority”); J.J. Ryan & Sons v. Rhone Poulenc Textile, SA, 863 F.2d 315, 319 (4th
Cir. 1988); Cohen v. Wedbush, Noble, Cooke, Inc., 841 F.2d 282 (9th Cir. 1988); Valero
Refining, Inc. v. M/T Lauberhorn, 813 F.2d 60 (5th Cir. 1987); I.S. Joseph Co. v. Michigan Sugar
Co., 803 F.2d 396, 399-400 & n.2 (8th Cir. 1986); Becker Autoradio v. Becker Autoradiowerk
GmbH, 585 F.2d 39, 44 & n.10 (3d Cir. 1978).

(b) Historic U.S. authority permitting arbitrators to resolve disputes about scope of arbitration
clause. Notwithstanding AT&T Technologies, a number of U.S. courts held that disputes
about the scope of an arbitration agreement that concededly exists and is valid could be
for resolution by the arbitrators. See Apollo Computer, Inc. v. Berg, 886 F.2d 469 (1st Cir.
1989); Matter of Arbitration No. AAA13-161-0511-85, 867 F.2d 130, 133 (2d Cir. 1989); Societe
Generale etc. v. Raytheon European Mgt and Systems Co., 643 F.2d 863, 869 (1st Cir. 1981);
Oil, Chemical & Atomic Workers v. American Petrofina Co., 759 F.2d 512, 515 (5th Cir. 1985);
Butler Products Co. v. Unistrut Corp., 367 F.2d 733 (7th Cir. 1966).
(c) Historic U.S. authority permitting arbitrators to resolve disputes about the underlying
contract. Lower U.S. court decisions regarding the allocation of power between courts and
arbitrators to resolve disputes about formation, validity, or legality of the parties'
underlying contract were divided. Many U.S. courts concluded that disputes about the
formation, validity, or legality of the parties' underlying contract (as distinguished from
the separable arbitration agreement) were for resolution by the arbitrators. This was
often cited as a corollary of the separability doctrine. See Prima Paint, supra; Mesa
Operating Limited Partnership v. Louisiana Interstate Gas Corp., 797 F.2d 238 (5th Cir. 1986);
Unionmutual Stock Life Ins. Co. v. Beneficial Life Ins. Co., 774 F.2d 524 (1st Cir. 1985); In re Oil
Spill by Amoco Cadiz, 659 F.2d 789 (7th Cir. 1981); Island Territory of Curacao v. Solitron
Devices, Inc., 489 F.2d 1313 (2d Cir. 1973), cert. denied, 416 U.S. 989 (1974). Other U.S. courts
concluded that disputes about the existence of the underlying contract required judicial
resolution. Interocean Shipping Co. v. National Shipping & Trading Corp., 462 F.2d 673, 676
(2d Cir. 1972) (“There can be no doubt that the question of the very existence of the
charter party which embodies the arbitration agreement” requires judicial resolution
under §4); In re Kinoshita & Co., 287 F.2d 951, 953 (2d Cir. 1961) (“if it was claimed that ...
there had at no time existed as between the parties any contractual relation whatever, ...
a trial of this issue would be required”).
U.S. courts have also held that parties may agree to judicial resolution of disputes about
the underlying contract. However, they seldom concluded that this had in fact occurred.
See infra pp. 206-07.

15. First Options and current U.S. law regarding allocation of jurisdictional competence
between arbitrators and courts under the FAA.First Options reflects the current state of the law
under the FAA with respect to the allocation of jurisdictional competence between arbitrators
and courts to resolve disputes over arbitration agreements. The Court's opinion places greater
emphasis on the terms of the parties' arbitration agreement than many prior authorities. See
also Harper, The Options in First Options: International Arbitration and Arbitral Competence, 771
P "90" PLI/Comm. 127 (1998); Park, Determining Arbitral Jurisdiction: Allocation of Tasks Between
P "91" Courts and Arbitrators, 8 Am. Rev. Int'l Arb. 133 (1999); Wyss, First Options of Chicago, Inc. v.
Kaplan: A Perilous Approach to Kompetenz-Kompetenz, 72 Tulane L. Rev. 351 (1997).
The First Options opinion plays an important role in the enforcement of arbitration agreements
 under the FAA, and we will return to it on a number of occasions. The following materials
introduce the decision's principal themes.
(a) An arbitrator can be granted power by an arbitration agreement to determine “arbitrability
questions.” First Options squarely held that, in some cases, the FAA permits an arbitral
tribunal to rule on its own jurisdiction. According to the First Options Court:
Just as the arbitrability of the merits of a dispute depends upon whether the parties
agreed to arbitrate that dispute, ... so the question who has the primary power to decide
arbitrability turns upon what the parties agreed about that matter. Did the parties agree
to submit the arbitrability question itself to arbitration?
Upon what provisions of the FAA does the Court's analysis rely? Does §4 of the FAA support
the Court's conclusion? Why should the FAA allow parties to submit “arbitrability
questions” to arbitration?

(b) First Options' presumptions for determining when parties will be deemed under the FAA to
have agreed to submit an “arbitrability question” to arbitration? First Options makes it clear
that an arbitral tribunal's authority to determine its own jurisdiction under the FAA is
principally a question of ascertaining what the parties' arbitration agreement provides.
In this connection, the Court set forth two important rules for determining whether an
agreement to arbitrate “arbitrability questions” exists: (a) the existence of an agreement
to arbitrate arbitrability questions requires “clear and unmistakable” evidence; and (b)
the scope of an existent arbitration agreement should be interpreted broadly, in favor of
arbitrability:
When deciding whether the parties agreed to arbitrate a certain matter (including
arbitrability), courts generally (though with a qualification we discuss below) should
apply ordinary state-law principles that govern the formation of contracts. The relevant
state law here, for example, would require the court to see whether the parties
objectively revealed an intent to submit the arbitrability issue to arbitration.
This Court, however, has (as we just said) added an important qualification, applicable
when courts decide whether a party has agreed that arbitrators should decide
arbitrability: Courts should not assume that the parties agreed to arbitrate arbitrability
unless there is “clea[r] and unmistakabl[e]” evidence that they did so. AT&T Technologies,
475 U.S. at 649; see Warrior & Gulf, 363 U.S. at 583 n.7. In this manner the law treats silence
or ambiguity about the question “who (primarily) should decide arbitrability” differently
from the way it treats silence or ambiguity about the question “whether a particular
merits-related dispute is arbitrable because it is within the scope of a valid arbitration
agreement” – for in respect to this latter question the law reverses the presumption.
First Options of Chicago v. Kaplan, 514 U.S. at 944-45. Following First Options, these two
presumptions play a vital role under the FAA in determining the allocation of
competence to decide arbitrability questions.
(c) Requirement of “clear and unmistakable” evidence of agreement granting arbitrators power
to rule on “arbitrability questions.” The First Options opinion reasoned that “[c]ourts should
not assume that the parties agreed to arbitrate arbitrability unless there is ‘clea[r] and
unmistakabl[e]’ evidence that they did so.” Absent “clear and unmistakable” evidence of
this sort, disputes about arbitration agreements (i.e., arbitrability questions) are for
judicial resolution.
What is the basis for the heightened standard of proof required by First Options? Why
must a party seeking to arbitrate arbitrability questions adduce “clear and
unmistakable” evidence of an agreement to this effect? Is the Court's standard consistent
with the parties' likely expectations when making an arbitration agreement? Suppose
that parties to an international contract insert an ad hoc arbitration clause in their
agreement. If disputes arise about the (a) formation, (b) validity, (c) legality, and (d)
interpretation of the arbitration clause, how would the parties likely have intended each
such category of disputes to be resolved? Would they have the same view with respect to
each category? Should other national courts and arbitral tribunals apply the “clear and
unmistakable” evidence standard adopted in First Options?
P "91"
P "92"
 (d) Application of First Options to arbitration agreements incorporating institutional rules.
Consider the excerpts from the UNCITRAL, ICC, and LCIA rules set forth above. How does
First Options apply to each set of rules' treatment of an arbitral tribunal's authority to
rule on its jurisdiction? Consider the following hypotheticals:
(i) The Kaplans' company had signed a workout agreement containing a concededly-
valid ICC, UNCITRAL or LCIA arbitration clause, and the company denied that the
clause covered the parties' dispute. Alternatively, the Kaplans denied that they
were party to the workout agreement.
(ii) The Kaplans had personally signed an agreement containing an ICC, UNCITRAL or
LCIA arbitration clause, but they alleged that the underlying agreement was
fraudulently induced or invalid.
(iii) The Kaplans had personally signed an agreement containing an ICC, UNCITRAL or
LCIA clause, but they alleged that the arbitration clause itself was procured by
fraud or otherwise invalid.
In each case, would the relevant institutional arbitration rules provide “clear and
unmistakable” evidence of an agreement to arbitrate the particular jurisdictional
challenge between the relevant parties?
Lower U.S. courts have held that various institutional arbitration rules contain provisions
that commit issues of arbitrability to the arbitrators. See Apollo Computer, Inc. v. Berg,
886 F.2d 469 (1st Cir. 1989); Societe Generale de Surveillance, SA v. Raytheon European
Management & Sys. Co., 643 F.2d 863 (1st Cir. 1981); Daiei Inc. v. United States Shoe Corp.,
755 F.Supp.299, 303 (D. Haw. 1991) (“where the parties have specifically contracted to
submit issues of arbitrability to the arbitrator,” this agreement will be enforced).

(e) Application of First Options' requirement for “clear and unmistakable” evidence to different
types of challenges to arbitration agreements. Consider briefly how First Options'
requirement of “clear and unmistakable” evidence of an agreement to arbitrate
“arbitrability questions” would be applied to different types of challenges to arbitration
agreements. We also discuss each of these applications of First Options in greater detail
below.
First, suppose a party denies that it ever entered into an alleged arbitration agreement,
as in examples (i) and (iii) in the preceding Note, and as the Kaplans did in First Options.
How could there ever be “clear and unmistakable evidence” that a party agreed to
arbitrate its claim that no arbitration agreement involving it exists? If a party denies that
it ever formed any arbitration agreement, mustn't that claim be judicially resolved under
§4? See infra pp. 167-91. On the other hand, consider the language of (for example) Article
23 of the LCIA Rules. Does it not give the arbitrators power to decide the “initial
existence” of the arbitration agreement? Does Article 23 not grant this power in a “clear
and unmistakable” fashion? How does one decide whether Article 23 was ever agreed to
by the parties? What if there is clear evidence that, despite its protests, a party did enter
into an agreement to arbitrate all arbitrability questions.
Second, suppose that a party acknowledges that it executed an agreement containing an
arbitration clause, but denies that this clause is valid, as a matter of law. Assume further
that the clause in question is broadly-drafted, and either directly or through
incorporation of institutional arbitration rules would clearly encompass disputes about
its own validity (e.g., as under the LCIA or UNCITRAL arbitration rules). Is this “clear and
unmistakable” evidence of an intention to arbitrate questions of validity? Or does the
expression of intent to arbitrate arbitrability issues have to be legally effective?
Third, suppose that a party acknowledges that it entered into a valid arbitration clause,
but argues that this clause was subsequently terminated, revoked, or waived. Assuming a
broadly-drafted arbitration clause, are such challenges arbitrable?

(f) First Options and the separability doctrine. Nothing in First Options should disturb the role
of the separability doctrine under the FAA. This means, among other things, that a
challenge directed towards the parties' underlying contract (rather that their arbitration
agreement) will not affect the validity of the arbitration agreement or arbitral tribunal's
jurisdiction. See supra pp. 67-68.
(g) Presumptively broad scope of a valid arbitration agreement. In contrast to its approach to
determining the existence of an agreement to arbitrate arbitrability questions, First
Options held that the substantive scope of a concededly existent arbitration clause will
be interpreted in favor of arbitration: the “law ... insist[s] upon clarity before concluding
that the parties did not want to arbitrate a related matter.” This “pro-arbitration” rule of
interpretation under the FAA is discussed in detail below. See infra pp. 317-18. What
exactly is the rationale for this rule of interpretation? What provision of the FAA supports
the Court's rule?
P "92" (h) First Options' presumptions reexamined. What exactly is the difference between the
P "93" existence of an agreement to arbitrate arbitrability and the scope of an existent
arbitration agreement? Do these differences justify the significantly different treatments
accorded to each under the First Options analysis?
 (i) Wisdom of First Options' approach to allocation of power between arbitrators and courts. Is
First Options' basic approach to the allocation of power between courts and arbitrators
persuasive? Consider the following reaction to the Court's analysis:
While [the Court's analysis] may make sense in some contexts, for most situations it says
either too much or too little. If awards may still be reviewed for excess of authority under
the [FAA], judicial deference to arbitrators' decisions on jurisdiction may be an illusion.
On the other hand, lawyers straining to give meaning to the dictum might interpret the
pronouncement so broadly as to permit an inappropriate degree of arbitral autonomy,
opening the door to more problems than it resolves.
Park, Determining Arbitral Jurisdiction: Allocation of Tasks Between Courts and Arbitrators, 8
Am. Rev. Int'l Arb. 133 (1997). Is this persuasive? What exactly is the criticism of First
Options?
16. Standard of judicial review under the FAA of arbitral awards on questions of arbitrability.First
Options also addressed the standard of review that applies under the FAA to an arbitral award
ruling on “arbitrability” issues. According to the Court, where the parties have agreed to
arbitrate a particular issue (including arbitrability questions), “a court will set [an arbitral
award] aside only in very unusual circumstances.” And:
Did the parties agree to submit the arbitrability question itself to arbitration? If so, then the
court's standard for reviewing the arbitrator's decision about that matter should not differ
from the standard courts apply when they review any other matter that parties have agreed to
arbitrate. That is to say, the court should give considerable leeway to the arbitrator, setting
aside his or her decision only in certain narrow circumstances.
In contrast, where “the parties did not agree to submit the arbitrability question itself to
arbitration, then the court should decide that question just as it would decide any other
question that the parties did not submit to arbitration, namely independently.” The standard
of judicial review of arbitrators' jurisdictional rulings is discussed in greater detail below. See
infra pp. 849-59.
Is First Options' approach to standards of judicial review of jurisdictional awards wise? Consider
the level of judicial review that would apply to an arbitrator's (a) interpretation of the scope of
an arbitral clause; (b) determination that an arbitration agreement existed; and (c)
determination that an arbitration agreement was valid.
17. No interlocutory judicial review of arbitrators' jurisdictional rulings under U.S. law. U.S.
courts have not frequently considered interlocutory appeals from arbitrators' jurisdictional
rulings (in part because U.S. arbitrators have tended to reserve decision of all issues, including
jurisdictional issues, to their final award). If the tribunal does not make an interim award, then
as a practical matter there generally will be no decision as to which interlocutory judicial
review can be sought.
Even if an interim jurisdictional award is made by the tribunal, however, then interlocutory
judicial review probably is not available under the FAA. Under §§9 and 10 of the FAA, only
“final” arbitral awards can be either confirmed or vacated, and U.S. courts have generally
refused to consider interlocutory challenges to arbitral decisions. See infra pp. 461-68.
Although there are few reported decisions, lower U.S. courts appear reluctant to review interim
jurisdictional awards. Transportacion Maritima Mexicana, SA v. Companhia de Navegacao Lloyd
Brasileiro, 636 F.Supp. 474 (S.D.N.Y. 1983).
Is the U.S. approach a sensible one? Compare the approach under Article 16 of the UNCITRAL
Model Law and Article 190 of the Swiss Law on Private International Law. See supra pp. 88-89.
Why shouldn't courts entertain interlocutory challenges to interim jurisdictional awards?
Consider the wasted resources if the tribunal incorrectly upholds its own jurisdiction. On the
other hand, consider the delays that can result from preliminary litigation of arbitrability
disputes.
18. Alternative procedural avenues for obtaining immediate judicial consideration of arbitrator's
P "93" jurisdiction under the FAA. As the Court acknowledges in First Options, a party has the ability
P "94" under the FAA to either seek to enjoin arbitral proceedings (on the grounds that the
arbitrator lacks jurisdiction) or to commence litigation on the merits of the parties' dispute
(thus obliging the party seeking arbitration to move for a stay of litigation or an order
compelling arbitration under §§3 or 4 of the FAA). See infra pp. 399, 406. Of course, the
presumption that parties do not ordinarily intend to arbitrate questions of arbitrability, which
is set forth in First Options, would apply in such litigation.
19. Consequences under FAA of challenging an arbitrator's jurisdiction before the arbitrator. In
First Options, the Kaplans made written submissions to the arbitrator asserting that they were
not bound by the arbitration agreement between First Options and MKI. Moreover, the Kaplans'
submissions did not challenge the arbitrator's power to decide whether the Kaplans were
bound by the disputed arbitration clause. The First Options Court nonetheless held that this
conduct did not clearly establish that the Kaplans had agreed to arbitrate the question
whether they were bound by the arbitration clause.
Was the First Options decision correct on the facts? Isn't the presentation of arguments –
without any reservation of rights – to a decision-maker fairly clear evidence of submission to
the decision-maker's jurisdiction to decide those arguments? Note that the Supreme Court
observed that the Kaplans' presence before the arbitral tribunal was explicable because of
their ownership of MKI, and hence the apparent suggestion that their written submissions were
less clearly evidence that they personally accepted the tribunal's authority.
 As a practical matter, it is not prudent for a party to appear before a U.S. arbitral tribunal
without expressly reserving its jurisdictional objections. First Options may well not extend far
beyond its facts, and a party's submissions to a tribunal could well constitute evidence of an
agreement to arbitrate jurisdictional issues. Outside the United States, national law may well
regard the submission of jurisdictional arguments to an arbitral tribunal, without a reservation
of rights, as a submission to the tribunal's ruling.
20. Effect of national court litigation on arbitral proceedings. In ICC Case No. 5294, the Egyptian
respondent apparently commenced litigation in Egyptian courts and obtained an order
purporting to stay the arbitral proceedings. Many other national courts will similarly entertain
actions to stay or enjoin international arbitration proceedings. See infra pp. 380-400 for a
discussion of U.S. approaches to this issue.
Consider how the arbitral tribunal in ICC Case No. 5294 dealt with the alleged existence of
Egyptian judicial proceedings. What attitude should an arbitral tribunal take with respect to
parallel judicial proceedings or injunctions against the arbitral proceedings? See also Award in
ICC Case No. 4862 of 1986, reprinted in S. Jarvin, Y. Derains & J. Arnaldez, Collection of ICC
Arbitral Awards, 1986-1990, 508-09 (1994)(Yemeni court action, challenging validity of
arbitration clause, had no effect on arbitration sited in France).
Note that the arbitrator in ICC Case No. 5294 states that the Egyptian judicial proceedings “do
not have any influence on the arbitrator's jurisdiction in the present case.” Why is this true?
Suppose that the arbitration had been sited in Egypt, rather than Zurich. Suppose that a
Danish, rather than an Egyptian, court had issued the order staying the arbitration. Would the
order still be irrelevant?
21. Effect of New York Convention on appropriate stage for judicial consideration of disputes
over arbitration agreement's interpretation or validity. The New York Convention has been
interpreted as not addressing the allocation of authority between national courts and
arbitrators over disputes about arbitration agreements. See A. van den Berg, The New York
Convention of 1958 145-46 (1981). Under this view, national courts can in principle either decide
for themselves whether an arbitration agreement exists, or can leave such issues to arbitration
(followed by judicial review). Is this view consistent with the text of Article II?
Suppose that the parties' arbitration agreement expressly grants the arbitral tribunal
competence to decide a particular arbitrability issue or that it incorporates institutional
arbitration rules which specifically require jurisdictional issues to be resolved initially by the
arbitrators. See ICC Rules Article 6; UNCITRAL Rules Article 21. Does Article II's requirement that
member states “recognize” arbitration agreements, and “refer” the parties to arbitration,
obligate national courts to adhere to the arbitration agreements' or institutional rules'
allocation of authority to decide jurisdictional issues? There is little authority considering the
issue. In principle, however, why doesn't Article II of the Convention apply to, and require
enforcement of, agreements to arbitrate arbitrability questions?
22. Choice of law governing allocation of power between courts and arbitrators under Article
II(3). Assume that the Convention does not address the allocation of authority between national
courts and arbitrators over disputes about arbitration agreements. When a national court
P "94" considers a challenge to an arbitration agreement's validity under Article II(3), should it apply
P "95" local principles regarding the respective roles of courts and arbitrators in deciding issues of
arbitrability? Or, alternatively, if the arbitration agreement is governed by foreign law, should
the court follow the approach taken in the foreign country whose law applies to the arbitration
agreement?
Are choice-of-law clauses likely intended to encompass issues such as the allocation of
authority between arbitrators and national courts? Paine Webber, Inc. v. Elahi, 87 F.3d 589 (1st
Cir. 1996) (New York choice-of-law clause does not incorporate New York state law rules
regarding allocation of authority between arbitrator and court). U.S. courts appear to have
consistently applied U.S. law in determining the respective roles of courts and arbitrators,
albeit without analysis.

C. Law Applicable to International Arbitration Agreements (26)

Identifying the law applicable to an international arbitration agreement is a complex, but
critically important subject. The topic has given rise to extensive commentary, and even more
extensive confusion. This confusion does not comport with the ideals of international
commercial arbitration, which seeks to simplify, expedite, and rationalize dispute resolution.
Nonetheless, the intricacies of contemporary conflicts of law doctrine must be understood.
As discussed elsewhere, the law applicable to the parties' arbitration agreement may be
different from both the law applicable to the substance of the parties' underlying contract and
to the arbitral proceedings. (27) This section focuses solely on the law applicable to the
arbitration agreement. (28)
As described below, four possible alternatives for the law governing an arbitration agreement
are of particular importance: (a) the law expressly or impliedly chosen by the parties to govern
the arbitration agreement itself; (b) the law of the arbitral situs; (c) the law governing the
parties' underlying contract; and (d) the law of the forum in which judicial enforcement of the
agreement is sought (for example, the FAA in a U.S. court). There is little uniformity among
either arbitral tribunals or national courts in choosing between these alternatives.
The choice of law applicable to international arbitration agreements is affected by both the
New York Convention and national law. Both sources arguably provide choice of law rules
P "95" and/or substantive rules applicable to the formation, validity, and interpretation of
P "96" international arbitration agreements. Determining the interplay between the Convention's
choice of law and substantive rules, and those of national law, can be complex.
The materials excerpted below explore the choice of law applicable to international
arbitration agreements. First, consider the excerpts from the New York Convention, the Inter-
American Convention, and the 1961 European Convention. Second, consider the excerpted
provisions from the UNCITRAL Model Law, the Swiss Law on Private International Law, the FAA,
and the Restatement (Second) Conflict of Laws. Finally, read the judicial decisions in Ledee v.
Ceramiche Ragno and Rhone Mediterranee Compagnia Francese di Assicurazioni e Riassicurazoni
v. Achille Lauro, and the awards in ICC Case No. 6149 and ICC Case No. 5294.
NEW YORK CONVENTION
Articles II & V [excerpted below at pp. 987, 988]
INTER-AMERICAN CONVENTION
Articles 1 & 5 [excerpted below at pp. 995-996]
1961 EUROPEAN CONVENTION
Article VI(2)
In taking a decision concerning the existence or the validity of an arbitration agreement, courts
of Contracting States shall examine the validity of such agreement with reference to the
capacity of the parties, under the law applicable to them, and with reference to other
questions:
(a) under the law to which the parties have subjected their arbitration agreement;
(b) failing any indication thereon, under the law of the country in which the award is to be
made;
(c) failing any indication as to the law to which the parties have subjected the agreement,
and where at the time when the question is raised in court the country in which the award
is to be made cannot be determined under the competent law by virtue of the rules of
conflict of the court seized of the dispute.
The courts may also refuse recognition of the arbitration agreement if under the law of their
country the dispute is not capable of settlement by arbitration.
P "96"
P "97"
UNCITRAL MODEL LAW
Article 28 [excerpted below at p. 1018]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 178 [excerpted below at p. 1033]
RESTATEMENT (SECOND) CONFLICT OF LAWS
§§218 & 219 (American Law Institute 1971)
§218. Validity and Effect of Arbitration Agreement. The validity of an arbitration agreement, and
the rights created thereby, are determined by the law selected by application of the rules of
§§187-188. This determines whether a judicial action brought in violation of the provisions of an
arbitration agreement can be maintained.
§219. Method of Enforcement of Arbitration Agreement. The method of enforcing an arbitration
agreement is determined by the local law of the forum.
LEDEE v. CERAMICHE RAGNO
684 F.2d 184 (1st Cir. 1982)
COFFIN, CHIEF JUDGE.... The defendants-appellees are Italian corporations that make and
market ceramic tiles. The plaintiffs-appellants are two Puerto Rico corporations and an
individual citizen of the Commonwealth. In 1964 the parties entered into a distributorship
agreement giving the appellants exclusive rights to sell and distribute the appellees' ceramic
tiles in the Antilles. The agreement ... contained the following paragraph 9:
Any dispute related to the interpretation and application of this contract will be submitted to
an Arbiter selected by the President of the Tribunal of Modena, [Italy,] who will judge as last
resort and without procedural formalities.
In March, 1981, the appellants brought suit in the Superior Court of Puerto Rico, alleging that
the appellees had breached the contract by unjustifiably terminating their distributorship. The
P "97" complaint sought damages in accord with the provisions of the Puerto Rico Dealers Act, 292 10
P "98" L.P.R.A. §§278 et seq. The appellees removed the case to the United States District Court for
the District of Puerto Rico. 9 U.S.C. §205; 28 U.S.C. §§1332(a)(2), 1441(a). The district court
ordered arbitration in accord with paragraph 9 and dismissed the complaint. This appeal
ensued.
Appellants contend first that, under the laws of the Commonwealth of Puerto Rico, paragraph 9
is void and unenforceable. They invoke the general principle that contracting parties may not
agree to clauses or conditions “in contravention of law, morals, or public order.” 31 L.P.R.A.
§3372. And to show that paragraph 9 is contrary to the public order, they direct our attention to
the Dealers Act, as amended. The Dealers Act was enacted to help protect Puerto Rico
 distributors from the allegedly exploitative practices of certain foreign suppliers. (29)
Substantively, it prohibited termination of dealership contracts except “for just cause.” 10
L.P.R.A. §278a. Moreover, it declared that its provisions were of a public order and that the
dealers' rights under it could not be waived. 10 L.P.R.A. §278c.... [It] reads:
Any stipulation that obligates a dealer to adjust, arbitrate or litigate any controversy that
comes up regarding his dealer's contract outside of Puerto Rico, or under foreign law or rule of
law, shall be likewise considered as violating the public policy set forth by this chapter and is
therefore null and void. 10 L.P.R.A. §278b-2.
Appellants continue their argument by suggesting that, given the arbitration clause's
unenforceability under Puerto Rico Law, the federal district court could not enforce it. They
observe that chapter one of the [FAA] is limited, in that it makes arbitration clauses
enforceable “save upon such grounds as exist at law or in equity” for the revocation of
paragraph 9. We need not, however, consider to what extent the phrase “grounds as exist at law
or in equity” incorporates Commonwealth law.... In particular, we need not consider whether
the phrase incorporates the Dealers Act. The simple reason is that the district court did not
purport to exercise authority under Chapter One of the [FAA]; rather, it acted under Chapter
Two of the Act, 9 U.S.C. §201 et seq., which implemented the [New York] Convention.
P "98" A court presented with a request to refer a dispute to arbitration pursuant to Chapter Two of
P "99" the [FAA] performs a very limited inquiry. It must resolve four preliminary questions:
(1) Is there an agreement in writing to arbitrate the subject of the dispute? Convention,
Article II(1), II(2).
(2) Does the agreement provide for arbitration in the territory of a signatory of the
Convention? Convention, Articles I(1), I(3); 9 U.S.C. §206.
(3) Does the agreement arise out of a legal relationship, whether contractual or not, which is
considered as commercial? Convention, Article I(3); 9 U.S.C. §202.
(4) Is a party to the agreement not an American citizen, or does the commercial relationship
have some reasonable relation with one or more foreign states? 9 U.S.C. §202.
If the district court resolves those questions in the affirmative, as it properly did in this case,
then it must order arbitration unless it finds the agreement “null and void, inoperative or
incapable of being performed.” Convention, Article II(3).
Appellants argue that the Dealers Act renders paragraph 9 of the contract “null and void,
inoperative or incapable of being performed.” They contend that the “null and void” clause was
intended to incorporate the Dealers Act as an expression of Puerto Rico public policy. We
disagree. Such an expansive interpretation of the clause would be antithetical to the goals of
the Convention. In Scherk v. Alberto-Culver Co., 417 U.S. 506, 517 n.10 (1974), the Supreme Court
observed:
The goal of the Convention, and the principal purpose underlying American adoption and
implementation of it, was to encourage the recognition and enforcement of commercial
arbitration agreements in international contracts and to unify the standards by which
agreements to arbitrate are observed and arbitral awards are enforced in the signatory
countries.
The parochial interests of the Commonwealth, or of any state, cannot be the measure of how
the “null and void” clause is interpreted. Indeed, by acceding to and implementing the treaty,
the federal government has insisted that not even the parochial interests of the nation may be
the measure of interpretation. Rather, the clause must be interpreted to encompass only those
situations – such as fraud, mistake, duress, and waiver – that can be applied neutrally on an
international scale. I.T.A.D. Associates, Inc. v. Podar Brothers, 636 F.2d 75 (4th Cir. 1981). (30)
Nothing in the record suggests that the arbitration agreement was “null and void, inoperative
or incapable of being performed” within the terms of Article II(3) of the Convention....
P "99"
P "100"
RHONE MEDITERRANEE COMPAGNIA FRANCESE DI ASSICURAZIONI E RIASSICURAZIONI v. ACHILLE
LAURO
712 F.2d 50 (3d Cir. 1983)
GIBBONS, CIRCUIT JUDGE. Rhone Mediterranee Compagnia Francese di Assicurazioni E
Riassicurazioni (“Rhone”), a casualty insurer, appeals from an order of the District Court of the
Virgin Islands staying Rhone's action pending arbitration. The action results from a fire loss
which occurred when the vessel Angelina Lauro burned at the dock of the East Indian Co. Ltd in
Charlotte Amalie, St. Thomas. At the time of the fire the vessel was under time charter to Costa
Armatori SpA (“Costa”), an Italian Corporation. Rhone insured Costa, and reimbursed it for
property and fuel losses totalling over one million dollars. Rhone, as subrogee of Costa, sued
the owner of the vessel, Achille Lauro, (“Lauro”) and its master, Antonio Scotto di Carlo, alleging
breach of the Lauro-Costa time charter, unseaworthiness, and negligence of the crew. The
district court granted defendants' motion for a stay of the action pending arbitration, and
Rhone appeals.
As subrogee, Rhone stands in place of its insured, the time charterer Costa. In the time charter
contract there is a clause:
23. Arbitration. Any dispute arising under the Charter to be referred to arbitration in London (or
such other place as may be agreed according to box 24) one arbitrator to be nominated by the
Owners and the other by the Charterers, and in case the Arbitrators shall not agree then to the
 decision of an Umpire to be appointed by them, the award of the Arbitrators or the Umpire to
be final and binding upon both parties. Box 24 Place of arbitration (only to be filled in if place
other than London agreed (cl. 23) NAPOLI
All the parties to the time charter agreement and the lawsuit are Italian. Italy and the United
States are parties to the [New York] Convention. The [FAA,] 9 U.S.C. §§201-208 (1976),
implements the United States' accession on September 1, 1970 to the Convention by providing
that it “shall be enforced in United States courts in accordance with this chapter.” 9 U.S.C. §201.
[Rhone does not dispute that the Convention is applicable.]
What Rhone does contend is that under the terms of the Convention the arbitration clause in
issue is unenforceable. Rhone's argument proceeds from a somewhat ambiguous provision in
Article II(3) of the Convention:
The court of a Contracting State, when seized of an action in a matter in respect of which the
parties have made an agreement within the meaning of this article, shall, at the request of one
of the parties, refer the parties to arbitration, unless it finds that the said agreement is null
and void, inoperative or incapable of being performed.
P "100"
P "101"
Rhone contends that when the arbitration clause refers to a place of arbitration, here Naples,
Italy, the law of that place is determinative. It then relies on the affidavit of an expert on
Italian law which states that in Italy an arbitration clause calling for an even number of
arbitrators is null and void, even if, as in this case there is a provision for their designation of a
tie breaker.
The ambiguity in Article II(3) of the Convention with respect to governing law contrasts with
Article V, dealing with enforcement of awards. Article V(1)(a) permits refusal of recognition and
enforcement of an award if the “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.” Article V(1)(e) permits refusal of recognition and enforcement if “[t]he award has
not yet become binding on the parties, or has been set aside or suspended by a competent
authority of the country in which, or under the law of which, that award was made.” Article V(1)
(d) permits refusal of enforcement if “[t]he composition of the arbitral authority or the arbitral
procedure was not in accordance with the agreement of the parties, or, failing such agreement,
was not in accordance with the law of the country where the arbitration took place.” Thus
Article V unambiguously refers the forum in which enforcement of an award is sought to the law
chosen by the parties, or the law of the place of the award.
Rhone and the defendants suggest different conclusions that should be drawn from the
differences between Article II and Article V. Rhone suggests that the choice of law rule of Article
V should be read into Article II. The defendants urge that in the absence of a specific reference
Article II should be read so as to permit the forum, when asked to refer a dispute to arbitration,
to apply its own law respecting validity of the arbitration clause.
There is some treaty history suggesting that a proposal to incorporate in Article II choice of law
language similar to that in Article V was rejected because delegates to the United Nations
organization which drafted it were concerned that a forum might then have an obligation to
enforce arbitration clauses regardless of its “local” law. G.W. Haight, Convention on the
Recognition and Enforcement of Foreign Arbitral Awards: Summary Analysis of Record of U.N.
Conference, May/June 1958 at 27-28. It thus appears that the ambiguity in Article II(3) is
deliberate. How it should be resolved has been a matter of concern to commentators, who
suggest, variously, that the forum state should look to its own law and policy, to the rules of
conflicts of laws, or to the law of the place of execution of the agreement. Quigley, Accession By
The United States to the United Nations Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, 70 Yale L. J. 1049, 1064 (§3 permits examination of forum law and
policy).
None of the limited secondary literature sheds so clear a light as to suggest a certain answer.
However, we conclude that the meaning of Article II(3) which is most consistent with the overall
purposes of the Convention is that an agreement to arbitrate is “null and void” only (1) when it
P "101" is subject to an internationally recognized defense such as duress, mistake, fraud, or waiver,
P "102" see Ledee v. Ceramiche Ragno, 684 F.2d 184 (1st Cir. 1982); I.T.A.D. Associates, Inc. v. Podar
Brothers, 636 F.2d 75 (4th Cir. 1981), or (2) when it contravenes fundamental policies of the
forum state. The “null and void” language must be read narrowly, for the signatory nations have
jointly declared a general policy of enforceability of agreements to arbitrate....
Signatory nations have effectively declared a joint policy that presumes the enforceability of
agreements to arbitrate. Neither the parochial interests of the forum state, nor those of states
having more significant relationships with the dispute, should be permitted to supersede that
presumption. The policy of the Convention is best served by an approach which leads to
upholding agreements to arbitrate. The rule of one state as to the required number of
arbitrators does not implicate the fundamental concerns of either the international system or
forum, and hence the agreement is not void.
Rhone urges that this rule may result in a Neapolitan arbitration award which, because of
Italy's odd number of arbitrators rule, the Italian courts would not enforce. The defendants
insist that even in Italy this procedural rule on arbitration is waivable and a resulting award
will be enforced. Even if that is not the law of Italy, however, Rhone's objection does not
compel the conclusion that we should read Article II(3) as it suggests. The parties did agree to a
non-judicial dispute resolution mechanism, and the basic purpose of the Convention is to
discourage signatory states from disregarding such agreements. Rhone is not faced with an
 Italian public policy disfavoring arbitration, but only with an Italian procedural rule of
arbitration which may have been overlooked by the drafters of the time charter agreement.
Certainly the parties are free to structure the arbitration so as to comply with the Italian
procedural rule by having the designated arbitrators select a third member before rather than
after impasse. Even if that is not accomplished an award may still result, which can be
enforced outside Italy.
Rhone urges that Article V(1)(d) prohibits such enforcement outside Italy, because it refers a
non-Italian forum to the law of Italy. We disagree. Section 1 says only that “enforcement of an
award may be refused” on the basis of the law of the country where it was made. Where, as
here, the law of such a country generally favors enforcement of arbitration awards, and the
defect is at best one of a procedural nature, Article V(1) certainly permits another forum to
disregard the defect and enforce. That is especially the case when defendants come before the
court and, relying on Article II, seek a stay of the action in favor of arbitration. They will hardly
be in a position to rely on Italy's odd number of arbitrators rule if Rhone seeks to enforce an
award in the District Court of the Virgin Islands. (31)
P "102" The forum law implicitly referenced by Article II(3) is the law of the United States, not the local
P "103" law of the Virgin Islands or of a state. That law favors enforcement of arbitration clauses.
Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974); Becker Autoradio U.S.A. Inc. v. Becker
Autoradiowerk GmbH, 585 F.2d 39 (3d Cir. 1978). Indeed, “[a]n action or proceeding falling under
the Convention shall be deemed to arise under the laws and treaties of the United States.” 9
U.S.C. §203.... Since no federal law imposes an odd number of arbitrators rule – the only defect
relied upon by Rhone – the district court did not err in staying the suit for breach of the time
charter agreement pending arbitration....
AMENDMENT LAW TO THE MERCHANDISE MARITIME LAW JORDANIAN LAW NO. 35 OF 1983
Regardless of whatever is contained in any other law, any agreement, or stipulation which bars
the Jordanian courts from maintaining disputes relating to bills of lading or carriage of goods is
null and void.
INTERIM AWARD IN ICC CASE NO. 6149 OF 1990
XX Y.B. Comm. Arb. 41 (1995) (©)
UNIDENTIFIED ARBITRATOR. [A Korean manufacturer entered into three contracts to supply an
Iraqi buyer with various goods. The goods were to be delivered in Iraq. The contracts contained
the following arbitration clause:
“Any dispute with regards to this contract will be solved cordially; otherwise by two arbitrators
appointed by each side. In an eventual non agreement it will be governed by the laws and
regulations of the International Chamber of Commerce in Paris whose ruling should be final.”
Disputes arose under the contract, which led to various revisions to the parties' original
contracts. These revisions failed to preserve relations. In due course, the Korean seller
commenced an arbitration under ICC Rules. The Iraqi purchaser raised jurisdictional objections
to the tribunal's jurisdiction, citing section 2 of Jordanian Law No. 35 of 1983 [excerpted above
p. 103.]
The tribunal rendered the following interim award:
Section 2 of the Jordanian Law No. 35 of 1983 called “Amendment Law to the Merchandise
P "103" Maritime Law” is not applicable to the arbitration agreements contained in the three contracts
P "104" of sale. The arbitration agreements therefore have not been voided by said Section 2. But
they are still valid and binding upon the parties thus being susceptible of serving as a
legitimate basis for the exercise of the arbitral tribunal's jurisdiction over the subject-matter
of this arbitration....
Section 2 of the Jordanian Law No. 35 of 1983 is based upon motivations of Jordanian public
policy. Its obvious purpose is to prevent Jordanian courts from being ousted of their
jurisdiction as far as certain matters are concerned, considered to be of primordial importance
for the Jordanian public interest. The effect of the said Section 2 therefore is to deny
arbitrability to all matters defined by it. Non-arbitrability means that a matter is not capable
of settlement by arbitration. (Art. II(1) of the [1958 New York Convention]) Section 2 of the said
law thus removes arbitrability from “all disputes relating to bills of lading or carriage of
goods.”
National provisions on non-arbitrability of disputes are constituent parts of the public policy
provisions of the issuing state. The question of whether at all and, if so, to what extent an
international arbitral tribunal has to apply national provisions on the non-arbitrability of
certain matters, therefore has to be answered on the basis of the doctrines dealing with the
validity of international arbitration agreements under national public policy provisions. The
present arbitral tribunal thus is called upon to apply the general rules of conflict of laws on the
validity, under national public provisions, of international arbitration agreements.
Such validity of international arbitration agreements depends upon the proper law by which
they are governed. It may be disputed whether an arbitration agreement, as a matter of
principle, is subject to the same proper law by which also the main contract is governed so that
both, arbitration agreement and main contract, share the same proper law, or whether the
proper law of the arbitration agreement has to be determined upon its own, i.e., irrespectively
of the proper law of the main contract. This controversy does not need to be decided within the
present context. For both doctrines lead to the same result in the present dispute, i.e., to the
non-applicability of the afore-mentioned Jordanian Law No. 35 of 1983.
 If the arbitral tribunal would follow the first doctrine and assume the proper law of the
arbitration agreement to be identical with the proper law of the main contract, the validity of
the three arbitration agreements here under consideration would hinge upon the proper law of
the three sales contracts. It will be seen in the following section of this interim award that the
said three sales contracts are certainly not governed by Jordanian law. Thus, under the afore-
mentioned first doctrine, an application of the Jordanian Law No. 35 of 1983 would be
excluded.
The same conclusion would have to be drawn if the arbitral tribunal would follow the afore-
mentioned second, alternative doctrine by which the proper law of an arbitration agreement
would have to be determined upon its own, i.e., without having regard to the proper law of the
main contract. Pursuant to Article 13(3) of the ICC Rules of Conciliation and Arbitration, failing
any indication by the parties as to the applicable law, the arbitrator shall apply the law
P "104" designated as the proper law by the rule of conflict which he deems appropriate. If, according
P "105" to the second doctrine, the proper law of the three arbitration agreements could not
necessarily be derived from the proper law of the three sales contracts themselves, the only
other rule of conflicts of laws whose application would seem appropriate in the sense of the
above-mentioned Article 13(3), would be the application of the law where the arbitration takes
place and where the award is rendered.
This conclusion would be supported also by Article V(1)(a) for the above-mentioned [1958 New
York Convention] (a Convention which has been ratified by the Republic of Korea, Jordan,
France and Iraq). According to the said Article V, the validity of the arbitration agreement has
to be determined “under the law of the country where the award was made.” In the case here
under consideration, the above-mentioned second doctrine therefore would lead to the
application of French law, i.e., of Arts. 1493-1495, 1442-1446 of the Nouveau Code de Procédure
Civile. Under these French provisions, the three arbitration agreements would be valid and
binding. In other words: the application of Section 2 of the Jordanian Law No. 35 of 1983 would
again be excluded.
The non-applicability of that provision may be based upon two additional considerations.
Firstly: There can be no doubt that, if Jordanian courts would have to decide on the present
subject-matter, such courts would have to apply Section 2 of the Jordanian Law No. 35 of 1983.
But when the parties to the three sales contracts, in exercising their rights of autonomy to
choose an appropriate forum or arbitral tribunal for their eventual disputes, agreed upon the
jurisdiction of the ICC International Court of Arbitration in Paris, they obviously had the
intention to withdraw any jurisdiction from Korean, Jordanian and Iraqi state courts and to
subject all disputes resulting from their three sales contracts exclusively to the jurisdiction of
the ICC International Court of Arbitration. Such court, being an international arbitration body
sitting in a state other than Jordan, is not necessarily bound by considerations of Jordanian
domestic public policy at least insofar as Jordanian law is not applicable to the subject-
matter. It would therefore run counter to the common intention of the parties at the time when
they entered into the three sales contracts, if the arbitral tribunal would apply a public policy
provision of Jordanian law while there had been a clear intention of the parties to remove this
subject-matter from Jordanian domestic jurisdiction.
Secondly: When the parties entered into three sales contracts, Section 2 of the Jordanian Law
No. 35 of 1983 was not yet in effect. Thus Section 2 could only affect the three sales contracts
and void the three arbitration agreements therein contained, if it had retroactive effect. The
arbitral tribunal is, however, not in a position to assume such retroactivity.
The arbitration agreements contained in the three sales contracts, when properly construed,
also cover the present dispute. It is important, in this context, to be aware of the legal nature
of the claims introduced by claimant with his Request for Arbitration. Claimant does not assert,
before the arbitral tribunal, claims for the performance of contractual obligations assumed by
P "105" defendant when entering into the three sales contracts or claims immediately resulting from
P "106" such sales contracts. Defendant has accepted the goods delivered by claimant and has paid
the purchase prices for them. Defendant thus has performed all obligations explicitly
incumbent upon him under the three sales contracts. The present dispute therefore does not
deal with any matter of specific performance in regard to the three sales contracts.
But claimant essentially demands the repayment of certain sums of money paid by him upon a
performance bond extended to defendant in the fulfillment of his obligations under the three
sales contracts. Such request aims at the restitution of performances rendered under the three
sales contracts. The arbitral tribunal therefore is faced with either a request for the
compensation of damages for the breach of the three contracts, or with a request for the
restitution of an unjust enrichment or with any other request lying outside of a claim for
specific performance.
Since this interim award has not yet to deal with the merits of the claims introduced by
claimant, the arbitral tribunal, at the present stage of the proceedings, has no reason at all to
decide on the legal nature of such claims. No matter whether those claims would have to be
qualified as claims for the compensation of damages resulting from the breach of the three
sales contracts, or as claims for the restitution of an unjust enrichment, or as any other claim
falling outside the purview of a specific performance – in any such case those claims would be
covered by the three arbitration agreements.
This conclusion follows from the interpretation of the three arbitration agreements and is
based upon the tacit intention of the parties. When the parties entered into their three sales
contracts and when, at that time, they agreed upon the jurisdiction of the ICC International
Court of Arbitration, they certainly had in mind to subject to arbitration all matters relating to
 these three contracts, without regard as to whether the subject-matter of an eventual request
for arbitration would later be a claim for the specific performance of those contracts, or a
claim for the assessment of damages resulting from a breach of those contracts, or a claim for
the restitution of performances rendered without cause and therefore constituting unjust
enrichment, or finally any other claim directly or indirectly related to the three contracts. It
must be assumed that it was the tacit intention of the parties to invest the arbitral tribunal
with jurisdiction over all disputes possibly deriving from, or being related to, their three sales
contracts.
This reasoning becomes even more persuasive if one considers, hypothetically, the
consequences of a decision to the contrary: If it were permissible for the parties to be engaged
in arbitration proceedings before the ICC International Court of Arbitration on one issue of the
contracts, e.g., on a breach of them, and, at the same time, to sue each other before state
courts, e.g., before a Jordanian or a Korean state court, on another issue, e.g., upon an unjust
enrichment allegedly resulting from the undue performance of the contracts, a conflict
between the award of the arbitral tribunal and the judgment of the state court might ensue.
Such conflicts would be detrimental to the interests of the parties. The arbitral tribunal must
therefore assume that the parties wanted to avoid such conflicts. Consequently their
P "106" arbitration agreements must be construed in such a way as to exclude a concurrent jurisdiction
P "107" of the arbitral tribunal and a state court on matters resulting from one and the same
contracts. The present dispute therefore is covered by the arbitration agreements.
FINAL AWARD IN ICC CASE NO. 5294 OF 22 FEBRUARY 1988
XIV Y.B. Comm. Arb. 137 (1989) (©) [excerpted above at pp. 78-80]
Notes on Choice of Law Applicable to International Arbitration Agreements
1. The separability principle and choice of law applicable to arbitration agreements. As we have
seen, an arbitration agreement is regarded, under most nations' laws, as “separable” from the
underlying contract to which it relates. See supra pp. 55-74. Consequently, it is frequently said
that the arbitration clause of an agreement may be governed by a different substantive law
from that applicable to the underlying agreement. See supra pp. 43-46, 68; Restatement
(Second) Conflict of Laws §218 comment b (1971) (“the state whose local law governs the
arbitration agreement will usually be applied to determine other issues relating to the
contract. This will not, however, always be so.... Situations will arise where the state of most
significant relationship with respect to the issue of arbitration is not the same as the state of
most significant relationship with respect to other issues relating to the contract.”); A. Redfern
& M. Hunter, International Commercial Arbitration 3-35 to 3-39 (3d ed. 1999); Deutsche
Schlachtbau-und Tiefbohrgesellschaft m.b.H. v. Ras Al Khaimah Nat'l Oil Co., 2 Lloyd's Rep. 246, 2
(1987), rev'd on other grounds, 2 Lloyd's Rep. 293 (1988) (arbitration clause “need not be
governed by the same law” as the underlying contract); Hamlyn & Co. v. Talisker Distillery,
[1894] A.C. 202; Black Clawson Int'l Ltd v. Papierwerke Waldhof Aschaffenburg AG, [1981] 2 Lloyds
Rep. 446.
Consider the arbitral award in ICC Case No. 6194. How does the tribunal approach the effect of
the separability doctrine on the choice of law applicable to the arbitration agreement?
Does the separability doctrine mean that the law applicable to the arbitration clause is
necessarily different from that applicable to the underlying contract? Or merely that differing
laws may apply? If the latter, then what choice of law rules govern selection of that law?
2. Issues governed by law applicable to the arbitration agreement. The law governing an
international arbitration agreement is usually regarded as applicable to the agreement's: (a)
formation; (b) validity; (c) effect; and (d) interpretation. See Restatement (Second) Conflict of
Laws §218 comment a (1971); Dicey & Morris, The Conflict of Laws 573-79 (12th ed. 1993) (“The law
governing the arbitration agreement will determine its validity, effect, and interpretation.”).
Moreover, as ICC Case No. 6149 illustrates, the law governing the arbitration agreement is also
potentially applicable to issues of non-arbitrability and the procedural law of the arbitration.
See infra pp. 274-77, 429-32.
It is also possible for different laws to govern each of the foregoing issues. In U.S. courts, for
example, federal law governs the interpretation of domestic arbitration agreements, see infra
p. 353, while issues of formation and validity are generally governed by a combination of state
and federal law. See infra pp. 348-53. Such complexities are unfortunate and do not comport
with the basic objectives of international commercial arbitration (including to simplify
international dispute resolution).
3. Historic common law choice of law rules applicable to arbitration agreements. Historically,
many choice of law authorities held that an arbitration agreement was governed by the law of
the judicial forum where enforcement of the agreement was sought. Application of the
enforcement forum's standards for interpretation and enforcement of the arbitration
agreement was the common law approach of U.S. courts prior to enactment of the FAA. That
approach regarded the validity and enforceability of an arbitration agreement as a
“procedural” or “remedial” matter, governed by the law of the judicial forum in which the
agreement was invoked.
For authorities adopting the historic common law choice of law approach to arbitration
P "107" agreements, see Restatement (Second) Conflict of Laws §218 Reporters' Note (1971) (citing cases);
P "108" Meacham v. Jamestown, Franklin, and Clearfield R.R., 211 N.Y. 346, 352 (1914) (Cardozo, J.,
concurring); Matter of Gantt, 297 N.Y. 433, cert. denied, 335 U.S. 843 (1948); Robert Lawrence Co. v.
Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir. 1959), cert. dismissed, 364 U.S. 801 (1960); Ferrara
SpA v. United Grain Growers Ltd, 441 F.Supp. 778, 781 n.2 (S.D.N.Y. 1977) (reasoning in dicta that
 forum's laws should apply, on grounds that New York Convention's legislative history
contemplates this and that it “is consistent ... with the view that enforceability of an agreement
to arbitrate relates to the law of remedies and is therefore governed by the law of the forum.”);
Sinva, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 253 F.Supp. 359 (S.D.N.Y. 1966) (“New York
for conflicts purposes treats issues concerning arbitrability as part of its ‘law of remedies,’ so
that New York local law would apply in the case at bar, rather than the law of England or France
which have greater contacts with the transactions involved here.”); The Eros, 241 F. 186
(D.C.N.Y.), aff'd, 251 F. 45 (2d Cir. 1916), cert. denied, 247 U.S. 509 (1917); Electrical Research Prods.
Inc. v. Vitaphone Corp., 171 A. 738 (Del. Ch. 1934).
For criticism of the traditional view, see Restatement (Second) Conflict of Laws §218 (1971);
Foerster, Arbitration Agreements and the Conflict of Laws: A Problem of Enforceability, 21 Arb. J.
129 (1966); Lorenzen, Commercial Arbitration – International and Interstate Aspects, 43 Yale L.J.
716, 719 (1934).
Under the historic choice of law approach, what substantive law would apply to the arbitration
agreements at issue in Ledee and Rhone? How does this compare with the law actually applied
by the courts in each case?
How would the historic common law rule be applied by an arbitral tribunal (for example, the
tribunals in ICC Case No. 6149 and ICC Case No. 5294)? Would it require the tribunal to apply the
substantive law of the arbitral situs? Note that the historic common law rule was not conceived
for, or very useful to, arbitral tribunals.
4. Contemporary choice of law rules applicable to arbitration agreement. The traditional
common law approach is not shared by most contemporary choice of law authorities.
(a) Law applicable to validity of arbitration agreement under Restatement (Second) Conflict of
Laws. Section 218 of the Restatement (Second) provides that the “validity of an arbitration
agreement, and the rights created thereby,” are to be determined by applying the
generally applicable conflicts rules of §187 and §188. Section 218 explains, in comment a,
that: “Whether a judicial action may be maintained in violation of the provisions of an
arbitration agreement should be determined not by the local law of the forum but rather
by the law selected by application of [§§187 & 188].”Restatement (Second) Conflict of Laws
§218 comment a (1971).
As discussed elsewhere, §§187 and 188 of the Restatement (Second) generally give effect
to the parties' contractual choice of law or, failing such agreement, provide for
application of the law of the state with the most significant relationship to the parties'
agreement (i.e., here, the parties' arbitration agreement). See infra pp. 542-43. Review
§§187 and 188, and consider how they would apply to an arbitration agreement. Recall
the separability doctrine and consider its effect upon choice of law analysis under the
Restatement's “most significant relationship” standard. What state will ordinarily have
the most significant relationship to an agreement to arbitrate?

(b) Method of enforcing arbitration agreement under Restatement (Second) Conflict of Laws.
Notwithstanding the general rule of §218, §219 of the Restatement (Second) provides that
the “method” of enforcing an arbitration agreement is determined by the law of the
enforcement forum (notwithstanding the applicability of §218's rules to the agreement's
validity). Thus, under §219, the availability in a national court of an order compelling
arbitration, a stay of litigation, and/or damages for breach of an arbitration agreement
would be controlled by the forum's law. In federal courts, the availability of orders
compelling arbitration and stays of litigation is governed by §§3 and 4 of the FAA. 9 U.S.C.
§§3 & 4. The possible application of these provisions in U.S. state courts is discussed
below. See infra pp. 356-57.
(c) Law applicable to validity of arbitration agreement under English conflicts rules. Under
English conflict of laws rules, the law governing the arbitration agreement was historically
presumed to be the law governing the parties' underlying contract. Dicey & Morris, The
Conflict of Laws 576-79 (12th ed. 1993); Compagnie Tunisienne de Navigation SA v.
Compagnie d'Armement Maritime SA [1971] A.C. 572. More recently, English courts have
placed greater weight on the parties' selection of a particular arbitral situs, regarding
this as an implied choice-of-law governing their arbitration agreement. Dicey & Morris,
The Conflict of Laws 577-78 (12th ed. 1993); XL Insurance Ltd v. Owens Corning, 2 Lloyd's Law
Rep. 500 (2000) (“by stipulating for arbitration in London under the provisions for the
[English Arbitration] Act ... the parties chose English law to govern the matters which fall
within those provisions, including the formal validity of the arbitration clause and the
P "108" jurisdiction of the arbitral tribunal; and by implication chose English law as the proper
P "109" law of the arbitration clause”)
(d) Law applicable to validity of arbitration agreement under 1961 European Convention. Article
VI(2) of the 1961 European Convention sets out choice of law rules applicable to the
validity of international arbitration agreements. Those rules are broadly compatible with
the contemporary common law choice of law approach to arbitration agreements, but are
more detailed in some respects. Identify how Article VI(2) of the 1961 European
Convention differs from §§218 and 219 of the Restatement (Second).
 (e) Law applicable to validity of arbitration agreement under Swiss conflict rules. Under Article
178(2) of the Swiss Law on Private International Law, a special conflict of laws rule is
established for the validity of arbitration agreements. Article 178(2) of the Swiss Law on
Private International Law establishes an independent conflicts rule applicable to
international arbitration agreements: “As regards its substance, the arbitration
agreement shall be valid if it conforms either to the law chosen by the parties, or to the
law governing the subject matter of the dispute, in particular the law governing the main
contract, or if it conforms to Swiss law.” Under this rule, an arbitration in Switzerland is
valid if its validity would be recognized under either (i) the law chosen by the parties to
govern the arbitration agreement, (ii) the law governing the merits of the parties' dispute,
or (iii) Swiss substantive law. What is the rationale for this approach? Compare it to the
contemporary common law approach and to the 1961 European Convention.
(f) Law applicable to arbitration agreement under institutional arbitration rules. In general,
leading institutional arbitration rules provide little guidance in selecting the law
applicable to the parties' arbitration agreement. Indeed, provisions of institutional rules
dealing with applicable law are expressly directed at the law governing the merits of the
parties' dispute. UNCITRAL Rules Article 33; 1998 ICC Rules Article 17; AAA International
Rules 29.
5. Parties' autonomy to select law applicable to arbitration agreement. Almost all
contemporary authorities recognize the autonomy of parties to select the law applicable to
their arbitration agreement. See New York Convention Article V(1)(a); 1961 European Convention
Article VI(2); Swiss Law on Private International Law §178(2); Restatement (Second) Conflict of
Laws §187, 218 (1971); Dicey & Morris, The Conflict of Laws 577 (12th ed. 1993); Volt Information
Sciences, Inc. v. Stanford University, 489 U.S. 468 (1989); Necchi Sewing Machine Sales Corp. v.
Carl, 260 F.Supp. 665 (S.D.N.Y. 1966). This is a specific application of the more general
autonomy of parties under most contemporary choice of law regimes to agree upon the
substantive law applicable to their relations.
Why is it that parties should be granted the freedom to select the law applicable to their
international arbitration agreements? Does this not unduly compromise the ability of states to
regulate commercial activity and access to justice within their territory? What benefits accrue
from permitting parties to select the law governing their arbitration agreements?
6. Limits on parties' autonomy to select law applicable to arbitration agreement. Are there
limits to the parties' autonomy to select the law applicable to their arbitration agreement?
Suppose that national law limits the enforceability or validity of arbitration agreements in
particular circumstances. See supra pp. 29-30 & infra pp. 156-57. Should parties be permitted
to contract out of such limitations?
Consider the award in ICC Case No. 6149. Suppose that the parties had directly agreed that
French (or some other non-Jordanian law) governed their arbitration agreement. The tribunal
would fairly clearly have concluded – as it did even without a direct choice-of-law clause – that
Jordanian Law No. 35 did not apply. But Jordanian Law No. 35 was clearly enacted to advance
substantial national policies of Jordan. Why should parties be permitted to contract out of such
vital national rules in cases with significant connections to Jordan? How would a Jordanian
court have resolved the question whether the arbitration agreement in ICC Case No. 6149 was
valid? Does that have any relevance to an arbitral tribunal's resolution of the same question?
Suppose that a nation's law invalidates arbitration agreements in consumer transactions or
employment relations. If parties to such transactions agree to arbitrate, but subject their
arbitration agreement to foreign law (which does not contain similar limitations), is their
agreement enforceable? Does it matter where the arbitral situs is located? Does it matter
whether the decision is made by (a) a local arbitral tribunal, (b) a foreign arbitral tribunal, (c) a
local court, or (d) a foreign court? Should it matter? If different decision-makers reach different
conclusions, won't the objectives of international arbitration (including uniform, enforceable
results and efficiency) be frustrated?
7. Choice of law applicable to arbitration agreement in absence of choice-of-law clause
specifically applicable to the arbitration agreement. In most cases, parties do not expressly
specify the law applicable to their arbitration agreement. Instead, agreements will typically
P "109" have a general choice-of-law clause, applicable to the parties' “entire” contract, or no choice-
P "110" of-law clause at all. In both cases, courts will need to apply conflict of laws principles to
select the law applicable to the parties' arbitration agreement. These principles are discussed
below.
8. Choice of law applicable to arbitration clause where underlying contract contains a choice-
of-law clause. International commercial contracts frequently contain choice-of-law clauses
which apply to the contract generally. In principle, these choice-of-law clauses can be drafted
broadly enough to encompass the arbitration clause contained in the parties' contract, even
though it is “separable.” For example: “All of the provisions of this contract (Articles 1-21) shall
be governed by the law of State X.” Often, however, choice-of-law clauses are drafted more
narrowly: “This agreement shall be governed by the law of State X.” This type of formulation
arguably does not encompass a “separable” arbitration agreement contained within the
underlying contract.
What approach should be taken to a “general” choice-of-law clause? Should such clauses
presumptively apply to a “separable” arbitration clause, or should they presumptively not
apply to the arbitration clause? If there is no meaningful evidence of the parties' intent, and
one merely has a general choice-of-law clause and an ordinary arbitration clause, should the
law selected by the parties to govern their underlying contract also apply to their separable
 arbitration clause? Do you know enough to answer the question? Do you also want to know the
nationalities of the parties, the applicable law they chose, and the location of their arbitral
situs? Why?
Consider the following hypotheticals:
a. French and German parties agree to arbitrate in Germany and to a general choice-of-law
clause selecting German law.
b. French and German parties agree to arbitrate in Switzerland and to a general choice-of-
law clause selecting Swiss law.
c. French and German parties agree to arbitrate in Switzerland and to a general choice-of-
law clause selecting German law.
d. French and German parties agree to arbitrate in France and to a general choice-of-law
clause selecting German law.
e. French and German parties agree to arbitrate, without selecting an arbitral situs, and to a
general choice-of-law clause selecting (i) Swiss; (ii) French; or (iii) German law.
f. French and German parties agree to arbitrate in England and to a general choice-of-law
clause selecting Swiss law.
Some authorities have interpreted general choice-of-law clauses as extending to “separable”
arbitration provisions contained within an underlying contract. See Union of India v. McDonnell
Douglas Corp. [1993] 2 Lloyd's Rep. 48 (“The parties may make an express choice of law to
govern their commercial bargain and that choice may also be made of the law to govern the
agreement to arbitrate. In the present case it is my view that by Art. 11 the parties have chosen
the law of India not only to govern the rights and obligations arising out of their commercial
bargain but also the rights and obligations arising out of their agreement to arbitrate.”); Final
Award in ICC Case No. 6379 of 1990, XVII Y.B. Comm. Arb. 212, 215 (1992) (applying law governing
underlying contract, not law of arbitral situs); Final Award in ICC Case No. 3572 of 1982, XIV Y.B.
Comm. Arb. 111 (1989) (applying law chosen by parties to govern underlying contract); Award in
ICC Case No. 6850 of 1992, XXIII Y.B. Comm. Arb. 37 (1998) (applying choice-of-law clause in
underlying contract to arbitration agreement).
On the other hand, the weight of authority has refused to apply a general choice of law clause
to the arbitration agreement, particularly where the parties' chosen law would invalidate the
arbitration clause. Final Award in ICC Case No. 5294 of 22 February 1988, XIV Y.B. Comm. Arb. 137,
140-41 (1989) (applying law of arbitral situs, not law governing underlving contract); Final Award
in ICC Case No. 6162 of 1990, XVII Y.B. Comm. Arb. 153 (1992) (applying Swiss law, as law of
arbitral situs, to arbitration agreement; refusing to apply substantive law governing underlying
agreement); Award in ICC Case No. 7453 of 1994, XXII Y.B. Comm. Arb. 107 (1997) (Michigan choice
of law clause in underlying contract not applicable to arbitration clause; instead, FAA applies);
XL Insurance Ltd v. Owens Corning, 2 Lloyd's Law Rep. 500 (2000). Compare the approach that
U.S. courts have taken to choice-of-law clauses under Volt and the FAA. See infra pp. 373-77.
9. Choice of law applicable to arbitration clause where underlying contract contains no choice-
of-law clause. Suppose that the parties' underlying contract does not contain a general (or
P "110" other) choice-of-law clause. What law should govern the parties' separable arbitration
P "111" agreement in these circumstances?
(a) Law of arbitral situs. As noted above, many authorities apply to substantive law of the
arbitral situs to arbitration agreements (absent contrary choice by the parties). See Final
Award in ICC Case No. 5294 of 22 February 1988, XIV Y.B. Comm. Arb. 137, 140-41 (1989)
(applying law of arbitral situs, not law governing underlying contract, to determine
whether “the agreement to arbitrate is binding”); Final Award in ICC Case No. 6162 of 1990,
XVII Y.B. Comm. Arb. 153 (1992) (applying Swiss law, as law of arbitral situs, to arbitration
agreement; refusing to apply substantive law governing underlying agreement); Judgment
of 24 November 1994, XXI Y.B. Comm. Arb. 635 (Rotterdam Rechtbank) (1996) (“the law
applicable to the arbitration agreement is the law of the place of arbitration”); Judgment
of 26 May 1994, XXIII Y.B. Comm. Arb. 754 (Bezirksgericht Affoltern am Albis 1994) (1998) (“in
the absence of a choice of law provision, the validity of the arbitral clause must be
decided according to the law of the seat of the arbitral tribunal”); Judgment of 30 May
1994, XX Y.B. Comm. Arb. 745 (Tokyo High Court) (1995) (“If the parties' will is unclear we
must presume, as it is the nature of arbitration agreements to provide for given
procedures in a given place, that the parties intend that the law of the place where the
arbitration proceedings are held will apply.”).
The foregoing result can be explained as an implied choice of law by the parties (through
their selection of the arbitral situs). Alternatively, the arbitral situs can be said to have
the most significant relationship with the parties' arbitration agreement. Finally, as
discussed below, Article V(1) of the New York Convention also arguably provides for
application of the law of the arbitral situs to arbitration agreements (absent contrary
choice by the parties). See infra pp. 113-14.
Is it sensible to apply the law of the arbitral situs to an arbitration agreement where the
parties have not otherwise agreed? Consider the hypotheticals set forth above. See supra
p. 110.
 (b) Law of underlying contract. As discussed above, notwithstanding rules of preference for
the law of the arbitral situs, a few authorities apply the law governing the parties'
underlying contract to arbitration provisions contained therein (absent contrary
agreement by the parties). See Final Award in ICC Case No. 6379 of 1990, XVII Y.B. Comm.
Arb. 212, 215 (1992); Final Award in ICC Case No. 3572 of 1982, XIV Y.B. Comm. Arb. 111 (1989).
What is the rationale for this choice?
(c) Cumulative application of potentially applicable laws. How does the tribunal in ICC Case
No. 6149 approach the question of the law applicable to the arbitration agreement? As a
practical matter, many arbitrators draw comfort from concluding that their conclusions
about the formation or validity of an arbitration agreement would be the same under any
conceivably applicable law. See Final Award in ICC Case No. 5485 of 18 August 1987, XIV Y.B.
Comm. Arb. 156 (1989) (applying, cumulatively, ICC Rules, arbitral situs's law, law
governing underlying contract, and trade usages); First Award in ICC Case No. 4145 of 1983,
XII Y.B. Comm. Arb. 97 (1987) (applying substantive laws chosen by parties and law of
arbitral situs; finding all satisfied); Award in ICC Case No. 6850 of 1992, XXIII Y.B. Comm.
Arb. 37 (1998) (cumulatively applying both German and French law to validity of
arbitration clause and issues of capacity). The same approach is also sometimes taken to
the substantive law applicable to the merits of the parties' dispute. See infra p. 538.
(d) Rules of preference. The sequential or cumulative approach is comforting (if sometimes a
bit forced), but provides no guidance when a “true conflict” exists. If the potentially-
applicable substantive laws yield differing results, then (it is said) some choice must be
made among them. In that case, what rules of preference should be adopted?
At the end of the day, selecting the law governing the parties' arbitration agreement
(absent an express agreement) usually requires choosing between two principal
alternatives – the substantive law of the parties' underlying contract or the law of the
place where the arbitration has its seat (assuming this is different from the law governing
the underlying contract). See Restatement (Second) Conflict of Laws §218 comment b
(1971); Dicey & Morris, The Conflict of Laws 577-78 (12th ed. 1993). Different national choice
of law systems and international instruments have adopted different approaches to this
issue.
Consider Article VI(2) of the 1961 European Convention. What rule of preference does it
adopt where parties have not specified the law governing their arbitration agreement?
Compare Article V(1)(a) of the New York Convention. What rule of preference does Article
V(1)(a) of the New York Convention arguably adopt?
Both Article VI(2) of the 1961 European Convention and Article V(1)(a) of the New York
Convention contemplate, in the absence of an agreement by the parties as to the law
P "111" governing their arbitration agreement, application of the substantive law of the place
P "112" where the award will be made (i.e., the arbitral situs). What constitutes a choice of law
applicable to the arbitration agreement? Does a choice of law clause in the underlying
contract constitute such a choice? Assuming it does not, do the 1961 European Convention
and the New York Convention adopt the right rule of preference? Why should the law of
the arbitral situs be applied to the validity of the arbitration agreement in the absence
of choice by the parties? Why not instead apply the law applicable to the underlying
contract? Which substantive legal system will play a greater role in the arbitral process?

(e) The “validation” principle. In practice, a prevailing theme of international arbitral awards
dealing with the law governing arbitration agreements has been the so-called validation
principle. Arbitrators strive (both expressly and otherwise) to apply a law that will give
effect to the parties' arbitration agreement.
One of the express consequences of Article 178(2) of the Swiss Law on Private International
Law, excerpted above, is to adopt a variation of the validation principle. Other
authorities are to the same effect. Santiago de Compostela Resolution of the Institut de
Droit International, Article 4, in 4 ICSID Rev. 139, 141 (1989) (Where the validity of the
agreement to arbitrate is challenged, the tribunal shall resolve the issue by applying one
or more of the following: the law chosen by the parties, the law indicated by the system of
private international law stipulated by the parties, general principles of public or private
international law, general principles of international arbitration, or the law that would be
applied by the courts of the territory in which the tribunal has its seat. In making this
selection, the tribunal shall be guided by the principle in favorem validitatis.”); Award in
ICC Case No. 7920 of 1993, XXIII Y.B. Comm. Arb. 80 (1998) (applying validation principle to
uphold validity of ambiguous arbitration clause).
Is the validation principle wise? Why should such efforts be made to enforce international
arbitration agreements? Are there particular policy objectives that are furthered by
generously enforcing arbitration agreements in international transactions?
 (f) International principles. A few authorities have concluded that international arbitration
agreements are governed by international principles. Final Award in ICC Case No. 8938 of
1996, XXIVa Y.B. Comm. Arb. 174, 176 (1999) (the arbitration agreement's “existence and
validity are to be ascertained, taking into account the mandatory rules of national law
and international public policy, in the light of the common intention of the parties,
without necessarily referring to a state law”); Judgment of 24 February 1994, XXII Y.B.
Comm. Arb. 682 (Paris Cour d'Appel) (1997) (“For the arbitration clause ... to be valid it is
sufficient to establish that it is an international contract which has been concluded in
conformity with the needs and conditions of international trade usages.”); Award in ICC
Case No. 7920 of 1993, XXIII Y.B. Comm. Arb. 80 (1998) (arbitral tribunal entitled to depart
from national law, and to apply general principles of law, in determining validity of
arbitration agreement); Friedland & Hornick, The Relevance of International Standards in
the Enforcement of Arbitration Agreements Under the New York Convention, 6 Am. Rev. Int'l
Arb. 149 (1995). Compare the discussion of “internationally neutral” substantive rules
under Article II of the New York Convention. See infra pp. 113-17, 275-77.
(g) Choice of law rules of arbitral situs. Some authorities have concluded that arbitral
tribunals are required to apply the choice of law rules applicable in the arbitral situs. See
infra pp. 535-36. This approach would presumably also extend to selecting the law
governing the arbitration agreement.
10. Choice of law rules applicable to international arbitration agreements subject to the New
York Convention. What effect does the New York Convention have on the choice of law
applicable to arbitration agreements falling within its scope? The decisions in Rhone
Mediterranee and Ledee illustrate the effect of the New York Convention on choice of law
analysis.
(a) Uniform international substantive standards under Article II. Can Article II be interpreted
as setting forth a uniform international standard for when an international arbitration
agreement is valid under the Convention? Under this view, Article II would establish a
substantive defense to arbitration agreements, applicable when those agreements are
“null and void” within the meaning of Article II. If this uniform international standard were
not satisfied, then enforcement of the agreement under Article II would be required
(subject to the Convention's jurisdictional requirements and other exceptions). Is this a
wise interpretation of Article II? Would it advance the goals of the Convention?
Does the text of Article II provide a sound basis for a uniform international definition of
“null and void”? Is the brief, half-sentence reference to agreements which are “null and
void, inoperative, or incapable of being performed” provide an adequate basis for
deciding cases? If the Convention's drafters had intended to create an international
definition of “null and void,” wouldn't they have included a more detailed formulation
(referring for example, to fraud, unconscionability, duress, etc.)?
P "112"
P "113"
If Article II does not establish a uniform international definition of “null and void,” then
what purpose does Article II serve? If individual nations can unilaterally establish
whatever defenses they wish to arbitration agreements, then what is accomplished by
Article II's obligation to “recognize” arbitration agreements? Suppose a state provides
that arbitration agreements are “null and void” if: (a) not affirmed in writing after a
dispute arises; (b) not approved by a designated government authority; (c) opposed by a
local national; or (d) contrary to national interests. What effect does Article II have in
these circumstances?
How would the arbitral tribunal in ICC Case No. 6149 respond to the foregoing queries?
How would the Ledee court respond?

(b) Article II overrides discriminatory national law. An alternative interpretation of Article II

would conclude that generally-applicable contract law defenses (under applicable
national law) would determine whether an arbitration agreement is “null and void,” but
that Article II would override national law defenses which are not based on generally-
applicable contract law rules. This would parallel the application of the domestic FAA,
and its preemptive effect on discriminatory state laws. See supra pp. 36-43 & infra pp.
114-17, 348-53.
Consider the Ledee opinion. Does it adopt the approach outlined above? Is this
persuasive? What textual objections can be made to the Ledee result?
Recall that Article V contains choice of law rules for international arbitration agreements
which (by their terms) apply at the stage of enforcing arbitral awards. Would it make
sense for Article II to impose a uniform set of international substantive rules governing
the formation and validity of international arbitration agreements, while Article V
apparently leaves individual states freedom to apply potentially more restrictive
national laws to deny enforcement to awards based on those agreements? What rationale
might support such a result?
 (c) National choice of law rules. As the court observes in Rhone Mediterranee, many
commentators have concluded that Article II requires application of some national law to
decide whether an arbitration agreement is “null and void” under the New York
Convention. Sanders, A Twenty Years' Review of the Convention on Foreign Arbitral Awards,
33 So. Cal. L. Rev. 14, 16 (1959) (Article II(3) refers to national conflict of law rules); Contini,
International Commercial Arbitration, 8 Am. J. Comp. L. 283, 296 (1959) (since Article II(3) is
silent, courts may make determination on basis of forum law, including forum choice of
law rules).
(d) Applicability of choice of law rules under Article V. As outlined elsewhere, supra p. 112 &
infra pp. 275-77, and in Rhone, Article V(1) of the Convention provides various defenses to
the enforcement of arbitral awards, including defenses based upon the invalidity of the
arbitration agreement. As Rhone and Ledee discuss, Article V(1)(a) arguably provides a
partial answer to the question of what law governs the formation and validity of the
arbitration agreement, by permitting non-recognition of an award if the parties'
agreement was invalid under “the law to which the parties have subjected it.” Article V(1)
(a) also provides that, “failing any indication” by the parties as to the law governing their
arbitration agreement, enforcement may be denied if the agreement is invalid under the
law of the place where the “award was made.” What effect do these provisions have on
the choice of law applicable to an arbitration agreement in an action to enforce the
agreement (rather than an award)? See infra pp. 275-77. A. van den Berg, The New York
Convention of 1958 126-28 (1981); McMahon, Implementation of the United Nations
Convention on Foreign Arbitral Awards in the United States, 2 J. Mar. L. & Comm. 735, 757
(1971).
Consider whether this approach is required by the Convention and whether it serves the
purposes of the Convention. Note that the Rhone court held that, although Article V of the
New York Convention contains choice-of-law principles, those rules are not applicable
under Article II(3). Is the court's rationale persuasive? Other authorities have also refused
to apply Article V's choice of law rules under Article II(3). Meadows Indemnity Co. v.
Baccala & Shoop Ins. Serv., Inc., 1991 U.S. Dist. Lexis 4144 (E.D.N.Y. 1991).

11. Approach of U.S. courts to choice of law applicable to international arbitration agreements.
Nothing in the FAA's first or second chapters addresses directly the question of what law is
applicable to an international arbitration agreement. U.S. precedent is in a state of transition,
with increasing judicial and academic attention being devoted to the choice of law applicable
to international arbitration agreements. For the time being, however, treatment of the topic in
the United States remains fluid.
(a) Historic lack of U.S. authority concerning choice of law applicable to international
arbitration agreements. Until fairly recently, U.S. courts generally applied perceived
P "113" federal substantive rules derived from §2 of the domestic FAA to international arbitration
P "114" agreements without engaging in any meaningful choice of law analysis. This conclusion
was historically a result of the view that Congress intended the FAA to preempt state (and
foreign) law in U.S. courts, which obviated the need for choice of law analysis.
Thus, there is relatively little considered U.S. judicial authority analyzing the conflict of
laws issues raised by international arbitration agreements. For some of the few U.S.
decisions discussing the choice of law issues raised by international arbitration
agreements, see Becker Autoradio U.S.A., Inc. v. Becker Autoradiowerk GmbH, 585 F.2d 39,
43 & nn. 8 & 9 (3d Cir. 1978); In the Matter of an Arbitration Between the West of England
Ship Owners Mutual Ins. Ass'n etc., 1992 WL 37700 (E.D. La. 1992); Marchetto v. DeKalb
Genetics Corp., 711 F.Supp. 936 (N.D. Ill. 1989); Meadows Indemnity Co. v. Baccala & Shoop
Ins. Services, Inc., 1991 U.S. Dist. Lexis 4144 (E.D.N.Y. 1991); Ferrara SpA v. United Grain
Growers, Ltd, 441 F.Supp. 778, 781 (S.D.N.Y. 1977) (raising, but not deciding, possible
applicability of (a) federal standards of enforceability under chapter one of FAA, (b) “a
uniform body of international law embodied in the Convention,” or (c) New York law;
suggesting that FAA standards would apply).
 (b) Lower U.S. court decisions applying federal common law rules to arbitration agreement
subject to New York Convention. Many recent U.S. decisions apply substantive rules of
federal common law to the formation and validity of international arbitration
agreements that are subject to the New York Convention. David L. Threlkeld & Co. v.
Metallgesellschaft Ltd, 923 F.2d 245, 249-50 (2d Cir. 1991); Filanto, SpA v. Chilewich Int'l
Corp., 789 F.Supp. 1229, 1234-36 (S.D.N.Y. 1992), appeal dismissed, 984 F.2d 38 (2d Cir. 1993);
Kahn Lucas Lancaster, Inc. v. Lark International Ltd, 956 F.Supp. 1131 (S.D.N.Y. 1997), rev'd.
186 F.3d 210 (2d Cir.1999); In the Matter of an Arbitration Between the West of England Ship
Owners Mutual Ins. Ass'n etc., 1992 WL 37700 (E.D. La. 1992) (applying federal law, not
Louisiana or English law, to decide whether arbitration agreement is “null and void”
under Article II); Marchetto v. DeKalb Genetics Corp., 711 F.Supp. 936 (N.D. Ill. 1989) (citing
§203 to conclude that “the validity of an arbitration agreement is determined by
reference to the [FAA] and the federal substantive law of arbitrability”).
For U.S. lower court decisions considering whether an arbitration agreement would be
null and void under federal law, as applied to particular claims, see McDonnell Douglas
Corp. v. Kingdom of Denmark, 607 F.Supp. 1016, 1020 (E.D. Mo. 1985) (“under some narrow
circumstances, public policy may be grounds for denying the enforcement of an
arbitration agreement”; court will order arbitration absent showing tribunal will be
“asked to rule on matters of national security in contravention of a policy of the United
States”); Antco Shipping Co. v. Sidermar SpA, 417 F.Supp. 207 (S.D.N.Y. 1976) (Article II(3)'s
“null and void” exception applies to claims based on illegality, but only where “the
essence of the arbitration or remedy is prohibited by a pertinent statute or other
declaration of public policy”). See infra pp. 157-61.

(c) Lower U.S. court decisions holding that Article II(3)'s “null and void” exception requires
application of “internationally neutral” defenses. Consider the court's analysis in Ledee.
What substantive law does the court apply to the validity of the arbitration agreement?
What does the Ledee court mean by its reference to “internationally neutral” defenses?
Does the Ledee court apply a system of national law or a uniform international standard?
Or, alternatively, does Ledee contemplate application of a national contract law, subject
to a requirement (derived from the New York Convention) that only “internationally
neutral” defenses be recognized?
The few other lower U.S. courts to have considered the issue have refused to apply foreign
laws singling out arbitration agreements for special burdens. I.T.A.D. Associates, Inc. v.
Podar Brothers, 636 F.2d 75 (4th Cir. 1981); Becker Autoradio U.S.A., Inc. v. Becker
Autoradiowerk GmbH, 585 F.2d 39, 43 n.8 (3d Cir. 1978) (dicta that U.S. court would not
apply “the law of state X [that] will not enforce, or gives very limited effect to arbitration
clauses”); Meadows Indemnity Co. v. Baccala & Shoop Ins. Serv., Inc., 760 F.Supp. 1036, 1043
(E.D.N.Y. 1991) (rejecting defense to action to compel arbitration where defendant argued
that arbitration agreement was not enforceable in arbitral situs because claims were
non-arbitrable, applying “emphatic federal policy” favoring arbitration); Marchetto v.
DeKalb Genetics Corp., 711 F.Supp. 936 (N.D. Ill. 1989) (rejecting claim that arbitration
agreement was void under Italian law because it applied to tort claims and because non-
parties were sued: “the possibility that Italian law might divest a panel of Italian
arbitrators is not determinative”); Development Bank of Philippines v. Chemtex Fibers Inc.,
617 F.Supp. 55 (S.D.N.Y. 1985) (“it is clear that the Convention does not contemplate the
expression of local public policy as a barrier to the arbitrability of claims”); Ferrara SpA v.
United Grain Growers, Ltd, 441 F.Supp. 778, 781 (S.D.N.Y. 1977) (refusing to give effect to
“purported Italian law rule [that] appears to be a special requirement governing
agreements to arbitrate, but inapplicable to other contractual terms and conditions”);
Antco Shipping Co. v. Sidermar SpA, 417 F.Supp. 207 (S.D.N.Y. 1976).
Are these decisions, and the analysis in Ledee, correct? Why should U.S. courts enforce
P "114" arbitration agreements that are invalid under the law of the parties' chosen arbitral
P "115" forum? under the law chosen by the parties to govern their arbitration agreement? As a
practical matter, what is likely to occur after a U.S. court concludes that parties must
arbitrate pursuant to an arbitration agreement that is invalid under the law of the foreign
arbitral situs?

(d) Content of “internationally neutral” defenses under Article II(3). Assume that Ledee is
correct that only defenses that are “neutral on an international scale” can be relied on to
demonstrate the invalidity of an arbitration agreement. Why was the Puerto Rican law in
Ledee not “internationally neutral”? If both Italy and Puerto Rico (or the United States)
forbid agreements to arbitrate franchise disputes, would that be an “internationally
neutral” defense? What if most countries do so? Or does Ledee forbid any national law
that singles out arbitration agreements for special disfavor, no matter how widely
accepted such a rule is?
What defines the content of “internationally neutral” defenses like fraud, mistake, duress,
and waiver? Does the Ledee court contemplate some international standard of fraud or
waiver, that each nation must apply? Alternatively, does Ledee regard the requirement of
international neutrality as essentially negative, preempting various parochial defenses,
but leaving it to national law (such as the FAA) to define the details of internationally
neutral defenses? If so, what choice of law rules should be applied to select the
appropriate national law?
 (e) Lower U.S. court decisions holding that Article II(3)'s “null and void” exception requires
application of enforcement forum's public policy. In Rhone, the Third Circuit adopted a
slightly different approach from that in Ledee. The Rhone decision holds that an
arbitration agreement is “null and void” if either: (i) like Ledee, it is null and void under
an “internationally neutral” defense, or (ii) unlike Ledee, it is null and void because it
contravenes a fundamental public policy of the judicial enforcement forum.
Is that interpretation of Article II(3) consistent with the approach in Ledee? Is it not clear
that the Puerto Rican dealers' law in Ledee stated a fundamental public policy of the
forum? Why wouldn't that Puerto Rican public policy have rendered the agreement null
and void under the Rhone rationale? (Note the comment made below that the true
rationale for Ledee lay in the preemption of the Puerto Rican law by the domestic FAA.
See infra p. 117.)

(f) Lower U.S. court decisions refusing to apply foreign law to arbitration agreement under
Article II(3). In Rhone, the U.S. court refused to apply Italian law, which appeared fairly
clearly to render the parties' arbitration agreement invalid (because the agreement
called for an even number of arbitrators). In addition to Rhone, a number of other U.S.
courts refused to apply foreign law to determine the validity of arbitration agreements in
actions under the New York Convention. See I.T.A.D. Associates, Inc. v. Podar Brothers, 636
F.2d 75 (4th Cir. 1981); Becker Autoradio U.S.A., Inc. v. Becker Autoradiowerk GmbH, 585 F.2d
39, 43 & nn. 8 & 9 (3d Cir. 1978); In the Matter of an Arbitration Between the West of England
Ship Owners Mutual Ins. Ass'n etc., 1992 WL 37700 (E.D. La. 1992); Marchetto v. DeKalb
Genetics Corp., 711 F.Supp. 936 (N.D. Ill. 1989); Meadows Indemnity Co. v. Baccala & Shoop
Ins. Serv., Inc., 760 F.Supp. 1036 (E.D.N.Y. 1991); Ferrara SpA v. United Grain Growers, Ltd, 441
F.Supp. 778, 781 n.2 (S.D.N.Y. 1977) (reasoning in dicta that enforceability of arbitration
agreement is governed by law of the enforcement forum); Antco Shipping Co. v. Sidermar
SpA, 417 F.Supp. 207 (S.D.N.Y. 1976).
Is this refusal by U.S. courts to apply the law of a foreign arbitral situs justifiable? Why
should U.S. courts give effect to arbitration agreements that are invalid under the law of
the arbitral situs?
Why didn't Italian law apply to the arbitration agreement in Rhone? Consider the Rhone
court's explanation that the relevant rule of Italian law was “waivable” and “procedural,”
and therefore did not justify nonenforcement of the arbitration agreement. Is the court's
reasoning persuasive? Does the Rhone court mean that, by agreeing to international
arbitration, the parties must have intended to waive any technical requirements imposed
by Italian law? Is that persuasive? Or, is Rhone an example of a court applying the
validation principle?
Under Rhone's analysis, what kinds of foreign laws would be applied to render an
arbitration agreement invalid? Would Rhone permit defenses of fraudulent inducement,
waiver, unconscionability, or illegality? These defenses are also usually waivable. What
effect would the Rhone court have given to an Italian statute that mirrored the Puerto
Rican statute in Ledee?
What if the parties select foreign law to govern the validity and scope of their arbitration
agreement? Shouldn't that choice be respected? How would Rhone have been decided if
the parties had expressly selected Italian law to govern their arbitration agreement? Why
should an implied choice, or a choice made by application of conflicts rules, be
different?

(g) Lower U.S. court decisions applying law of arbitral situs or underlying contract to
P "115" arbitration agreement. A few U.S. lower courts have applied the law of either the arbitral
P "116" situs or the parties' underlying contract to an arbitration agreement. Frydman v.
Cosmair, Inc., 1995 WL 404841 (S.D.N.Y. 1995) (“Where ... there is a dispute as to whether the
parties agreed to arbitrate, the court must look to the state law which governed the
contract formation.... Since the contract in dispute here was formed in France between
French citizens, French law applies in the determination of whether it constitutes an
agreement to arbitrate.”). As Ledee and Rhone illustrate, and as discussed below,
however, most U.S. courts have refused to give effect to foreign law (including the law of a
foreign arbitral situs) to deny recognition to international arbitration agreements. See
supra pp. 114-15.
12. Roles of U.S. federal and state law in determining existence and validity of arbitration
agreement under the domestic FAA. First Options also addresses briefly the respective roles of
federal and state law under the domestic FAA in determining whether a valid arbitration
agreement exists. According to the Court's description:
When deciding whether the parties agreed to arbitrate a certain matter (including
arbitrability), courts generally (though with a qualification we discuss below) should apply
ordinary state-law principles that govern the formation of contracts.
The First Options opinion then cited (without attempting any conflict of laws analysis) to the
law of the state that governed two parties' underlying contract (Illinois) and to the law of the
state where the arbitration was sited (Pennsylvania).
The respective roles of federal and state law in determining the existence of arbitration
agreements under the FAA is discussed in detail below. See infra pp. 341-58. In summary,
however, First Options fairly clearly requires the application of generally-applicable state law
 (not federal law) rules to the formation of domestic arbitration agreements, subject to
preemption by federal law under the FAA of state law rules which single out arbitration
agreements for unfavourable treatment. See infra pp. 350-56; Mastrobuono v. Shearson Lehman
Hutton, Inc., 514 U.S. 52 (1995), excerpted infra pp. 368-73.
13. Roles of U.S. federal and state law in determining existence and validity of international
arbitration agreement under the FAA. International arbitration agreements, which are subject
to the New York Convention, are likely governed by a different allocation of U.S. federal and
state law with respect to formation and validity than that applicable to domestic arbitration
agreements. As discussed below, the weight of U.S. lower court authority holds that federal
common law governs the formation and validity of international arbitration agreements which
are subject to the New York Convention. See infra pp. 353-56.
14. Roles of U.S. federal and state law in interpreting arbitration agreements. Whatever the law
applicable to other aspects of arbitration agreements, it is well-settled that federal law
governs the interpretation of both domestic and international arbitration agreements in the
United States. See infra pp. 315-18, 349-53.
15. Content of Article V's choice of law rules. Assume that Article V's choice of law rules do
apply to arbitration agreements under Article II. What are the content of those rules?
(a) The law to which “the parties have subjected” the arbitration agreement. Article V(1)(a)
refers in the first instance to the law that the parties have selected to govern the
arbitration agreement. As discussed above, this law can be different from the governing
the parties' underlying contract. See supra pp. 43-46, 68, 107-08. Also as noted above,
parties very seldom expressly specify the law governing the arbitration agreement itself.
When they do not, then only an implied or imputed choice of law is possible – which
typically involves selecting either the law selected by the parties to govern the
underlying contract or the law of the arbitral situs chosen by the parties. See supra pp.
109-13. Is such an implied choice of law permitted, or, in the absence of an express choice
of law, does Article V(1)(a) require application of the law of the place where the award was
(or will be) made?
(b) The law of the place where the award “was made.” It is not easy to apply the law of the
place the award “was” made in an action to enforce an arbitration agreement, which
occurs well before any award is rendered. Of course, one could try to predict where a
future award will be made, which will ordinarily be the arbitral situs. See, e.g., Meadows
Indemnity Co. v. Baccala & Shoop Ins. Serv., Inc., 1991 U.S. Dist. Lexis 4144 (E.D.N.Y. 1991)
(discussing possible enforcement fora). But, in some cases, the parties' arbitration
agreement specifies no arbitral situs, making it difficult even to speculate about the
place where an award might be made. See infra pp. 573-80.
(c) Practical shortcomings of applying Article V(1)(a)'s choice of laws rules under Article II. For
P "116" the reasons discussed above, Article V(1)(a)'s choice of law rules will often not provide
P "117" dispositive guidance under Article II even assuming that they are applicable at all at
this stage. The parties usually will not have subjected the arbitration agreement to a
specified law and it may be difficult to predict where an arbitral award will be made.
Thus, Article V(1)(a) sometimes does not offer conclusive guidance as to what law should
govern the validity of the parties' arbitration agreement.
16. What law should be applied under Article II of the New York Convention? Do any of the rules
outlined above – Ledee, Rhone, decisions under the domestic FAA, Article V(1)(a), or the
traditional common law rule – adopt the appropriate choice-of-law rule for the validity of
arbitration agreements under Article II(3) of the New York Convention? What law should a U.S.
court apply to arbitration agreements under Article II(3)?
Suppose that the parties in Rhone had expressly subjected their arbitration agreement to
Italian law. Should U.S. courts have then applied Italian law to determine the validity of the
agreements? Or are U.S. courts correct to apply the FAA?
If the parties have not specifically agreed upon a law governing their arbitration agreement,
then what law should determine whether that agreement is “null and void”? the law of the
arbitral situs? the law of the underlying contract? the forum's law? an international standard?
17. Alternative grounds for Ledee result – preemption of state law.Ledee could have been
decided on a narrower ground that, in the United States, restrictions on arbitrability imposed
by state (as opposed to federal) law are preempted by the FAA and Convention. See infra pp.
331-56. The basis for the alleged invalidity of the arbitration agreement in Ledee was a Puerto
Rican statute forbidding arbitration of certain franchise disputes. As we have seen, claims that
state law forbids arbitration of particular categories of disputes have been rejected, primarily
on the grounds that the strong federal policy favoring arbitration (reflected in the FAA and the
New York Convention) preempts inconsistent state prohibitions on arbitration. See supra pp.
35-41 & infra pp. 331-56; Southland Co. v. Keating, 465 U.S. 1 (1984) (holding that FAA preempt
state statutory prohibition against arbitration of franchise disputes); Perry v. Thomas, 482 U.S.
483 (1987) (holding that FAA preempts California Labor Code prohibition against arbitration of
employer-employee disputes over wage collection). Relying on this authority, the Ledee court
could have simply held the Puerto Rican statute preempted under the FAA without considering
whether the Convention required that an “internationally neutral” defense be asserted. Note
that the Ledee court's holding would appear to limit the ability of Congress to impose
restrictions on arbitration agreements.

D. Applicability of International Arbitration Conventions and National Arbitration

 Legislation to International Arbitration Agreements (32)
1. Introduction
An important preliminary issue in disputes over the enforcement or interpretation of
international arbitration agreements is determining the applicability of the New York
Convention (or other international arbitration conventions or treaties) and national arbitration
legislation to a particular agreement. Both international arbitration conventions and national
arbitration statutes contain “jurisdictional requirements” which define what arbitration
P "117" agreements are (and are not) subject to those instruments' substantive rules. These
P "118" jurisdictional requirements can have important practical consequences, because the
substantive terms of the Convention and most contemporary international arbitration statutes
(such as the UNCITRAL Model Law) are “pro-arbitration.”
a. Applicability of the New York Convention to International Arbitration Agreements
Despite its importance, there are numerous international arbitration agreements to which the
New York Convention does not apply: “there is a vast area not covered by the Convention.” (33)
Defining precisely those arbitration agreements that are subject to the New York Convention is
not always straightforward. In contrast to Article I's definition of the arbitral awards which are
subject to the Convention, (34) nothing in Article II (or otherwise) details which arbitration
agreements fall within Article II's “recognition” requirement. In the words of one commentator,
“the Convention does not give a definition as to which arbitration agreements fall under”
Article II. (35)
Five jurisdictional requirements of the New York Convention warrant attention (and parallel
similar requirements under the Inter-American Convention). (36) First, Article II(1) limits the
Convention's coverage to “agreement[s] in writing.” Second, the Convention is applicable in
many national courts only on the basis of reciprocity (i.e., vis-a-vis other nations that also have
ratified the Convention). Third, the Convention only applies to agreements concerning “foreign”
or “non-domestic” awards. Fourth, the Convention is generally applicable only to differences
arising out of “commercial” relationships. Fifth, again pursuant to Article II(1), the parties'
agreement must provide for arbitration of “differences which have arisen or which may arise ...
in respect of a defined legal relationship, whether contractual or not.” (37)
P "118"
P "119"
b. Applicability of National Arbitration Legislation to International Arbitration Agreements
Like the New York Convention, contemporary international arbitration statutes in most states
contain either express or implied jurisdictional limitations. These jurisdictional requirements
have substantial practical importance, because they determine when the generally “pro-
arbitration” substantive provisions of contemporary arbitration legislation apply.
The jurisdictional requirements of national arbitration statutes vary from state to state. In
general, however, these jurisdictional limits are broadly similar to those contained in the New
York Convention: (a) a “writing” requirement; (b) a possible reciprocity requirement; (c) a
“foreign” or “international” connection requirement; (d) a “commercial relationship”
requirement; and (e) a “defined relationship” requirement. We examine each of these
categories of jurisdictional requirement below, in conjunction with discussions of the parallel
jurisdictional limitations under the New York and Inter-American Conventions.
2. “Foreign” or “International” Arbitration Agreements
Both the New York Convention and most contemporary national arbitration statutes that
regulate international arbitration apply only to arbitration agreements that have some sort of
“foreign” or “international” connection. This is consistent with the purpose of both types of
instruments, which is to facilitate the international arbitral process, without disturbing local
legal rules for domestic arbitration matters.
The New York Convention is applicable only to arbitral awards: (i) that are “made” in a state
other than the one where recognition or enforcement is sought, or (ii) that are “not considered
as domestic awards” under the law of the enforcing state. (38) These provisions have generally
been held applicable by analogy to arbitration agreements (as well as awards), (39) extending
the Convention only to those agreements that have a “foreign” or “international” connection.
Similarly, the Inter-American Convention is applicable (according to its title and preamble) to
“international commercial arbitration.” (40)
P "119" The Conventions' limitation to international arbitration agreements is paralleled by similar
P "120" jurisdictional requirements in many national arbitration statutes. For example, Article 1(1) of
the UNCITRAL Model Law provides that the Law applies only to “international commercial
arbitration,” as defined in article 1(3). (41) Similarly, Article 176 of the Swiss Law on Private
International Law provides that the Act's international arbitration provisions are limited to
cases where, “when the arbitration agreement was concluded, at least one of the parties had
neither its domicile nor its habitual residence in Switzerland.” (42) These jurisdictional limits
serve the general purpose of permitting separate legal regimes for international and domestic
arbitration agreements (in light of the differing policies implicated in each case).
The materials excerpted below illustrate the requirement for a “foreign” or “international”
connection under the Convention and selected national arbitration legislation. First, consider
the relatively limited indicia of scope in the New York and Inter-American Conventions. Then,
review the decision in Brier v. Northern Marine Inc., excerpted below which considered whether
an agreement between two U.S. nationals, concerning underlying activities occurring in the
 United States, but providing for arbitration (in a Convention State) outside the United States,
is subject to the Convention. (43) Also review the excerpts from the UNCITRAL Model Law and
Swiss Law on Private International Law which illustrate the requirement for an “international”
connection under contemporary national arbitration legislation.
NEW YORK CONVENTION
Article 1 [excerpted below at p. 987]
INTER-AMERICAN CONVENTION
Preamble & Article 1 [excerpted below at p. 995]
1961 EUROPEAN CONVENTION ON INTERNATIONAL COMMERCIAL ARBITRATION
Article 1 [excerpted below at p. 981]
P "120"
P "121"
UNCITRAL MODEL LAW
Article 1 [excerpted below at p. 1012]
FEDERAL ARBITRATION ACT
9 Unitd States Code §202 [excerpted below at p. 1003]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 176 [excerpted below at p. 1033]
BRIER v. NORTHSTAR MARINE INC.
1992 WL 350292 (D.N.J. April 28, 1992)
ROSEN, UNITED STATES MAGISTRATE ... On or about October 21, 1990, plaintiff John H. Brier, Jr.,
the owner of the vessel and three other individuals were travelling from Connecticut to
Maryland aboard a fifty-three (53) foot yacht titled the M/Y Joanie Bee.... As plaintiff was
entering the Hereford Inlet in New Jersey, the vessel ran aground.... Plaintiff [contacted
defendant] Northstar Marine, Inc. to ascertain whether the company could provide the
necessary assistance to plaintiff in refloating his vessel. Captain Risko, the owner and operator
of Northstar Marine, Inc. informed plaintiff that he could provide the necessary assistance....
Captain Risko informed Mr. Brier that he would be conducting a salvage operation. He then
read from a document known as the “Miranda Act for Salvors” (44) which basically states that
the Lloyd's of London Form will be used. This form also states that the terms are “No Cure, No
Pay,” which allows the company to conduct the salvage operation without a prearranged price
and at the completion of the operation the company will submit a claim. If the master or his
insured do not agree with the claim, it must be arbitrated by the Lloyd's of London Arbitration
Panel.
P "121"
P "122"
Somewhere between 8:25 a.m. and 9:00 am on October 22, 1990, Mr. Cassidy, the owner and
operator of the Cape May Marine Services, arrived at plaintiff's motel room with an initial set
of documents for plaintiff to sign prior to defendants attempting to refloat the boat. Among the
documents was the Lloyd's Standard Form of Salvage Agreement (hereinafter, “LOF
Agreement”) which was approximately three pages long. Mr. Cassidy then proceeded to scan
the document with the plaintiff, highlighting each paragraph. The document provided that all
disputes between the parties be arbitrated at Lloyd's of London in England and that English
law will govern the resolution of the dispute.
Plaintiff signed the documentation including the LOF Agreement and his vessel was thereafter
refloated and towed to the Canyon Club Marina in New Jersey.... On or about October 24, 1990,
plaintiff was informed that the costs of the refloating and towing his vessel amounted to
$38,250.00. Plaintiff refused to pay this amount and on February 11, 1991 instituted the instant
action [for a declaratory judgment that the LOF Agreement was an invalid adhesion contract.
The defendants invoked the arbitration clause and the New York Convention. Plaintiff replied
that the Convention did not apply.] ...
It is plaintiff's contention that the provisions of the Lloyd's Standard Form of Salvage
Agreement requiring the contractor and the owner to arbitrate their dispute concerning
compensation in London pursuant to English law, when both are U.S. citizens and their
relationship is not reasonably related to England, falls outside the [New York] Convention as
enacted in the United States and therefore this court is precluded from requiring arbitration in
accordance with the agreement.
In the present case the parties are in agreement that all are citizens of the United States....
However, my inquiry cannot end here since §202 ... carves out certain exceptions even where
all parties to the relationship are citizens of United States.... The legislative history of §202
makes it clear that where the matter is solely between citizens of the United States it will fall
outside the Convention unless there is a reasonable relation with a foreign state....
Therefore, unless the facts allow this case to fit within one of the four jurisdictional
requirements noted above, it will fall outside the Convention and render the arbitral
agreement between these parties unenforceable.
Is the property located abroad? The only property involved in the case at bar is the vessel, the
M/Y Joanie Bee, which is registered in the State of Connecticut and at all times material hereto
has been located off the Coast of New Jersey.
 Does the agreement envisage performance abroad? The performance in the instant case
involved the refloating of the vessel and the towing of it to Canyon Club Marina, in New Jersey.
All performance which occurred in this case occurred within the coastal waters of New Jersey.
Does the agreement envisage enforcement abroad? Defendants argue that the LOF Agreement
P "122" clearly satisfies the third condition in that the language of the contract envisions that English
P "123" law would apply to the arbitration, and more importantly, the arbitration and any appeal
therefrom, would be before the Committee of Lloyd's in London, England. Defendants rely on
Fuller Co. v. Compagne Des Bauxites De Guinea, 421 F.Supp. 938 (W.D. Pa. 1976) to support their
assertion that the present case is the type of enforcement Congress envisioned when it carved
out the exceptions found in 9 U.S.C. §202.
However, Fuller is easily distinguishable from the case at bar. While it is true that both parties
were considered United States citizens in Fuller, the court in Fuller found the “reasonable
relationship” to exist under the performance exception not the enforcement exception. In
Fuller, the contract envisaged that plaintiff would provide extensive technical services in
Guinea. An affidavit submitted to the court stated that the total cost of Fuller's technical
representatives in Guinea was $269,562.08. Consequently, the court held that the case fell
within the exception due to the “substantial amount of performance of this contract in Guinea.”
As stated above performance of the contract in dispute was performed solely in New Jersey.
In contrast, plaintiff asserts that the enforcement of this agreement bears no reasonable
relation to London, England. The fact that the parties are currently before this court to
determine the enforceability of the arbitration agreement is of itself significant. Moreover,
plaintiff asserts that the vessel upon which the contractor claimed a maritime lien was located
in New Jersey and therefore the security posted to obtain the release of the vessel would have
remained in this district subject to enforcement of a subsequent arbitration award. I agree.
Accordingly, I find this district to be the proper place to enforce an arbitral award, not London,
England. Additionally, unlike the facts in Fuller, where the contract provided for the design,
manufacture and sale of equipment to be used at the buyer's plant in Guinea and for extensive
technical services to be provided in Guinea, in the instant case, the only visible tie with the
foreign nation is found in the language of the LOF Agreement itself.
Does the agreement have some other reasonable relation with one or more foreign states?
Defendants argue that the current facts set forth a reasonable relation with the foreign nation.
Their contention is that the parties willingly entered into the LOF Agreement which clearly
compelled arbitration in London, England and that the Committee of Lloyd's is the only
internationally recognized body which deals with salvage arbitrations and no other body is so
recognized. (45) Furthermore, defendants assert that it is undisputed that Lloyd's sits in
London, England and that English law controls their arbitrations and any appeal thereof.
Consequently, defendants contend that the situs and law found in the LOF Agreement was
selected with care and that of itself encompasses the reasonable relation with London,
England.
Defendants' argument however, is circular. If I were to agree with defendants analysis that the
P "123" reasonable relation with the foreign forum is created by the document itself, I would be
P "124" allowing “the exception to swallow the rule.” The only avenue which would bring this
particular issue before the court is where a document has been signed by the parties,
compelling foreign arbitration, and all the parties are United States citizens. Consequently,
following defendants reasoning, in every case the parties would fall within the fourth
jurisdictional exception, since the document itself would always name a foreign nation for
arbitration....
Taking into consideration the purpose of tee agreement and the motivation for the exception
created by Congress (46) I find based on the narrow facts before me, that this case falls outside
the Convention.
Notes on Requirement for a “Foreign” or “International” Arbitration Agreement
1. Uncertainty about scope of application of the New York Convention to international
arbitration agreements. Consider the text of Article II of the New York Convention. What
categories of such agreements does Article II govern? Does Article II clearly address this issue?
2. Limitation of New York Convention to “foreign” or “non-domestic” arbitration agreements. As
with the New York Convention's reciprocity requirement, it is not clear whether and how the
Convention's “foreign” or “non-domestic” award requirement applies to arbitration
agreements. Arguably, the Convention only applies to agreements that would produce foreign
or non-domestic awards subject to the Convention; alternatively, the Convention may be more
broadly applicable to a wider range of agreements. van den Berg, When is an Arbitral Award
Non-Domestic Under the New York Convention of 1958?, 6 Pace L. Rev. 25, 51-54 (1985); Ebb,
Developing Views on What Constitutes a Foreign Arbitration Agreement and a “Foreign Award”
under the New York Convention, 1 Am. Dev. Int'l Arb. 364 (1990). What might this wider category
of agreements be? Where would one look in the Convention for a definition of them.
3. Limitation of Inter-American Convention to “international commercial arbitration.” Consider
the title and the preamble to the Inter-American Convention. Both appear, at least impliedly,
to limit the Convention's scope to “international commercial arbitration.” Is this term defined
anywhere in the Convention?
What meaning should be given to “international commercial arbitration” as used in the Inter-
American Convention? What is the purpose of limiting the Convention to “international”
matters?
Consider the following: (a) two U.S. citizens contract in the United States concerning a purely
 U.S. matter, and agree to arbitrate in the United States; (b) two U.S. citizens contract in the
United States concerning acts to be performed in State A, and agree to arbitrate in the United
States; (c) same as (a), but one contracting party is a State A national; (d) same as (b), but one
contracting party is a State A national; (e) same as (a), but the arbitral situs is in State A. Which
of the foregoing are “international”? Why?
4. Limitation of 1961 European Convention to “international” arbitrations. Consider the
definition of the scope of the 1961 European Convention in Article 1. What are the components
of this definition? Consider the hypotheticals in the previous Note. How does Article 1 of the
1961 European Convention apply to each? Compare Article 1 to the New York and Inter-
American Conventions. Which approach is preferable?
5. Rationale for limiting New York Convention, Inter-American Convention and 1961 European
Convention to “international” arbitration agreements. Consider the express and implied
limitations in the New York Convention, the Inter-American Convention and the 1961 European
Convention regarding “international” arbitration agreements. Broadly speaking, and with
significantly different wording, all three instruments are limited to “international” or
“foreign/non-domestic” arbitration agreements. What is the reason for this limitation? What
benefits and costs does it produce? What would be wrong with adopting the Conventions' rules
for domestic arbitrations?
P "124" 6. “International” connection requirement under national arbitration legislation. Consider the
P "125" “international” connection requirements imposed by various national arbitration statutes.
(a) Limitation of UNCITRAL Model Law to “international” arbitration agreements. Consider the
text of Article 1 of the UNCITRAL Model Law, which limits the Model Law's applicability to
“international commercial arbitration,” and then provides a definition of “international”
arbitration. Compare Article 1(3)'s definition of “international” arbitration with the
definition of “foreign” and “non-domestic” under the New York Convention. Compare
Article 1(3) with §202 of the FAA and, in particular, with the Northstar Marine decision.
(b) Limitation of Swiss Law on Private International Law to “international” arbitration
agreements. Consider the text of Article 176(1) of the Swiss Law on Private International
Law. How does Article 176(1)'s formulation compare with that of the UNCITRAL Model Law
and §202 of the FAA? Which approach is preferable?
7. Application of New York Convention to arbitration agreements between local parties
specifying a foreign arbitral situs. Consider the basic facts in Northstar Marine. Does the
Convention apply whenever a court in one Convention State is presented with an arbitration
agreement specifying an arbitral situs in another Convention State? Specifically, the
arbitration agreement in Northstar Marine provided for arbitration in London, between U.S.
parties; why wasn't this agreement subject to the Convention? Consider the text of Article II.
Isn't the Northstar Marine agreement plainly caught by its terms?
8. U.S. court decisions considering application of New York Convention to arbitration
agreements between U.S. nationals specifying a foreign arbitral situs. A number of U.S. courts
other than Northstar Marine have considered whether the Convention applies to arbitration
agreements between U.S. nationals specifying a foreign arbitral situs. In Wilson v. Lignotock
U.S.A., Inc., 709 F.Supp. 797 (E.D. Mich. 1989), for example, the court held that, under §202, the
Convention was not applicable to an agreement to arbitrate in Switzerland between a U.S.
company and its U.S. employee, where the parties' underlying contract was to be entirely
performed in the United States.
Several other lower U.S. courts have reached similar conclusions about agreements between
U.S. citizens to arbitrate local disputes outside the United States. Jones v. Sea Tow Services
Freeport NY, Inc., 30 F.3d 360 (2d Cir. 1994); Reinholtz v. Retriever Marine Towing & Salvage, 1993
WL 414719 (S.D. Fla. May 21, 1993); Bethlehem Steel Corp. v. Singer Corp., 1992 WL 110735 (S.D.N.Y.
1992) (Convention not applicable to dispute involving contract with French entity); Coastal
States Trading, Inc. v. Zenith Nav., SA, 446 F.Supp. 330, 341 (S.D.N.Y. 1977). See also A. van den
Berg, The New York Convention of 1958 57 (1981). (“As the [New York] Convention applies to the
enforcement of an award made in another State, it could apply to the enforcement of an
agreement providing for arbitration in another State”).
9. Application of New York Convention to arbitration agreement between foreign parties
specifying arbitral situs within the forum state. Suppose that two English entities, parties to an
entirely domestic English transaction, agreed to arbitrate disputes relating to the transaction
in New York. If the validity of the agreement were at issue in a U.S. court, would the New York
Convention apply? Conversely, how would Northstar Marine have been resolved in English
courts? Should it have been resolved any differently than in U.S. courts?
Suppose that a French entity and a German entity, parties to an international transaction,
agreed to arbitrate disputes relating to the transaction in New York. If the validity of the
agreement were at issue in a U.S. court, would the New York Convention apply? What about in a
French or German court?
10. Effect of §202 of the FAA on application of New York Convention. Consider the text of §202 of
the FAA. How does §202 clarify the applicability of the New York Convention to international
arbitration agreements? Note that §202 only addresses cases involving U.S. citizens, not cases
involving one or more foreign nationals. Note also that §202 is not literally an affirmative
statement of the Convention's scope, but rather a negative statement as to when the
Convention will be “deemed” inapplicable.
Nonetheless, lower U.S. courts have applied §202's “reasonable relation” requirement in
 determining what arbitration agreements – as well as what arbitral awards – are subject to the
Convention. Coastal States Trading, Inc. v. Zenith Nav. SA, 446 F.Supp. 330, 341 (S.D.N.Y. 1977)
(applying §202, incorrectly, to hold that arbitration agreement between U.S. and Panamanian
company for shipment of oil from England to United States was not nondomestic); Fuller Co. v.
Compagnie des Bauxites de Guinee, 421 F.Supp. 938, 941 (W.D. Pa. 1976).
11. Rationale for §202. What precisely is the legislative purpose of §202? Is there a U.S. public
policy in precluding U.S. citizens from resolving disputes abroad? Recall the frequency of
public statements of concern about overloaded U.S. dockets, delays in trials and appeals, and
P "125" the high cost of the legal system. Is it wise to force U.S. parties to contribute to the back-log?
P "126" The stated legislative purpose of §202's exclusion was to avoid possible application of the
Convention to at least some categories of local disputes between Americans. Foreign Arbitral
Awards, S. Rep. No. 91-702, 91st Cong., 2d Sess. 6 (1970) (Appendix; Statement of Richard D.
Kearney) (“it was necessary to modify the definition of commerce to make it quite clear that
arbitration arising out of relationships in interstate commerce remains under the original
Arbitration Act and is excluded from the operation of the proposed Chapter 2”). In the words of
the House Report:
The second sentence of Section 202 is intended to make it clear that an agreement or award
arising out of a legal relationship exclusively between citizens of the United States is not
enforceable under the Convention in U.S. Courts unless it has a reasonable relation with a
foreign state. H.R. Rep. No. 91-1181, 91st Cong., 2d Sess. 2, reprinted in [1970] U.S. Code Cong. &
Ad. News 3601, 3602.
12. Application of New York Convention to transactions between U.S. nationals involving
property or performance abroad. U.S. nationals frequently enter into agreements with one
another with respect to property located, or performance occurring, outside the United States.
Section 202 seeks to make it clear that these agreements are subject to the Convention, even
though they involve only U.S. nationals. See Fuller Co. v. Compagne Des Bauxites De Guinea, 421
F.Supp. 938 (W.D. Pa. 1976).
13. Application of New York Convention to transactions between U.S. nationals having a
“reasonable relationship” to a foreign state. Even if a transaction does not involve property or
performance abroad, §202 also subjects agreements having a “reasonable relationship” to a
foreign state to the Convention. That is true even if a transaction involves only U.S. nationals.
What would satisfy §202's “reasonable relationship” requirement? As a matter of statutory
interpretation, doesn't a “reasonable relationship” necessarily involve things other than
property or performance abroad (which are separately mentioned in §202? Note that London
was selected in Northstar Marine for a variety of historical and legal reasons relating to the
salvage industry. Why wasn't this sufficient to satisfy the reasonable relationship requirement?
Section 202's “reasonable relationship” standard was based on §1-105 of the Uniform
Commercial Code, dealing with choice-of-law clauses. As discussed elsewhere, §1-105 generally
permits parties to a transaction to select a neutral foreign law which has no connection to the
parties' transaction. See infra p. 542. Why shouldn't §202 be interpreted as permitting selection
of a neutral arbitral situs (especially where the situs has particular expertise or historical
experience)?
14. Application of §202 outside the consumer/employee context. Suppose two sophisticated
U.S. companies, from different parts of the United States, agree to arbitrate in Canada (or
London). What U.S. public policy would forbid this? Suppose that the arbitration agreement in
Northstar Marine had been carefully negotiated, with the advice of counsel.
15. Residual application of §§3 and 4 of the FAA. Even if the New York Convention, and the
second chapter of the FAA, do not apply to an agreement between U.S. parties specifying a
foreign arbitral situs, don't §§3 and 4 of the FAA still apply? Wouldn't they require either an
order compelling arbitration abroad or a stay of U.S. litigation? Compare the cases of an
arbitration agreement that does not satisfy the Convention's “writing” requirement or that
provides for arbitration in a non-Convention State. See supra p. 138.
16. Consequences of concluding that §202 does not apply to arbitration agreement. Assume, as
the Northstar Marine court held, that an arbitration agreement between two U.S. nationals is
not subject to the Convention (and that the domestic FAA does not require enforcement). Then
what? Is the entire arbitration agreement void? What does Northstar Marine hold? Is the
offending term, selecting a foreign arbitral situs, to be severed, leaving an arbitration
agreement without a selection of an arbitral situs? Could a U.S. court then select, or could the
arbitral tribunal select, a U.S. arbitral situs? Compare the discussion above of agreements
selecting an arbitral situs in a non-Convention State. See supra p. 148.
3. “Written” Arbitration Agreements
The provisions of the New York and Inter-American Conventions and most national arbitration
P "126" statutes are limited to “written” agreements to arbitrate. (47) Article II(2) of the New York
P "127" Convention defines an “agreement in writing” to include “an arbitral clause in a contract or
an arbitration agreement, signed by the parties or contained in an exchange of letters or
telegrams.” (48) Article 1 of the Inter-American Convention is similar. Likewise, Article 7(2) of
the UNCITRAL Model Law provides that the “arbitration agreement shall be in writing,” while §2
of the FAA extends the domestic U.S. arbitration statute only to “written provision[s]” for
arbitration. (49)
The drafting history of the New York Convention suggests generally that Article II(2)'s writing
requirement was intended to exclude oral agreements to arbitrate and the acceptance of a
written offer to arbitrate through conduct or oral statements. (50) National courts have not
 interpreted Article II(2) uniformly. Some courts have held the New York Convention
inapplicable where an arbitration clause in one party's communications (typically order forms
or invoices) was not affirmatively accepted in writing by the other party. (51) On the other hand,
other courts have held that the Convention is satisfied by implied (or tacit) acceptance of a
form quotation containing an arbitration provision. (52)
U.S. courts have taken a fairly expansive view of Article II(1)'s “writing” requirement. Some
courts have found the Convention's “writing” requirement satisfied by exchanges of telexes,
some of which contained arbitration clauses to which the parties did not object. (53) Other U.S.
courts have upheld arbitration clauses contained in exchanges of letters or unsigned forms,
(54) in written offers pursuant to which the offeror commenced performance that the offeree
P "127" accepted, (55) and in insurance contracts requested by the insured, and signed by the insurer,
P "128" but not yet signed by the insured. (56) In contrast, a writing was found lacking where there
was a written document which the parties orally accepted but did not sign. (57)
The following materials explore the “writing” requirements of the New York and Inter-American
Conventions and leading contemporary arbitration statutes. First, review the text of Article II of
the New York Convention, Article 1 of the Inter-American Convention, Article 7 if the UNCITRAL
Model Law, §2 of the Federal Arbitration Act, and Article 178 of the Swiss Law on Private
International Law. Then consider the decision in Kahn Lucas Lancaster, Inc. v. Lark International
Ltd, (58) holding Article II(2)'s “writing” requirement satisfied.
NEW YORK CONVENTION
Article II [excerpted below at p. 987]
INTER-AMERICAN CONVENTION
Article 1 [excerpted below at p. 995]
1961 EUROPEAN CONVENTION
Article 1(2) [excerpted below at p. 981]
UNCITRAL MODEL LAW
Article 7 [excerpted below at pp. 1013-14]
FEDERAL ARBITRATION ACT
9 United States Code §2 [excerpted below at p. 999]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 178 [excerpted below at p. 1033]
P "128"
P "129"
KAHN LUCAS LANCASTER, INC. v. LARK INTERNATIONAL LTD
956 F. Supp. 1131 (S.D.N.Y. 1997), reversed 186 F.3d 210 (2d Cir. 1999)
DENISE COTE, DISTRICT JUDGE. On December 13, 1995, Kahn Lucas Lancaster, Inc. (“Kahn Lucas”),
brought this action ... against Lark International Ltd (“Lark”) based on two purchase orders
whereby Kahn Lucas purchased clothing manufactured abroad for sale to Sears in the United
States ... According to the Complaint, Kahn Lucas is a New York corporation which is in the
children's clothing business. Lark is a Hong Kong corporation which acts as an agent in Asia for
United States clothing buyers. In early 1995, Kahn Lucas issued two purchase orders to Lark for
finished fleece garments to be imported from the Philippines and sold to Sears in The Fall and
Winter of 1995. The sales to Sears were firm orders from Sears for retail sale, and the purchase
orders explicitly noted that the goods were intended for sale to Sears.
Kahn Lucas alleges that in performing its agency services, Lark sub-contracted with Philippine
manufacturers for the production of the garments, arranged for the shipment of the goods to
the United States, and inspected the goods prior to shipment. Ultimately, there were several
problems with the goods. Some of the garments were defective, some of the shipments
contained the wrong colors or sizes, and many of the goods were never delivered or were
delivered late.
The two purchase orders at issue in this case, one dated January 25, 1995, and the other dated
February 1, 1995, both contain arbitration clauses. Both orders state that the goods are
“ordered from” Lark, listing Lark's address in the Philippines at the top of the order. At the
bottom of all of the pages of the February 1 order, “Lark International (Agent)” appears as the
“seller's firm name,” while Kahn Lucas is listed as the buyer. As to the January 25 order, “Agent
Lark International” appears as the seller's firm name only on the last page of the form. In any
case, no other party – including the manufacturers of the goods – is listed on either of the
forms.
On the front near the bottom, the forms contain two paragraphs which deal with the effect of
the purchase orders. The first paragraph references the additional terms on the reverse side of
the form, and specifically calls attention to the arbitration provision:
This order is given subject to all of the terms and conditions on the face and reverse sides
hereof, including the provisions for arbitration...all of which are accepted by seller. This order
supersedes seller's confirmation form, if any, and constitutes the entire contract between
buyer and seller.
P "129" (Emphasis supplied). The second paragraph stipulates the methods by which the purchase
P "130" orders may be accepted by the seller and become a binding contract:
P "130"
This order shall become a contract for the entire quantity specified above either (a) when
signed by seller and returned to buyer, or (b) when seller retains this order without written
objection for ten days, or (c) when seller delivers all or any part of the merchandise ordered
hereunder or (d) when seller has otherwise manifested assent to the terms and conditions
hereof.
(Emphasis supplied). At the very bottom of the forms in capital letters, it states, “additions,
terms and conditions on reverse side.”
The reverse side of the forms, which is captioned “additional terms and conditions,” contains,
among other provisions, an arbitration clause:
Any controversy arising out of or relating to this Order ... shall be resolved by arbitration in the
City of New York, pursuant to the Rules then obtaining of the General Arbitration Council of the
Textile Industry.... The parties consent to the application of the New York or Federal Arbitration
Statutes and to the jurisdiction of the Supreme Court of the State of New York, and of the United
States District Court of the Southern District of New York, for all purposes in connection with
said arbitration ... (Emphasis supplied).
The choice of law clause states:
The validity of this Order and construction of the provisions hereof, shall be determined in
accordance with the laws of the State of New York. (Emphasis supplied).
Lark does not dispute that it received the purchase orders and that it did not object to them.
In fact, Lark performed under the purchase orders [in various ways detailed by the court
including arranging for the purchase of raw materials, overseeing the production schedule,
assuring quality control, and accepting payment....
Kahn Lucas ... [argues] that this Court has subject matter jurisdiction through Chapter 2 of the
[FAA], which implements the [New York] Convention. Section 203 of the Act states that “[a]n
action or proceeding falling under the Convention shall be deemed to arise under the laws and
treaties of the United States.” 9 U.S.C. §203 (emphasis supplied)....
In order for this Court to have federal question subject matter jurisdiction, the dispute between
Kahn Lucas and Lark must “fall under” the Convention. The Convention requires contracting
states (which include all countries even possibly relevant here – the United States, the
Philippines, the United Kingdom, Hong Kong, and China) “to recognise an agreement in writing
under which the parties undertake to submit to arbitration all or any differences which have
arisen or which may arise between them in respect of a defined legal relationship, whether
contractual or not, concerning a subject matter capable of settlement by arbitration.”
P "130" Convention, Art. II(1) (emphasis supplied). Therefore, in order to determine whether the
P "131" Convention applies, this Court must engage in a four-step analysis:
(1) Is there an agreement in writing to arbitrate the subject of the dispute?
(2) Does the agreement provide for arbitration in the territory of a signatory of the
Convention?
(3) Does the agreement arise out of a legal relationship, whether contractual or not, which is
considered as commercial?
(4) Is a party to the agreement not an American citizen, or does the commercial relationship
have some reasonable relation to one or more foreign states?
Ledee v. Ceramiche Ragno, 684 F.2d 184, 186-87 (1st Cir. 1982). It is only the first of these
questions, whether there is an agreement in writing, that is seriously in dispute here. (59) The
Convention defines “agreement in writing” as including “an arbitral clause in a contract or an
arbitration agreement, signed by the parties or contained in an exchange of letters or
telegrams.” Convention, Art. II(2). As the Fifth Circuit has held, this definition includes either:
(1) an arbitral clause in a contract or
(2) an arbitration agreement, (a) signed by the parties or (b) contained in an exchange of
letters or telegrams.
Sphere Drake Ins. v. Marine Towing, Inc., 16 F.3d 666, 669 (5th Cir. 1994). Thus, an arbitral clause
in a contract is sufficient to implicate the Convention. That is, an “agreement in writing” does
not necessarily have to be either signed by the parties or contained in an exchange of letters
or telegrams, as long as the Court is otherwise able to find “an arbitral clause in a contract.”
(60) If there is an arbitral clause in a contract between Kahn Lucas and Lark, then the
Convention applies, and this Court has subject matter jurisdiction. Consequently, under the
Convention and its implementing legislation, this Court would have the power to compel
arbitration....
Kahn Lucas argues that its two purchase orders constitute a contract between it and Lark
wherein the parties agreed to arbitrate any dispute arising out of the transactions
contemplated by the forms. In deciding whether a contract to arbitrate exists, the Court must
engage in a two-step process. First, the court must determine whether the parties agreed to
arbitrate their dispute. Second, the court must assess “whether the scope of that agreement
P "131" encompasses the asserted claims.”David L. Threlkeld & Co. v. Metallgesellschaft Ltd (London),
P "132" 923 F.2d 245, 249 (2d Cir. 1991). The Second Circuit has made clear that “federal policy
strongly favors arbitration as an alternative dispute resolution process.” This policy is “even
stronger in the context of international business transactions,” such as the transaction at issue
here.
As a threshold issue, this Court must ascertain what body of substantive law to apply. In an
 ordinary case under the Act, the question of whether a contract to arbitrate was created is
governed by state law. Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987); Progressive Casualty Ins. Co.
v. CA Reaseguradora Nacional De Venezuela, 991 F.2d 42, 45-46 (2d Cir. 1993). In disputes
governed by the Convention, however, federal law applies. See, e.g., David L. Threlkeld, 923 F.2d
at 249-50; Filanto, SpA v. Chilewich Int'l Corp., 789 F.Supp. 1229, 1234-36 (S.D.N.Y. 1992), appeal
dismissed, 984 F.2d 38 (2d Cir. 1993).
Lark raises several arguments as to why it should not be bound by the arbitration clause in the
purchase orders. Lark first contends that it is not a party to the purchase orders because it was
not the “seller” or “manufacturer” in the actual transaction, and that therefore the purchase
orders' references to it as “seller” are “erroneous.” Lark argues that it acted as Kahn Lucas'
buying agent, not as a seller, and that the manufacturers who ultimately shipped the goods
directly to Kahn Lucas are the “sellers” contemplated by the purchase orders. In support of this
position, Lark cites cases which hold that an agent is not liable on a contract it signs on behalf
of a disclosed principal.
I find that the purchase orders embody an agreement between Kahn Lucas and Lark for the
sale of goods, as opposed to an agreement between Kahn Lucas and the manufacturers.... Kahn
Lucas and Lark are the only parties referenced in the purchase orders. Lark is specifically
identified as the entity from which the goods were ordered. Kahn Lucas paid only Lark, and no
other party, for the goods referenced in the purchase orders. Lark's position that the purchase
orders are contracts between Kahn Lucas and the manufacturers is belied by the fact that the
only parties which could possibly be bound by the purchase orders are the only parties listed –
Kahn Lucas and Lark. (61)
The next issue is whether the purchase orders create a binding contract between the parties. In
this case, the purchase orders were offers to buy, which Lark accepted when it performed
pursuant to the orders. The orders themselves state on their face that they can be accepted by
failure to object within ten days, by delivering all or part of the goods, or by otherwise
manifesting assent. Lark accepted the offer embodied in the purchase orders by ordering the
goods from the manufacturers, overseeing production, complying with the other terms of the
letters of credit, and arranging for the shipment of the goods. Section 2-206(1)(a) of the Uniform
Commercial Code states that:
an offer to make a contract shall be construed as inviting acceptance in any manner and by
any medium reasonable under the circumstances.
P "132"
P "133"
The following subsection, Section 2-206(1)(b) states that:
an order or other offer to buy goods for prompt or current shipment shall be construed as
inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of
conforming or non-conforming goods.... (Emphasis supplied)....
Lark argues that it did not sign the purchase orders, and that therefore it should not be bound
by them. But the mere fact that Lark did not sign the forms is insufficient to show that there is
no binding contract between the parties.
[I]t is well-established that a party may be bound by an agreement to arbitrate even absent a
signature. Further, while the [Federal Arbitration] Act requires a writing, it does not require that
the writing be signed by the parties....
The second step in determining whether to compel arbitration is to ascertain whether the
dispute between the parties is within the scope of the arbitration clause. The clauses at issue
here require arbitration of “[a]ny controversy arising out of or relating to” the purchase orders.
Lark does not contest that Kahn Lucas' claims that the goods were nonconforming, delivered
late, or not delivered at all, arise out of or relate to the purchase orders.
Notes on “Writing” Requirements
1. Rationale for requirements that arbitration agreements be in “writing.” The materials
excerpted above include a number of different “writing” requirements for international
arbitration agreements. What do these differing requirements call for? Why?
Suppose A and B agree orally to arbitrate an existing dispute between them before C, as
arbitrator. Suppose C and D witness the oral agreement. Why should the agreement not be
enforced? Recall the pro-arbitration policies of the New York and Inter-American Conventions
(and most national arbitration statutes). See supra pp. 20-24. Wouldn't those purposes be
served by enforcing oral promises to arbitrate? Aren't other oral agreements generally
enforceable under most developed legal systems?
What aspects of arbitration agreements argue for the “writing” requirement imposed by the
New York Convention, other international instruments, and most national arbitration statutes?
What policies are advanced by the requirement? One explanation is ensuring that parties are
aware both of their waiver of otherwise-available judicial remedies when agreeing to arbitrate
and of their commitment to arbitrate. Doesn't any contract involve a compromise or waiver of
otherwise existing rights? What is special about arbitration agreements? Also important, in the
international context, is the impetus that a “writing” requirement gives to the parties'
consideration of, and agreement on, critical issues such as arbitral situs, language, institutional
rules, and the like. Does the value of encouraging discussion of, and agreement on, these issues
warrant refusal to enforce oral arbitration agreements?
Consider the following defense of the “writing” requirement:
 If the arbitration agreement is signed by only one party and if the other is alleged to have
tacitly assented to it great difficulties are likely to arise.... An English party who has not signed
anything would be exposed to foreign arbitration proceedings and to the enforcement here of
a foreign award. This is a major legislative decision which the New York Convention did not
P "133" require and which is open to much abuse. The converse case ... is equally serious: let us assume
P "134" that ... parties entered in [a foreign state] into a contract of sale of goods. This they can do
orally. But it does not follow that the foreign party has entered into an arbitration agreement,
must arbitrate in London and must allow the award to be enforced in [the foreign state]. These
again are grave matters of legal policy. The New York Convention did not require Parliament to
take a position on them. Is it likely that it did so voluntarily and, in the absence of reciprocity,
went far beyond anything contemplated by the Convention?
Mann, An “Agreement in Writing” to Arbitrate, 3 Arb. Int'l 171 (1987). Is this persuasive? Why
doesn't it “follow” that oral assent to a sales contract, containing an arbitration clause,
constitutes the entry into an arbitration agreement? If parties may agree orally to a $20 million
sales transaction, why can't they agree orally to a $500,000 arbitration? If arbitration is such a
good thing in international transactions, why not dispense with the “writing” requirement in
order to allow even more international disputes to be arbitrated?
Consider the approach to writing requirements of Article 1(2) of the 1961 European Convention
on International Commercial Arbitration. Is this desirable? More desirable than that of the New
York Convention?
2. Possible interpretations of the “writing” requirement under Article II of the New York
Convention. What does Article II's “writing” requirement demand? Consider the interpretation
adopted by the trial court in Lark International, reading Article II(2) as requiring either (i) an
arbitral clause contained in a contract, or (ii) an arbitration agreement that is (A) signed by the
parties, or (B) contained in an exchange of letters or telegrams. Accord Sphere Drake Ins. plc v.
Marine Towing, Inc., 16 F.3d 666 (5th Cir. 1994).
Is this interpretation Article II(2) persuasive? What does the first category identified by the
Lark International opinion include? More to the point, what does it exclude? Anything? Doesn't
“an arbitral clause in a contract” include oral contracts? Consider the text of Article II(2). Does
it support, as a textual matter, the Lark International interpretation? Compare Sen Mar, Inc. v.
Tiger Petroleum Corp., 776 F.Supp. 879 (S.D.N.Y. 1991).
For an alternative interpretation of Article II's “writing” requirement, consider:
“Article II(2) may be divided into two alternatives for an arbitration agreement in writing: ...
[1] an arbitral clause in a contract or a submission agreement, the contract or agreement being
signed by the parties; ...
[2] an arbitral clause in a contract or a submission agreement, contained in an exchange of
letters or telegrams.”
A. van den Berg, The New York Convention of 1958 191 (1981). How does this differ from the trial's
court's formulation in Lark International's? Which is correct?
The district court's judgment in Lark International was reversed on appeal. 186 F.3d 210 (2d Cir.
1999). The Second Circuit reasoned:
Article II, section 1 of the Convention provides that each contracting state ... “shall recognize”
an “agreement in writing” to arbitrate a given dispute. Article II, section 2, in turn, defines the
term “agreement in writing” to include “an arbitral clause in a contract or an arbitration
agreement, signed by the parties or contained in an exchange of letters or telegrams.” Lark
contends that the modifying clause “signed by the parties or contained in an exchange of
letters or telegrams,” modifies both: (1) “an arbitral clause in a contract” and (2) “an arbitration
agreement” and, as a result, the dispute between the parties is not arbitrable due to the
absence of Lark's signature on the Purchase Orders. Kahn Lucas contends, and the district court
held, that “signed by the parties” modifies only the clause immediately preceding it, “an
arbitration agreement,” and not the previous clause [,“an arbitral clause in a contract.”]....
As an initial matter, we must determine the meaning of the two elements in the series, namely
“an arbitral clause in a contract” and “an arbitration agreement.” We find the meaning of “an
arbitral clause in a contract” to be self-evident. We also find that the phrase “an arbitration
agreement,” because it is used in conjunction with the phrase “an arbitral clause in a contract,”
refers to any agreement to arbitrate which is not a clause in a larger agreement, whether that
agreement is part of a larger contractual relationship or is an entirely distinct agreement
which relates to a non-contractual dispute. The parties agree that the Arbitration Clauses each
constitute “an arbitral clause in a contract” and not “an arbitration agreement” under the
Convention.
P "134" We turn, then, to the plain meaning of the English-language version of the Convention. Taking
P "135" its lead from the Fifth Circuit's analysis in Sphere Drake, Kahn Lucas argues that the
grammatical structure of section 2 compels the conclusion that its dispute with Lark falls
within the Convention. We disagree. Section 2 takes the structure “A or B, with C.” ...
Grammatically, the comma immediately following “an arbitration agreement” serves to
separate the series (“an arbitral clause in a contract or an arbitration agreement”) from the
modifying phrase (“signed by the parties or contained in an exchange of letters or telegrams”),
and suggest that the modifying phrase is meant to apply to both elements in the series.
Indeed, this comma can serve no other grammatical purpose. As a result, Kahn Lucas's reading
of the statute would render the comma mere surplusage, a construction frowned upon....
The plain language of the other working-language versions of the Convention compels the
 conclusion that, in order to be enforceable under the Convention, both an arbitral clause in a
contract and an arbitration agreement must be signed by the parties or contained in an
exchange of letters or telegrams. In the French- and Spanish-language versions, the word for
“signed” appears in the plural forms, “signes” and “firmados” respectively. Because each of the
two antecedents is couched in the singular, the modifier unambiguously applies to both of
them. If, as Kahn Lucas argues, only an arbitration agreement need be signed by the parties,
the French-language version would utilize the verb “signe” and the Spanish “firmado.”
Accordingly, although we are cognizant that the Convention “should be interpreted broadly to
effectuate its recognition and enforcement purposes,” Bergesen v. Joseph Muller Corp., 710 F.2d
928, 933 (2d Cir. 1983), the rules governing our construction do not allow us to follow the Fifth
Circuit's interpretation of Article II, section 2 as expressed in Sphere Drake. Upon review of the
Convention's text, punctuation and subject matter, as well as an examination of the
Convention's legislative history, we hold that the modifying phrase “signed by the parties or
contained in an exchange of letters or telegrams” applies to both “an arbitral clause in a
contract” and “an arbitration agreement.”
Is the Second Circuit's analysis persuasive?
3. Is Article II's “writing” requirement exclusive? Consider again the text of Article II(2). Does
Article II(2) require arbitration agreements to satisfy the definition of an “agreement in writing”
set out therein in order to benefit from the Convention's protections? Or, alternatively, does
Article II(2) merely provide a non-exclusive list of some of the types of “agreements in writing”
which satisfy Article II, without purporting to exclude all other types of agreements from the
“agreement in writing” definition? Authorities are divided.
(a) Authorities concluding that Article II(2)'s definition is not exclusive. A few authorities have
concluded that Article II(2) merely lists some examples of the sorts of arbitration
agreements that would satisfy the Convention's “agreement in writing” requirement, but
does not exclude the conclusion that other types of agreements also satisfy the
requirement. That is, Article II(2) contains a non-exclusive list of agreements which clearly
satisfy the Convention's “writing” requirement, without prejudice to arguments that other
types of agreements are also “agreements in writing” which are subject to the Convention.
Consider:
While agreements of the type mentioned in Article II(2) are definitely within the ambit of
the Convention, its application is not limited to such agreements. Others which constitute
valid agreements in writing under the private international law of the forum are equally
included.
A. Samuel, Jurisdictional Problems in International Commercial Arbitration 83 (1989). See
also Judgment of 16 December 1992, XXI Y.B. Comm. Arb. 535 (Oberlandesgericht Cologne)
(1996) (Article II(2) “does not provide for a uniform rule,” because Article VII permits
reliance and more lenient national law standards). Is the non-exclusive interpretation of
Article II(2)'s writing requirement wise? What are the benefits of extending the Convention
to a broader range of arbitration agreements? the costs?
Assume that Article II(2)'s definition of an “agreement in writing” is illustrative, and not
exclusive. What then does Article II mean, and, in particular, to what arbitration
agreements does it apply? Two principal possibilities exist:
First, Article II(1)'s reference to an “agreement in writing” might establish a uniform,
international standard for written arbitration agreements. This category would include,
but not be limited to, the agreements listed in Article II(2). Agreements that satisfied
P "135" Article II(2)'s standard (either by inclusion on Article II(2)'s list or otherwise) would be
P "136" subject to Article II's basic rule of enforceability; other agreements would not be
enforceable under Article II (although they might nonetheless be enforceable under
national law).
Second, Article II(1)'s reference to an “agreement in writing” might permit national courts
to extend the Convention's coverage under local law, for local purposes, to agreements
not listed in Article II(2). Other states which are party to the Convention could, but would
not be obliged to, accept such extensions.
Which of the foregoing interpretations is more persuasive? Why?

(b) Authorities concluding that Article II(2)'s definition is exclusive. Some authorities have
concluded that Article II(2)'s definition of what constitutes an “agreement in writing” is
exclusive. See Swiss Federal Supreme Court Judgment of 21 March 1995, XXII Y.B. Comm.
Arb. 800 (1997) (“the issue of (formal) validity is determined solely according to the
Convention; the requirement of the written form according to Article II of the New York
Convention is to be interpreted independently, without the assistance of a national law”);
A. van den Berg, The New York Convention of 1958 179 (1981). These authorities typically
rely on the French (and Spanish) texts of the Convention. The French text of Article II(2) of
the Convention is more clearly exclusive than the English text. It provides: “On entend par
‘convention écritè’ ...,” most nearly translating into “The term ‘agreement in writing’
means...” The Spanish is to the same effect (“La expresión ‘acuerdo por escrito’ denotará
...).
Compare the English text of Article II(2): “The term ‘agreement in writing’ shall include ...”
Is this formula not fairly clearly “non-exclusive”?
 4. Does Article II(2) impose a minimum requirement, a maximum limit, or something else on
national rules regarding “writings”? What exactly does Article II(2) require? Does Article II(2): (a)
require national courts to exclude from the Convention's coverage any agreement that does not
meet or exceed Article II(2)'s definition of an “agreement in writing”; (b) require national courts
to include in the Convention's coverage any agreement that meets or exceeds Article II(2)'s
definition of an “agreement in writing”; or (c) require national courts to do both (a) and (b).
Which interpretation would best serve the purposes of the Convention?
U.S. courts have generally concluded that Article II(2) imposes a higher requirement than the
domestic FAA, and that this requirement must be satisfied in order for the Convention to apply.
See Lark Int'l Ltd v. Kahn Lucas Lancaster, Inc., 186 F.3d 210 (2d Cir. 1999); Sedco v. Petroleos
Mexicanos Mexican National Oil Co., 767 F.2d 1140 (5th Cir. 1985); Sen Mar, Inc. v. Tiger Petroleum
Corp., 774 F.Supp. 879 (S.D.N.Y. 1991); Al-Salamah Arabian Agencies Co. v. Reece, 673 F.Supp. 748
(M.D.N.C. 1987). Compare Beromun AG v. Societa Industriale Agricola “Tresse,” 471 F.Supp. 1163
(S.D.N.Y. 1979). U.S. courts would also very likely conclude that arbitration agreements which do
satisfy Article II(2)'s “writing” requirement will be subject to the Convention, notwithstanding
other, more demanding formal requirements of national law. Cf. Doctor's Associates Inc. v.
Cassarotto, 517 U.S. 681 (1996) (state “conspicuous notice” requirement preempted by §2 of
domestic FAA). (In fact, this latter category of cases has seldom arisen in U.S. courts, because
the domestic FAA's “writing” requirement is less rigorous that that of Article II of the
Convention. See infra p. 138.)
Other national courts have also generally treated Article II(2)'s writing requirement as a
mandatory minimum and maximum requirement. See ANC Maritime Co. v. The West of England
Shipowners Mutual Protection and Indemnity Ass'n Ltd, XXIII Y.B. Comm. Arb. 654 (Supreme Court
of Greece 1997) (Article II(2) “introduced a directly applicable substantive rule, which binds the
States-Parties and does not allow the court, in the field of application of the Convention, the
possibility to resort to another rule of substantive or private law in order to confirm the
validity of the form of the conclusion of the agreement to arbitrate”); DIETF Ltd v. RF AG, XXI Y.B.
Comm. Arb. 685 (Basel Ct. App. 1994) (“By requiring the written form, Article II of the New York
Convention means to exclude arbitration agreements concluded orally or tacitly. This provision
of the Convention is actually strict in comparison with several foreign legal systems. Article II
sets not only a maximum but also a minimum requirement. Obviously, a Contracting State may
not set stricter requirements as to form, nor can it accept less far-reaching formal
requirements.... That provision does not allow for acceptance of the validity of an arbitration
clause which does not meet the said requirements.”); Office National du Thé et du Sucre v.
Philippines Sugar Co. Ltd, XXI Y.B. Comm. Arb. 627 (Casablanca Ct. App. 1983) (Article II(2)
definition of “agreement in writing” prevails over inconsistent Moroccan legislation requiring
“hand-written” arbitration agreement); NV Carbomet v. Ians Transport BV, XXI Y.B. Comm. Arb.
632 (Court of First Instance of Rotterdam 1990).
P "136"
P "137"
5. What types of arbitration agreements satisfy the writing requirement of Article II(2)? What
categories of arbitration agreements satisfy the definition of an “agreement in writing” set out
in Article II(2)? National courts and other authorities have reached differing conclusions.
(a) Contract, signed by all parties, containing an arbitration clause. It is clear that Article II(2)
is satisfied by a contract, which both parties sign, that contains a written arbitration
clause as one of its terms. One Italian decision has suggested that the arbitration clause
itself (as distinct from the contract itself) had to be signed, but then rejected the
suggestion. Societa Atlas General Timbers SpA v. Agenzia Concordia Line SpA, Corte di
Cassazione, May 18, 1978, No. 2392. It is also clear that a submission agreement (by which
the parties agree to refer an existing dispute to arbitration) which is signed by both
parties, satisfies Article II(2)'s “writing” requirement.
(b) Exchanges of telexes, telegrams, e-mails, or similar communications, containing an
arbitration clause. The treatment of exchanges of telexes, telegrams, e-mails, and similar
communications, which contain an arbitration clause, is less clear. If a telex (or similar
communication) offers an arbitration agreement, and that offer is accepted by telex (or
similar communication), then Article II(2)'s writing requirement should be satisfied.
Nonetheless, authorities differ on whether such communications must be “signed.” Many
have rightly concluded that they need not be manually signed with a written signature. A.
van den Berg, The New York Convention of 1958 194 (1981); In the Matter of the Arbitration
Between Herlofson Mgt A/S and Ministry of Supply, 765 F.Supp. 78 (S.D.N.Y. 1991) (“Drafts of
a contract, reflecting an agreement to arbitrate, can provide the requisite writing”);
Marion Coal Co. v. Marc Rich & Co., 539 F.Supp. 903 (S.D.N.Y. 1982) (same); Beromun AG v.
Societa Industriale Agricola “Tresse,” 471 F.Supp. 1163 (S.D.N.Y. 1979), Astor Chocolate Corp.
v. Mikroverk Ltd, 704 F.Supp. 30 (E.D.N.Y. 1989). (Additionally, there is uncertainty as to
how such communications would be “signed,” although technological developments make
surrogate signatures increasingly reliable and common.)
 (c) Oral or other non-written acceptance of a written contract containing an arbitration clause
satisfies Article II(2). By far the most significant area of disagreement over Article II(2)
concerns its application to oral or other non-written acceptances of a written offer,
containing within it a written arbitration clause. This is the fact pattern presented in Lark
International. National courts and commentators are divided in their analysis of such
agreements.
As noted above, the district court's opinion in Lark International adopts an unusually
expansive approach to Article II(2)'s “writing” requirement (which was reversed on
appeal). Consider the Lark International court's explanation for why Article II(2)'s “writing”
requirement was satisfied. According to the court: “If there is an arbitral clause in a
contract ... then the Convention applies....” What does that statement mean? There are, of
course, oral “contracts.” As noted above, doesn't the Lark International rationale cover
these? See also Dixie Aluminum Products Co. v. Mitsubishi Int'l Corp., 785 F.Supp. 157 (N.D.
Ga. 1992) (arbitration clause in buyer's sales confirmation was binding on seller, even
though not signed).

(d) Oral or other non-written acceptance of a written contracts containing an arbitration clause
does not satisfy Article II(2). In contrast to the district court's opinion in Lark International,
many authorities conclude flatly that Article II(2) of the Convention does not extend to
oral, tacit or other non-written acceptance of written contracts. See DIETF Ltd v. RF AG, XXI
Y.B. Comm. Arb. 685 (Basel Ct. App. 1994); Judgment of 16 December 1992, XXI Y.B. Comm.
Arb. 535 (Oberlandesgericht Cologne) (1996) (Article II(2)'s writing requirement not
satisfied by tacit acceptance of general terms and conditions, which contained
arbitration clause); A. van den Berg, The New York Convention of 1958 196-98 (1981); K.
Berger, International Economic Arbitration 142-46 (1993); supra p. 127. Compare Sphere
Drake Ins. plc v. Marine Towing, Inc., 16 F.3d 666 (5th Cir. 1994) (Because the present case
concerns an “arbitral clause in a contract, the qualifications applicable to arbitration
agreements do not apply. A signature is therefore not required.”).
(e) Lark International revisited. Does Article II(2) exclude from its scope an arbitration clause
in a written document that the parties have assented to in an exchange of letters? The
answer should be that Article II(2) covers such circumstances. Must the assent to the
written (but unsigned) contract be express? The answer should be in the negative; nothing
in Article II(2) imposes a requirement that assent be express, and the Convention's
purposes would best be served it were implied. Finally, if implied assent can be obtained
from telexes and letters (and presumably other forms of writing), was Lark International
decided correctly (albeit for confused reasons)? That is, did the parties' written
P "137" correspondence provide implied acceptance of a written document (Kahn Lucas'
P "138" purchase order) containing an arbitration clause?
(f) Post-dispute “writing” agreeing to arbitrate. Even if no written (or no valid written)
arbitration agreement exists, the parties' post-dispute conduct can constitute or
acknowledge a written agreement to arbitrate. The least controversial example of this
should be a party's signature on the Terms of Reference under the ICC Rules. See supra
pp. 13-14. But see Judgment of 16 December 1992, XXI Y.B. Comm. Arb. 535
(Oberlandesgericht Cologne) (1996) (ICC Terms of Reference held not to satisfy Article
II(2)'s “writing” requirement). Other examples also frequently occur, typically involving
correspondence preceding or during an arbitration. Nghiem v. NEC Electronics, Inc., 25
F.3d 1437 (9th Cir. 1994) (party's letter commencing arbitration constituted writing
confirming arbitration agreement in unsigned employee handbook).
6. “Writing” requirements under national arbitration legislation. The New York Convention's
“writing” requirement is broadly similar to requirements under national arbitration statutes in
leading jurisdictions.
(a) “Writing” requirement under the UNCITRAL Model Law. Consider Article 7(2) of the UNCITRAL
Model Law. How does Article 7(2)'s “writing” requirement compare to that of Article II(2) of
the New York Convention? How would Lark International be decided under Article 7(2)? Is
Article 7(2) of the UNCITRAL Model Law broader or narrower than Article II(2) of the New
York Convention?
(b) “Writing” requirement under the FAA. As noted above, §2 of the FAA also contains a
“writing” requirement. Consider the language of §2 (referring to a “written provision in any
maritime transaction or a contract evidencing a transaction involving commerce”). Note
also the separate reference in §2 to “an agreement in writing to submit to arbitration an
existing controversy.” What meaning do these phrases suggest? Are they broader or
narrower than Article II(2)'s writing requirement?
Section 2 has been interpreted as less stringent than that under Article II(2). See supra pp.
127-28. Lower U.S. courts have held that the parties' acceptance – either orally or by
conduct – of an unsigned, written contract containing an arbitration clause satisfies §2 of
the FAA. McAllister Brothers, Inc. v. A & S Transp. Co., 621 F.2d 519, 524 (2d Cir. 1980); Blatt v.
Shearson/American Express, [CCH] Fed. Sec. L. Rep. ??92,976 (S.D.N.Y. 1986); Imptex
International Corp. v. Lorprint Inc., 625 F.Supp. 1572 (S.D.N.Y. 1986) (enforcing arbitration
clause contained in written contract that was not signed, on theory that the parties were
by act and conduct committed to it); Valero Refining, Inc. v. M/T Lauberhorn, 813 F.2d 60
(5th Cir. 1987).
 (c) “Writing” requirement under Swiss Law on Private International Law. Consider Article 178(1)
of the Swiss Law on Private International Law. How does its “writing” requirement
compare to that of Article II(2)? With Article 7(2) of the UNCITRAL Model Law? How would
Lark International have been decided under Article 178(1)?
(d) “Writing” requirement under Inter-American Convention. Consider Article I of the Inter-
American Convention. Compare its “writing” requirement to those in Article II of the New
York Convention and the UNCITRAL Model Law.
7. Effect of §§3 and 4 of the FAA on arbitration agreements which do not satisfy the
Convention's “writing” requirement. Suppose that an arbitration agreement does not satisfy
Article II(2)'s writing requirement, but that it does satisfy the domestic FAA's writing
requirement. Can the agreement be enforced under §§2, 3, and 4 of the domestic FAA (which, as
noted elsewhere, applies to foreign commerce, see supra pp. 36-41)? For example, when the
Lark International was reversed, should the domestic FAA's more lenient writing requirement
have been applied to give effect to the parties' arbitration agreement? Recall that Article VII of
the Convention preserves rights granted by national arbitration legislation which go beyond
the Convention's own protections. See supra p. 23.
8. Non-statutory enforcement of unwritten arbitration agreement. Suppose that an arbitration
agreement does not satisfy the writing requirement of either the New York Convention or
national arbitration legislation (such as the FAA). Does this mean that the unwritten arbitration
agreement is therefore invalid and unenforceable? Does either Article II(2) of the Convention or
§2 of the FAA provide that “arbitration agreements which do not satisfy the foregoing writing
requirement are void”?
In some states, it may be possible to enforce unwritten arbitration agreements under
generally-applicable rules of substantive contract law. What arguments can you develop for
and against such enforcement possibilities?
9. Distinction between Article II(2)'s formal requirements and substantive rules of contract
formation. The conclusion that there was an “agreement in writing” to arbitrate that satisfies
Article II(2) does not necessarily mean that this agreement constitutes a validly-formed
arbitration agreement under applicable substantive law. Article II(2) imposes a formal
P "138" requirement, which can exclude otherwise validly-formed arbitration clauses from the New
P "139" York Convention. Conversely, even if an arbitration agreement satisfies Article II(2)'s formal
writing requirement, it may not satisfy applicable substantive law governing contract
formation.
This distinction is illustrated by Lark International. After concluding that Article II(2)'s “writing”
requirement was satisfied, the court went on and separately considered whether “a contract to
arbitrate exist[ed],” based upon substantive contract law rules (including the Uniform
Commercial Code). See infra pp. 167-91, discussing the substantive rules governing formation of
arbitration agreements.
10. Practical importance of applicability of New York Convention or the Inter-American
Convention in national court litigation. The question whether the New York Convention or the
Inter-American Convention applies to an arbitration agreement has substantial importance in
litigation in national courts.
(a) Special rules and scrutiny applicable in national courts to arbitration agreements subject to
Conventions. In many national courts, the applicability of the New York or Inter-American
Convention has a substantial impact on the rules that govern an international arbitration
agreement. Many domestic statutes have archaic or “anti-arbitration” features, which are
substantially different from the substantive rules under either Convention. It is therefore
critical in many cases to determine whether or not the Convention is applicable.
Even where the literal terms of national law and the Conventions are similar, the
applicability has substantial practical importance. Actions in national court which are
subject to the Convention are subject to substantially greater international scrutiny than
purely local litigations. In particular cases, this can have a material impact on the care
and attitude of local tribunals.

(b) General applicability in U.S. courts of domestic FAA to arbitration agreements subject to
Conventions. Even if an arbitration agreement is subject to the New York or Inter-
American Convention, authorities decided under the domestic FAA will in many
circumstances apply to the agreement. This is in part because of §208 of the FAA, which
renders the FAA's first chapter applicable under the Convention. Section 208 provides
that the FAA's first chapter shall be applicable under the New York Convention, except
where it is “in conflict” with either the Convention or its implementing legislation. 9 U.S.C.
§208. Section 307 has the same effect in action under the Inter-American Convention. 9
U.S.C. §307. Moreover, many lower U.S courts have concluded that defenses to validity,
existence, and legality under the New York and Inter-American Conventions are
substantially similar to those under §2, and have relied on §2 decisions under the
Conventions.
 (c) Special rules applicable in U.S. courts to arbitration agreements under the New York and
Inter-American Conventions. Although the New York and Inter-American Conventions are
similar in many respects to the FAA, there are important consequences in U.S. courts of
concluding that one of the Conventions applies to an arbitration agreement. First, where
one of the Conventions applies, its substantive provisions concerning the enforceability
of arbitration agreements must be given effect in both federal and state courts. As
discussed below, these rules are generally “pro-arbitration,” in that they provide for the
presumptive enforceability of arbitration agreements, subject to only a limited category
of defenses. See infra pp. 165-66. These rules generally do not differ substantially from
those under the domestic FAA, but there are areas of divergence.
Second, U.S. courts have repeatedly referred to the existence of particularly weighty
“pro-arbitration” policies under the New York Convention and second chapter of the FAA.
See infra pp. 165-66. Although the precise impact of these policies, and the way in which
they differ from policies under the domestic FAA, is difficult to articulate, they
nonetheless contribute to an enhanced enforceability of international arbitration
agreements in U.S. courts. The same applies to the Inter-American Convention.
Third, the FAA's second and third chapters provide special jurisdictional and procedural
rules for the enforcement of agreements that are subject to the New York or Inter-
American Convention in U.S. courts. Among other things, federal (rather than state) courts
will have jurisdiction to consider litigation involving Convention agreements. This can
have very important practical consequences, given the differing character and
background of U.S. federal and state court judges.
Fourth, U.S. courts have generally held that, where one of the Conventions applies to an
arbitration agreement, issues relating to the formation, validity, and legality of the
agreement are governed by federal common law rules (rather than state contract law, as
under the domestic FAA). See infra pp. 348-54. These differences can have material
differences in particular cases.

11. Applicability of New York Convention in arbitral proceedings. The New York Convention is, by
its terms, directed towards the actions of “Contracting States” and the decisions of national
P "139" courts. See, for example, the provisions of Articles II(1), II(3), and V. Does the Convention apply
P "140" in arbitral proceedings? If a party argues to an arbitrator that the Convention requires
recognition of an arbitration agreement, is the arbitrator bound to apply the Convention? As
the award in ICC Case No. 6149 illustrates, international arbitral tribunals are ordinarily
receptive to arguments based on the Convention. See also [ADD]
On the other hand, some arbitral tribunals have refused to apply limitations imposed by the
Convention (e.g., Article II(2)'s writing requirement), sometimes reasoning broadly that the
Convention simply does not apply to arbitrators. Consider the following:
The Convention ... deals only with the recognition and enforcement in a Contracting State of
arbitral awards made in another Contracting State. The Convention does not contain
substantive provisions which are directly applicable to the determination as to the
competence of arbitrators according to the law of the country in which the arbitral award is
rendered. The arbitrators are therefore not bound by the Convention in determining their
competence. The question whether in the present case there exists “a written agreement”
within the meaning of Article II(2) of the Convention therefore does not have to be answered by
the arbitrators.
Award of March 20, 1977, III Y.B. Comm. Arb. 225 (1978). Compare Final Award in ICC Case No. 7626
of 1995, XXII Y.B. Comm. Arb. 132, 137 (1997) (applying “writing” requirement of Article II(2)). Is
this persuasive? On what theory would the Convention apply to arbitral proceedings?
4. Reciprocity Requirements Under International Conventions and National Arbitration
Legislation
The concept of reciprocity plays a significant role in many private international law contexts.
For example, the availability of international judicial assistance and the enforceability of
foreign judicial judgments often depends on principles of reciprocity. (62) Reciprocity can also
be relevant to the enforceability of international arbitration agreements, under both
international conventions and national arbitration legislation.
Article I(3) of the New York Convention provides that Contracting States may declare that they
“will apply the Convention, on the basis of reciprocity, to the recognition and enforcement of
only those awards made in the territory of another Contracting State.” (63) In addition, Article
XIV of the Convention contains a separate, more general reciprocity provision: “A Contracting
State shall not be entitled to avail itself of the present Convention against other Contracting
States except to the extent that it is itself bound to apply the Convention.”
Most Convention signatories, including the United States, have deposited reciprocity
P "140" reservations. (64) The U.S. reservation provides in relevant part that the United States will
P "141" “apply the Convention, on the basis of reciprocity, to the recognition and enforcement of
only those awards made in the territory of another Contracting State.” (65)
It is important to note that reciprocity under the U.S. reservation (and most other reservations)
is determined by reference to the place where the arbitration is conducted and the award is
made – not by reference to the parties' nationalities. (66) Thus, suppose a company based in
State A (which has not ratified the New York Convention) arbitrates with a company based in
State B (which has ratified the Convention) in State C (which also has ratified the Convention,
 with a reciprocity reservation). In this case, an award in favor of the State A company would
ordinarily be enforceable in accordance with the Convention in State C. Similarly, an award in
favor of the State B company would be enforceable in other Convention signatories against the
State A company. But an award in favor of any company, rendered in State A, would not be
enforceable under the Convention (except where a state had not made a reciprocity
reservation). (67)
The applicability of the Convention's reciprocity requirement to arbitration agreements – as
distinguished from awards – is not clear. The reciprocity limitation in Article I(3) and most
states' reservations refer, by their literal terms, only to arbitration awards, not agreements. At
least arguably, therefore, Article II's requirements for the enforcement of arbitration
agreements apply, without regard to reciprocity, including, for example, to agreements to
arbitrate in non-signatory states with nationals of non-signatory states. (68) Similarly, Article
XIV of the Convention refers more broadly to reciprocity, without limiting the principle to
awards, and the purposes of the reciprocity reservation would appear applicable to
arbitration agreements as well as arbitral awards.
Notwithstanding this, several lower U.S. courts have limited the reach of Article II of the
Convention to only those arbitration agreements that specify an arbitral situs in another
Convention signatory – that is, these courts have refused to “refer” a party to arbitration in a
situs within a country that is not a signatory to the Convention. (69)
Most contemporary national arbitration statutes do not contain express reciprocity
P "141" requirements like those in the New York Convention. Moreover, national courts have generally
P "142" not considered whether such requirements should or may be implied. Nonetheless, where
the Convention does not apply, there is at least arguably a basis in national policy for imposing
a reciprocity requirement on parties seeking to enforce international arbitration agreements.
(70)
The following excerpt from National Iranian Oil Co. v. Ashland Oil, Inc. (71) illustrates the
approach taken by those U.S. courts which have extended the reciprocity requirement of the
New York Convention to arbitration agreements. In reading the excerpt, consider how the
purposes of the Convention and the FAA are served (if at all) by the court's approach to the
reciprocity requirement.
NEW YORK CONVENTION
Articles I(3) & XIV [excerpted below at pp. 987, 990]
INTER-AMERICAN CONVENTION
[excerpted below at pp. 995-997]
FEDERAL ARBITRATION ACT
9 United States Code §304 [excerpted below at p. 1004.]
NATIONAL IRANIAN OIL COMPANY v. ASHLAND OIL, INC.
817 F.2d 326 (5th Cir. 1987)
GOLDBERG, CIRCUIT JUDGE.... According to the [parties'] allegations, two Ashland Oil Company
(“Ashland”) subsidiaries, Ashland Overseas Trading Limited (“AOTL”) and Ashland Bermuda
Limited [entered into long term oil supply contracts with] the National Iranian Oil Company
(“NIOC”), an instrumentality of the Islamic Republic of Iran.... [D]uring the Islamic Revolution in
Iran, NIOC allegedly repudiated then renegotiated its contracts with Ashland's two subsidiaries
on several occasions in 1978 and 1979.... On April, 11 [1979], the parties allegedly executed a new
contract....
P "142"
P "143"
On November 12, 1979, following the takeover of the American Embassy in Tehran ... President
Carter banned the importation of all oil from Iran not already in transit. Several cargoes of
crude, however, were then en route to AOTL. AOTL received and refined the oil, worth nearly
$283,000,000. Despite NIOC's demand, neither Ashland nor its subsidiaries have rendered
payment. Ashland, in essence, contends that it is not responsible for the alleged breaches of its
subsidiaries and that NIOC itself breached the March and April agreements.
In accord with the terms of the arbitration clause of the parties' April contract, NIOC appointed
an arbitrator to resolve the dispute.... Ashland refuses to participate in an arbitral proceeding
in Iran because of the danger to Americans. Nor has Ashland agreed to participate in an
arbitration elsewhere. NIOC thus brought suit against Ashland in federal district court, and
alleged breach of contract in the first three counts of its complaint. In count four of its
complaint, NIOC sought to compel arbitration in Mississippi, to have the court appoint an
arbitrator and to stay litigation pursuant to the [FAA].
Ashland then filed a counterclaim, alleging tortious interference with and breach of contract by
NIOC. NIOC responded to the counterclaim by filing an application that also sought to appoint
an arbitrator, to compel arbitration, and totstay litigation. Because the terms of the agreement
expressly provided for arbitration in Tehran, the district court found that it lacked the power to
order arbitration in Mississippi under §4 of the Act, and thus it denied NIOC's motion. NIOC
appeals from that order....
Section 4 ... facially mandates that two conditions must be met before a district court may
compel arbitration: (1) that the arbitration be held in the district in which the court sits; and (2)
that the arbitration be held in accordance with the agreement of the parties. In this case the
 forum selection clause, found in Article X of the April contract, provides that “the seat of
arbitration shall be in Tehran, unless otherwise agreed by the parties.” Relying on Snyder v.
Smith, 736 F.2d 409 (7th Cir.), cert. denied, 469 U.S. 1037 (1984), the district court reasoned that
the language of §4 deprived it of the power to compel arbitration in Mississippi, because to
order arbitration in Mississippi would violate the forum selection clause and thus would not be
“in accordance with the terms of the agreement.” ...
Apparently contrary to some other courts, we have not taken such a literal approach to the
two-part mandate of §4. In Dupuy-Busching General Agency, Inc. v. Ambassador Ins. Co., 524 F.2d
1275 (5th Cir. 1975) (per curiam), [we suggested] that the language of §4 need not be applied
literally, that there may be some cases in which district courts are empowered to compel
arbitration notwithstanding the parties' contractually established forum outside of the district
in which the courts sit. But this is not such a case. By bringing suit in a district other than the
district designated in the forum selection clause, the plaintiff in Dupuy-Bushing in effect had
waived the right to its bargain ... [T]here has been no such waiver here....
P "143" In the first place, as NIOC now concedes, it has no right to an order compelling arbitration in
P "144" Tehran. When the United States adhered to the [New York] Convention, U.S. courts were
granted the power to compel arbitration in signatory countries. See 9 U.S.C. §206. But Iran is
not one of the 65 nations [now 120] that have adhered to the Convention, and thus no American
court may order arbitration in Iran. Consequently, NIOC has no right that is recognized under
U.S. law to compel an arbitration in Iran.
Because a waiver is a voluntary relinquishment of a known right, and because NIOC has nothing
that it could relinquish in a U.S. court, NIOC could not have waived its “right” to the benefit of
the forum selection clause. Moreover, Ashland contends and NIOC does not dispute that NIOC
has attempted, and still may be attempting, to compel arbitration through the court system in
Iran. Thus, NIOC has not waived its contractual right to arbitration in Iran. NIOC, at most, simply
and pragmatically has recognized that it has no legal right in the U.S. courts to compel
arbitration in Tehran.
NIOC also argues that, because it may be “inconvenient” for Ashland to participate in an
arbitral proceeding in Iran, this impossibility (or commercial impracticability) renders the
forum selection clause without force. NIOC, relying on Snyder, therefore asserts that the forum
selection clause should be severed and Ashland compelled to perform the essential term of
the bargain, viz., to participate in an arbitral proceeding (in Mississippi). This syllogism too is
fatally flawed.
In The Bremen v. Zapata Off-Shore Oil Co., [407 U.S. 1, 10-12 (1972)], the Supreme Court held ...
that forum selection clauses must be strictly enforced, unless the enforcement would be
“unreasonable,” or unless the resisting party could show “countervailing” or “compelling”
reasons why it should not be enforced. But the forum selection clause at issue in The Bremen
did not relate to the choice of situs in an arbitral proceeding, rather it related to the parties'
contractual choice of arbitration as opposed to litigation to resolve its disputes. Thus, in Sam
Reisfeld & Son Import Co. v. SA Eteco, 530 F.2d 679 (5th Cir. 1976), we held that the test in The
Bremen was inapposite respecting the enforcement of the choice of situs expressed in an
arbitration agreement. In Reisfeld, a U.S. company argued that a forum selection clause
designating Belgium as the situs of arbitration should not be enforced because “it is so
unreasonable that it either vitiates the arbitration clause altogether or requires a transfer to a
more neutral situs.” We held that the forum selection clause contained in an arbitration
provision must be enforced, even if unreasonable. A forum selection clause establishing the
situs of arbitration must be enforced unless it conflicts with an “explicit provision of the [FAA].”
... NIOC['s] assertion of inconvenience or impossibility fails [this test.]
Under traditional principles of contract law, NIOC's argument that the political atmosphere in
Iran renders arbitration there impossible or impracticable certainly supplies an adequate
predicate for finding the forum selection clause unenforceable and without effect. “Where only
part of the obligor's performance is impracticable his duty to render the remaining part is
P "144" unaffected if ... it is still practicable for him to render performance that is
P "145" substantial.”Restatement (Second) of Contracts §270. But impracticability is an argument
upon which NIOC may not rely. In order to assert the doctrine of impossibility or commercial
impracticability, the party wishing to assert such a defense must meet two conditions. First,
“[t]he affected party must have no reason to know at the time the contract was made of the
facts on which he [or she] relies.”Restatement (Second) of Contracts §266, comment a.... [I]t
simply is unimaginable that NIOC, part of the revolutionary government, could not reasonably
have foreseen that Tehran would become a forum in which it is indisputably impossible for
Americans to participate in any proceedings.
Second, a party may not rely on the doctrine of impossibility or impracticability “[i]f the event
is due to the fault of the ... [party] himself [or herself].”Restatement (Second) of Contracts §261,
comment d. Yet, as part of the revolutionary Government, NIOC certainly bears responsibility
for creating the chain of events making it impossible for an American entity reasonably to
travel to and to engage in quasi-judicial proceedings in Iran. Thus, NIOC cannot assert the
doctrine of impossibility.
Even were NIOC able to rely on the fact that it is now impossible for Ashland to arbitrate in
Iran, thus vitiating the forum selection clause, NIOC must show that the venue provision is
severable from the rest of the arbitration agreement. Whether the agreement to arbitrate is
entire or severable turns on the parties' intent at the time the agreement was executed, as
determined from the language of the contract and the surrounding circumstances. NIOC must
therefore show that the essence, the essential term, of the bargain was to arbitrate, while the
situs of the arbitration was merely a minor consideration.
 But the language of the standard form document – drafted by NIOC – belies any such argument.
Not only did NIOC choose Tehran as the site of any arbitration, but the contract also provides
that Iranian law governs the interpretation and rendition of any arbitral awards. The
arbitration agreement also provides that, should one of the parties fail to appoint an
arbitrator or should the two arbitrators fail to agree on a third arbitrator, “the interested party
may request the President of the Appeal Court of Tehran to appoint the second arbitrator or the
third arbitrator as the case may be.” Indeed, the contract expressly provides that the entire
agreement is to be interpreted by reference to Iranian law. The language of the contract thus
makes self-evident the importance of Iranian law and Iranian institutions to NIOC. The
language of the contract demonstrates that the parties intended the forum selection clause
and the arbitral agreement to be entire, not divisible....
NIOC points to the weighty congressional policy favoring the use of arbitration if the parties
have contractually agreed to resolve their disputes in this manner. This policy acquires special
significance in the international context.... Therefore, we have repeatedly held that “arbitration
should not be denied ‘unless it can be said with positive assurance that an arbitration clause is
not susceptible of an interpretation which would cover the dispute at issue.’”Phillips Petroleum,
794 F.2d at 1081 (quoting Wick v. Atlantic Marine, Inc., 605 F.2d 166, 168 (5th Cir. 1979)). At the
P "145" same time, a corollary “to th[is] principle[] is that the duty to submit a dispute to arbitration
P "146"
arises from contract, therefore a party cannot be compelled to arbitrate a dispute if he has not
agreed to do so.”Lodge No. 2504, 812 F.2d at 221. Thus, NIOC's appeal to congressional policy
will not suffice to transform the plain words of the parties' agreement to arbitrate in Tehran,
Iran to arbitrate in Jackson, Mississippi.
There is also a countervailing policy concern evoked by this case. When the United States
adhered to the Convention, it expressly chose the option available in Article I(3), to “apply the
Convention, on the basis of reciprocity, to the recognition and enforcement of only those awards
made in the territory of another Contracting State.” Declaration (emphasis added). While the
House and Senate Committee reports do not inform us as to the purpose of adopting this
reservation, its purpose seems obvious. Concerned with reciprocity, Congress must have meant
only to allow signatories to partake of the Convention's benefits in U.S. courts and thus to give
further incentives to non-signatory nations to adhere to the Convention. Were we now to order
arbitration in Mississippi, despite the forum selection clause designating Tehran ... we would
do great violence to this obvious congressional purpose. Were we to order arbitration in the
U.S. in the face of a forum selection clause designating a non-signatory forum, which was
unenforceable ab initio, the non-signatory would have little reason to leave the Hobbesian
jungle of international chaos for the ordered and more predictable world of international
commercial law....
Notes on Reciprocity Requirements
1. Application of Article I(3)'s reciprocity limitation to arbitration agreements. Does Article I(3)'s
reciprocity requirement apply to arbitration agreements, as distinguished from arbitral
awards?
(a) Text of Article I(3)'s reciprocity limitation. Consider the text of Article I(3) of the Convention
and its reference to reciprocity. Article I(3) is expressly and unambiguously limited to
“awards,” and makes no reference to “agreements.” Consider the text of tee U.S.
reservation pursuant to Article I(3): that reservation, tracking the Convention's text, is also
limited to “awards,” and makes no reference to “agreements.” Given this, does Article I(3)
create any exception to Article II's provisions regarding the enforceability of arbitration
agreements?
(b) Divergent U.S. authorities on application of Article I(3)'s reciprocity limitation to arbitration
agreements. Lower U.S. courts have reached divergent results on the question whether
Article I(3)'s reciprocity limitation applies to arbitration agreements. According to one
lower U.S. court, Article I(3)'s reciprocity “limitation clearly applies only to the
recognition and enforcement of arbitral awards; it has no relevance to the problem
pending before this court – whether to order arbitration under the terms of the
Convention.”Fuller Co. v. Compagnie des Bauxites de Guinee, 421 F.Supp. 938, 941 n.3 (W.D.
Pa. 1976). Equally plausible, however, is an implied exception to Article II, for agreements
that would produce unenforceable awards because of the reciprocity reservation. That is
apparently the conclusion adopted in NIOC. See also Ledee v. Ceramiche Ragno, 684 F.2d
184, 185-86 (1st Cir. 1982); Tolaram Fibers, Inc. v. Deutsche Engineering Der Voest Alpine
Industrieanlagenbau GmbH, 1991 U.S. Dist. Lexis 3565 (M.D.N.C. 1991).
How should Article I(3)'s reciprocity limitation be applied (if at all) to arbitration
agreements?

2. Application of Article XIV's reciprocity rule to arbitration agreements. Article XIV provides
broadly that a “Contracting State shall not be entitled to avail itself of the present Convention
against other Contracting States except to the extent that it is bound to apply the Convention.”
How does Article XIV apply to the enforcement of international arbitration agreements?
 (a) Who can invoke Article XIV? Can private parties invoke Article XIV in private litigation? Or
P "146" is Article XIV directed solely to state-to-state dealings? Note that Article XIV's language
P "147" appears to be directed to the rights of “Contracting States” between themselves, and
not to the rights of private litigants. That is also consistent with the article's location in
the overall structure of the Convention, in the final part of the Convention where other
inter-state provisions are located. A few courts and commentators have nonetheless
apparently interpreted Article XIV as granting rights to private litigants. See Fertilizer
Corp. Of India v. IDI Management, Inc., 517 F.Supp. 948 (S.D. Ohio 1981); Quigley, Accession
by the United States to the United Nations Convention on the Recognition and Enforcement
of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1074 (1961); A. van den Berg, The New York
Convention of 1958 13-15 (1981); infra pp. 734-35.
(b) Does Article XIV apply to arbitration agreements? Consider again the language of Article
XIV. Does this language provide a sound basis for concluding that Article XIV does not
apply to arbitration agreements specifying arbitral situses in non-Convention states?
3. Can the U.S. reservation to the Convention be judicially extended? Recall that the U.S.
reservation to the New York Convention is limited to arbitral awards. Even if Article XIV permits
Contracting States to make reciprocity reservations extending beyond Article I(3), has the
United States done so? If not, then should a U.S. court do so? Would this not involve judicial
interference in the task of treaty negotiations, contrary to basic separation of powers
principles?
4. How might a reciprocity limitation apply to arbitration agreements? Assuming that either
Article I(3) or Article XIV does allow a reciprocity limitation to be placed on arbitration
agreements under Article II, what precisely would that limitation say? Suppose a U.S. party and
an Iranian party agree to arbitrate in Switzerland (which is a New York Convention signatory).
Would the reciprocity limitation relieve U.S. courts of an obligation to recognize the arbitration
agreement? Suppose a U.S. party and a Swiss party agree to arbitrate in Iran.
(a) The reciprocity limitation does not relieve nationals of Convention States of obligations to
arbitrate against nationals of non-Convention States. Some U.S. courts have held that U.S.
(and other) parties from New York Convention states are required by the Convention to
arbitrate against parties from non-Convention states, provided that the arbitration
agreement specifies an arbitral situs in a signatory state. E.A.S.T. Inc. of Stamford,
Connecticut v. M/V Alaia, 876 F.2d 1168 (5th Cir. 1989).
(b) Authorities concluding that the reciprocity limitation relieves parties of obligations to
arbitrate in non-Convention states. Consider again the hypothetical where a U.S. and a
Swiss party agree to arbitrate in Iran. Would a reciprocity limitation under Article XIV or
Article I(3) relieve U.S. (or Swiss) courts of an obligation to recognize the arbitration
agreement? How exactly would the language of Article XIV and Article I(3) apply in such
circumstances? What purposes would be served by denying recognition of the arbitration
agreement in these circumstances?
Suppose (as in NIOC) a U.S. party and an Iranian party agree to arbitrate in Iran. Would a
U.S. court be required to recognize the arbitration agreement? NIOC held that the
Convention is not applicable to agreements to arbitrate in non-Convention states. For
other decisions adopting the result in NIOC, see Ledee v. Ceramiche Ragno, 684 F.2d 184,
185-86 (1st Cir. 1982); Tolaram Fibers, Inc. v. Deutsche Engineering Der Voest Alpine
Industrieanlagenbau GmbH, 1991 U.S. Dist. Lexis 3565 (M.D.N.C. 1991). Compare Fuller Co. v.
Compagnie des Bauxites de Guinee, 421 F.Supp. 938, 941 n.3 (W.D. Pa. 1976).

5. Wisdom of NIOC's interpretation of the reciprocity limitation. Suppose that Iran were
suddenly to ratify the New York Convention, and the Ashland v. NIOC arbitration were to
proceed in Teheran. Would Ashland be better off, after the Convention had been ratified by
Iran? Or worse? Consider the following: (a) the Convention would not limit the power of Iranian
courts to vacate awards made in Iran (see infra pp. 792-93); (b) the Convention would greatly
facilitate the ability of NIOC to enforce an award made in Iran against Ashland in the United
States (where its assets are primarily situated) and other Convention states (see infra pp. 706-
08, 779-94); (c) the Convention would not as a practical matter facilitate meaningfully the
ability of Ashland to enforce an award against NIOC in Iran (where its assets are primarily
situated); and (d) the Convention would facilitate Ashland's ability to enforce an award against
NIOC in Convention states other than Iran, provided NIOC left assets in those jurisdictions.
Consider the NIOC court's explanation for its application of a reciprocity requirement:
Congress must have meant only to allow signatories to partake of the Convention's benefits in
U.S. courts and thus to give further incentives to non-signatory nations to adhere to the
Convention.
How is this rationale applicable to the various factual scenarios outlined above?
P "147"
P "148"
6. What is the consequence of applying a reciprocity limitation to an arbitration agreement
under the Convention? Suppose that either Article I(3) or Article XIV does permit states to
impose reciprocity limitations on the recognition of arbitration agreements under the
Convention, and that a state imposes such a limitation. What precisely is the effect upon an
agreement, like that in NIOC, specifying an arbitral situs in a non-Convention state?
Specifically, consider the following options: (a) the arbitration agreement is entirely void; (b)
only the offending selection of a non-Convention arbitral situs is void, and the arbitral tribunal
 is permitted to select a new situs; (c) only the offending selection of a non-Convention arbitral
situs is void, and the court will select a new arbitral situs. What did the NIOC court hold? What
is the correct result? What law governs this issue? the Convention? national law? if so, which
national law?
7. Effect of §206 on the reciprocity limitation. Consider the language of §206 of the FAA. Note its
provision that U.S. courts “may direct that arbitration be held in accordance with the
agreement at any place therein provided for, whether that place is within or without the United
States.” 9 U.S.C. §206. Is this section limited to places located in Convention states? What
warrants implying such a limitation? Is §206 mandatory, or does a court have discretion
whether to compel arbitration?
Does §4 of the FAA impose a separate obligation on U.S. courts, incorporated into §§206 and
208, to compel arbitration in a non-Convention state? Would this prevail over the U.S.
reservation (if that reservation extended to agreements)? See infra pp. 580-96, for negative
answers.
8. Effect of §3 of the FAA on claims, asserted in U.S. courts, which are subject to arbitration in a
non-Convention situs. Suppose that a party commences litigation in U.S. courts, in derogation
of an arbitration agreement specifying a non-Convention arbitral situs. Does §3 of the FAA
require that the litigation be stayed? Is it not clear that a valid arbitration agreement, within
the meaning of §3, exists? Note that Article VII of the New York Convention provides a savings
clause, which preserves for parties their otherwise available rights outside of the Convention.
What basis is there for implying the Convention's reciprocity limitation into §3?
9. Absence of express reciprocity requirement from leading national arbitration statutes.
Consider the text of the UNCITRAL Model Law, the FAA, and the Swiss Law on Private
International Law. Do any of these statutes impose a reciprocity requirement for the
enforcement of an international arbitration agreement?
10. Implied reciprocity requirement. Should the UNCITRAL Model Law, the FAA, or other national
arbitration legislation be interpreted as imposing an implied reciprocity requirement as a
condition for enforcement of an international arbitration agreement? Suppose, for example, an
Iranian company wishes to require a German company to arbitrate in Iran (although, let us
assume, Iranian courts would not require an Iranian company to arbitrate in Germany). Should
German courts uphold the parties' arbitration agreement and require the German company to
arbitrate in Iran?
11. Absence of provision for reciprocity reservation from Inter-American Convention. Note that
there is no provision in the Inter-American Convention for a reciprocity reservation. Consider,
however, §304 of the FAA, which introduces a reciprocity reservation with respect to the
enforcement of arbitral awards. See also infra pp. 735-36. Should the same reciprocity
limitation be extended by U.S. courts to arbitration agreements? Does the Convention permit
either such reciprocity requirement?
12. Possible approaches to arbitration agreements after invalidating choice of non-Convention
arbitral situs. Suppose that a court invalidates an offending choice of a non-Convention
arbitral situs, but concludes that the parties' basic agreement to arbitrate should still be
enforced. What should it then do? Should it (as the NIOC court considered) order arbitration
locally subject to its own judicial control? Note that, in NIOC, this would have resulted in
rewriting the Ashland-NIOC agreement, changing the arbitral situs from one party's home forum
to that of the other party. What would justify this?
Should a court order arbitration in a “neutral” arbitral situs, located in a Convention state?
Should a court seek to replace the selection of a non-Convention arbitral situs with a
Convention situs most nearly approximating the parties' original choice? For example, in NIOC,
could the arbitral situs have been moved to neighboring Turkmenistan or Syria? Additionally,
would it be appropriate for the arbitration to continue to be subject to the procedural law of
Iran, and to actions to vacate the award in Iranian courts? Or, should national courts leave the
selection of an arbitral situs to the arbitral tribunal itself?
13. Practical importance of reciprocity reservation for drafting arbitration agreements. Given
the reciprocity reservation, it is important that parties not agree to arbitration to be
conducted in a nation that is not a signatory to the New York Convention. Doing so will deprive
the award (and perhaps the agreement) of the protections of the Convention in a substantial
number of countries.
P "148"
P "149"
5. “Commercial” Relationship Requirement
Both the New York Convention and many national arbitration statutes apply only to
“commercial” relationships. Thus, Article 1(3) of the Convention provides that member states
may declare that the Convention applies only to “relationships ... which are considered as
commercial under the national law of the State making [the] declaration.” A number of nations,
including the United States, have made declarations under Article 1(3). (72)
It is not entirely clear why the Convention permitted reservations as to non-commercial
matters. The reason appears to be partially historical: the Convention's commercial exception
parallels similar sections in Article I(2) of the Geneva Protocol of 1923. (73) More specifically,
some civil law nations took the position during negotiations on the Convention that their
domestic arbitration statutes distinguished between commercial and non-commercial
matters, and that they could ratify the Convention only as to the former. (74)
 Article I(3) of the Convention apparently leaves it to individual signatories to define
“commercial” under national law, without imposing any express external limits on national
P "149" definitions. (75) Despite this, the Convention's “commercial” requirement has produced few
P "150" difficulties in most national courts. (76) In interpreting the “commercial” relationship
requirement of the Convention and §202, U.S. courts have construed the requirement broadly.
(77)
One lower U.S. court has indicated that the definition of “commercial” under the Convention is
broader than that of “commerce” under the domestic FAA. (78) Among other things, it is clear in
the United States that the term “commercial relationship” includes employee-employer
relations, (79) fiduciary relationships, (80) contracts where a foreign state constructs buildings
for, and leases them to, a foreign investor, (81) relationships giving rise to antitrust and other
public law disputes, (82) cases involving claims by foreign regulatory authorities, (83) insurance
and reinsurance contracts, (84) and maritime agreements. (85) In contrast, one district court
opinion concluded, arguably in reliance on the United States' “commercial relationship”
reservation, that claims for salvage services rendered to a U.S. warship are non-arbitrable. (86)
Nevertheless, there is scope for differences over the Convention's “commercial” requirement.
In other contexts, such as under the foreign sovereign immunity and act of state doctrines, U.S.
courts have struggled with “commercial” exceptions. (87) Similar debates may arise under the
P "150" Convention. Disputes can also be anticipated over the application of the Convention to arbitral
P "151" awards based on arguably “penal” or “public law” statutes, such as the antitrust laws. (88)
Likewise, disputes may arise involving application of the Convention to concession agreements
or other contracts involving what might be regarded as elements of national sovereignty. (89)
Indeed, motivated by such concerns, at least one foreign court decision has adopted what
appears to be a narrow definition of “commercial relationship.” (90)
The U.S. reservation to the New York Convention provides that the Convention will be applied
“only to differences arising out of legal relationships, whether contractual or not, which are
considered as commercial under the national law of the United States.” (91) This reservation is
codified in §202 of the FAA, which provides, among other things, that “[a]n arbitration
agreement ... arising out of a legal relationship, whether contractual or not, which is considered
as commercial ... falls under the Convention.” (92) Section 202 also specifically provides that
“commercial” relations include those which fall within the definition contained in §2 of the
domestic FAA of arbitration agreements affecting interstate and foreign commerce. (93)
Like the New York Convention, national arbitration statutes are frequently limited to
“commercial” matters. Article I(1) of the UNCITRAL Model Law expressly limits the Law's
application to “international commercial arbitration,” while §1 of the FAA is limited to
arbitration agreements in “transaction[s] involving commerce.” (94) National court decisions
have typically interpreted the term “commercial” expansively.
P "151"
P "152"
6. Requirements That Arbitration Agreements Concern “Existing or Future Differences” Arising
From “Defined Legal Relationship”
The New York Convention and many national arbitration statutes also contain “requirements”
concerning existing or future disputes and defined legal relationships. In fact, these provisions
are more in the nature of extensions or clarifications of the Convention and national
legislation, designed to overcome historic obstacles to commercial arbitration, than
limitations upon their reach.
There has long been (and still is) a distinction between agreements to arbitrate existing
disputes and those to arbitrate future disputes. At common law, the latter were effectively
unenforceable, owing to the unwillingness of courts to order specific performance. (95) In some
countries, agreements to arbitrate remain unenforceable unless they concern pre-existing
disputes or are confirmed after a dispute arises. This was historically true in parts of the
Middle East and Latin America. (96)
Indeed, even today, under the domestic arbitration statutes of five U.S. states (preempted in
virtually all international cases by the FAA or the New York or Inter-American Conventions),
only agreements to arbitrate pre-existing disputes are enforceable. (97) And, under the FAA,
U.S. courts distinguish between agreements to arbitrate certain future disputes involving
public law protections (like the antitrust laws), and those to arbitrate pre-existing public law
claims. (98)
Both the New York Convention and its predecessors attempted to overcome historic national
biases against agreements to arbitrate future disputes. The Geneva Protocol of 1923 obliged
signatories to recognize arbitration agreements “whether relating to existing or future
differences.” (99) Article II(2) of the New York Convention and Article 1 of the Inter-American
Convention contain language to the same effect.
Similarly, leading national arbitration statutes confirm that both existing and future disputes
may be arbitrated. The UNCITRAL Model Law provides for the enforceability of arbitration
agreements concerning “disputes which have arisen or which may arise.” (100) Likewise, §2 of
the FAA applies to both “written provision[s]” in contracts concerning “disputes thereafter
arising out of such contracts,” and to “an agreement in writing to submit to arbitration an
existing controversy.” (101)
P "152"
P "153"
Apart from distinctions between existing and future disputes, it has been suggested that there
is an implied requirement under Articles I(1) and I(3) of the Convention that a “difference” exist
 between the parties. (102) In practice, it is rare that litigation or arbitration will transpire
unless there is some sort of difference between the parties. It is not clear, therefore, when (or
why) the Convention's requirement will apply. Arguably, it excludes feigned arbitrations, where
two putatively adverse parties contrive to procure an arbitral award. Alternatively, the
Convention seeks to impose a “ripeness” requirement, (103) precluding arbitration until a
concrete dispute has crystallized between the parties. (104)
Finally, Article II(3) of the Convention requires that an arbitration agreement be “in respect of a
defined legal relationship, whether contractual or not.” In virtually all commercial arbitrations,
there will be an arbitration agreement which relates to a written contract between the parties,
and Article II(3)'s requirement will fairly clearly be satisfied. Thus, there is virtually no
precedent, from the United States or otherwise, dealing with the requirement for a “defined
legal relationship.” (105)
Article II(3) arguably excludes entirely open-ended arbitration agreements (e.g., A and B agree
to arbitrate any dispute which may ever arise between them), although it is not clear what
policy this exclusion would serve. On the other hand, the reference to relationships “whether
contractual or not” in Article II(3) would appear to confirm that non-contractual claims (such as
tort, competition, and other public law claims) may be arbitrated, and that arbitration
agreements and awards relating to such claims are in principle enforceable under the
Convention. (106)
P "153"

References
1) For commentary on the separability doctrine, see W. Craig, W. Park & J. Paulsson,
International Chamber of Commerce Arbitration §5.04 (2d ed. 1990); A. van den Berg, The
New York Convention of 1958 145-146 (1981); Bedell, Harrison & Grant, Arbitrability: Current
Developments in the Interpretation and Enforceability of Arbitration Agreements, 13 J.
Contemp. L. 1 (1987); P. Mayer, L'Autonomie de l'arbitre internationale dans l'appreciation de
sa propre competence, 217 Recueil des Cours 323 (1989); A. Redfern & M. Hunter,
International Commercial Arbitration 3-31 to 3-35 (3d ed. 1999); G. Wilner, Domke on
Commercial Arbitration: The Law and Practice of Commercial Arbitration §§8:01-02 (1984 &
1992 Rev.); Nussbaum, The Separability Doctrine in American and Foreign Arbitration, 17
N.Y.U.L. Q. 609 (1940); Park, Determining Arbitral Jurisdiction Allocation of Tasks Between
Courts and Arbitrators, 8 Am. Rev. Int'l Arb. 133, 142-43 (1997); Rosen, Arbitration Under
Private International Law: The Doctrines of Separability and Competence de la Competence,
17 Fordham Int'l L.J. 599 (1997; S. Schwebel, The Severability of the Arbitration Agreement, in
International Arbitration: Three Salient Problems (1987); Svenlov, What Isn't, Ain't, 25 J.
World Trade 37 (1991); Note, Federal Arbitration Act and Application of the “Separability
Doctrine” in Federal Courts, 1968 Duke L. J. 588; Note, The Doctrine of Separability in Soviet
Arbitration Law: An Analysis of Sojuzneftexport v. JOC Oil Co., 28 Colum. J. Transnat'l L. 301
(1990).
2) See infra p. 69.
3) See infra p. 69; S. Schwebel, The Severability of the Arbitration Agreement in International
Arbitration: Three Salient Problems 1-7 (1987).
4) See infra pp. 71, 348-49. E.g., Sauer-Getriebe KG v. White Hydraulics, Inc., 715 F.2d 348 (7th
Cir. 1983) (“The agreement to arbitrate and the agreement to buy and sell motors are
separate. Sauer's promise to arbitrate was given in exchange for White's promise to
arbitrate and each promise was sufficient consideration for the other.”); Hellenic Lines, Ltd
v. Louis Dreyfus Corp., 372 F.2d 753, 758 (2d Cir. 1967); Robert Lawrence Co. v. Devonshire
Fabrics, Inc., 271 F.2d 402, 410 (2d Cir. 1959), dismissed, 364 U.S. 801 (1960).
5) Texas Overseas Petroleum Co. v. Libyan Arab Republic, Nov. 27, 1975 Preliminary Award,
reprinted in 1 J.G. Wetter, The International Arbitral Process: Public and Private 444-65
(1979). See also Prima Paint Co. v. Corklin Mfg Co., 388 U.S. 395, 402 (1967) (“except where
the parties otherwise intend ... arbitration clauses are ‘separable’ from the contracts in
which they are embedded....”); In re Kinoshita & Co., 287 F.2d 951 (2d Cir. 1961); Deutsche
Schlachtbau und Tiefbohrgesellschaft m.b.H. v. Ras Al Khaimah Nat'l Oil Co. 2 Lloyd's Rep.
246 2 (1987), rev'd on other grounds, 2 Lloyd's Rep. 293 (1988) (“an arbitration agreement
constitutes a self-contained contract collateral or ancillary to the substantive
agreement”); Bremer Vulkan Schiffbau und Maschinenfabrik v. South India Shipping Corp.,
[1981] 1 Lloyd's Rep. 253.
6) Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 409 (2d Cir. 1959).
7) See W. Craig, W. Park & J. Paulsson International Chamber of Commerce Arbitration §5.04
(2d ed. 1990).
8) 388 U.S. 395 (1967).
9) Whether a party seeking rescission of a contract on the ground of fraudulent inducement
may in New York obtain judicial resolution of his claim is not entirely clear. In light of our
disposition of this case, we need not decide the status of the issue under New York law.
10) The Court of Appeals has been careful to honor evidence that the parties intended to
withhold such issues from the arbitrators and to reserve them for judicial resolution. We
note that categories of contracts otherwise within the [FAA] but in which one of the parties
characteristically has little bargaining power are expressly excluded from the reach of
the Act. See §1.
11) This position is consistent both with the decision in Moseley v. Electronic Facilities, 374 U.S.
167, 171, 172 (1963), and with the statutory scheme. As the “saving clause” in §2 indicates,
the purpose of Congress in 1925 was to make arbitration agreements as enforceable as
other contracts, but not more so. To immunise an arbitration agreement from judicial
challenge on the ground of fraud in the inducement would be to elevate it over other
forms of contract – a situation inconsistent with the “saving clause.”
12) It is true that the [FAA] was passed 13 years before this Court's decision in Erie R. Co. v.
Tompkins, brought to an end the regime of Swift v. Tyson, 16 Pet. 1 (1842), and that at the
time of enactment Congress had reason to believe that it still had power to create federal
rules to govern questions of “general law” arising in simple diversity cases – at least,
absent any state statute to the contrary. If Congress relied at all on this “oft-challenged”
power, see Erie R. Co., 304 U.S. at 69, it was only supplementary to the admiralty and
commerce powers, which formed the principal bases of the legislation....
13) For commentary, see Park, Determining Arbitral Jurisdiction: Allocation of Tasks Between
Courts and Arbitrators, 8 Am. Rev. Int'l Arb. 133, 142-43 (1997); Goldman, The
Complementary Roles of Judges and Arbitrators in Ensuring That International Commercial
Arbitration is Effective, in Sixty Years of ICC Arbitration – A Look at the Future 255, at 263
(1984); Rosen, Arbitration Under Private International Law: The Doctrines of Separability and
Competence de la Competence, 17 Fordham Int'l L.J. 599 (1997); C. Schmitthoff, The
Jurisdiction of the Arbitrator, in the Art of Arbitration 285, 288 (J. Schultsz & A. Van den Berg
eds. 1987); S. Schwebel, International Arbitration: Three Salient Problems 1-60 (1987).
14) In the United States, the FAA specifically provides for actions to compel arbitration. See 9
U.S.C. §§4, 206, 303; infra pp. 378-93. Most other countries do not provide orders for
specific performance of arbitration; instead, relief is afforded by way of a stay of judicial
proceedings involving arbitrable claims.
15) Leading institutional arbitration rules uniformly permit default awards. See infra pp. 847-
48.
16) The FAA contains provisions for both confirming and enforcing arbitration awards
(including default awards), see infra pp. 708-11, 882-96, and for vacating arbitral awards,
see infra pp. 708-11, 896-900.
17) The FAA contains provisions for staying litigation of claims subject to a valid arbitration
agreement, see 9 U.S.C. §3 and infra pp. 393-96. Most other countries provide comparable
relief.
18) Leading institutional arbitration rules uniformly permit arbitrators to rule upon
challenges to their jurisdiction. See infra pp. 85, 453-55.
19) In many countries, interlocutory judicial review of interim jurisdictional awards is
available. See infra pp. 88-93. Under the FAA, interim awards are generally not subject to
judicial review, see infra pp. 93-94, 464-66, although the equivalent of judicial review may
be available in an action to enjoin or compel arbitration or by commencing litigation on
the merits. See infra pp. 93-94.
20) The FAA permits challenges to an arbitrator's jurisdiction in actions to vacate or confirm
arbitral awards, see infra pp. 849-59.
21) XIV Y.B. Comm. Arb. 137 (1989).
22) 514 U.S. 938 (1995).
©) International Council Commercial Arbritration.
23) Section 241 of the Zurich Rules of Civil Procedure of 13 June 1976 reads:
“The Court of Arbitration may rule on its own jurisdiction pursuant to Article III even when
the validity of the arbitration agreement is contested.”
24) Article 502(3) of the Egyptian Code of Civil Procedure reads:
The arbitrator cannot be a minor (not possessing full legal capacity) or subject to
curatorship or deprived from his civil rights as a result of criminal penalty or declared
bankrupt unless he has his status restored.
In case of plurality of arbitrators, their number should be in all cases uneven. Otherwise,
the arbitration is null.
Without prejudice to what is provided for in special laws, the appointment of the
arbitrators has to be contained in the arbitration agreement or in a separate agreement.
[Translation by Prof. Ahmed El-Kosheri.]
25) Article 22 of the Egyptian Civil Code reads:
Principles of competence of courts and all questions of procedure are governed by the
law of the country in which the action is brought, or in which the proceedings are taken.
26) For commentary on the law applicable to international arbitration agreements, see
Friedland & Hornick, The Relevance of International Standards in the Enforcement of
Arbitration Agreements Under the New York Convention, 6 Am. Rev. Int'l Arb. 149 (1995);
Naon, Choice of Law Problems in International Commercial Arbitration (1992); ICCA Congress
Series No. 7, The Law Applicable in International Arbitration 197 (1996); Dimolitsa, Issues
Concerning the Existence, Validity, and Effectiveness of the Arbitration Agreement, 71CC Ct.
Bull. 14 (1996); A. Redfern & M. Hunter, International Commercial Arbitration 3-35 to 3-39
(3d ed. 1999).
27) See supra pp. 41-45 & infra pp. 107-17. Moreover, different legal systems may characterize
particular issues differently, and subject them to potentially differing national laws. See
infra pp. 412-13, 428-29.
28) The choices of law applicable to the merits of the parties' dispute and to the arbitration
proceedings are discussed elsewhere. See infra pp. 411-33 & 523-71.
29) The Act's statement of motives reads, in part:
The Commonwealth of Puerto Rico cannot remain indifferent to the growing number of
cases in which domestic and foreign enterprises, without just cause, eliminate their
dealers, concessionaires or agents, as soon as these have created a favorable market and
without taking into account their legitimate interests. The Legislative Assembly of Puerto
Rico declares that the reasonable stability in the dealer's relationship in Puerto Rico is
vital to the general economy of the country, to the public interest and to the general
welfare, and in the exercise of its police power, it deems it necessary to regulate, insofar
as pertinent the field of said relationship, so as to avoid the abuse caused by certain
practices. Laws of Puerto Rico, 1964, p. 231.
30) Our conclusion accords with the general mode by which appellate courts have construed
the Convention and Chapter Two of the [FAA]. See Parsons & Whittemore Overseas Co., Inc.
v. Societe Generale de l'Industrie du Papier (RAKTA), 508 F.2d 969, 973-74 (2d Cir. 1974)
(construing narrowly the “public policy” defense to enforcement of awards under Article
V(2)(b)); McCreary Tire & Rubber Co. v. CEAT, 501 F.2d 1032 (3rd Cir. 1974) (observing that
there is “nothing discretionary” about Article II(3)). Similar considerations have influenced
the construction of other domestic statutes in the context of international arbitration. See
Scherk, supra; Societe Generale de Surveillance, SA v. Raytheon European Management and
Systems Co., 643 F.2d 863, 867 (1st Cir. 1981).
31) Had Rhone so requested it would have been proper for the district court to condition its
stay order on the defendants' agreement to reform the arbitration clause so as to satisfy
Italy's procedural requirement. Since no such request was made we do not consider
whether, had it been made, we would remand for such a modification.
©) International Council Commercial Arbitration.
©) International Council Commercial Arbitration.
32) For commentary see A. van den Berg, The New York Convention of 1958 121-233 (1981); A.
Redfern & M. Hunter, Law and Practice of International Commercial Arbitration, 3-01 to 3-
68 (1999); Foustoucos, Conditions Required for Validity of an Arbitration Agreement, 5 J. Int'l
Arb. 113 (1988); Mann, An “Agreement in Writing” to Arbitrate, 3 Arb. Int'l 171 (1987); Quigley,
Accession by the United States to the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049 (1961); A. Samuels, Jurisdictional
Problems in International Commercial Arbitration (1989).
33) Comment, International Commercial Arbitration Under the United Nations Convention and
Amended Arbitration Statute, 47 Wash. L. Rev. 441, 441 (1972).
34) See infra pp. 711-36.
35) van den Berg, When is an Arbitral Award Non-Domestic Under the New York Convention of
1958?, 6 Pace L. Rev. 25, 51 (1985).
36) The Inter-American Convention, ICSID, the 1961 European Arbitration Convention, and
other international arbitration conventions also contain various jurisdictional
requirements. See supra pp. 23-26.
37) Lower U.S. courts have frequently distilled or restated these jurisdictional requirements:
before applying the New York Convention, a judge must inquire “whether (1) there is a
written arbitration agreement; (2) the agreement provides for arbitration in a signatory
country; (3) the agreement arises out of a commercial legal relationship; and (4) the
commercial transaction has a reasonable relationship with a foreign state.”Trademasters
International, Inc. v. A.E.C. Trading Co., 1988 W.L. 58595 (N.D. Ill. 1988). See Riley v. Kingsley
Underwriting Agencies, Ltd, 969 F.2d 453, 959 (10th Cir. 1992); Ledee v. Ceramiche Ragno, 684
F2d 184, 186-87 (1st Cir. 1982); Sedco v. Petroleos Mexicanos Mexican Nat'l Oil, 767 F.2d 1140,
1144-45 (5th Cir. 1985); In re Oil Spill by Amoco Cadiz, 659 F.2d 789, 795-96 (7th Cir. 1981).
SMG Swedish Machine Group, Inc. v. Swedish Machine Group, Inc., 1991 WL 10662 (N.D. Ill.
1991); Technetronics, Inc. v. Leybold-Geaeus GmbH, 1993 WL 197028 (E.D. Pa. 1993). Compare
Cargill Int'l SA v. M/T Pavel Dybenko, 991 F.2d 1012 (2d Cir. 1993); Iran v. Gould, Inc., 887 F.2d
357, 362 (9th Cir. 1989) (three-factor list), cert. denied, 494 U.S. 1016 (1990).
38) New York Convention Article I(1) defines the awards that are subject to the Convention:
This Convention shall apply to the recognition and enforcement of arbitral awards made
in the territory of the State other than the State where the recognition and enforcement of
such awards are sought, and arising out of differences between persons, whether physical
or legal. It shall also apply to arbitral awards not considered as domestic awards in the
State where their recognition and enforcement are sought.
39) See infra pp. 124-26.
40) The Inter-American Convention does not further define this phrase. See infra p. 124.
41) UNCITRAL Model Law Article 1(1)-1(3).
42) Swiss Law on Private International Law Article 176(1).
43) In these circumstances, most U.S. courts have concluded that the Convention does not
apply to agreements involving consumers or workers. Jones v. Sea Tow Services Freeport
NY, Inc., 30 F.3d 360 (2d Cir. 1994); Wilson v. Lignotock USA, Inc., 4 Mealey's Int'l Arb. Report
(May 1989) Al (E.D. Mich. April 6, 1989); Reinholtz v. Retriever Marine Towing & Salvage, 1993
WL 414719 (S.D. Fla. May 21, 1993); Brier v. Northstar Marine Inc., 1992 WL 350292 (D.N.J. April
23, 1992). See infra pp. 125-26.
44) Defendants allege that the exact wording of the Miranda Act of Salvagers is as follows:
“The Lloyds of London Salvage Agreement is a no cure, no pay agreement which permits us
to assist you immediately without lengthy negotiations. After we have completed the job,
if we are successful in salving your boat, we will make a salvage claim based upon the
value of what we have saved. If we are not successful we will claim nothing. If you or your
insurer believe that our claim is toothigh, you may request Lloyd's to appoint an
arbitrator to determine how much we should be paid. Whatever amount the arbitrator
awards us, we will accept. This agreement is published and approved by Lloyd's of
London for use in salvage situations. Do you accept?”
45) This court takes judicial notice of the fact that the Committee of Lloyd's has a long and
admirable history and tradition of being particularly suited to arbitrate these type of
matters. However, this alone does not establish the “reasonable relationship” required by
9 U.S.C. §202.
46) I find that Congress did not intend to expand jurisdiction to include local disputes
between citizens of the United States since these matters were better left to the judiciary
in the district where the incident occurred.
47) See New York Convention Article II(1). See also A. van den Berg, The New York Convention of
1958 196 (1981); Mann, An “Agreement in Writing” to Arbitrate, 3 Arb. Int'l 171 (1987).
48) National courts have fairly uniformly concluded that the term “telegram” includes
telexes, telecopies, and other modern methods of communications. Carbomin SA v. Ekton
Corp., XII Y.B. Comm. Arb. 502 (1987 Geneva Court of Appeal); Tracomin SA v. Sudan Oil
Seeds Co., XII Y.B. Comm. Arb. 511 (1987 Swiss Federal Supreme Court).
49) UNCITRAL Model Law Article 7(2); FAA 9 U.S.C. §2.
50) A. van den Berg, The New York Convention of 1958 196 (1981) (“The history of Article II(2)
confirms that the drafters of the Convention wished to exclude the oral or tacit
acceptance of a written proposal to arbitrate.”).
51) See J.A. van Walsum NV v. Chevelines SA, 64 Schweizerische Juristen-Zeitung 56 (1968)
(Article II(3) not satisfied by tacit acceptance of sales confirmation, which contained an
arbitration clause); Confex v. Ets Dahan, XII Y.B. Comm. Arb. 484 (1986) (French Supreme
Court) (Article II(3) not satisfied by tacit acceptance of letter asserting that contract was
subject to certain standard conditions, which incorporated arbitration agreement).
52) Zambia Steel & Building Supplies Ltd v. James Clark & Eaton Ltd [1986] 2 Lloyd's Rep. 225
(Article II(3) satisfied by tacit acceptance of written quotation, containing an arbitration
clause); Chemicals & Phosphates Ltd v. NV Algemeene Oliehandel, 1971 Nederlandse
Jurisprudentie No. 470 (Article II(3) satisfied where seller sent buyer a written sales
contract, containing an arbitration clause, and buyer did not object until months after
taking delivery of goods).
53) Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 846 (2d Cir. 1987). See also Oriental
Commercial & Shipping Co. v. Rosseel, NV, 609 F.Supp. 75 (S.D.N.Y. 1985).
54) Beromun AG v. Societa Industriale Agricola “Tresse,” 471 F.Supp. 1163 (S.D.N.Y. 1979).
55) Filantro SpA v. Chilewich Int'l Corp., 789 F.Supp. 1229 (S.D.N.Y. 1992). See also Astor
Chocolate Corp. v. Mikroverk Ltd, 704 F.Supp. 30 (E.D.N.Y. 1989) (no signature required on
contract, where related correspondence evidenced consent).
56) Sphere Drake Ins. plc v. Marine Towing, Inc., 16 F.3d 666 (5th Cir. 1994). See also Marion Coal
Co. v. Marc Rich & Co., 539 F.Supp 903, 907 (S.D.N.Y. 1982) (drafts of agreement containing
arbitration clause can provide requisite writing).
57) Sen Mar, Inc. v. Tiger Petroleum Corp., 774 F.Supp. 879 (S.D.N.Y. 1991).
58) 956 F.Supp. 1131 (S.D.N.Y. 1997), rev'd, 186 F.3d 210 (2d Cir. 1999).
59) The other three questions may all be answered in the affirmative. First, the arbitration
clause at issue here provides for arbitration in New York, which, as part of the United
States, is in the territory of a signatory to the Convention. Second, the relationship here
no doubt is a commercial one. Third, one of the parties to the “agreement,” if one is found,
is Lark, which is not an American citizen.
60) To the extent Sen Mar, Inc. v. Tiger Petroleum Corp., 776 F.Supp. 879, 882-83 (S.D.N.Y. 1991),
reaches a different conclusion regarding the proper reading of this provision of the
Convention, this Court declines to follow it.
61) Under this construction of the document, Lark's agency cases are irrelevant. Lark does not
contend, and the evidence does not support, that it was an agent for the seller. That is,
this is not a case where Kahn Lucas is trying to hold Lark (the seller's agent) to the
contract despite the fact that its “principal” (the manufacturer) is disclosed.
62) See G. Born, International Civil Litigation in United States Courts 951-55 (3d ed. 1996).
63) New York Convention Article I(3).
64) The U.S. reservation to the Convention provides:
The United States of America will apply the Convention only to differences arising out of
legal relationships, whether contractual or not, which are considered as commercial
under the national law of the United States. The United States of America will apply the
Convention, on the basis of reciprocity, to the recognition and enforcement of only those
awards made in the territory of another Contracting State.
9 U.S.C.A. §201. Many other signatories to the Convention have adopted similar
“commercial relationship” and “reciprocity” reservations. See 9 U.S.C.A. §201, reproducing
excerpts of many reservations.
65) See 9 U.S.C.A. §201.
66) See La Societe Nationale v. Shaheen Natural Resources Co., 585 F.Supp. 57 (S.D.N.Y. 1983),
aff'd, 733 F.2d 260 (2d Cir.), cert. denied, 469 U.S. 883 (1984); E.A.S.T., Inc. v. M/V Alaia, 876
F.2d 1168, 1172 (5th Cir. 1989) (“The principle of reciprocity is thus concerned with the
forum in which the arbitration will occur and whether that forum state is a signatory to the
Convention – not whether both parties to the dispute are nationals of signatory states.”);
Quigley, Convention on Foreign Arbitral Awards, 58 A.B.A.J. 821, 822 (1972).
67) See infra pp. 146-48.
68) See infra pp. 146-47.
69) See, e.g., National Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326, 331 (5th Cir.), cert. denied,
484 U.S. 943 (1987); Ledee v. Ceramiche Ragno, 684 F.2d 184, 185-86 (1st Cir. 1982); Tolaram
Fibers, Inc. v. Deutsche Engineering Der Voest Alpine Industrieanlagenbau GmbH, 1991 U.S.
Dist. Lexis 3565 (M.D.N.C. 1991).
70) Many states impose a reciprocity requirement with respect to the enforcement of foreign
judgments. See G. Born, International Civil Litigation in United States Courts 951-55 (3d ed.
1996). Arguably, the same considerations that justify this reciprocity requirement (and
that under the Convention) would also justify denying effect to arbitration agreements
providing for arbitration in, or with entities from, states that will not enforce such
agreements.
71) 817 F.2d 326, 331 (5th Cir.), cert. denied, 484 U.S. 943 (1987).
72) The U.S. reservation to the Convention is excerpted above. See supra p. 140. It provides, in
relevant part, that the United States “will apply the Convention only to differences arising
out of legal relationships, whether contractual or not, which are considered as
commercial under the national law of the United States.”
73) It also appears in other international arbitration conventions. See Inter-American
Convention Article 1; 1961 European Convention on International Arbitration Article I(1)(a).
74) See A. van den Berg, The New York Convention of 1958 51 (1981); U.N. Doc. E/CONF.26/SR.23;
Message from the President on the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, S. Exec. Doc. E, 90th Cong., 2d Sess. 18 (1968) (“commercial
matters reservation was included to remove a barrier to accession by nations having
separate civil and commercial codes which allow arbitration only of matters falling within
the latter.”) See also Island Territory of Curacao v. Solitron Devices, 356 F.Supp. 1, 13
(S.D.N.Y.), aff'd, 489 F.2d 1313 (2d Cir. 1973), cert. denied, 416 U.S. 986 (1974) (there is
“nothing to show what the purpose of the ‘commercial’ limitation was,” and that “[w]e may
logically speculate that it was to exclude matrimonial and other domestic relations
awards, political awards, and the like.”). Thus, in some states, “commercial” matters do
not include “civil” disputes, with the latter including a wide range of questions involving
consumers, statutory protections, and the like.
75) The language of the U.S. reservation provides that determinations whether a matter is
“commercial” will be made under the “national law of the United States.”
76) Like U.S. courts, foreign courts have generally interpreted the “commercial” relationship
requirement broadly. See Canada Packers Inc. v. Terra Nova Tankers Inc., XXII Y.B. Comm.
Arb. 668 (Ontario Ct. Just. 1992) (tort claims encompassed by Article I(3)'s “commercial”);
Carters (Merchants) Ltd v. Ferraro, IV Y.B. Comm. Arb. 275 (Corte di Appello di Napoli Feb.
20, 1975); European Grain & Shipping Ltd v. Bombay Extractions Ltd, VIII Y.B. Comm. Arb. 371
(Bombay High Ct. Nov. 5, 1981) (“We have no doubt that the contract in the instant case,
which was for the sale and purchase of a commodity, was clearly a contract which brought
about a legal relationship which was commercial in nature under Indian law.”);
Oberlandesgericht of Hamm, 2 November 1983, XIV Y.B. Comm. Arb. 629 (1989). But see
India Organic Chemicals, Ltd v. Chemtex Fibres Inc. (1978) All India Rep. 106 (High Ct. of
Bombay 1977) (transfer of technology not “commercial” under Indian law).
77) See Societe Generale de Surveillance v. Raytheon European Management & Sys. Co., 643
F.2d 863 (1st Cir. 1981); Sumitomo Corp. v. Parakopi Compania Maritime, 477 F.Supp. 737
(S.D.N.Y. 1979), aff'd mem., 620 F.2d 286 (2d Cir. 1980); Siderius, Inc. v. Compania de Acero
del Pacific, 453 F.Supp. 22 (S.D.N.Y. 1978); Star-Kist Foods v. Diakan Hope, 423 F.Supp. 1220
(C.D. Cal. 1976); Antco Shipping Co. v. Sidermar, SpA, 417 F.Supp. 207 (S.D.N.Y. 1976); Weight
Watchers of Quebec v. Weight Watchers Int'l, 398 F.Supp. 1057 (E.D.N.Y. 1975); Island
Territory of Curacao v. Solitron Devices, Inc., 356 F.Supp. 1 (S.D.N.Y.), aff'd, 489 F.2d 1313 (2d
Cir. 1973), cert. denied, 416 U.S. 986 (1974); Faberge Int'l Inc. v. Di Pino, 491 N.Y.S.2d 345
(1985) (employment agreement is commercial, notwithstanding existence of fiduciary
duties).
78) Sumitomo Corp. v. Parakopi Compania Maritima, 477 F.Supp. 737, 740 (S.D.N.Y. 1979), aff'd,
620 F.2d 286 (2d Cir. 1980).
79) Prograph Int'l Inc. v. Barhydt, 928 F.Supp. 983 (N.D. Calif. 1996) (employment dispute is
“commercial” within meaning of Convention); Faberge Int'l Inc. v. Di Pino, 491 N.Y.S.2d 345
(App. Div. 1985) (“The fact that the employer-employee relationship may include a degree
of fiduciary obligation does not deprive it of its commercial character.”).
80) See note 77 supra.
81) E.G., Island Territory of Curacao v. Solitron Devices, Inc., 356 F.Supp. 1 (S.D.N.Y.), aff'd, 489
F.2d 1313 (2d Cir.), cert. denied, 416 U.S. 986 (1973).
82) E.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985). See infra
pp. 257-83.
83) E.g., Corcoran v. Ardra Ins. Co., 566 N.Y.S.2d 575 (1990).
84) E.g., Meadows Indemnity Co. v. Baccala & Shoop Ins. Services, Inc., 760 F.Supp. 1036
(E.D.N.Y. 1991).
85) E.g., Antco Shipping Co. v. Sidermar SpA, 417 F.Supp. 207 (S.D.N.Y. 1976) (maritime contract
of affreightment).
86) Bureau Wijsmuller v. United States, 1976 A.M.C. 2514 (S.D.N.Y. 1976). The decision also relied
on U.S. statutory restrictions on the capacity of the U.S. Government to enter into
arbitration agreements. See infra pp. 231-39.
87) See G. Born, International Civil Litigation in United States Courts 235-66, 733-38 (3d ed.
1996).
88) Such disputes over the terms “civil or commercial” have arisen under the Hague Service
Convention and the Hague Evidence Convention. See G. Born, International Civil Litigation
in United States Courts 800-01, 896-97 (3d ed. 1996).
89) Many international “concession agreements” between developing states and
multinational companies contain arbitration clauses. These concession agreements
typically involve the development of the developing nation's natural resources, a subject
that U.S. courts have sometimes been reluctant to inquire into in the foreign sovereign
immunity and act of state contexts. See G. Born, International Civil Litigation in United
States Courts 245, 737 (3d ed. 1996). Nonetheless, the drafters of arbitral clauses in typical
concession agreements clearly intended that these clauses, and any subsequent arbitral
awards, would fall within the Convention's “commercial” scope. Congress shares that
intention, as demonstrated by its amendment of the FAA to make clear that the act of
state doctrine does not apply to frustrate enforcement of arbitral awards or agreements.
9 U.S.C. §15.
90) India Organic Chemicals, Ltd v. Chemtex Fibres Inc. (1978) All India Rep. 106 (High Ct. of
Bombay 1977) (transfer of technology not “commercial” under Indian law).
91) See 9 U.S.C.A. §201.
92) 9 U.S.C. §202. Section 202 is reprinted in Appendix D.
93) See infra pp. 388-89. The purpose of this provision was to make clear that the Convention
was applicable to agreements even if they were also subject to the first chapter of the
FAA. As discussed above, however, §202 excludes agreements and awards between U.S.
nationals having no reasonable relationship to the United States. See supra pp. 125-26.
94) UNCITRAL Model Law Article 1(1); FAA §1.
95) See, e.g., Tobey v. County of Bristol, 23 Fed. Cas. 1313, 1321-23 (C.C. D. Mass. 1845), discussed
above at supra pp. 37-38 & infra pp. 156-57.
96) E.g., Naón, Arbitration in Latin America, 5 Int'l Arb. 137 (1989); S. Saleh, Commercial
Arbitration in the Arab Middle East 49-50 (1984).
97) E.g., Ala. Code §6-6-1 (1977); Neb. Rev. Stat §25-2103 (1979); N.D. Cent. Code §32-29-01
(Supp. 1985); Va. Code §8.01-577 (1984); W. Va. Code §55-10-1 (1981). See also National
Gypsum Co. v. Northern Sales Ltd [1963] Lloyd's Rep. 499 (Supreme Court of Canada)
(holding that agreement to arbitrate future disputes was void under Quebec law; Quebec
law subsequently amended to overturn result).
98) See, e.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n.21
(1985) (indicating disapproval of “prospective waiver” of statutory antitrust remedies).
99) Geneva Protocol of 1923, Article I. See supra p. 17.
100) UNCITRAL Model Law on International Commercial Arbitration, Article 7(1), reprinted in
Appendix F.
101) FAA, 9 U.S.C. §2.
102) A. Redfern & M. Hunter, International Commercial Arbitration 9-11 (2d ed. 1991); A. van den
Berg, The New York Convention of 1958 147 (1981).
103) Cox v. Fremont County Pub. Building Auth., 415 F.2d 882, 886 (10th Cir. 1969) (“There is no
dispute requiring arbitration until a matter of fact or law is asserted by one side and
denied by the other”).
104) What the Convention would not appear to have intended was the result arguably
permitted under some U.S. and English judicial decisions. An English Court of Appeal
decision, rendered prior to the English Arbitration Act, 1996, seems to have held that no
“dispute” exists, and therefore no arbitration will be compelled, if one party has no
reasonable basis for its claims or defenses. Sethia Liners Ltd v. State Trading Corp. of India
Ltd [1986] 1 Lloyd's Rep. 31, 32 (“If the Court is satisfied that the plaintiffs are clearly right
in law, and that the defendants have no arguable defence, then it will not avail the
defendants to have raised a point of law which the Court can see is in fact bad. In those
circumstances, the defendants cannot be heard to say that there was a dispute to be
referred to arbitration.”). This rationale, if imported into the Convention or other national
legal systems, would pose a threat to the arbitration process, among other things by
creating incentives and opportunities for the parallel proceedings and judicial
interference that arbitration is intended to avoid.
105) For a national court decision refusing to interpret Article II(1) narrowly, see Hi-Fert Pty
Limited v. Kinkiang Maritime Carriers, 12 Mealey's Int'l Arb. Rep. C-1 (N.S.W. Australia 1997)
(rejecting argument that claims under Australian Trade Practices Act are non-arbitrable).
106) See infra pp. 321-23, for a discussion of the application of arbitration agreements to non-
contractual claims, including claims based on statutory protections and common law tort
theories. Of course, the limitation of the Convention to “commercial” matters (pursuant to
many states' reservations) and the “non-arbitrability” exceptions under the Convention
and national law would continue to apply. See infra pp. 243-95.
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Document information
Part One : Chapter 3. Formation and Validity of
Publication International Arbitration Agreements
International Commercial 3 Formation and Validity of International Arbitration Agreements
Arbitration: Commentary and
Materials (Second Edition) The formation and validity of international arbitration agreements are of critical importance
to the arbitral process. Both issues arise in many international arbitrations and can have a
decisive impact on the course of arbitral proceedings. This Chapter provides an overview of the
Bibliographic reference issues of formation and validity of international arbitration agreements.
'Part One : Chapter 3. First, we examine the presumptive validity of international arbitration agreements under the
Formation and Validity of New York Convention and other contemporary international and national authorities. Second,
International Arbitration the Chapter discusses the formation of international arbitration agreements. Third, we
Agreements', in Gary B. Born , consider the more important substantive bases for challenging the enforceability of
International Commercial international arbitration agreements, again under leading international and national
Arbitration: Commentary and instruments. Fourth, we explore the so-called non-arbitrability doctrine, which provides that
Materials (Second Edition), certain types of disputes may not be arbitrated, under international and national authorities.
2nd edition (© Kluwer Law
International; Kluwer Law A. Presumptive Validity of International Arbitration Agreements
International 2001) pp. 155 - As discussed above, international commercial arbitration is ordinarily based on the parties'
296 voluntary consent to arbitrate their disputes. (1) “Obviously, no arbitration is possible without
its very basis, the arbitration agreement.” (2) As a consequence, the legal rules governing the
validity of international arbitration agreements are of great practical importance.
P "155"
P "156"
1. Historic Unenforceability of International Arbitration Agreements
Until relatively recently, legislatures and courts in many nations treated arbitration
agreements – both domestic and international – as unenforceable. This was true both in major
trading states and elsewhere.
Historically, U.S. and English courts held that agreements to arbitrate were revocable at will,
(3) because they “ousted” courts of jurisdiction contrary to public policy. (4) Even when such
agreements were deemed valid and binding, a party could not obtain specific performance or
equitable relief ordering its counter-party to arbitrate. (5)
Throughout the 19th century, this historic common law hostility towards arbitration agreements
generally prevailed in U.S. courts. (6) U.S. courts refused either to order arbitration in
accordance with an arbitration agreement or to stay judicial proceedings where a valid
arbitration agreement covered the parties' dispute. At the same time, damages were seldom
an effective means of enforcement, since proof of injury resulting from a refusal to arbitrate
was difficult. As a consequence, the utility of commercial arbitration in the United States was
severely limited until well into this century. (7) As the Second Circuit once wrote, with some
exaggeration, “[one] of the dark chapters in legal history concerns the validity, interpretation
and enforceability of arbitration agreements.” (8)
Other nations also historically regarded arbitration agreements as unenforceable. Countries in
many parts of the world refused for much of the past century to recognize or enforce
international or domestic arbitration agreements. (9) Many developing states particularly in
P "156" the Middle East, Latin America and Africa took the position that international arbitration
P "157" agreements were contrary to national interests and invalid. (10) This position was reflected
both in international agreements and national legislation. (11) Alternatively, in some countries,
arbitration agreements were permitted only as to existing disputes (as distinguished from
future disputes not yet known to the parties). (12)
2. Presumptive Validity of International Arbitration Agreements Under New York Convention
and National Arbitration Legislation
During the course of the 20th century, historic distrust of the arbitral process was gradually
eroded. During the 1920s, the signing of the Geneva Protocol and Geneva Convention, the
enactment of the FAA in the United States, and the founding of the International Chamber of
Commerce's arbitration facilities in Paris signalled important changes in national and
international attitudes towards arbitration. (13) Following WWII, the drafting of the New York
Convention (in 1958) and the promulgation of the UNCITRAL Arbitration Rules (in 1976) marked
important advances in international acceptance of the arbitral process. (14) Finally, the
sweeping liberalizations and privatizations of the 1980s and 1990s were accompanied by
broader acceptance of international arbitration, including in developing nations which had
historically been the greatest sceptics of arbitration.
a. Presumptive Validity of International Agreements under The New York Convention
The New York Convention has played a critical part in securing the enforceability of
international arbitration agreements during the past several decades. More than 120 nations
are now party to the Convention, including almost all major developed and developing states.
 Central to the Convention's role in facilitating the international arbitral process are its
provisions regarding the enforceability of international arbitration agreements. (15)
As we will see, a primary objective of the New York Convention was to overturn historic mistrust
P "157" of the arbitral process and to render international arbitration agreements more readily
P "158" enforceable. (16) Thus, Article II of the Convention provides:
1. Each Contracting State shall recognize an agreement in writing under which the parties
undertake to submit to arbitration all or any differences which have arisen or which may
arise between them in respect of a defined relationship, whether contractual or not,
concerning a subject matter capable of settlement by arbitration.
2. The term ‘agreement in writing’ shall include an arbitral clause in a contract or an
arbitration agreement, signed by the parties or contained in an exchange of letters or
telegrams.
3. The court of a Contracting State, when seized of an action in a matter in respect of which
the parties have made an agreement within the meaning of this article, shall, at the
request of one of the parties, refer the parties to arbitration, unless it finds that the said
agreement is null and void, inoperative or incapable of being performed.
Article II(1) and II(3) impose a basic obligation to “recognize” written agreements to arbitrate
and to “refer” the parties to such agreements to arbitration. The phrase “refer the parties to
arbitration” was based on the language of Article 4(1) of the Geneva Protocol of 1923, and was
included in the Convention without discussion. (17)
Article II(3) does not appear to leave national courts with any discretion to deny a stay of local
judicial proceedings where an arbitration agreement is enforceable under the Convention. (18)
U.S. courts have frequently said that the judicial role in determining whether to enforce an
international arbitration agreement under the New York Convention is very limited. (19)
Indeed, assuming that jurisdictional, venue, and similar requirements are satisfied, (20) the
FAA has been held to “leave no place for the exercise of discretion by a district court, but
instead [to] mandate that district courts shall direct the parties to proceed to arbitration on
issues as to which an arbitration agreement has been signed.” (21) Lower U.S. courts have
concluded that Article II(3) requires that national courts “shall” refer parties to arbitration. (22)
P "158"
P "159"
Courts in most major trading states have interpreted Article II in an avowedly “pro-
enforcement” fashion. (23) In the words of the U.S. Supreme Court:
[t]he goal of the Convention, and the principal purpose underlying American adoption and
implementation of it, was to encourage the recognition and enforcement of commercial
arbitration agreements in international contracts and to unify the standards by which
agreements to arbitrate are observed.... (24)
Consistent with this view, most national courts have emphasized the Convention's “pro-
arbitration” policies and have narrowly interpreted the Convention's exceptions to the
enforceability of arbitration agreements. (25)
b. Article II's Exceptions to the Enforceability of International Arbitration Agreements
Article II of the Convention contemplates a variety of grounds for objecting to the
enforceability of international arbitration agreements. In particular, Article II(3) contemplates
non-enforcement of an arbitration agreement if the agreement is “null and void, inoperative or
incapable of being performed,” while Article II(1) permits non-enforcement of an arbitration
agreement if it appears the claims asserted in the arbitration are “non-arbitrable.”
Preliminarily, it is important to note that Article II was added to the Convention in the closing
days of negotiations. (26) Little thought, and less drafting attention, was given to the provision.
Given the fundamental importance of Article II, and its treatment of arbitration agreements,
this was unfortunate.
P "159"
P "160"
i. “Null and Void, Inoperative or Incapable of Being Performed”
The New York Convention's text provides only limited guidance as to the meaning of Article II's
exceptions. Most authorities regard Article II(3)'s “null and void” exception as referring to cases
in which an arbitration agreement was defective or invalid from the outset. (27) Typical
examples of defenses falling within the category include defects in formation, fraud, duress,
unconscionability, illegality, mistake, and lack of capacity. (28)
Article II(3) also permits non-enforcement of “inoperative” agreements. One leading
commentator has concluded that inoperative agreements are limited to those that were at one
time valid, but which thereafter ceased to have effect. (29) That would presumably include
cases of waiver, revocation, or termination of the arbitration agreement, or failure to comply
with time limits prescribed by the arbitration agreement.
Article II(3) also allows non-enforcement of arbitration agreements that are “incapable of being
performed.” This presumably includes cases where the parties have agreed upon a procedure
that is physically impossible to follow (for example, because a named arbitrator has died, an
arbitral institution has gone out of existence or an arbitral situs has become inaccessible). (30)
It also arguably includes cases of arbitration provisions that are unenforceable because they
are vague, indefinite or internally contradictory. (31)
 ii. “Not Capable of Settlement by Arbitration”
Article II(1) of the Convention excepts from the Convention's provisions disputes whose “subject
matter is not capable of settlement by arbitration.” This so-called “non-arbitrability”
exception encompasses disputes involving matters of public policy which are deemed
inappropriate for resolution by arbitration, as distinguished from national judicial,
administrative, or other governmental proceedings. (32) Representative examples of disputes
which are “non-arbitrable” in different jurisdictions include consumer claims, employer-
employee claims, securities disputes, competition issues, and franchisor-franchisee disputes.
iii. Recurrent Issues Under Article II
P "160" Despite their apparent simplicity, Articles II(3) and II(1) are far from models of clarity. Beneath
P "161" the surface of Article II(3)'s command that national courts recognize valid arbitration
agreements lie a tangle of choice of law and substantive contract law issues. First, in
considering whether to enforce an arbitration agreement under Article II(3) and Article II(1),
one must first decide whether arbitrability questions are to be resolved by national courts or
by arbitrators. Second, one must then determine what law governs the formation, validity, and
legality of the alleged arbitration agreement. Finally, after conflict of laws questions have been
resolved, national courts must then consider substantive issues of contract formation, validity,
and legality under applicable law.
c. Presumptive Validity of International Arbitration Agreement Under Developed National
Arbitration Legislation
Virtually all developed trading states (and many other nations) have enacted arbitration
legislation which parallels the New York Convention's rule that international arbitration
agreements are presumptively enforceable. (33) Like Article II of the Convention, this
legislation typically provides that international arbitration agreements are valid and
enforceable, subject only to defined grounds for challenging the validity of such agreements.
Leading examples of such legislation include Article 8 of the UNCITRAL Model Law and §2 of the
FAA. (34)
Parallelling the New York Convention, Article 8 of the UNCITRAL Model Law provides that
a court before which an action is brought in a matter which is the subject of an arbitration
agreement shall, if a party so requests ... refer the parties to arbitration unless it finds that the
agreement is null and void, inoperative or incapable of being performed. (35)
Likewise, §2 of the FAA provides that written arbitration agreements “shall be valid,
irrevocable, and enforceable, save upon such grounds as exist at law or in equity for revocation
of any contract.” (36) Other contemporary national arbitration legislation similarly guarantees
the presumptive validity of international arbitration agreements, generally subject only to
ordinary contract defenses. (37)
3. Selected Materials Concerning the Presumptive Validity of International Arbitration
Agreements
P "161" The materials excerpted below introduce the presumption, under most contemporary
P "162" international and national authorities, that international arbitration agreements be
recognized. First, consider Decision No. 24 of the Andean Commission, which reflects historic
distrust of the international arbitral process. Also consider the Saudi and Jordanian arbitration
legislation excerpted below, which illustrate lingering doubts about international arbitration
in some quarters. Second, consider the UNCITRAL, Swiss, and U.S. arbitration legislation,
reproduced below, which reflects contemporary legislative approaches to international
arbitration agreements. Third, reread the district court's opinion in Kahn Lucas, Inc. v. Lark
International Ltd, (38) which is a representative example of how U.S. courts consider the
formation of arbitration agreements under the Convention. Fourth, consider the opinion in
Ledee v. Ceramiche Ragno, (39) which interprets Article II(3)'s exception for agreements which
are “null and void.” Finally, consider the Interim Award in ICC Case No. 6149 of 1990, (40) which
illustrates the application of the New York Convention by an international arbitral tribunal.
DECISION 24 OF THE ANDEAN COMMISION CONCERNING TREATMENT OF FOREIGN CAPITAL
Article 51 10 Int'l Legal Materials 152 (1971)
[No agreement concerning foreign investment shall contain provisions] which withdraw
possible ... controversies from the national jurisdiction of the recipient country ...
KINGDOM OF SAUDI ARABIA ARBITRATION REGULATIONS
Royal Decree M/46 dated 12-7-1403 (April 25, 1983)
Article 3
3. Government Agencies are not allowed to resort to arbitration for settlement of their disputes
with third parties except after having obtained the consent of the President of the Council of
Ministers. This provision may however be amended by resolution of the Council of Ministers.
JORDANIAN LAW NO. 35 OF 1983
[excerpted above at p. 103]
P "162"
P "163"
BRAZILIAN LAW NO. 9,307 OF 23 SEPTEMBER 1996
 Articles 3 & 7
Article 3. The interested parties may submit the settlement of their disputes to an arbitral
tribunal by virtue of an arbitration agreement, which may be in the form of either an
arbitration clause or a submission to arbitration (acte de compromis).
Article 7. If there is an arbitration clause but resistance as to the commencement of the
arbitral proceedings, the interested party may request the Court to summon the other party to
appear in Court so that the submission to arbitration may be signed; the Judge shall order a
special hearing for this purpose.
First Paragraph: The plaintiff shall specify, in detail, the subject matter of the arbitration,
attaching to its motion the document containing the arbitration clause.
Second Paragraph: If the parties attend the hearing, the Judge shall first try to conciliate their
dispute. If he does not succeed, the Judge shall try to persuade them to sign, by mutual
agreement, the submission to arbitration.
Third Paragraph: If the parties disagree on the terms of the submission to arbitration, the
Judge, after hearing the defendant, shall decide on the contents thereof, either at the same
hearing or within ten days, in accordance with the provisions of the arbitration clause, and
taking account of the provisions of Articles 10 and 21, second paragraph, of this Law.
Fourth Paragraph: If the arbitration clause fails to provide for the appointment of arbitrators,
the Judge, after hearing the parties, shall rule thereon, being allowed to appoint a sole
arbitrator to decide the dispute.
Fifth Paragraph: If the plaintiff, without good cause, fails to attend the hearing designated for
the drafting of the submission to arbitration, the case will be terminated without judgment on
the merits.
Sixth Paragraph: If the defendant fails to attend the hearing, the Judge shall have the authority,
after hearing the plaintiff, to establish the contents of the submission to arbitration, and to
appoint a sole arbitrator.
Seventh Paragraph: The judgment granting the motion shall have the force of a submission to
arbitration.
UNCITRAL MODEL LAW
Article 8 [excerpted below at p. 1014]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 178 [excerpted below at p. 1033]
P "163"
P "164"
FEDERAL ARBITRATION ACT
9 United States Code §§2, 201-208 [excerpted below at pp. 999, 1002-3]
LEDEE v. CERAMICHE RAGNO
684 F.2d 184 (1st Cir. 1982) [excerpted above at pp. 98-100]
KAHN LUCAS LANCASTER, INC. v. LARK INTERNATIONAL LTD
956 F.Supp. 1131 (S.D.N.Y. 1997) [excerpted above at pp. 129-33]
INTERIM AWARD IN ICC CASE NO. 6149 OF 1990
XX Y.B. Comm. Arb. 41 (1995) [excerpted above at pp. 104-07]
Notes on Presumptive Validity of International Arbitration Agreements
1. Historic hostility of developing states to international arbitration. For much of the 20th
century, developing states treated international arbitration with an unrelenting antipathy.
Numerous public pronouncements; and academic commentaries condemned international
arbitration as an unacceptable, unjustifiable infringement upon the sovereignty of developing
(and other) states, which was to be vigorously resisted. Decision 24 of the Andean Commission
reflects this attitude.
Why were developing states historically mistrustful of international arbitration? What are the
benefits to a state from treating international arbitration agreements as unenforceable? What
are the costs?
Consider Brazilian Law 9,307 of 23 September 1996. Note the distinction between an
“arbitration agreement” and a “submission to arbitration.” Until the 1996 legislation, only
“submissions to arbitration,” which were entered into after a dispute arose, were valid; pre-
dispute arbitration clauses were not. Why would such an approach be adopted?
2. Abandonment of historic hostility of developing countries to international arbitration. The
historic hostility of developing countries to international arbitration has substantially eroded
over the past two decades. Prior to 1980, the New York Convention had not been ratified by
(among others) Algeria, Argentina, Bahrain, Bangladesh, Bolivia, Burkina Faso, Cameroon, China,
Costa Rica, Guatemala, Guinea, Haiti, Indonesia, Kenya, Laos, Lebanon, Malaysia, Mali,
Mauritania, Mozambique, Nepal, Panama, Paraguay, Peru, Saudi Arabia, Senegal, Singapore,
Turkey, Uruguay, Venezuela, Viet Nam, and Zimbabwe. Between 1980 and the present, all of
these states acceded to the Convention.
 Consider again Brazilian Law 9,307 of 23 September 1996. Note that it provides a mechanism for
enforcing pre-dispute arbitration agreements. Despite the defects in the approach of Article 7
of Brazilian Law 9,307, it is a step towards enforceability of arbitration agreements.
What explains the abandonment of hostility by developing states towards international
arbitration? Consider briefly the structure and enforceability of international arbitration
agreements and awards. If a company based in a developing state wishes to avail itself of
P "164" contractual (or other) rights against a foreign investor, in an enforceable fashion, is
P "165" international arbitration a reasonably good remedy? What can a national of a developing
state do with a judgment it obtains from its own courts against a foreign investor who badly
performs a contract within the foreign company? What can a company based in a developing
state do with an arbitral award it obtains against a foreign investor? What can a company from
a foreign state do to resist an arbitral award made against it? Where will that award likely have
to be enforced?
3. Historic unenforceability of arbitration agreements at common law. Mistrust of the arbitral
process was not confined to developing states. As we have seen, arbitration agreements were
historically regarded as unenforceable at common law in both England and the States. See
supra pp. 156-57.
Joseph Story stated the historic common law position in the United States, inherited from
England, as follows:
Now we all know that arbitrators, at the common law, possess no authority whatsoever, even to
administer an oath, or to compel the attendance of witnesses. They cannot compel the
production of documents and papers and books of account, or insist upon a discovery of facts
from the parties under oath. They are not ordinarily well enough acquainted with the principles
of law or equity, to administer either effectually, in complicated cases; and hence it has often
been said, that the judgment of arbitrators is but rusticum judicium. Ought then a court of
equity to compel a resort to such a tribunal, by which, however honest and intelligent, it can in
no case be clear that the real legal or equitable rights of the parties can be fully ascertained or
perfectly protected? ... [An arbitration agreement is not specifically enforceable because it] is
essentially, in its very nature and character, an agreement which must rest in the good faith
and honor of the parties, and like an agreement to paint a picture, to carve a statue, or to write
a book ... must be left to the conscience of the parties, or to such remedy in damages for the
breach thereof, as the law has provided.
Tobey v. County of Blistol, 23 Fed.Cas. 1313, 1321-23, (C.C.D. Mass. 1845). Consider Story's
reasoning. Is it persuasive? Why should arbitration agreements be permitted?
4. Presumptive validity of international arbitration agreements under the New York Convention.
Consider Article II of the New York Convention. What exactly does Article II provide with respect
to the validity of international arbitration agreements? Are such agreements always valid
under Article II? If not, when are arbitration agreements valid? What does it mean for an
arbitration agreement to be “null and void”? What exactly does Article II accomplish?
5. “Pro-enforcement” bias of Article II. Both Ledee and Lark International interpret Article II of
the New York Convention and the FAA as establishing a strong presumption favouring the
enforceability of international arbitration agreements: “federal policy strongly favors
arbitration as an alternative dispute resolution process.”Lark International, 956 F.Supp. at 1135.
Other lower U.S. courts have endorsed the same pro-enforcement bias. Riley v. Kingsley
Underwriting Agencies, Ltd, 969 F.2d 953, 960 (10th Cir. 1992) (“‘null and void’ exception ... is to
be narrowly construed”); Rhone Mediterranee, 712 F.2d at 53-54 (“The policy of the Convention is
best served by an approach which leads to upholding agreements to arbitrate.”); I.T.A.D.
Associates, Inc. v. Podar Brothers, 636 F.2d 75 (4th Cir. 1981); Technetronics, Inc. v. Leybold-
Geaeus GmbH, 1993 U.S. Dist. Lexis 7683 (E.D. Pa. 1993); Samson Resources Co. v. Int'l Business
Partners, Inc., 906 F.Supp. 624 (N.D. Okla. 1995) (“the policy favoring arbitration is ‘even stronger
in the context of international business transactions’”); Meadows Indemnity Co. v. Baccala &
Shoop Ins. Serv., Inc., 760 F.Supp. 1036, 1043 (E.D.N.Y. 1991); Tennessee Imports, Inc. v. Filipi, 745
F.Supp. 1314 (M.D. Tenn. 1990); Ferrara SpA v. United Grain Growers, Ltd, 441 F.Supp. 778 (S.D.N.Y.
1977).
Lark International, Ledee, and other lower U.S. courts have said that the Convention prescribes
weightier pro-enforcement policies than the domestic FAA. According to one court, quoted in
Lark International, “the liberal federal arbitration policy ‘applies with special force in the field
of international commerce.’”David L. Threlkeld & Co. v. Metallgesellschaft Ltd, 923 F.2d 245, 248
(2d Cir. 1991) (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 631
(1985)). See also Pepsico Inc. v. Oficina Central de Asesoria y Ayuda Tecmica, CA, 945 F.Supp. 69
(S.D.N.Y. 1996) (“strong policy favoring prompt arbitration expressed in the U.N. Convention”);
Samson Resources Co. v. Int'l Business Partners, Inc., 906 F.Supp. 624 (N.D. Okla. 1995) (“the
policy favoring arbitration is ‘even stronger in the context of international business
transactions’”); Filantro SpA v. Chilewich Int'l Corp., 789 F.Supp. 1229 (S.D.N.Y. 1992).
What exactly does it mean to say that the Convention is “pro-arbitration” or “pro-
enforcement”? Consider the different issues to which a “pro-arbitration” policy might apply: (a)
P "165" doubts will be resolved in favor of the existence of an arbitration agreement; (b) doubts will be
P "166" resolved in favor of the validity and legality of an arbitration agreement; and (c) doubts will
be resolved in favor of interpreting the scope of an arbitration agreement to cover borderline
disputes. Is it appropriate for a “pro-arbitration” policy to be applied to any or all of these
questions? Why? Would it not be more appropriate to enforce and interpret arbitration
agreements “neutrally,” like other contracts, without any particular bias?
 6. Presumptive validity of international arbitration agreements under contemporary national
arbitration statutes. Consider Article 8(1) of the UNCITRAL Model Law and §2 of the FAA. What
does each provide with respect to the validity of arbitration agreements? Compare Article 8(1)
of the UNCITRAL Model Law with §2 of the FAA. What are their differences? How does each
compare with Article II of the New York Convention?
Are all arbitration agreements valid under Article 8 and §2? What arbitration agreements are
invalid?
7. Grounds for invalidity of international arbitration agreements. What are the possible grounds
for challenging the validity of international arbitration agreements? What are the usual bases
for disputing the existence or validity of other types of contract? Is there any reason that
generally-applicable contract law rules should not provide the grounds for challenging the
validity and existence of arbitration agreements? The substantive grounds for challenging the
validity or existence of international arbitration agreements are detailed below. See infra pp.
167-242.
8. Representative examples of national laws disfavoring arbitration. Consider the Jordanian
Merchandise Maritime Law, set forth above, which invalidates arbitration agreements.
Consider also the Saudi Arabian legislation excerpted above, requiring governmental approval
of arbitration agreements entered into by “Government Agencies.” What is the purpose of such
legislation? Are valid public policies served by these statutes? Is such legislation consistent
with Article II of the New York Convention?
9. Separability of arbitration agreement under Article II of the Convention. Recall the
separability doctrine, which provides that arbitration clauses are ordinarily “separable” from
the underlying contract in which they appear. See supra pp. 55-74. Consider again the
suggestion that the New York Convention requires application of the separability doctrine
(save where otherwise agreed). See supra p. 70.
10. Choice of law applicable to Article II exceptions for arbitration agreements which are “null
and void, inoperative or incapable of being performed?” What law is applicable to Article II
above. This is discussed in detail above. See supra pp. 113-16.
11. Alternative explanation for Rhone – “submerged” forum non conveniens considerations
applicable to “foreign” arbitrations under Article II(3). The result, and to some extent the
reasoning, in Rhone may best be explained as a peculiar kind of forum non conveniens
decision. In Rhone, the parties' agreement called for arbitration in Italy. If the U.S. court in
Rhone had held the parties' arbitration agreement invalid under Italian law, and permitted
U.S. litigation to go forward, Italian courts might never have had the opportunity to consider
the arbitration agreement's validity under Italian law. That is unsatisfactory: Italian courts are
much better placed than U.S. courts to apply Italian arbitration statutes, and ought to be given
the opportunity to do so where arbitrations in Italy are contemplated. The Rhone court's
unwillingness to hold the parties' agreement invalid under Italian law may in fact reflect a
recognition that U.S. courts were not the most appropriate forums for such litigating issues.
A forum non conveniens theory is made express in some lower U.S. court decisions, which
reason that a foreign arbitration should be permitted to go forward, subject to the power of the
tribunal and foreign courts to stop it if the parties' agreement is invalid. See Meadows
Indemnity Co. v. Baccala & Shoop Ins. Serv., Inc., 1991 U.S. Dist. Lexis 4144 (E.D.N.Y. 1991);
Marchetto v. DeKalb Genetics Corp., 711 F.Supp. 936 (N.D. Ill. 1989). Is this a sensible approach?
If this is the rationale of a decision, note the very limited effect that the decision of a national
court outside the arbitral situs should have: it ought not to bind other courts (and in particular
not courts in the arbitral situs) or arbitrators nor to suggest that a valid arbitration agreement
exists. It merely indicates that one rationale is not the appropriate forum for deciding
challenges to the validity of a foreign arbitration agreement.
On the other hand, perhaps Rhone holds something more far-reaching. Suppose that Italian
courts did hold the arbitration agreement invalid. Does Rhone mean that the arbitration
agreement is nonetheless valid under the Convention? Could the arbitration go forward in
Italy? Does Rhone mean that the arbitration could go forward somewhere other than Italy?
12. Formation of international arbitration agreements: an initial view. In deciding whether or not
an international arbitration agreement has been formed, should a court or arbitral tribunal
adopt exactly the same approach as that applicable to other types of agreements? That is,
should the same showing, and degree of certainty with respect to proof, be required to
establish the formation of an arbitration agreement as an ordinary commercial contract?
P "166"
P "167"
Is there anything about the nature of an agreement to arbitrate (as distinguished from an
agreement to buy goods or provide services) which would call for either more rigorous or less
demanding standards of proof or certainty? For example, should especial clarity be required to
establish the existence of an arbitration agreement, which has the effect of waiving access to
judicial relief and appellate rights (as well as discovery, jury trials, and other procedural rights
under national law)? Alternatively, should the “pro-arbitration” policies of the Convention and
national arbitration legislation make it easier to demonstrate formation of an international
arbitration agreement? See infra pp. 182-85.
13. Interpretation of international arbitration agreements: an initial view. We discuss the
interpretation of international arbitration agreements in detail below. See infra 297-330. For
present purposes, consider the approach of First Options, Lark International, and ICC Case No.
6149 to interpreting the scope of the parties' arbitration agreements. Do these decisions adopt
 any presumptions regarding the scope of arbitration agreements? In cases of doubt, should
arbitration agreements be interpreted broadly or narrowly?
14. Involvement in dispute of non-parties to arbitration agreement. It is often the case that an
international commercial dispute will involve multiple parties, only some of whom are bound
by an arbitration agreement. In these circumstances, will the arbitration agreement be given
effect, notwithstanding the absence of important parties in the arbitration?
U.S. courts have generally required parties to arbitrate disputes, notwithstanding the absence
of important parties from the arbitration agreement and proceedings. Moses H. Cone Memorial
Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 20 (1983) (“an arbitration agreement must be enforced
notwithstanding the presence of other persons who are parties to the underlying dispute but
not the arbitration agreement”); Air Freight Services, Inc. v. Air Cargo Transport, Inc., 919 F.Supp.
321 (N.D. Ill. 1996) (“a plaintiff cannot avoid an arbitration agreement simply by adding as a
defendant a person not a party to the arbitration agreement; that person still can obtain a stay
of litigation pending arbitration”).

B. Formation of International Arbitration Agreements

International arbitration agreements, like other agreements, give rise to questions of contract
formation. It is elementary that Article II of the New York Convention, and most national
arbitration statutes, will only give effect to an international arbitration agreement that has
been validly formed.
1. Selected Materials on the Formation of International Arbitration Agreements
The materials excerpted below illustrate the issues which may arise from claims that the
parties' underlying contract, or their arbitration agreement, was not validly formed. These
issues include the application of the separability doctrine, choice-of-law problems, and the
respective roles of national courts and arbitrators in resolving disputes over contract
formation.
First, reread the JOC Oil award, where the arbitral tribunal considered issues of formation of
the underlying contract and the arbitration agreement. Then, read the U.S. Court of Appeals'
decision in Republic of Nicaragua v. Standard Fruit Co., (41) which takes a very expansive
approach to formation of international arbitration agreements, and the Swiss appellate court's
P "167" decision in Nokia Maillefer SA v. Mazzer, (42) which takes a somewhat different view. Next,
P "168" consider again the decisions in ICC Award No. 6149 and Lark International, and reread the
excerpted provisions of the UNCITRAL Model Law, the French Code of Civil Procedure, and the
Swiss Law on Private International Law. Finally, consider again the U.S. Supreme Court's
opinion in First Options, which addresses questions concerning the formation of arbitration
agreements and the allocation of authority between courts and arbitrators to decide such
questions.
ALL-UNION EXPORT-IMPORT ASSOC. SOJUZNEFTEEXPORT (MOSCOW) v. JOC OIL, LTD
[excerpted above at pp. 59-63]
REPUBLIC OF NICARAGUA v. STANDARD FRUIT CO.
937 F.2d 469 (9th Cir. 1991)
FERGUSON, JUDGE. The Republic of Nicaragua appeals from two orders of the district court
which denied its motion to compel international arbitration of a contract dispute (Count I) and
granted summary judgment to Standard Fruit Company (“SFC”) and its two parent companies,
Standard Fruit and Steamship Company (“Steamship”) and Castle & Cooke, Inc. (“C&C”), (43) on
Nicaragua's breach of contract claim (Count II). Nicaragua ... argues [on appeal] that the
questions of whether a document entitled “Memorandum of Intent” was a valid contract and
whether Standard Fruit Company was bound by that contract should have been referred to
arbitration in the first instance, not decided by the district court. Secondly, it contends that
disputed issues of material fact exist on the question of whether the Memorandum of Intent
was a binding contract for the purchase and sale of bananas, or merely an “agreement to
agree” at some later date....
We hold that although it was the court's responsibility to determine the threshold question of
arbitrability, the district court improperly looked to the validity of the contract as a whole and
erroneously determined that the parties had not agreed to arbitrate this dispute. Instead, it
should have considered only the validity and scope of the arbitration clause itself. In addition,
the district court ignored strong evidence in the record that both parties intended to be bound
by the arbitration clause. As all doubts over the scope of an arbitration clause must be
resolved in favor of arbitration, and in light of the strong federal policy favoring arbitration in
international commercial disputes, Nicaragua's motion to compel arbitration should have
P "168" been granted. Whether the Memorandum was binding, whether it covered banana purchases,
P "169" and whether Standard Fruit Company was bound by it are all questions properly left to the
arbitrators....
Since 1970, defendant Standard Fruit Company has been involved in the production and
purchase of bananas in western Nicaragua.... In 1979, the Sandinistas overthrew the Somoza
government in Nicaragua, forming a new “Government of National Reconstruction,” led by a
three-person junta. The Sandinistas wished to assume closer control over the banana industry,
and eventually to transfer SFC's shares in [certain banana plantation] partnerships to the
Nicaraguan government.... [After unsuccessful negotiations,] Nicaragua promulgated “Decree
No. 608,” which declared that the banana industry was to become a state monopoly, that all
plantation leases would be transferred to a new government agency, and that all preexisting
 lease, partnership, and fruit purchase contracts were nullified. SFC interpreted this decree as
an expropriation of its business, and immediately ceased all operations in Nicaragua. Sousane
and a few key employees left the country, and no more bananas were purchased. Both sides
were surprised and upset by the issuance of the decree and the almost immediate withdrawal
of SFC, with the bananas still ripe on the trees and ready to pick. As a result, Nicaragua
requested a “summit meeting” at which SFC and its two parent companies, Steamship and C&C,
could sort out their differences with the Sandinistas and come back to the country....
The meeting commenced in San Francisco on Friday, January 9, 1981, and continued for three
days of intense negotiations, led by C&C Vice President and General Counsel Robert Moore
(principal draftsman of the Memorandum) and Norton Tennille, Nicaragua's legal counsel. On
Sunday, January 11, a document entitled “Memorandum of Intent” was executed by two officers
of C&C, two officers of Steamship, and two Ministers of Trade and a member of the ruling junta
of Nicaragua. Sousane and other SFC representatives participated in the negotiations but did
not sign the document.
The Memorandum, termed an “agreement in principle,” contained an arbitration provision,
and envisioned the renegotiation and replacement of four operating contracts between SFC
and “the competent Nicaraguan national entity.” These were to include a detailed fruit
purchase contract, a technical assistance contract, the transfer of SFC's shares in the
production societies, and Nicaragua's purchase of SFC's assets in the country. The
Memorandum also established the essential elements of the fruit purchase contract: a price
term ($4.30 per box, less specified deductions), the length of the contract (five years, although
no dates were specified), and stated that it would cover all the first-quality bananas produced
by the Nicaraguan growers. Additional provisions rescinded the terms of Decree 608 for five
years, reinstated SFC's favored tax status, and clarified the financing arrangements for
Nicaragua's banana industry.
Within a week after the Memorandum was signed, SFC returned to Nicaragua and resumed its
operations there. In addition, it began negotiating with Nicaraguan officials regarding the
P "169" technical assistance and fruit purchase contracts referred to in the Memorandum, as well as
P "170" the share transfers and asset buy-outs. Many subsequent drafts of these four documents
were exchanged, some similar to the Memorandum and some not, although none were ever
finalized and executed. Throughout the negotiations and for the next 22 months, SFC complied
with the terms of the Memorandum as though it were bound by it. For example, it began paying
$4.30 per box of bananas.... During this period, C&C and SFC produced and disseminated a
number of documents which referred to the Memorandum as “a contract,” a “commitment,” or
“a final agreement,” several of which were signed and/or approved by Robert Moore. These
included a C&C press release sent out the day after the Memorandum was signed, SEC reports,
Annual Reports, letters, telexes, letters to the editor, and internal memoranda. Although SFC,
Steamship, C&C, and Nicaragua all acted as though the Memorandum was binding for almost
two years, the implementing contracts were never finalized, and SFC left Nicaragua for good on
October 25, 1982.
The arbitration clause [contained in the Memorandum] states that:
Any and all disputes arising under the arrangements contemplated hereunder ... will be
referred to mutually agreed mechanisms or procedures of international arbitration, such as the
rules of the London Arbitration Association.
Nicaragua admits that this clause is less than crystal clear and in fact refers to an association
which does not exist. However, it introduced a letter written by Robert Moore, principal
draftsman of the Memorandum, to explain the inconsistency. The letter, written to Nicaragua's
representative only three weeks after the negotiations, described the “deep sense of urgency
on both sides,” the “exceedingly tight time schedule,” and the “highly political nature of the
agreement (from the Nicaraguan standpoint).” It explained that, during the negotiations
themselves, neither side could remember the name of the arbitration body in London, and
stated: “What resulted was an agreement for providing for arbitration but without finally fixing
the forum or an automatic method of transmitting disputes.” Moore suggested “we would be
better off agreeing in advance that Paragraph IV was to be read and interpreted to provide for
arbitration by [a certain] agency,” and concluded “I am sure you will agree that it is best done
in the infancy of the agreement and at a time that negotiations of the implementing
agreements are being worked out.” (Emphasis added). (44) Although this letter seems to
suggest both that C&C intended the clause to be binding and that the parties intentionally left
it vague because they could not remember the name of the London arbitration agency, the
district court disregarded this evidence.
The district court applied a three-part test for arbitrability: “first, whether the parties entered
P "170" into a contract; second, that the contract included an agreement to arbitrate disputes, and
P "171" third, that the disputes covered by the arbitration agreement included those which are
before the Court.” It then proceeded to find that the Memorandum as a whole was not a
binding contract, that the arbitration provision was not a present agreement to submit to
arbitration, but merely “a provision declaring the expectations of the parties that contracts to
be negotiated later would include agreements to arbitrate.” ... The court [also] determined that
the phrase “all arrangements contemplated hereunder” in Paragraph IV referred only to the
“implementing agreements” subsequently to be negotiated, executed, and performed in
Nicaragua, and not to the Memorandum itself....
Section 2 [of the FAA] ... embodies a clear federal policy of requiring arbitration unless the
agreement to arbitrate is not part of a contract evidencing interstate commerce or is
revocable “upon such grounds as exist at law or in equity for the revocation of any contract.” ...
[T]his “‘liberal federal policy favoring arbitration agreements’ ... is at bottom a policy
 guaranteeing the enforcement of private contractual arrangements.”Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625 (1985) (quoting Moses H. Cone, 460 U.S. at 24).
“Thus, as with any other contract, the parties' intentions are generously construed as to issues
of arbitrability.”Id. at 626. Therefore, the only issue properly before the district court was
whether the parties had entered into a contract ... committing both sides to arbitrate the issue
of the contract's validity....
Nicaragua's primary claim [or appeal] is that the three-part test applied to determine whether
the parties had in fact agreed to arbitrate violates Prima Paint, which expressly held that
courts may not consider challenges to a contract's validity or enforceability as defenses
against arbitration.... In the instant case, the district court made a preliminary “Factual
Conclusion” that the Memorandum “was not intended as a binding contract,” in direct
opposition to the Prima Paint rule. (45) ... [This holding relied] chiefly on the trial testimony of
Robert Moore, who drafted most of the Memorandum, and on what the court termed the
“unambiguous” language of the document itself. However, as Nicaragua correctly points out,
Moore's testimony directly conflicts with contemporary documents in the record, which should
have precluded any summary judgment. As a matter of law, the key language in Paragraph IV
seems highly ambiguous, since it refers to “the arrangements contemplated hereunder,” and
thus requires extensive inquiry into just what arrangements are being referred to....
[We repeat] Prima Paint's clear directive that courts disregard surrounding contract language
and “consider only issues relating to the making and performance of the agreement to
P "171" arbitrate.” 388 U.S. at 404. The correct analysis is set forth in Sauer-Getriebe KG v. White
P "172" Hydraulics, Inc., 715 F.2d 348, 350 (7th Cir. 1983), cert. denied, 464 U.S. 1070 (1984):
“White argues that if there is no contract to buy and sell motors there is no agreement to
arbitrate. The conclusion does not follow its premise. The agreement to arbitrate and the
agreement to buy and sell motors are separate. Sauer's promise to arbitrate was given in
exchange for White's promise to arbitrate and each promise was sufficient consideration for
the other.”
Id. There, the Seventh Circuit ordered arbitration despite the facts that the district court had
found the contract “vague and ambiguous,” and construed it against its drafter. See also
Teledyne, Inc. v. Kone Corp., 892 F.2d 1404, 1410 (9th Cir. 1990). Thus, in the absence of any
evidence that Paragraph IV of the Memorandum was intended as non-severable, we must
strictly enforce any agreement to arbitrate, regardless of where it is found. Under Prima Paint
and Teledyne, we hold that the district court erred in considering the contract as a whole to
determine the threshold question of whether Nicaragua may enforce the arbitration agreement
contained in Paragraph IV....
The next question is whether Paragraph IV in fact constitutes an agreement to arbitrate, and
whether it encompasses the dispute at hand. The district court stated that the parties had not
made any present agreement to submit all disputes under the Memorandum to arbitration,
but merely agreed to include such clauses in future contracts.... It is unclear whether [this]
statement[] [was] based on the language of the Memorandum itself, or on the evidence of the
parties' intent developed during the evidentiary hearing. In any case, since “the issue of
arbitrability ‘is to be determined by the contract entered into by the parties,’ the task before
this court remains one of contractual interpretation.”
However, because of the presumption of arbitrability established by the Supreme Court, courts
must be careful not to overreach and decide the merits of an arbitrable claim. Our role is
strictly limited to determining arbitrability and enforcing agreements to arbitrate, leaving the
merits of the claim and any defenses to the arbitrator. Here, the district court disregarded “the
emphatic federal policy in favor of arbitral dispute resolution [which] applies with special
force in the field of international commerce.”Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614, 631 (1985)....
The district court also found that the clause's “lack of specificity” mitigated against its
enforcement. However, the clear weight of authority holds that the most minimal indication of
the parties' intent to arbitrate must be given full effect, especially in international disputes.
See, e.g., Bauhinia Corp. v. China Nat'l Machinery and Equip. Co., 819 F.2d 247 (9th Cir. 1987)
(arbitration ordered where contract contained two incomplete and contradictory arbitration
clauses); Mediterranean Enterprises, Inc. v. Ssangyong Corp., 708 F.2d 1458, 1462-63 (9th Cir. 1983)
(broadly construing scope of Korean arbitration clause under the Act). Under this analysis,
Paragraph IV here was not too vague to be given effect, especially when considered in light of
Robert Moore's letter explaining the ambiguity.... Nicaragua's motion to compel arbitration is
granted, and the case remanded to determine the appropriate arbitral agency.
P "172"
P "173"
NOKIA MAILLEFER SA v. MAZZER
(Vaud Cantonal Court of Appeals 1993) XXI Y.B. Comm. Arb. 687 (1996)
[On 30 March 1988, Nokia-Maillefer SA (“Nokia”), a Swiss company, sent one Mr. Mazzer, an
Italian businessman, a confirmation of an order which he had placed. The confirmation
referred to Nokia's enclosed general conditions of sale, which contained a forum selection
clause choosing Swiss courts. On 31 March 1988, Leasindustria, an Italian financing company,
replied to Nokia by sending a purchase order to which its general conditions of purchase were
annexed. Article 10 of the general conditions included a forum selection clause providing for
Milan courts. Two months later, Nokia returned the purchase order, replacing the word “Milan”
in Article 10 with “International Chamber of Commerce, Paris.” By a telex to Leasindustria, Mr.
Mazzer accepted the modification. When a dispute arose, the Italian buyer commenced court
 proceedings before a Swiss court of first instance of Canton Vaud, where Nokia was
headquartered. Nokia requested the Court to refer the dispute to arbitration.]
The dispute is whether Article 10 of the purchase order, as modified, is a valid arbitration
clause. The autonomy of the arbitration clause as to the contract in which it is contained or to
which it refers is unanimously recognized. Hence, to the exception of cases where a ground for
nullity of the contract also affects the clause, the validity of the arbitration clause must be
examined separately.
An arbitration clause can only be validly concluded where there is a common intention of the
parties to refer a possible dispute to arbitration. The existence of such an agreement must be
ascertained according to the general principles of the Code of Obligations, in particular Art. 2
CO. (46) Considering the important consequences of an arbitration agreement, the court shall
beware of finding too easily that such an agreement has been concluded (Journal des
Tribunaux 1990 I 563, especially p. 565).
In the present case, the arbitration clause at issue takes the place of an arbitration agreement,
and does not appear in a general agreement to arbitrate. The question of the authority having
jurisdiction to decide on a possible dispute has been dealt with in different stages in two
different documents, one of which has been modified by one party. In the annex to the
confirmation of order ... which it sent on 30 March 1988 to Giacomo Ezio Mazzer, Nokia enclosed
the general conditions of sale which, at no. 17.1, provided that the forum be at the seat of the
P "173" supplier. Subsequently, the general conditions of purchase annexed to the purchase order sent
P "174" on 31 March 1988 by Leasindustria initially provided that the parties agreed to accept the
jurisdiction of the Milan courts over all possible disputes. Lastly, Milan was replaced by
“International Chamber of Commerce, Paris.” Thus, the question of the authority having
jurisdiction to decide on a possible dispute has not been provided for straightaway in a clear
and indisputable manner.
In this evolutionary and uncertain context, there is no common intent on arbitration unless the
‘final’ arbitration clause, that is, Article 10 as modified, has a manifest and certain meaning. It
is at least necessary that a common intent of the parties can be deduced from their
expressions.
Considering the clause, it is not possible to ascertain the common intent of the parties, in
particular as to the arbitration agreement. Initially, the clause at issue provides under “forum”
for the jurisdiction of the (State) courts of Milan. Only the term “Milan” has been replaced by
“International Chamber of Commerce, Paris,” with no mention of the fact that the jurisdiction of
the courts is excluded and replaced by private arbitration.
The jurisdiction of the International Chamber of Commerce in Paris cannot be deemed to be
tantamount to the appointment of an arbitrator, as the word arbitrator or arbitration does not
appear and the International Chamber of Commerce itself does not act as arbitrator. Only
physical persons may be arbitrators, to the exclusion of legal entities or collectivités; in
particular, a Chamber of Commerce cannot be appointed as arbitrator.
Appellant must bear the consequences of the ambiguity and obscurity of the alleged clause,
which it modified with the intention of transforming a prorogatio fori into an arbitration clause
functioning also as arbitration agreement. Appellee's agreement as to the modifications does
not clear away the uncertainty as to the meaning of the clause and, consequently, of the
agreement.
In a context in which it should not be held too easily that an agreement has been concluded,
we cannot accept an unclear clause as proof of an agreement having an uncertain subject
matter. Hence, we must hold that the parties did not conclude a valid arbitration agreement
nor an arbitral clause ...
KAHN LUCAS LANCASTER, INC. v. LARK INTERNATIONAL LTD
956 F.Supp. 1131 (S.D.N.Y. 1997) [excerpted above at pp. 129-33]
INTERIM AWARD IN ICC CASE NO. 6149 OF 1990
XX Y.B. Comm. Arb. 41 (1995) [excerpted above at pp. 104-07]
P "174"
P "175"
UNCITRAL MODEL LAW
Articles 7, 16 & 34 [excerpted below at pp. 1013, 1016, 1019-20]
FRENCH CODE OF CIVIL PROCEDURE
Book IV, Articles 1458 & 1466 [excerpted above at p. 77]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Articles 178 & 186 [excerpted below at pp. 1033, 1034]
FIRST OPTIONS OF CHICAGO v. KAPLAN
514 U.S. 938 (1995) [excerpted above at pp. 81-84]
Notes on Formation of International Arbitration Agreements
1. Allocation of power to decide disputes over formation of underlying contract. Who decides
disputes whether the underlying contract, containing an arbitration agreement, was validly
formed? In particular, are disputes over the formation of the underlying contract for resolution
by an arbitrator or by a national court?
 (a) Applicability of separability doctrine in disputes over formation of underlying contract. As
discussed above, most developed arbitration regimes recognize the separability
doctrine. See supra pp. 55-74. Under the separability doctrine, an arbitration clause is
viewed as presumptively separable from the parties' underlying contract. As a
consequence, defects in the formation of the underlying contract do not necessarily affect
the formation of the arbitration clause. See supra pp. 67-68. Note how this issue is
addressed in JOC Oil, the UNCITRAL Model Law, and the Swiss Law on Private International
Law.
(b) Allocation of power to decide disputes over formation of underlying contract under national
law. As discussed above, many developed national arbitration statutes allocate power
between courts and arbitrators to decide disputes over the existence and validity of
arbitration agreements. See supra pp. 74-95. These allocations can extend to disputes
over the formation of the underlying contract, containing an arbitration clause. Consider
again how the UNCITRAL Model Law, FAA, and Swiss Law on Private International Law
address the allocation of competence to decide disputes over formation of the
underlying contract.
(c) Allocation of power to decide disputes over formation of underlying contract under
institutional arbitration rules. Consider Article 21 of the UNCITRAL Arbitration Rules, Article
6 of the 1998 ICC Rules, Article 23 of the LCIA Rules, and Article 15 of the AAA International
Rules. How does each provision deal with the allocation of power to decide disputes over
the formation of the underlying contract?
2. Authorities holding that arbitration clause may grant arbitrators competence to decide
disputes over formation of underlying contract. For authorities holding that an arbitration
clause can confer competence on an arbitral tribunal to decide disputes over the formation of
the parties' underlying contract, see Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469
(9th Cor. 1991); All-Union Export-Import Assoc. Sojuznefteexport (Moscow) v. JOC Oil Ltd, supra.
3. Authorities holding that arbitration clause cannot grant arbitrators power to decide disputes
P "175" over formation of underlying contract. Consider the following observation of the House of Lords
P "176" in Heyman v. Darwins Ltd [1942] AC 356, 366 (Viscount Simon LC):
If the dispute is whether the contract which contains the clause has ever been entered into at
all, that issue cannot go to arbitration under the clause, for the party who denies that he has
ever entered into the contract is thereby denying that he has ever joined in the submission [to
arbitration].
For similar observations, see Asheville Investments Ltd v. Elmore Contractors Ltd [1988] 3 W.L.R.
867, 873 (C.A.) (“it ... is a principle of law that an arbitrator does not have jurisdiction to rule
upon the initial existence of the contract”); Svenlov, What Isn't, Ain't, 25 J. World Trade 37, 49
(1991) (“carried to its extreme,... the separability doctrine ... could give rise to a valid arbitral
award even if two parties had never met, as long as one person alleged there was a contract
between them containing an arbitration clause”); Preliminary Award of 14 January 1982, XI Y.B.
Comm. Arb. 97, 103-04 (1986) (“An arbitration clause may not always be operative in cases
where it is clearly indicated by facts and circumstances that there never existed a valid
contract between the parties”); PMC, Inc. v. Atomergic Chemetals Corp., 844 F.Supp. 177 (S.D.N.Y.
1994) (“the question of the very existence of the [contract] which embodies the arbitration
agreement is encompassed within the meaning of ‘the making of the arbitration agreement’”
under §4, and requires judicial resolution); Nussbaum, The “Separability Doctrine” in American
and Foreign Arbitration, 17 N.Y.U. L. Rev. 609, 610 (1940).
Why are the foregoing contentions not unanswerable? If the parties simply never entered into a
contract, how can they be said to have agreed to an arbitration clause contained in that
contract? What would be the response of the authors of Standard Fruit Co. and the JOC Oil
award?
4. Possible rationales for granting arbitrators power to decide disputes over formation of
underlying contract. What rationale would support a conclusion granting arbitrators power to
decide claims that the parties' underlying contract was not properly formed?
(a) Impact of separability doctrine. Assume that the separability doctrine is accepted and
applicable. If so, then questions about contract formation would be directed to two
separate agreements: (a) the underlying contract; and (b) the arbitration agreement. Are
there circumstances in which one might conclude that the arbitration agreement has
validly been formed, but the underlying contract had not? Consider the analysis in JOC Oil
and the facts in Standard Fruit and Nokia.
 (b) Potentially different national laws applicable to formation of arbitration agreement and
underlying contract. Suppose that different laws applied to the arbitration agreement
and the underlying contract. As we have seen, this is not uncommon in international
transactions. See supra pp. 43-47, 95-117. Would it not therefore be possible for the
underlying contract to have not been properly formed (under one national law), but the
arbitration agreement to have been properly formed (under identical facts, but a
different national law)? How likely is it that this would produce differing conclusions
about the existence of an agreement in each case?
Consider Article 178 of the Swiss Law on Private International Law and the validation
principle, discussed above, see supra p. 112. Also recall the possible application of
uniform international substantive rules to the formation of arbitration agreements under
Article II of the New York Convention, which might differ from the national law rules
governing formation of an underlying contract, see supra pp. 114-16.

(c) Potentially different substantive rules of contract formation applicable to arbitration

agreement and underlying contract. It is also possible that different rules of contract
formation would apply to the underlying contract and the arbitration agreement. This can
be true even if the same national law applies to both issues. Consider the tribunal's
analysis in JOC Oil, which concluded that different substantive rules of contract law
applied to the formation and validity of the arbitration agreement and of the underlying
contract. Is this implausible?
(d) Potentially different standards of proof for formation of arbitration agreement and
underlying contract. Suppose that different standards of proof applied to the formation of
arbitration agreements as compared to other agreements. Would there be any basis for
requiring different standards of proof in this fashion? For example, might the pro-
enforcement policies of the New York Convention and modern arbitration legislation
permit a conclusion that an arbitration agreement had been validly formed even if a
related underlying contract had not? Is it possible that in signifying their assent to
international arbitration provisions, parties evince a particular desire that their
“agreement” be recognized, without legal technicalities of particular national laws? Why?
Is this (partially) an explanation for the result in Standard Fruit? But see infra pp. 183-84,
317-18, 349-53 discussing why the pro-arbitration rules of interpretation under the FAA do
not apply to issues of formation and validity of the arbitration agreement.
P "176" (e) Possible factual distinctions in formation of underlying contract and arbitration agreement.
P "177" Suppose that a party's claim that no underlying contract exists rests on an alleged
failure to agree on certain material terms (such as price) or on an alleged intention of the
parties that any agreement be consummated in a later formal contract. In these cases,
might one conclude that an agreement to arbitrate was reached, even though other
related agreements were not? Can it be that, in certain circumstances, an agreement to
arbitrate crystallizes out of precontractual negotiations before the overall agreement is
consummated? Consider, in this regard, the facts of the Standard Fruit and Nokia cases.
Suppose that the court in Lark International had concluded that the U.C.C.'s standards for
tacit acceptance of the purchase orders had not been satisfied (because, for example,
Lark had not in fact done much by way of performance and payments had been made
directly to the manufacturers by Kahn Lucas). Would there nonetheless have been a
possible basis for concluding that there was an agreement to arbitrate satisfying Article
II? Suppose that Lark International had, in response to the purchase orders, sent Kahn
Lucas a fax saying: “As discussed, the arbitration clause is fine, but we need to discuss
price and delivery schedules.” Wouldn't Article II of the Convention require recognition of
the arbitration agreement?

5. Allocation of power under the FAA to decide disputes over formation of underlying contract.
In the United States, the allocation of power between courts and arbitrators to decide disputes
over the formation of the underlying contract remains unclear, with divided lower court
authority. See also supra pp. 89-93.
(a) Lower U.S. court decisions holding that arbitrators must resolve claim that no underlying
contract exists. The court in Standard Fruit holds that the arbitral tribunal must decide
whether the Memorandum (containing the alleged arbitration clause) is a binding
contract. For other U.S. decisions requiring arbitration of challenges to the formation of
the parties' underlying contract, see Teledyne, Inc. v. Kone Corp., 892 F.2d 1404, 1410 (9th
Cir. 1990) (only issue for court is “whether there are grounds for an independent challenge
to the arbitration clause, rather than a challenge to the arbitration clause which must rise
or fall with a challenge to the contract as a whole”); Sauer-Getriebe KG v. White Hydraulics,
Inc., 715 F.2d 348, 350 (7th Cir. 1984) (arbitrators to “adjudicate the validity of [the]
contract”); Pennsylvania Data Entry, Inc. v. Nixdorf Computer Corp., 762 F.Supp. 96, 100 (E.D.
Pa. 1991) (standard AAA clause held to require arbitration of claims that there was no
meeting of the minds as to contract and that contract was mutually rescinded); Hydrick v.
Management Recruiters Int'l, Inc., 738 F.Supp. 1434 (N.D. Ga. 1990); Hospital for Joint
Diseases & Medical Center v. Davis, 442 F.Supp. 1030 (S.D.N.Y. 1977), aff'd mem., 578 F.2d
1368 (2d Cir. 1978).
 (b) Lower U.S. court decisions holding that courts must resolve claim that no underlying
contract exists. The Lark International court, and many other lower U.S. court decisions,
have required judicial resolution of claims that there was never any underlying contract.
According to one U.S. court: “There are, of course, certain issues, such as the existence of
any agreement at all between the parties, which by their very nature cannot fall within
the scope of arbitration.”Merritt-Chapman & Scott Corp. v. Pennsylvania Turnpike Comm.,
387 F.2d 768, 771 n.5 (3d Cir. 1967). See Three Valleys Municipal Water District v. E.F. Hutton
& Co., 925 F.2d 1136 (9th Cir. 1991) (“we read Prima Paint as limited to challenges seeking to
avoid or rescind a contract – not to challenges going to the very existence of a contract
that a party claims never to have agreed to. A contrary rule would lead to untenable
results. Party A could forge party B's name to a contract and compel party B to arbitrate
the question of the genuineness of its signature.”); T & R Enterprises v. Continental Grain
Co., 613 F.2d 1272, 1277-78 (5th Cir. 1980); Interocean Shipping Co. v. National Shipping &
Trading Corp., 462 F.2d 673, 676 (2d Cir. 1972) (“There can be no doubt that the question of
the very existence of the charter party which embodies the arbitration agreement”
requires judicial resolution under §4); In re Kinoshita & Co., 287 F.2d 951, 953 (2d Cir. 1961)
(“if it was claimed that ... there had at no time existed as between the parties any
contractual relation whatever, ... a trial of this issue would be required”); Grynberg
Production Corp. v. British Gas plc, 867 F.Supp. 1278 (E.D. Tex. 1994) (refusing to enforce
alleged arbitration agreement that appeared only in “unexecuted Final Agreement”
which “was never agreed to”); Continental Service Life and Health Insurance Co. v. A.G.
Edwards & Sons, 664 F.Supp. 997, 999 (M.D. La. 1987) (“Where the validity or the existence
of a contract containing an alleged arbitration clause is put at issue, a trial on the merits
is required before a party to a lawsuit can be ordered to arbitrate.”); Dougherty v.
Mieczkowski, 661 F.Supp. 267, 274 (D. Del. 1987); Beromun AG v. Societa Industriale Agricola
“Tresse” etc., 471 F.Supp. 1163, 1169 (S.D.N.Y. 1979) (finding no agreement in exchanges of
telexes); Griffin v. Semperit of America, Inc., 414 F.Supp. 1384 (S.D. Tex. 1976) (“whether
there ever existed any contractual relationship between the disputing parties” is “per se
non-arbitrable”); Braum v. Gilligan, Will & Co., 287 F.Supp. 766, 769 (S.D.N.Y. 1986) (“since
[the] arbitration provision is an integral part of [the] alleged contract, the issue as to
P "177" whether the parties agreed to that provision requires us first to determine if a contract
P "178" exists”).
(c) Effect of §4 of FAA on disputes over formation of underlying contract. Consider the text of
§4 of the FAA which requires district courts to order arbitration of disputes pursuant to
arbitration agreements, provided that “the making of the agreement for arbitration ... is
not in issue.” 9 U.S.C. §4. How does §4 affect disputes over the formation of the underlying
contract? Does a challenge to the formation of the underlying contract put the “making of
the agreement for arbitration ... in issue”? Recall the discussion above of the separability
doctrine, in Prima Paint and elsewhere. See supra pp. 55-74.
6. Effect of First Options on resolution by U.S. courts of claims that no underlying contract
exists. What effect, if any, does First Options have on the allocation of power to resolve claims
that no underlying contract exists? As discussed elsewhere, the Court held that the disputes
about the “arbitrability question” could, in principle, be submitted to arbitration. See supra
pp. 90-94. In addition, however, First Options requires “clear and unmistakable” evidence of an
agreement to submit “questions of arbitrability” to arbitration. See supra pp. 91-92. The First
Options Court also made it plain that the general rule regarding expansive interpretation of
concededly existent arbitration agreements was inapplicable to decisions about the existence
of agreements to arbitrate arbitrability issues. How does the First Options standard apply (if at
all) to questions regarding the formation of the parties' underlying contract?
(a) Effect of separability doctrine. Under the separability doctrine, as adopted in Prima Paint
and elsewhere, is a dispute about the formation of the parties' underlying contract a
“question of arbitrability”? Under the separability doctrine, isn't such a dispute irrelevant
to the formation and existence of the separate arbitration agreement?
On the other hand, if one party denies that the underlying contract was ever formed,
doesn't this necessarily – or at least potentially – challenge the existence of an
arbitration agreement? How could the parties have validly formed an arbitration clause,
but not the underlying contract containing the clause? See supra pp. 55-74, 175-76.

(b) Treatment of disputes about formation of the underlying contract in First Options. Does
First Options address how the separability doctrine applies to disputes about formation
of the underlying contract? Note that First Options involved a dispute about formation of
the underlying contract – namely, whether certain entities had become parties to an
agreement containing an arbitration clause. Who did the First Options Court conclude
should resolve this formation issue? Under what standard?
Rightly or wrongly, First Options Court apparently subjected disputes about the formation
of the underlying contract to its general analysis. That analysis is described above, and
requires “clear and unmistakable” evidence of an agreement to arbitrate issues of
arbitrability. For more detailed analysis of this standard, see supra pp. 91-92.

(c) Lower court applications of First Options to contract formation issues. Relatively few lower
U.S. court decisions have applied First Options to disputes about the formation of the
underlying contract, see Aviall, Inc, v. Ryder System, Inc., 913 F.Supp. 826 (S.D.N.Y. 1996)
(suggesting that First Options implicitly overrules Prima Paint and rejects separability
doctrine).
 7. Authorities considering whether an arbitration clause may validly be formed even if
underlying contract is not. National courts and other authorities have reached divergent
conclusions in cases presenting the question whether an arbitration agreement has been
validly formed notwithstanding the non-formation of the parties' underlying contract. For
authorities holding that non-formation of the underlying contract necessarily entails non-
formation of the arbitration clause, see Pollux Marine Agencies v. Louis Dreyfus Corp., 455
F.Supp. 211, 219 (S.D.N.Y. 1978) (“something can be severed only from something else that exists.
How can the Court ‘sever’ an arbitration clause from a non-existent charter party?”); Nussbaum,
The “Separability Doctrine” in American and Foreign Arbitration, 17 N.Y.U. L. Rev. 609, 610 (1940)
(“It is universally [sic] recognised that on principle, invalidity of the main contract entails
invalidity of the arbitration agreement.”); Svernlov, What Isn't, Ain't, 25 J. World Trade 37, 38
(1991) (“Where it is alleged that no agreement has been entered into, the application of the
separability doctrine is more doubtful. If the principal agreement was never entered into, the
arbitration agreement contained therein must be affected by the invalidity as well.”).
For authorities holding that an arbitration clause may be validly formed, even if the underlying
contract is not, see Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469 (9th Cor. 1991); All-
Union Export-Import Assoc. Sojuznefteexport (Moscow) v. JOC Oil Ltd, supra.
8. Allocation of power to decide disputes over formation of arbitration agreement. Who decides
disputes whether the arbitration agreement itself was validly formed – the arbitrators or a
national court?
(a) The allocation of power under national law to decide disputes over formation of the
P "178" arbitration agreement. As discussed above, national arbitration legislation generally
P "179" addresses the allocation of power to decide disputes over arbitration agreements. See
supra pp. 88-95. This extends to the power to decide disputes over the formation of
arbitration agreements. Review the materials excerpted above regarding the allocation
of power between arbitrators and courts under the UNCITRAL Model Law, the Swiss Law on
Private International Law, the French Civil Code, and English Law. See supra pp. 88-95.
Who decided whether there was a valid arbitration agreement in Standard Fruit? Nokia?
JOC Oil?
(b) Allocation of power to decide disputes over formation of arbitration agreement under
institutional arbitration rules. Consider again Article 21 of the UNCITRAL Arbitration Rules,
Article 6 of the 1998 ICC Rules, Article 23 of the LCIA Rules, and Article 15 of the AAA
International Rules. How does each provision purport to deal with the allocation of power
to decide disputes over the formation of the arbitration agreement? Note that most of
these provisions grant the arbitrators power to resolve disputes over the “existence” and
“validity” of arbitration agreements. What effect do these provisions have, when a party
denies that it ever entered into the arbitration agreement that incorporates them?
9. Allocation of power under the FAA to decide disputes over formation of arbitration
agreement. Under the FAA, who decides disputes whether an arbitration agreement itself (as
distinct from the underlying contract) was validly formed?
(a) U.S. court decisions requiring judicial resolution of claims of non-existence of the arbitration
agreement itself. U.S. courts have almost uniformly held that the existence of the
arbitration agreement itself is a question for judicial resolution, and have refused to
require arbitration of such questions. As discussed above, Moseley v. Electronic & Missile
Facilities, Inc., 374 U.S. 167 (1963), held that claims of fraud in the inducement of the
arbitration agreement itself are subject to judicial resolution. The same conclusion would
appear to apply with even greater force to disputes over the formation of the arbitration
agreement. See Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395 (1967);
I.S. Joseph Co. v. Michigan Sugar Co., 803 F.2d 396, 399-400 & n.2 (8th Cir. 1986) (“If there is
in fact a dispute as to whether an agreement to arbitrate exists, then that issue must first
be determined by the court as a prerequisite to the arbitrator's taking jurisdiction.”);
Interocean Shipping Co. v. National Shipping & Trading Corp., 462 F.2d 673, 676 (2d Cir.
1972); In re Kinoshita & Co., 287 F.2d 951, 953 (2d Cir. 1961).
 (b) Effect of First Options on power of arbitrators to decide disputes over formation of
arbitration agreement. Consider the Court's analysis in First Options. As we have seen, the
Court held that an agreement to arbitrate “questions of arbitrability” would be found only
if “clear and unmistakable” evidence of such an agreement was adduced. See supra pp.
90-94. How would Standard Fruit have been decided under the First Options analysis? Was
there “clear and unmistakable” evidence in Standard Fruit of an agreement to arbitrate
disputes about arbitrability? What was that evidence? Suppose that litigation had arisen
in U.S. courts in connection with JOC Oil. Was there “clear and unmistakable” evidence of
an agreement there to submit issues of arbitrability to arbitration? Note that the Nokia
court considered and decided claims that an arbitration agreement had been formed.
How could there ever be “clear and unmistakable” evidence of an agreement to arbitrate
disputes about the formation of an arbitration agreement? Consider the following
hypotheticals:
i. One party denies it signed or otherwise assented to a separate arbitration
agreement (e.g., a submission agreement).
ii. One party denies that the underlying contract contains any arbitration clause.
iii. One party denies that the arbitration clause satisfies the “writing” requirement
under applicable law and the New York Convention.
iv. One party denies that an admittedly existent arbitration clause grants arbitrators
power to decide disputes over formation of the arbitration clause.

(c) Relevance of institutional rules to arbitrator's authority to decide disputes over formation of
arbitration agreement. As we have seen, leading institutional arbitration rules provide
that the arbitrators shall decide claims that the arbitration agreement itself does not
exist. See UNCITRAL Rules Article 21; ICC Rules Article 6; AAA International Rules Article 15;
supra pp. 84-85. Do those provisions supply “clear and unmistakable” evidence of an
agreement to arbitrate disputes over formation of the arbitration agreement (as required
by First Options)?
How can parties have “agreed” – much less “clearly and unmistakably” agreed – to give an
arbitrator power to determine whether the agreement vesting him with authority was
P "179" properly formed? Some have suggested that this is akin to the fable of Baron
P "180" Munchhausen, who lifted himself from a swamp by his own pigtail. Less picturesquely,
in order to decide that there is clear and unmistakable evidence of an agreement to
arbitrate disputes over the formation of arbitration agreements, mustn't the court first
decide that the parties in fact entered into an arbitration agreement? Doesn't this
decision result in (and require) judicial resolution of the dispute over the formation of the
arbitration agreement?
Note that, in Nokia, the alleged arbitration agreement would have provided for
arbitration under the ICC Rules. Would not Article 6 of these Rules require that disputes
about the existence of an arbitration agreement be submitted to arbitration? Should the
Nokia court have required the parties to arbitrate the issues of formation of an
arbitration agreement that it decided?

10. Relevance of New York Convention to allocation of competence to resolve disputes over
formation of underlying contract or arbitration agreement. Consider the obligation imposed on
Contracting States by Article II of the New York Convention to recognize international
arbitration agreements. What relevance, if any, does Article II have to the allocation of
competence between national courts and arbitrators to decide disputes over the formation of
(a) an underlying contract, and (b) an arbitration agreement? Suppose that the parties'
arbitration agreement provides expressly that it is separable and that the arbitrators shall
have power to resolve disputes over the formation of the parties' underlying contract (or
arbitration agreement). What effect would Article II of the Convention have on this provision in
a dispute over formation of the underlying contract (or arbitration agreement)?
11. Law applicable to formation of arbitration agreement. What substantive law applies to the
formation of an international arbitration agreement? As discussed in detail above, possible
choices include the law of the judicial forum where enforcement of the arbitration agreement
is sought, the law selected by the parties to govern the alleged arbitration agreement, the law
of the arbitral situs or place where an arbitral award might eventually be made, the law
governing the underlying contract, or the validation principle. See supra pp. 43-47, 108-13. In
addition, as discussed elsewhere, Article II of the New York Convention (and Article 1 of the
Inter-American Convention) arguably establish uniform international rules governing the
formation of arbitration agreements. See supra pp. 113-16 & infra pp. 276-77. Finally, in U.S.
courts, there is substantial authority that federal common law rules derived from the FAA and
the New York Convention govern the formation of arbitration agreements that are subject to
the Convention. See supra pp. 114-16.
Consider what substantive law was applied to the formation of international arbitration
agreements in JOC Oil, Standard Fruit, Lark International, Nokia, and ICC Case No. 6149. What
sort of consistent or predictable rules can you derive from these decisions? Does this state of
affairs serve the goals of international commercial arbitration? How might it be remedied?
Consider §§187 and 188 of the Restatement (Second) Conflict of Laws. What does §188 provide
with respect to the law governing issues of formation? See also Restatement (Second) Conflict of
 Law §199(2) (1971) (“Formalities which meet the requirements of the place where the parties
execute the contract will usually be acceptable.”).
12. Choice of law applicable to formation of arbitration agreement under Article II. Consider
again what law applies to the formation of an arbitration agreement which would be subject to
Article II. There are four basic possibilities: (a) a uniform international substantive rule,
derived from Article II, prescribing when a valid arbitration agreement existed; (b) an
international substantive rule, derived from Article II, prohibiting (or “preempting”) national
laws which discriminated against arbitration agreements; (c) an international choice of law
rule, derived from Article V; and (d) reference to national choice of law rules.
(a) Uniform international definition of “agreement” in Article II(2). One possibility, referred to
above, is that Article II(2) might be read as establishing a single, uniform definition of
“agreement,” which would be mandatorily applicable in all Contracting States. Under this
analysis, the formation of an arbitration agreement, otherwise subject to the Convention,
would be governed directly by Article II itself. Article II's standards would occupy the
entire field of legal rules governing the formation of arbitration agreements and override
national (or state) law on the subject.
There is little authority considering this view of the Convention. For one exception, see
Friedland & Hornick, The Relevance of International Standards in the Enforcement of
Arbitration Agreements Under the New York Convention, 6 Am. Rev. Int'l Arb. 149 (1995)
(“With regard to Article II, the Convention calls for the development by and among the
courts of signatory nations of unified international standards to govern key issues such as
what constitutes a binding arbitration agreement.”). Would such an approach be wise?
Would it advance the Convention's purposes?
Suppose that a Contracting State's courts were to adopt stringent requirements for the
P "180" formation of arbitration agreements (e.g., an arbitration agreement is only properly
P "181" formed if it is negotiated between the parties, if it is genuinely neutral, or if is
established by clear and convincing evidence). Would it be desirable for the Convention
to override such national law requirements?
Note that substantive rules of national law governing contract formation are usually
detailed. See, e.g., Restatement (Second) Contracts §§17-109 (1981). Is the brief text of
Article II(2) an adequate substitute for developed national regimes of contract law? How
would issues such as offer and acceptance, capacity, formalities, and consideration be
dealt with? Consider the possibility of looking to international sources for rules on these
issues, such as the Vienna Convention of International Sale of Goods or the UNIDROIT
Principles of International Commercial Contracts. Why do there need to be complicated
rules governing the formation and validity of arbitration agreements, especially given the
pro-arbitration policies of the Convention?

(b) Article II overrides discriminatory national law. As discussed in greater detail below, in the
United States, the FAA has been interpreted to preempt state law rules that single out
arbitration agreements for specially demanding treatment. See infra pp. 349-53. For
example, the domestic FAA has been interpreted as preempting state law requirements
that arbitration agreements be conspicuously placed, in capital letters, on the first page
of any contract. See Doctor's Associates Inc. v. Casarotto, 517 U.S. 681 (1996). This result has
been based upon §2's command that arbitration agreements “shall be valid, irrevocable,
and enforceable, save upon such grounds as exist at law or in equity for the revocation of
any contract.” 9 U.S.C. §2. State law rules that subject arbitration agreements to more
demanding treatment than “any contract” are preempted. See infra pp. 349-53.
Why isn't a similar approach appropriate under Article II of the Convention? Like §2 of the
FAA, Article II requires Contracting States to “recognize” written arbitration agreements,
and “refer the parties to arbitration,” except where the agreement is “null and void,
inoperative or incapable of being performed.” As with §2 of the FAA, would not Article II's
purposes be served by reading it to preempt national law rules which disfavor arbitration
agreements? If national law may unilaterally block or disfavor the formation of
arbitration agreements, then what is the point of Article II(1)'s requirement that
arbitration agreements be recognized?
Consider the award in ICC Case No. 6149. Does that award interpret the Convention as
overriding rules of national law which discriminate against arbitration agreements?
Consider the court's analysis in Ledee of Article II(3)'s exception for arbitration
agreements which are “null and void.” How does the Ledee court give meaning to this
provision? What is the meaning of “internationally neutral” defenses? As discussed below,
the Ledee court appears to interpret the Convention as overriding national law rules of
contract validity that discriminate against arbitration agreements. See supra pp. 113-14.
Is this a wise approach? Compare it to an approach (discussed above at supra pp. 113-14,
180-81) that would interpret Article II as establishing a uniform set of substantive contract
law rules governing arbitration agreements. What are the relative advantages and
disadvantages of each approach?
 (c) Choice of law rules under Article V. As ICC Case No. 6149 illustrates, and as discussed above,
Article V of the Convention sets forth choice of law rules that apply at the stage of
enforcing arbitral awards. See New York Convention, Article V(1)(a); supra pp. 113-14. These
rules require application of the law the parties have selected to apply to their arbitration
agreement or, in the absence of such a choice, the law of the arbitral situs. Some
authorities have concluded that Article V(1)(a)'s choice of law rules should apply to the
enforcement of arbitration agreements (as well as awards). See A. van den Berg, The New
York Convention of 1958 126-28 (1981); McMahon, Implementation of the United Nations
Convention on Foreign Arbitral Awards in the United States, 2 J. Mar. L. & Comm. 735, 757
(1971); Swiss Federal Supreme Court Judgment of 21 March 1995, XXII Y.B. Comm. Arb. 800
(1997) (applying Article V(1)(a) conflicts rules, on grounds that “where the New York
Convention applies, reference should be made, for all issues which concern the validity of
the arbitration and are not regulated by the Convention itself, to the law to be
determined according to Article V(1)(a)”). Note the tribunal's application of Article V(1)
(a)'s choice of law rules in ICC Case No. 6149.
Although the issue is explored in greater detail below (see supra pp. 114-17), consider
briefly the wisdom of applying Article V(1)(a)'s choice of law rules to determine what
national law applies to the formation and validity of an arbitration agreement. Would the
application of such choice of law rules be consistent with the uniform interpretation of
Article II(2) outlined above? Would it (or could it) be consistent with a conclusion that
Article II overrides national law that discriminates against arbitration agreements?

(d) National choice of law rules. Finally, Article II might be interpreted to leave questions
P "181" about the formation and validity of arbitration agreements entirely to national law, both
P "182" with respect to substantive and choice of law rules. That is, Article II would require
Contracting States to recognize arbitration agreements, but only when national law has
concluded that such an agreement has been formed and is valid. Would this
interpretation of Article II advance the Convention's purposes? Is it consistent with the
text of Article II?
As discussed above, national choice of law rules generally provide for application of one
of the following alternatives to issues concerning formation of the arbitration agreement:
(a) law of the judicial enforcement forum; (b) law governing the arbitration agreement; (c)
law of the arbitral situs; or (d) law of the place where the award must be enforced. See
supra p. 180.
What law did the Nokia court apply to the putative arbitration agreement? What law
would have applied if the litigation had taken place in Italy? France?

13. U.S. courts' choice of law applicable to formation of arbitration agreement under Article II.
As discussed in greater detail elsewhere, U.S. lower courts have generally held that the
formation and validity of arbitration agreements which are subject to the Convention is
governed by U.S. federal common law rules of substantive contract law. See supra pp. 114-16. As
Ledee illustrates, a number of U.S. courts have also concluded that the Convention preempts
both foreign and U.S. (state) rules restricting the enforceability of arbitration agreements. See
supra pp. 113-16 & infra p. 276.
What substantive law did the court in Lark International apply to the formation of the
arbitration agreement? Note the New York choice-of-law clause in the underlying purchase
orders. How should this affect analysis? Note that the court cites New York Uniform Commercial
Code and New York case law in deciding the issues of formation.
14. Standards of proof for establishing existence of arbitration agreement under national (or
other) law. What standard of proof should apply to the formation of arbitration agreements?
Suppose, for example, that one party adduces some evidence that an arbitration agreement
was formed, which its counterparty partially rebutts. How clear or strong a showing must be
made to justify a conclusion that an arbitration agreement has been formed? Further, should
the same degree of clarity and certainty be required for arbitration agreements as for
underlying substantive contracts?
(a) Heightened standard of proof. One might reason that especially clear and unambiguous
evidence must be adduced to demonstrate that an arbitration agreement has been
validly formed. See Award in ICC Case No. 7453 of 1994, XXII Y.B. Comm. Arb. 107 (1997) (“the
consent of each party must be unambiguously demonstrable”). The rationale would be
that parties should be held to have given up their (important) rights of access to judicial
protections only where they have clearly agreed to do so. Consider the court's analysis in
Nokia. Does the Swiss court in effect adopt a heightened standard of proof for arbitration
agreements, as compared to other types of contracts?
(b) Relaxed standard of proof. Alternatively, one might reason that the pro-arbitration
policies of the Convention and national law warrant a lower standard of proof of
formation of arbitration agreements, as compared to other contracts. The result in
Standard Fruit is arguably representative of this view. Compare the Standard Fruit
analysis (and result) to that in Nokia. Which is wiser?
15. Standard of proof for establishing existence of arbitration agreement under the FAA. What
must be demonstrated under the FAA to establish the existence of an arbitration agreement? If
there is a dispute over the formation or existence of an arbitration agreement, what
presumptions (or default rules) should apply? That is, if it is unclear whether the parties have
agreed to arbitrate, should doubts be resolved in favor of, or against, arbitration? Should the
 same standards of proof apply as those used for underlying commercial contracts? It is critical
to distinguish, in considering these questions, between the existence of an arbitration
agreement and the scope of an arbitration agreement.
(a) Generally-applicable state contract law. First Options indicates that the formation of
arbitration agreements under the domestic FAA is governed by generally applicable state
contract law rules. See supra pp. 116 & infra pp. 349-53. These rules, almost by definition,
would apply the same standards of proof to the formation of arbitration agreements as to
the formation of other contracts. E.g., Progressive Casualty Ins. Co. v. C.A. Reaseguradora
Nacional de Venezuela, 991 F.2d 42, 46 (2d Cir. 1993); Kresock v. Bankers Trust Co., 21 F.3d
176, 178 (7th Cir. 1994) (“An agreement to arbitrate is treated like any other contract”);
Singer v. Smith Barney Shearson, 926 F.Supp. 183 (S.D. Fla. 1996) (“arbitration agreements
are no more than contracts to which the usual rules of contract interpretation apply”).
(b) State law presumptions requiring clear evidence of existence of arbitration agreement. In
some U.S. states, local law purportedly imposes unusually rigorous standards of proof
P "182" with respect to arbitration agreements. That is, no agreement to arbitrate will be found in
P "183" the absence of clear and compelling evidence of such an agreement. See Massey v.
Galvan, 822 S.W.2d 309, 316 (Tex. App. 1992) (“No party is under a duty to arbitrate unless
by clear language he has previously agreed to do so; and it must clearly appear that the
intention of the parties was to submit their dispute to an arbitration panel and to be
bound by the panel's decision”); Matter of Doughboy Indus., 233 N.Y.S.2d 488 (App. Div.
1962) (“the threshold for clarity of agreement to arbitrate is greater than with respect to
other contractual terms”); Schubtex, Inc. v. Allen Snyder, Inc., 424 N.Y.S.2d 133 (N.Y. 1979)
(“a litigant ought not to be forced into arbitration and, thus, denied the procedural and
substantive rights otherwise available in a judicial forum, absent evidence of an express
intention to be so bound”); Computer Assoc. Int'l Inc. v. Com-Tech Assoc., 658 N.Y.S.2d 322
(App. Div. 1997) (A party who agrees to arbitration “waives in large part many of his normal
rights under the procedural and substantive law of the State, and it would be unfair to
infer such a significant waiver on the basis of anything less than a clear indication of
intent”); Manes v. Dallas Baptist College, 638 S.W.2d 143, 145 (Ct. App. Dallas 1982) (“The
arbitration agreement need not be in any particular form, but no party is under any duty
to arbitrate unless by clear language he has so agreed, and it must clearly appear that
the intention of the parties was to submit their dispute to the arbitrators and to be
bound by that decision.”); Marlene Indus. Corp. v. Carmac Textiles, Inc., 408 N.Y.S.2d 410,
413 (1978) (no arbitration “in the absence of an express unequivocal agreement to that
effect”); Riverdale Fabrics Corp. v. Tillinghast-Stiles Co., 128 N.Y.S.2d 288 (1954) (“The intent
must be clear to render arbitration the exclusive remedy”).
(c) Preemptive effect of domestic FAA on state law requirements of heightened evidence of
arbitration agreement. Does the domestic FAA permit state (or foreign) law rules which
require clear evidence of (or some other heightened standard of proof for) arbitration
agreements? Recall the domestic FAA's requirement that arbitration agreements be
subjected to the same generally-applicable rules that apply to other agreements. See
supra pp. 113-17 & infra pp. 349-53. Does this preempt the application of state law
presumptions which require heightened proof of the parties' agreement to arbitrate? A
few lower courts have (correctly) held the domestic FAA preempts state law rules that
require greater evidence of an agreement to arbitrate than of other types of contracts,
see National Union Fire Insurance Co. of Pittsburgh v. Belco Petroleum Corp., 88 F.3d 129 (2d
Cir. 1996); Paine Webber Inc. v. Bybyk, 81 F.3d 1193, 1198 (2d Cir. 1996) (“The Federal
Arbitration Act creates a ‘body of federal substantive law of arbitrability, applicable to
any arbitration agreement within the coverage of the Act.’” (quoting Moses H. Cone));
Progressive Casualty Ins. Co. v. C.A. Reaseguradora Nacional de Venezuela, 991 F.2d 42, 46,
48 (2d Cir. 1993) (“the rule set forth in Marlene Industries is preempted”); Singer v. Jefferies
& Co., 571 N.Y.S.2d 680, 683 (N.Y. 1991); A/S J. Ludwig Mowinckels Rederi v. Dow Chem. Co.,
307 N.Y.S.2d 660, 662 (1970) (“Prima Paint leaves no plausible alternative but application
of the Federal statute [i.e., the FAA] in state courts as well as in Federal courts.”).
(d) “Pro-arbitration” standard of proof of formation of arbitration agreement arguably
applicable under the domestic FAA. It could also be that the domestic FAA requires, as a
matter of federal law, a lower standard of proof for the existence of an arbitration
agreement than for other types of contracts. First Options makes no reference to any such
rule (and likely suggests the contrary, by its reliance on state law rules of contract
formation). Nonetheless, would the domestic FAA's “pro-arbitration” policies not be
advanced by a rule allowing arbitration agreements to be established more easily than
other contracts? Is this consistent with the text of §2 of the FAA?
Lower U.S. federal courts have not clearly analyzed the question of what presumptions (if
any) should apply to the existence of an agreement to arbitrate. Authority (usually
unreasoned) can be found for both the view that arbitration agreements must be
established by clear evidence and for the view that doubts will be resolved in favor of the
existence of an arbitration agreement. Compare Kresock v. Bankers Trust Co., 21 F.3d 176,
178 (7th Cir. 1994) (“An agreement to arbitrate is treated like any other contract”) with
Insurance Co. of North Am. v. ABB Power Generation, Inc., 925 F.Supp. 1053 (S.D.N.Y. 1996)
(“courts resolve ambiguities against finding the existence of an agreement to arbitrate”)
with Standard Fruit, 937 F.2d 469 (“the most minimal indication of the parties' intent to
arbitrate must be given full effect”).
 (e) Doubtful relevance of domestic FAA's pro-arbitration approach to interpretation of
arbitration agreements to disputes over formation of arbitration agreement. In Standard
Fruit, there was a separate challenge to the existence of any agreement to arbitrate. Did
the Standard Fruit court actually consider the claim that no arbitration agreement had
been formed or did it instead hold that this issue was for the arbitrators to decide? While
the opinion is unclear, the court appears to have decided the claim itself, but by
applying the FAA's familiar presumption that all doubts as to interpretation of the scope
of an arbitration agreement are to be resolved in favor of arbitration. See infra pp. 317-19.
P "183" As noted above, this is inconsistent with the analysis in First Options, which clearly
P "184" distinguished between the presumptions applicable to interpretation of an existent
arbitration agreement and those applicable to the formation of an arbitration
agreement. See supra pp. 90-94.
Most lower U.S. courts have refused to apply to FAA's pro-arbitration approach to
interpreting arbitration clauses to issues of formation of an arbitration agreement. See
Chevron U.S.A., Inc. v. Consolidated Edison Co. of New York, Inc., 872 F.2d 534, 537 (2d Cir.
1989); Heinhuis v. Venture Associates Inc., 1991 U.S. Dist. Lexis 8190 (E.D. La. 1991) (refusing
to apply presumption of arbitrability to question “whether the arbitration clause is part
of the parties' contractual agreement at all”); DeMarco California Fabrics, Inc. v. Nygard
Int'l, Ltd, 1990 U.S. Dist. Lexis 3842 (S.D.N.Y. 1990) (“the federal policy favoring arbitration
is most applicable in determining the scope of arbitration agreements, rather than
whether an arbitration agreement actually exists”); Astor Chocolate Corp. v. Mikroverk Ltd,
704 F.Supp. 30, 33 n.4 (E.D.N.Y. 1989) (pro-arbitration “policy argument would seem
inapplicable” to dispute concerning “existence of the arbitration clause”).
A few U.S. courts, in addition to Standard Fruit, appear to have applied the “pro-
arbitration” rules of interpretation under the FAA to questions of formation and validity.
See, e.g., Filantro SpA v. Chilewich Int'l Corp., 789 F.Supp. 1229 (S.D.N.Y. 1992).
Is it appropriate to apply the FAA's presumption of arbitrability in deciding whether an
arbitration agreement actually exists? Does that mean that if there is any doubt
concerning, for example, a claim that one party forged the other party's signature on a
submission agreement, arbitration must be compelled? If so, is that appropriate? If pro-
arbitration policies support the extension of arbitration agreements to debatable issues,
why don't they support the recognition of debatable arbitration agreements?

(f) “Pro-arbitration” standard of proof arguably applicable to international arbitration

agreements under second chapter of FAA. As we have seen, the formation of international
arbitration agreements under the New York Convention and the second chapter of the FAA
is ordinarily held to be governed by federal common law rules, formulated specifically
for arbitration agreements. See supra pp. 113-17. Do these federal common law rules
impose less demanding rules of contract formation or a lower standard of proof for
arbitration agreements than for other contracts? What rationale would support such a
result?
Consider the rules set forth regarding the formation of arbitration agreements under the
Swiss Law on Private International Law. See supra p. 112. Consider also the U.S. lower court
authorities declaring that particularly weighty “pro-arbitration” policies are applicable
under the New York Convention and the second chapter of the FAA. See supra pp. 165-66.
Don't these various strands of analysis argue for federal common law rules of contract
formation which facilitate the entry into international arbitration agreements? Is
Standard Fruit an example of such a rule? Does such a rule of “easy” formation of
international arbitration agreements make the result (if not the stated rationale) of
Standard Fruit more understandable?
 (g) “Clear and unmistakable evidence” of agreement to arbitrate arguably required under
domestic FAA. First Options arguably imposes a requirement that the existence of
domestic arbitration agreements be established through “clear and unmistakable”
evidence. Put differently, is First Options' “clear and unmistakable” evidence test
applicable only to agreements to arbitrate “questions of arbitrability” or does it extend
to the existence of any arbitration agreement (including agreements to arbitrate
substantive issues)?
It is not easy, in fact, to tell quite what First Options means. The opinion will probably be
interpreted, however, as meaning: (a) the existence of any arbitration agreement is to be
determined without resort to any presumptions, simply applying state-law (or otherwise
applicable) contract rules; (b) the existence of an agreement to arbitrate disputes about
the formation or validity of arbitration agreements (“arbitrability questions”) is
determined in light of a requirement for “clear and unmistakable” evidence of such an
agreement; (c) the scope of an existent arbitration agreement, as applied to substantive
disputes, is determined in light of a “pro-arbitration” presumption; and (d) the scope of
an existent arbitration agreement, as applied to disputes about jurisdiction or
arbitrability, may or may not be determined in light of a requirement for “clear and
unmistakable” evidence.
If the foregoing analysis of First Options were applicable to international arbitration
agreements, then how should Standard Fruit have been resolved? Was there sufficient
evidence that a binding arbitration agreement applicable to the merits of the parties'
dispute existed to satisfy generally-applicable rules of contract law? Was there “clear
and unmistakable” evidence of an agreement to arbitrate disputes over formation of the
arbitration agreement?
How should Lark International have been decided under First Options? Should the court
have decided itself whether an arbitration agreement had been formed, or should it have
referred this issue to arbitration? What if the parties' tentative arbitration agreement had
incorporated the ICC Rules?

P "184"
P "185"
16. Parties' assent to arbitration agreement. A recurrent issue is whether a party has validly
assented to an arbitration clause. This question arose, in different ways, in JOC Oil, Standard
Fruit, and Nokia. As discussed above, resolution of this issue depends in part on the applicable
standard of proof that is required to establish the existence of an arbitration agreement.
Compare again Standard Fruit and Nokia. How would the Swiss court have decided Standard
Fruit? How would the U.S. court have decided Nokia?
Assent in international commercial transactions is usually evidenced by written instruments.
Where arbitration agreements are concerned, written evidence of assent is usually a necessity,
because of the “writing” requirements applicable to arbitration agreements in most contexts.
See supra pp. 126-40. In most instances, therefore, determining whether a party assented to an
arbitration agreement will involve considering and interpreting the documentation exchanged
between the parties. See infra pp. 185-86.
It is generally settled that a party's assent to a written instrument need not be represented by
its (or its agent's) signature. “Ordinary contract principles determine who is bound by such
written provisions and of course parties can become contractually bound absent their
signatures.”Fisser v. International Bank, 282 F.2d 231, 233 (2d Cir. 1960). See infra pp. 653-72.
17. Exchanges of contractual documentation containing differing terms relating to arbitration.
National courts have considered challenges to the existence of an arbitration agreement in a
number of cases arising from the exchange of contractual documentation with differing dispute
resolution terms. Such difficulties have been most common when merchants have exchanged
differing sales and purchase forms, leading to what is sometimes referred to as the “battle of
the forms.” See Uniform Commercial Code §2-207; Restatement (Second) Contracts §§58-61
(1981); 1 Corbin, Contracts §§86, 87 (1963).
(a) Law applicable to formation of arbitration agreement. As discussed above, the substantive
law applicable to issues of formation of an arbitration agreement is determined by
choice of law rules. See supra pp. 180-82. In U.S. courts, the most commonly-applied rules
when the parties have exchanged writings with differing terms and conditions are U.S.
common law principles, the Uniform Commercial Code, and the Vienna Convention on
International Sale of Goods. U.S. courts have applied these standards to a variety of
disputes over the formation of arbitration agreements.
 (b) Formation of underlying contract under UCC §2-207. Under §207(1) of the UCC, lower U.S.
courts have held that the mere presence of an arbitration clause in one of the party's
forms, but not the other's, does not prevent formation of a contract. C. Itoh & Co.
(America) Inc. v. Jordan Int'l Co., 552 F.2d 1228, 1235 (7th Cir. 1977); Dorton v. Collins &
Aikman Corp., 453 F.2d 1161 (6th Cir. 1972); Valmont Industries, Inc. v. Mitsui & Co., 419
F.Supp. 1238 (D. Neb. 1976); Air Products & Chemicals, Inc. v. Fairbanks Morse, Inc., 206
N.W.2d 414 (Wisc. 1973).
If a contract is formed, §2-207 of the UCC deals with additional terms contained in one
party's form, providing generally that additional terms included in an expression of
acceptance become part of the contract unless they either “materially alter” the offer or
are objected to. Section 2-207(2) and (3) also provide that where the parties' conduct
recognizes the existence of a contract, but their writings differ over material terms, the
contract is limited to the provisions common to both writings.

(c) Formation of arbitration agreement under UCC §2-207. In cases involving one writing that
provides for arbitration, and another writing that does not, lower U.S. courts have
generally relied on §2-207 to deny arbitration. They have done so on the theory that the
arbitration clause was a material term that, under UCC §2-207(2), is not included in the
parties' contract. E.g., Southeastern Enameling Corp. v. General Bronze Corp., 434 F.2d 330
(5th Cir. 1970); Fairfield-Noble Corp. v. Pressman-Gutman Co., 475 F.Supp. 899 (S.D.N.Y. 1979);
Duplan Corp. v. W.B. Davis Hosiery Mills, 442 F.Supp. 86 (S.D.N.Y. 1977). See also Manhattan
Construction Co. v. Rotek, Inc., 905 F.Supp. 971 (N.D. Okla. 1995) (reviewing parties' offers
and acceptances and concluding that contract did not include arbitration clause). In
some cases, both parties' communications have included arbitration clauses – but
different ones – raising questions as to whether either governs and, if not, whether any
arbitration is appropriate. E.g., Lea Tai Textile Co. v. Manning Fabrics, Inc., 411 F.Supp. 1404
(S.D.N.Y. 1975).
Some courts have apparently taken a per se approach, reasoning that inclusion of an
arbitration clause is always material, and that an arbitration clause is therefore never
properly includible in the parties' contract under §2-207(2). See In re Marlene Industries
Corp., 408 N.Y.S.2d 410 (1978) (arbitration clause is always a material alteration;
“unequivocal agreement” required before arbitration will be ordered); Supak & Sons Mfg.
Co. v. Pervel Indus., Inc., 593 F.2d 135, 136-37 (4th Cir. 1979); De Marco Calif. Fabrics, Inc. v.
P "185" Nygard Int'l, Ltd, 1990 WL 48073 (S.D.N.Y. 1990); R. Leflar, American Conflicts Law 320 (3d ed.
P "186" 1977). Other lower courts have taken a case-by-case approach. N&D Fashions, Inc. v. DHJ
Indus., Inc., 548 F.2d 722, 766 (8th Cir. 1977) (whether addition of arbitration clause is
material alteration is “question of fact to be resolved by the circumstances of each
particular case”); Dorton v. Collins & Aikman Corp., 453 F.2d 1161, 1169 & n.8 (6th Cir. 1972)
(same); Schulze & Burch Biscuit Co. v. Tree Top, Inc., 831 F.2d 709 (7th Cir. 1987) (same).
Several courts and commentators have questioned whether a per se rule that an
arbitration clause is always a material alteration for purposes of §2-207 is permitted by
the FAA. The argument for preemption is that singling arbitration clauses out for per se
treatment as a material term denies them equal treatment, as required under §2's
savings clause, with “any contract.” Hirshman, The Second Arbitration Trilogy: The
Federalization of Arbitration Law, 71 Va. L. Rev. 1305, 1357-60 (1985); Note, Incorporation of
State Law Under the Federal Arbitration Act, 78 Mich. L. Rev. 1391, 1410-11 (1980); Medical
Dev. Corp. v. Industrial Molding Corp., 479 F.2d 345, 348 (10th Cir. 1973); Dorton v. Collins &
Aikman Corp., 453 F.2d 1161 (6th Cir. 1972).
Does it matter whether or not state law also accords other contract terms “per se” status
as material alterations? Consider the rationale in Supak & Sons Mfg. Co. v. Pervel Indus.,
Inc., 593 F.2d 135 (4th Cir. 1979); §2-207 does not “restrict the validity or enforceability of
arbitration agreements” but is “rather a general rule of contract formation.” “The UCC rule
in the instant case does not apply only to arbitration clauses. Many sorts of clauses,
including those disclaiming an otherwise applicable warranty of merchantability ... are
also considered material alterations.” Is that persuasive?

(d) Is the addition of an arbitration clause a material alteration under UCC §2-207? Should the
proposal of an arbitration clause be regarded, either per se or presumptively, as a
material alteration? Is arbitration so dramatically different from litigation? so unusual in
international transactions? Does the answer to the question depend on either (a) the
terms of the arbitration clause that is proposed (i.e., is a “neutral” clause different from
one that favors the proposing party); or (b) what is standard or expected in the industrial
sector or market at issue? See C. Itoh & Co. (America) Inc. v. Jordan Int'l Co., 552 F.2d 1228
(7th Cir. 1977); Collins, Arbitration and the Uniform Commercial Code, 41 N.Y.U. L. Rev. 736
(1966).
How should one party's alterations to an arbitration clause proposed by the adverse
party be treated under §2-207? Should competing proposals for different arbitral situses,
institutions, or applicable law be regarded as material alterations? What about different
numbers of arbitrators or different arbitral procedures (like language or discovery)? How
would Nokia be analyzed under UCC §2-207?
 (e) Applicability of UCC §2-207 under New York Convention. Some lower U.S. courts have
concluded that UCC §2-207 states a rule of federal common law applicable to actions
falling under the New York Convention and the FAA's second chapter. Beromun AG v.
Societa Industriale Agricola “Tresse” etc., 471 F.Supp. 1163, 1169-70 (S.D.N.Y. 1979) (applying
§2-207 as rule of federal common law); Ferrara SpA v. United Grain Growers, Ltd, 441
F.Supp. 778, 780 n.2 (S.D.N.Y. 1977).
18. Indefinite or internally contradictory arbitration agreements. Appendix P contains a number
of commonly encountered arbitration clauses, which contain useful elements. Most arbitration
institutions recommend arbitration provisions and various of these are also included in
Appendix P. Also of interest, however, are the following examples of arbitration clauses which
are less than ideal models. What is wrong with each one?
“All disputes arising in connection with the present agreement shall be submitted in the first
instance to arbitration. The arbitrator shall be a well-known chamber of commerce (like the
International Chamber of Commerce) designated by mutual agreement between buyer and
seller.” (47)
“For all claims of disputes arising out of this agreement which could not be amicably settled
between the parties, is competent the arbitrage for export trade at the Federal Chamber of
Commerce in Beograd. In the case that the buyer is accused, the Chamber of Commerce in New
York [which does not exist] is competent.” (48)
“All disputes arising in connection with the present agreement should be resolved by
negotiation and friendly settlement. If this method of resolution should be impracticable, the
P "186" disputed questions shall be decided in accordance with the Rules of Arbitration of the ICC in
P "187" Paris. In the event the proceedings were not able to decide the question for any reason
whatsoever, the judicial courts of the injured party shall decide the dispute on a legal basis.”
(49)
“In case of dispute (contestation) the parties undertake to submit to arbitration but in case of
litigation the Tribunal de la Seine shall have exclusive jurisdiction.” (50)
“All disputes arising in connection with the present contract (contract) shall be finally settled
by arbitration. Arbitration to be held outside the United States of America shall be conducted
in accordance with the Rules of Arbitration of the International Chamber of Commerce, unless
by written agreement of the parties, they adopt the Rules of the American Arbitration
Association. Arbitration to be held in the United States of America shall be conducted in
accordance with the Rules of the American Arbitration Association, unless by written
agreement of the parties, they adopt the rules of Arbitration of the International Chamber of
Commerce.” (51)
19. National court decisions and arbitral awards involving allegedly indefinite or internally
contradictory arbitration clauses. Numerous national court decisions and arbitral awards have
considered claims that particular arbitration clauses are indefinite or internally contradictory.
See the discussion at infra pp. 596-609. See generally Schmitthoff, Defective Arbitration Clauses,
[1975] J. Bus. Law 9.
Reread the last sentence of the Standard Fruit decision, as well as the parties' purported
arbitration “agreement.” Where will the parties' arbitration be conducted? Under what
procedural rules will it be conducted? Some lower courts have refused to enforce agreements
to arbitrate that lack a consensus on basic issues relating to the arbitration, such as situs or
applicable rules. See infra p. 188. Should the Standard Fruit court have also done so?
(a) National court decisions involving allegedly indefinite arbitration agreements. Various
national courts have considered claims that an arbitration agreement does not exist
because it is indefinite or internally-contradictory. See Star Shipping AS v. China National
Foreign Trade Transp. Corp. [1993] 2 Lloyd's Rep. 445 (upholding clause providing “any
dispute arising under the charter is to be referred to arbitration in Beijing or London in
the defendant's option”); Judgment of 15 November 1994, XXII Y.B. Comm. Arb. 707
(Oberlandesgericht Hamm) (1997) (denying enforcement of award on grounds that
arbitration clause was invalid because it failed to specify arbitral tribunal; clause
provided for arbitration by “the arbitral tribunal of the International Chamber of
Commerce in Paris, seat in Zurich.”); Mangistaumunaigoz Oil v. United World Trade Inc.
[1995] 1 Lloyd's Rep. 617 (word “if any” disregarded as surplusage in clause providing
“arbitration, if any, by ICC Rules in London”); Lucky-Goldstar Int'l (H.K.) Ltd v. Ng Moo Kee-
Eng. Ltd (May 5, 1993 Hong Kong Supreme Court) (clause referring to non-existent
institution held to constitute valid ad hoc arbitration agreement); Harper Robinson v.
Société Internationale de Maintenance et de Réalisation, Rev. Arb. at page 87 (1997) (Cour
d'appel de Grenoble) (refusing to uphold clause providing for arbitration with non-
existent appointing authority); Lovelock Ltd v. Exportles [1968] Lloyd's Rep. 163 (refusing
to uphold internally contradictory clause); Nokia Maillefer SA v. Mazzer, XXI Y.B. Comm.
Arb. 681 (Vaud Court of Appeal 1993) (1996) (no arbitration agreement concluded); Award
in ICC Case No. 7920 of 1993, XXIII Y.B. Comm. Arb. 80 (1998) (upholding ambiguous clause).
See infra pp. 596-609.
 (b) Arbitral awards involving allegedly indefinite or internally-contradictory arbitration
agreements. Consider again the arbitral award in ICC Case No. 5294, excerpted above, and
the tribunal's treatment of the argument that the parties' arbitration agreement was
indefinite. The tribunal's willingness to minimize imperfections in the parties' arbitration
agreement is consistent with most arbitral awards on the issue. See Preliminary Award of
25 November 1994, XXII Y.B. Comm. Arb. 211 (Zurich Chamber of Commerce 1997)
P "187" (“international trade arbitration organization in Zurich” held to mean arbitration and
P "188" Zurich Chamber of Commerce International Arbitration Rules); Final Award in ICC Case
No. 5294 of 22 February 1988, XIV Y.B. Comm. Arb. 137 (1989) (“rules of conciliation and
arbitration of the International Chamber of Commerce, Zurich, Switzerland” held to mean
ICC arbitration sited in Zurich); Award in ICC Case No. 5103, reprinted in S. Jarvin, Y.
Derains & J. Arnaldez, Collection of ICC Arbitral Awards, 1986-1990, at 361 (1994) (reference
to Paris Chamber of Commerce interpreted as reference to ICC); Award in ICC Case No.
6709, reprinted in J. Arnaldez, Y. Derains & D. Hascher, Collection of ICC Arbitral Awards
1991-1995, at 435 (1997) (same); Interim and Final Awards of 1983, 1984, and 1986 in ICC Case
No. 4145, reprinted in S. Jarvin, Y. Derains & J. Arnaldez, Collection of ICC Arbitral Awards,
1986-1990, at 55 (1994) (upholding validity of allegedly ambiguous arbitration clause);
Benglia, Inaccurate Reference to the ICC, 7 ICC Ct. Arb. Bull. 11 (1996).
(c) Lower U.S. court decisions holding that an attempted arbitration agreement was too
indefinite or internally contradictory to be enforceable. For lower U.S. court decisions
holding that an attempted arbitration agreement was too indefinite or contradictory to
be enforceable, see Oilex AG v. Mitsui & Co. (U.S.A.), Inc., 669 F.Supp. 85 (S.D.N.Y. 1987);
Bothell v. Hitachi Zosen Corp., 97 F.Supp.2d 1048, 1051-53 (W.D. Wash. 2000) (“I find that in a
series of documents, where the words used to refer to a proposed arbitration agreement
are so vague as to be meaningless and no further explanation is provided, either by
attachment, discussion, or otherwise, the totality of the documents exchanged between
the parties does not constitute a valid ‘arbitration agreement.’”); Branham v. CIGNA
Healthcare of Ohio, 692 N.E.2d 137, 139-40 (Ohio 1998) (holding that arbitration agreement
was ambiguous and invalid where the agreement provided that “any controversy between
GROUP, a Subscriber or Dependent (whether a minor or adult) or the heirs-at-law or
personal representatives (including any of their agents, employees, or providers), arising
out of or in connection with this Agreement shall, upon written notice by one party to
another, be submitted to arbitration;” clause was ambiguous because the preposition
“between” lacked a second object and thus, it was unclear which disputes were covered);
Jiampietro v. Utica Alloys, Inc., 576 N.Y.S.2d 733, 733 (App. Div. 1991) (“The agreement to
arbitrate is ambiguous and unenforceable because the ‘schedule’ containing the list of
sanctions available upon a breach of the underlying agreement is inconsistent with an
agreement to arbitrate.”); Lovisa Construction Co. v. County of Suffolk, 485 N.Y.S.2d 309,
310 (Sup. Ct. 1985) (although the parties agreed to submit disputes to an engineer for
binding resolution, the scope of the issues to be submitted and the exceptions to the
agreement were ambiguous and rendered the agreement to arbitrate unenforceable);
Massaro Electric Co. v. CMG-Construction Management Group, 689 N.Y.S.2d 361, 362 (N.Y.
Dist. Ct. 1999) (Court found there was no valid agreement to arbitrate where there was no
signed agreement and the parties relied on “vague references contained in the small
print and incorporated by reference to an unsigned master agreement.”); National
Material Trading v. Tang Industries, Inc., 1997 WL 915000 (D.S.C. 1997) (Agreement to
arbitrate held unenforceable and invalid where the agreement provided that “[a]ny
disputes or differences that may arise out of or in connection with this contract shall be
referred to the Court of Arbitration at the Chamber of Commerce and Industry of
Switzerland and settled in conformity with the rules and procedures of said Commission”;
there is no such forum as the Court of Arbitration at the Chamber of Commerce and
Industry of Switzerland and court held that it had no authority to rewrite the agreement
by choosing a proper forum for the arbitration); Samsung Corp. v. Khozestan Machine Kar
Co., 926 F.Supp. 436, 440-42 (S.D.N.Y. 1996) (Samsung argued that the parties had agreed
to set the terms governing their agreement “otherwise as per owners' charter party”
(which is customary language in the ship chartering industry) and that in doing so, KMK
had agreed to whatever arbitration clause Samsung included in the final charter party
sent to KMK; the court held that the phrase was too indefinite to be enforceable.).
 (d) Lower U.S. court decisions holding that indefinite arbitration agreement could be enforced.
In general, most lower U.S. court decisions have held that indefinite, vague, ambiguous,
or contradictory arbitration agreements may be enforced. These decisions have usually
considered whether the parties' arbitration agreement lacks, or is contradictory
regarding, a term that is so fundamental that it requires ignoring the basic agreement to
arbitrate. In general, however, even disagreement about highly important issues, such as
situs and arbitral institution, have not been sufficient to render an arbitration agreement
invalid in U.S. courts. See Bauhinia Corp. v. China Nat'l Machinery & Equip. Import & Export
Corp., 819 F.2d 247 (9th Cir. 1987); Pacific Reinsurance Mgt Corp. v. Ohio Reinsurance Corp.,
814 F.2d 1324 (9th Cir. 1987); Compania Espanola de Petroleos, SA v. Nereus Shipping SA, 527
F.2d 966 (2d Cir. 1975); Lapine Technology Corp. v. Kyocera Corp., 909 F.Supp. 697 (N.D. Calif.
1995) (arbitration agreement not rendered entirely unenforceable because it included
invalid provision), rev'd on other grounds 130 F.3d 884 (9th Cir. 1997); HZI Research Center
P "188" Inc. v. Sun Instruments Japan Co., 10 Mealey's Rep. 11 (Oct. 1995) (S.D.N.Y. 1995) (upholding
P "189" clause referring to non-existent institution); Rosgoscirc v. Circus Show Corp., 1993 WL
277333 (S.D.N.Y. 1993) (finding valid arbitration agreement where clause referred to
nonexistent institution); Warnes SA v. Harvic Int'l Ltd, 1993 WL 228028 (S.D.N.Y. 1993) (“an
agreement on a non-existent arbitration forum is the equivalent of an agreement to
arbitrate which does not specify a forum; since the parties had the intent to arbitrate
even in the absence of a properly designated forum”); Euro-Mec Import, Inc. v. Pantrem &
C., SpA, 1992 WL 350211 (E.D. Pa. 1992) (“ambiguity regarding key aspects of the arbitration
proceedings ... does not necessarily render an arbitration clause unenforceable”); CAE
Industries Ltd v. Aerospace Holdings Co., 741 E.Supp. 388 (S.D.N.Y. 1989); Great Northern
Nekoosa Corp. v. ASEA, AB, 657 F.Supp. 1253 (W.D. Ark. 1987); Schulze & Burch Biscuit Co. v.
Tree Top, Inc., 642 F.Supp. 1155, 1156-57 (N.D. Ill. 1986) (enforcing agreement that provided
only “All disputes under this transaction should be arbitrated in the usual manner”;
noting that FAA provides means to select situs and arbitrators and that parties' conduct
indicated that AAA rules would apply); Peters Fabrics, Inc. v. Jantzen, Inc., 582 F.Supp. 1287,
1291 (S.D.N.Y. 1984) (competing forms providing for AAA and GAC arbitrations, held to
constitute agreement to arbitrate); Dan River, Inc. v. Cal-Togs, Inc., 451 F.Supp. 497
(S.D.N.Y. 1978); Astra Footwear Industry v. Harwyn Int'l, Inc., 442 F.Supp. 907 (S.D.N.Y. 1978)
(court holds that agreement to arbitrate before non-existent “Chamber of Commerce in
New York” is not ICC arbitration clause, but that parties meant to arbitrate, and appoints
arbitrator under FAA §5); Lory Fabrics, Inc. v. Dress Rehearsal Inc., 434 N.Y.S.2d 359 (App.
Div. 1980) (different form contracts).
(e) Consequences of defective term in arbitration agreement. Suppose that one term of an
arbitration agreement is invalid, for example, because it selects a deceased arbitrator, a
non-existent administering authority, or otherwise. Is the remainder of the arbitration
agreement still valid? Consider:
Where one term of an arbitration agreement has failed, the decision between substituting
a new term for the failed provision and refusing to enforce the agreement altogether
turns on the intent of the parties' at the time the agreement was executed, as determined
from the language of the contract and the surrounding circumstances.... to the extent the
court can infer that the essential term of the provision is the agreement to arbitrate, that
agreement will be enforced despite the failure of one of the terms of the bargain. If, on
the other hand, it is clear that the failed term is not an ancillary logistical concern but
rather is as important a consideration as the agreement to arbitrate itself, a court will not
sever the failed term from the rest of the agreement and the entire arbitration provision
will fail.”).
Zechman v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 742 F.Supp. 1359 (N.D. Ill. 1990).
20. Formation of arbitration agreements by incorporation from other instruments. International
contracts frequently incorporate arbitration agreements or rules from other sources (i.e, other
contracts, trade association rules). This process of incorporation raises legal issues under
applicable law.
(a) Enforceability of incorporated arbitration agreements under most national arbitration
statutes. Under most developed national arbitration regimes, arbitration provisions may,
subject to varying conditions, validly be incorporated into an agreement by reference
from other agreements or sources. See Judgment of 14 July 1995, XXI Y.B. Comm. Arb. 643
(Herzogenbusch Gerechtshof) (1966) (arbitration clause validly incorporated into
agreement); Judgment No. 8469 of 11 July 1992, XXII Y.B. Comm. Arb. 715 (Corte di
Cassazione) (1997) (arbitration clause validly incorporated by “multi-step” process
through several separate contracts).
 (b) Enforceability of incorporated arbitration agreements under the FAA. It is well-settled
under the FAA in the United States that an agreement may validly incorporate an
arbitration clause from another document. R.J. O & Brien & Assoc. v. Pipkin, 64 F.3d 257,
260 (7th Cir. 1995) (“A contract ... need not contain an explicit arbitration clause if it
validly incorporates by reference an arbitration clause in another document”); Gingiss
International, Inc. v. Bormet, 58 F.3d 328 (7th Cir. 1995) (“a sub-contract with a guarantor or
surety may incorporate a duty to arbitrate by reference to an arbitration clause in a
general contract”); Progressive Casualty, Inc. Co. v. CA Reaseguradora Nacional, 991 F.2d 42,
48 (2d Cir. 1993) (incorporation of arbitration agreement); Paper Express, Ltd v. Pfankuch
Maschinen GmbH, 972 F.2d 753, 755 (7th Cir. 1992); Heinhuis v. Venture Assoc., Inc., 959 F.2d
551, 553-54 (5th Cir. 1992) (excess insurance policy incorporated arbitration clause from
underlying insurance policy); Maxum Found., Inc. v. Salus Corp., 779 F.2d 974, 978 (4th Cir.
1985); Exchange Mutual Ins. Co. v. Haskell Co., 742 F.2d 274, 275-76 (6th Cir. 1984)
(arbitration clause from prime contract incorporated into performance bond); Import
Export Steel Corp. v. Mississippi Valley Barge Line Co., 351 F.2d 503, 505-06 (2d. Cir. 1965);
Hodge Brothers, Inc. v. DeLong Co., 942 F.Supp. 412 (W.D. Wis. 1996); Matter of Arbitration
P "189" between Keystone Shipping Co. and Texport Oil Co., 782 F.Supp. 28, 31 (S.D.N.Y. 1992);
P "190" Continental U.K. Ltd v. Anagel Confidence Compania Naviera, SA, 658 F.Supp. 809, 813
(S.D.N.Y. 1987) (if “party's arbitration clause is expressly incorporated into a bill of lading,
non-signatories ... who are linked to that bill through general principles of contract law or
agency law may be bound”); State Trading Corp. of India v. Grunstad Shipping Corp., 582
F.Supp. 1523 (S.D.N.Y. 1984) (arbitration clause in charter party was incorporated with
sufficient specificity into bill of lading). See also Wilson Fertilizer & Grain, Inc. v. ABM
Milking Co., 654 N.E.2d 848 (Ind. App. 1995); Chiacchia v. National Westminister Bank USA,
507 N.Y.S.2d 888, 890 (App. Div. 1986).
U.S. courts have also permitted “prospective” incorporation of procedures which did not
exist at the time that the incorporating language was drafted. Geldermann, Inc. v. CFTC,
836 F.2d 310, 318 (7th Cir. 1987), cert. denied, 488 U.S. 816 (1988) (incorporation into earlier
agreement of arbitration procedures which were adopted at later date).

(c) Requirement of clarity regarding incorporated arbitration agreement under the FAA.
Particularly in cases involving unsophisticated parties, U.S. lower courts have required
relative clarity from language incorporating an arbitration clause in another document.
Paine Webber, Inc. v. Bybyk, 81 F.3d 1193 (2d Cir. 1996) (no incorporation of arbitration
provision “unless it is clearly identified in the [principal] agreement”); Chiacchia v.
National Westminister Bank USA, 507 N.Y.S.2d 888, 890 (App. Div. 1986) (same); Traynham
v. Yeargin Enterprises, Inc., 403 S.E.2d 329, 330 (S.C. Ct. App. 1991) (Court upheld denial of
motion to dismiss complaint where the agreement between the parties did not contain
an explicit reference to arbitration, but only purported to incorporate “the 1976 edition of
A.I.A. document A201” which did contain an arbitration clause.); Weiner v. Mercury Artists
Corp., 130 N.Y.S.2d 570, 571 (App. Div. 1954) (one-page contract did not validly incorporate
arbitration provision in 200-page pamphlet).
(d) Enforceability of arbitration clauses incorporated from institutional rules under the FAA.
U.S. courts have given effect to arbitration clauses incorporated from institutional rules
or by-laws. E.g., Hodge Brothers, Inc. v. DeLong Co., 942 F.Supp. 412 (W.D. Wis. 1996)
(rejecting argument that agreement incorporating National Grain and Feed Association
Rules did not incorporate arbitration provisions of rules).
21. Formation of arbitration agreements by conduct. Most legal systems recognize that a party's
assent to contractual terms may be established by its conduct or oral statements. For
example, a party's performance of its putative contractual obligations is often regarded as a
basis for finding assent to a disputed contract. Despite the “writing” requirement that applies
to arbitration agreements under most international and national authorities, see supra pp. 126-
40, a party's conduct can be relevant to establishing the existence of a valid arbitration
agreement.
Numerous authorities have relied on a party's commencement of arbitral proceedings, or its
participation without protest in such proceedings, as evidence of a valid arbitration
agreement. See Thomson-CSF, SA v. American Arbitration Association, 64 F.3d 773 (2d Cir. 1995)
(“party may be bound by an arbitration clause if its subsequent conduct indicates that it is
assuming the obligation to arbitrate”); Liberty Mutual Insurance Co. v. Lodha, 500 N.Y.S.2d 989,
990 (Sup. Ct. 1986) (where party voluntary participated in AAA arbitration, it waived any rights
to dispute the interpretation of the terms of the arbitration agreement); General Accident
Insurance Co. v. Giacomazzo, 612 N.Y.S.2d 43 (Sup. Ct. 1994) (where party arbitrated dispute, it
could not later dispute arbitration award); Manes Org., Inc. v. Standard Dyeing & Finishing Co.,
472 F.Supp. 687, 691 (S.D.N.Y. 1979) (“Manes contends that there is no enforceable agreement
between the parties for arbitration. However, Manes is estopped to deny the parties for
arbitration, when it is served its own Demand for Arbitration upon Standard in May, 1978, it
relied on the very arbitration provision it now argues is invalid.”).
22. The Standard Fruit decision. The reasoning in Standard Fruit is obviously wrong, and the
result is arguably wrong. It is important, however, to focus precisely on the opinion's mistakes.
First, is it sensible to conclude, as the Standard Fruit court does, that the parties' arbitration
agreement is binding even if the underlying Memorandum of Intent is not? Suppose that
Standard Fruit argued that the Memorandum of Intent was a forgery – that it had never
discussed, much less signed, any such document. Would this really be irrelevant to Nicaragua's
 motion to compel arbitration? If the Memorandum is not a binding contract, then how can the
arbitration provision contained in it be binding?
The standard answer to the foregoing, of course, is that the arbitration agreement is separable
and therefore that it is supported by separate consideration (the exchange of promises to
arbitrate), proved by separate evidence as to its existence, and subject to different rules of
formation. See supra pp. 67-68, 175-76. Is that answer persuasive in cases involving claims that
P "190" no underlying contract was formed? If the very existence of any contract is challenged, is that
P "191" not necessarily relevant to the existence of an agreement to arbitrate? In concrete terms, if
Standard Fruit and Nicaragua had no intention to be bound by the Memorandum of Intent,
would they have intended to be bound by the Memorandum's arbitration clause? Does the
Standard Fruit court address this difficulty?
Are the answers to the foregoing questions effected by the basis for the claim that no
underlying contract exists? Compare a case where the parties have detailed negotiations and
the issue is whether a binding contract has resulted with a case where one party denies any
dealings whatsoever with the other.
Second, even assuming that the binding character of the Memorandum is irrelevant to the
existence of an arbitration agreement, Standard Fruit also specifically challenged the
existence of the arbitration “agreement” itself. In particular, it argued that the arbitration
clause was only a statement of intention to attempt to agree on an arbitration mechanism in
the future. Did the Standard Fruit court offer any coherent response to this argument? Must this
argument not be judicially resolved?
Third, what are the limits of the Standard Fruit rationale? Suppose that the Memorandum of
Intent had not been signed, but that Nicaragua argued it had been orally agreed to. Suppose
the arbitration clause was contained in a draft prepared by Nicaragua, but not included in the
unsigned Memorandum of Intent? Suppose Standard Fruit said it never attended the “summit”
meeting?
Attempt to formulate a clear response to Standard Fruit's arguments, upholding the Ninth
Circuit's result. Consider how the tribunal's analysis in JOC Oil might be of assistance.
23. Law applicable to formal validity of international arbitration agreement under New York
Convention. Most authorities hold that Article II(2) of the New York Convention set forth an
exclusive, uniform rule of formal validity for arbitration agreements. This rule and its
requirements with respect to the written form of arbitration agreements are described above.
See supra pp. 126-40. That rule requires that arbitration clauses be contained in a contract
signed by the parties, but excludes other requirements of contractual formality. A. van den
Berg, The New York Convention of 1958 173-78, 226-27 (1981); Judgment of 21 March 1995, XXII Y.B.
Comm. Arb. 800 (Swiss Federal Tribunal) (1997) (commentators “agree that the New York
Convention, where applicable, prevails over national law, thereby guaranteeing its uniform
application by the Contracting States. Hence, the issue of (formal) validity is determined solely
according to the Convention.”).
Some jurisdictions impose particularly onerous or unusual requirements with respect to the
form of arbitration agreements. In some U.S. states, for example, state law requires that any
arbitration agreement be signed by a party's attorney, as well as the party. See Tex. Rev. Civ.
Stat. Ann. Article 224 (Vernon 1973). Such state law requirements are generally preempted by
the FAA. See supra pp. 116 & infra pp. 350-56 They would also be superseded by uniform
substantive rules under Article II of the New York Convention.
2. Selected Materials on Non-Contractual International Arbitration
It is frequently said that international arbitration is “consensual” or that every international
arbitration “requires an international arbitration agreement.” These observations are largely
accurate. The overwhelming majority of international arbitrations arise from arbitration
clauses and, without an arbitration agreement, there usually is no legal basis for an
international arbitration. (52)
Despite this general principle, it is not correct that international arbitration invariably
requires an arbitration agreement. There are instances in which disputes can be arbitrated,
and in which there exists a legal obligation to arbitrate, even without an international
arbitration agreement. In particular, contemporary “bilateral investment treaties” (“BITs”) or
“investment protection agreements” frequently create treaty-based rights (and obligations) to
P "191" arbitrate various categories of international disputes. (53) In the memorable phrase of one
P "192" authority, BITs provide the basis for “arbitration without privity.” (54)
The past decade has seen a dramatic increase in the number and scope of BITs, particularly
between developed, capital-exporting states and developing or emerging market states.
Germany, the United Kingdom, Switzerland, the Netherlands, and the United States all have
entered into substantial numbers of bilateral investment treaties with various states around
the world. (55) In 1999, there were more than 1,300 BITs in force. (56)
Typically, BITs ordinarily contain general requirements that each state afford nationals of the
other state either “national” or “most favored nation” status and that each state refrain from
expropriatory or otherwise arbitrary conduct with respect to the investments of the other
state's nationals. A key feature of the past decade's wave of BITs has been provisions granting
foreign investors (from one contracting state) the right to initiate international arbitration
against either the host state (the other contracting state) or its instrumentalies. For example, a
BIT between the United States and Haiti might provide that U.S. investors in Haiti could pursue
claims against the Haitian state for violations of the BIT's protections in international
 arbitration – even without any arbitration agreement (or any contract at all) with Haiti or any
Haitian state entity.
Consider briefly the following materials, which illustrate the dispute resolution provisions of
contemporary BITs. In particular, consider the excerpted portions from the United State-Haiti
BIT and the Spain-Algeria BIT. Also briefly consider the historical background of hostility to
international arbitration, reflected by the excerpt from Decision No. 24 of the Andean
Commission.
DECISION 24 OF THE ANDEAN COMMISSION CONCERNING TREATMENT OF FOREIGN CAPITAL
Article 51 10 Int'l Legal Materials 152 (1971) [excerpted above at p. 162]
P "192"
P "193"
TREATY CONCERNING THE ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENTS, 12
DECEMBER 1983, UNITED STATES OF AMERICA-HAITI
Article 7
7(3)(a). The national or company concerned may choose to consent in writing to the submission
of the dispute to the International Chamber of Commerce (“ICC”), for settlement by conciliation
or binding arbitration, at any time after six months from the date upon which the dispute
arose, provided:
(i) the dispute has not, for any reason, been submitted for resolution in accordance with any
applicable dispute resolution procedures previously agreed to by the parties to the
dispute; and
(ii) the national or company concerned has not brought the dispute before the courts of
justice or administrative tribunals or agencies of competent jurisdiction of the Party that
is a party to the dispute.
Once the national or company concerned has so consented, either party to the dispute may
institute proceedings before the ICC.
If the parties disagree over whether conciliation or binding arbitration is the move appropriate
procedure to be employed, the opinion of the national or company concerned shall prevail.
7(3)(b). Each party hereby consents to the submission of an investment dispute to the ICC for
settlement by conciliation or binding arbitration.
7(3)(c). Conciliation or binding arbitration of such disputes shall be done in accordance with
the provisions of the Regulations and Rules of the ICC.
7(3)(d). In case of arbitration between the party and a national or company of the other party,
the ICC, consistent with its rules, shall determine the venue for arbitration. The venue for
arbitration shall be in a State which is a party to the New York Convention on the Recognition
and Enforcement of Foreign Arbitral Awards. Moreover, each Party shall provide for
enforcement within its territory of ICC arbitral awards.
P "193"
P "194"
AGREEMENT ON THE PROMOTION AND RECIPROCAL PROTECTION OF INVESTMENTS, 23 DECEMBER
1994, SPAIN-ALGERIA
Article 11(2)
11(2). If the controversy cannot be resolved in this way [amicable means] within six months
from the date of written advice mentioned in paragraph 1, the controversy may be submitted
at the choice of the investor:
• to an arbitral tribunal, according to the Rules of Arbitration of the Arbitration Institute of
the Chamber of Commerce of Stockholm;
• to the Court of Arbitration of the International Chamber of Commerce in Paris;
• to an “ad hoc” arbitral tribunal established by the Rules of Arbitration of the United
Nations Commission on International Trade Law (UNCITRAL);
• to the International Centre for the Settlement of Disputes Concerning Investments Between
States and Citizens of Other States,” open to signature in Washington on 18 March 1965, when
each Member State to the present agreement has become signatory to such agreement.
Notes on Arbitration Under Bilateral Investment Treaties
1. Historic hostility of developing states to international arbitration. As discussed above,
developing states historically regarded international arbitration with a high degree of mistrust.
Decision 24 of the Andean Commission is one example of this.
What are the costs and risks to developing countries of agreeing to international arbitration
with foreign investors? Does the United States or France agree to international arbitration
when foreign investors acquire U.S. or French firms or undertake major projects in those
countries? If not, why should Nigeria, Saudi Arabia, India, or Brazil do so when U.S. or French
firms invest there?
What are the costs and risks to developing countries of not agreeing to international
arbitration with foreign investors?
2. Abandonment of historic hostility of developing countries to international arbitration. As
 detailed above, during the past two decades, much of the historic hostility of developing
states to international arbitration has dissipated. See supra pp. 156-61, 164-65. In addition to
adopting “pro-arbitration” national arbitration legislation, many developing states have
entered into BITs such as those excerpted above involving Haiti and Algeria.
Consider the basic structure and consequences of a BIT. Is it wise for a developing state to
enter into such a treaty? Why or why not? What are the costs and benefits of a BIT?
3. “Arbitration without privity.” Consider Article 7(3) of the U.S.-Haiti BIT. What does Article 7(3)
grant to foreign investors (from a signatory state) with respect to international arbitration?
Compare Article 11(2) of the Spain-Algeria BIT to Article 7(3) of the U.S.-Haiti BIT. For a more
detailed analysis, see Unegbu, BITs and ICC Arbitration, 16 J. Int'l Arb. 93 (1999).
Suppose that Company A invests $100 million in a plant in Haiti and the Haitian government
subsequently imposes staggeringly high tax rates on foreign investors. What does Article 7(3) of
the U.S.-Haiti BIT permit the U.S. investor to do? What would Article 11(2) of the Spain-Algeria
BIT permit in analogous circumstances? Would it matter, in either case, that the foreign
investor's investment agreement did not contain any dispute resolution or arbitration clause?
P "194"
P "195"
Which BIT (U.S.-Haiti; Spain-Algeria) offers broader and more certain rights with respect to
international arbitration?
4. Interaction between BITs and contractual dispute resolution provisions. Suppose that a
foreign investment agreement does contain a dispute resolution provision. How does this
interact with the dispute resolution rights granted in a BIT? Consider what Article 7(3) of the
U.S.-Haiti BIT provides in this regard. For example, in the foregoing hypothetical, suppose that
a U.S. investor agreed that all disputes arising from its investment agreement would be
resolved in Haitian courts. How would Article 11(2) of the Spain-Algeria BIT deal with such a
provision?
5. Choice of multiple arbitral forums. Consider again Article 11(2) of the Spain-Algeria BIT. Note
that it permits multiple arbitral forums which the foreign investor can choose between. What is
the purpose of granting the foreign investor a choice, unilaterally, between the Stockholm
Chamber of Commerce, the ICC, an ad hoc UNCITRAL tribunal, and ICSID? If an agreement
between two private parties granted one party, and not the other, such options would it be
enforceable? Would it be accepted in negotiations? Systemically, is there any risk that the
relevant arbitral institutions will take undesirable steps to compete for foreign investors'
business? How might they do so?
6. Standing to invoke arbitration under BITs. Who can invoke the arbitration remedies provided
for under a BIT? The answer, of course, depends on what the particular BIT provides. Virtually
all BITs provide, however, that arbitration remedies (and substantive rights) are extended to
“nationals” of one signatory state vis-à-vis the other signatory state. That is, a U.S. “national”
may invoke the U.S.-Haitian BIT against Haiti, but a French or a Haitian national may not.
Who is a “national” for purposes of a BIT? Again, the answer depends on the particular BIT and
its definitional provisions (if any). In general, however, BITs look to citizenship (for natural
persons) and incorporation and/or ownership (for juridical person). Typically, companies
incorporated under the laws of third states are not able to invoke rights (including arbitration
remedies) granted by a BIT between two countries.
7. ICSID implementing legislation. Arbitration without privity is also possible under ICSID, at
least as implemented in some states. Although national implementing legislation varies
widely, in some states, foreign investors are granted a right (even absent any contractual
arbitration provision) to arbitrate pursuant to the ICSID Rules against the host state with
respect to ICSID investment disputes. See Parra, The Role of ICSID in the Settlement of
Investment Disputes, 16 ICSID News 1 (1999).

C. Grounds For Objecting to Validity of International Arbitration Agreements

Even assuming that an international arbitration agreement has been formed, there will often
be grounds for challenging the validity of that agreement. In the vocabulary of the New York
Convention and UNCITRAL Model Law, the arbitration agreement may be “null and void,”
“inoperative,” or “incapable of being performed.” (57)
There are two basic categories of objections to the validity of arbitration agreements. First,
there can be challenges which parallel those which are available under generally-applicable
contract law to contest the validity of any contract. In particular, these grounds include
P "195" fraudulent inducement, fraud, illegality, unconscionability or duress, and waiver. Second, in
P "196" many nations, special rules of invalidity apply to some categories of arbitration agreements
(as distinguished from other types of contracts). We examine the first set of grounds for
challenging the validity of arbitration agreements immediately below. We consider the second
set in the following section.
1. Fraudulent Inducement or Fraud in the Factum
Two commonly invoked bases for objecting to the validity of international arbitration
agreements are fraudulent inducement and fraud. As with other grounds for challenging the
validity of arbitration agreements, claims of fraud and fraudulent inducement often require
application of separability doctrine and the competence-competence principle. A leading
national court decision concerning the effect of a fraudulent inducement claim on an
arbitration agreement is Prima Paint v. Flood & Conklin Mfg. Co., excerpted above. (58) There,
 as we have seen, one party resisted arbitration on the ground that the underlying contract
containing the arbitration clause was void because it had been fraudulently induced. The U.S.
Supreme Court invoked the separability doctrine and concluded that this claim did not
provide a legal basis for questioning the parties' arbitration agreement. As a result, the Court
held that the fraudulent inducement claim was arbitrable.
Like Prima Paint, many national courts have relied on the separability doctrine in refusing to
permit judicial consideration of claims that the parties' underlying contract was fraudulently
induced. Instead, as described in greater detail below, such claims have generally been
required to be presented to the arbitral tribunal. (59) Nevertheless, there are three significant
exceptions to this general rule.
First, claims of fraudulent inducement of the arbitration agreement itself (as opposed to the
underlying contract) have frequently been held to be subject to judicial resolution. (60)
Second, as recounted in the Westinghouse opinion, excerpted below, some national courts
have held that claims of outright fraud in the formation of an underlying contract – as
distinguished from mere fraudulent inducement – are always for judicial resolution. (61) Third,
most authorities have held that the arbitrability of fraudulent inducement claims is ultimately
a question of interpreting the parties' arbitration agreement; a narrow arbitration agreement
may not provide for arbitration of such issues. (62)
Claims of fraudulent inducement and fraud also raise choice of law questions. In particular,
does the same law govern fraud and fraudulent inducement claims as that otherwise
applicable to the parties' arbitration agreement? What is the effect of a choice-of-law clause
on fraud claims?
P "196"
P "197"
The materials excerpted below illustrate the resolution of claims that an arbitration
agreement (or the underlying contract containing it) was the product of fraud or fraudulent
inducement. In this connection, reconsider Prima Paint, as well as the decisions in
Westinghouse and First Options. Also compare the approaches adopted by the UNCITRAL Model
Law, the French Code of Civil Procedure, and the Swiss Law on Private International Law, all
excerpted below.
PRIMA PAINT CORP. v. FLOOD & CONKLIN MANUFACTURING CO.
388 U.S. 395 (1967) [excerpted above at pp. 63-67]
REPUBLIC OF THE PHILIPPINES v. WESTINGHOUSE ELECTRIC CORP.
714 F.Supp. 1362 (D.N.J. 1989)
DEBEVOISE, DISTRICT JUDGE. This is an action brought by the Republic of the Philippines and
the National Power Corporation (“NPC”), the Philippine government agency responsible for
electric power generation, against Westinghouse Electric Corporation (“WECOR”), a
Pennsylvania corporation, [Burns & Roe, a New Jersey engineering firm, and other U.S.
companies]. This case arises out of the construction of the 600-megawatt Philippines Nuclear
Power Plant Unit 1 (“PNPP”).... The fifteen-count complaint alleges breach of contract, fraud,
tortious interference with fiduciary duties, negligence, civil conspiracy, RICO violations,
antitrust violations and various pendent state claims. Defendants moved to stay this action
pending arbitration pursuant to contractual arbitration clauses and §3 of the [FAA] and/or
pursuant to the court's inherent power to manage its docket....
[Accepting plaintiffs' allegations,] in the summer of 1973, Ferdinand E. Marcos, then President of
the Republic of the Philippines, announced his government's decision to build the nation's first
nuclear powerplant.... Westinghouse sought the contract for the construction of the plant's
nuclear steam supply system and Burns & Roe was interested in obtaining the
architect/engineering (“A/E”) contract for the project. Plaintiffs allege that ... both
Westinghouse and Burns & Roe concluded that the way in which business was done in the
Philippines required the retention of a special sales representative (“SSR”) who had both
access to and influence in Malacanang, the presidential palace.... Since 1972, when Marcos
declared a state of martial law, Marcos had ruled the nation largely by decree and his direct
P "197" assent to such a high-profile project was considered essential. The complaint alleges that it
P "198" was understood that the SSR would offer Marcos a “piece of the action” in order to obtain his
endorsement of the bidders.
Westinghouse and Burns & Roe ultimately came to retain Herminio T. Disini as their SSR under
separate agreements. Disini was a well-known Philippine businessman and close personal
friend of President Marcos whose wife was also Mrs. Marcos cousin and personal physician....
Disini allegedly boasted to Burns & Roe that he could obtain a turnkey contract for PNPP
project for Westinghouse including an A/E subcontract for Burns & Roe.
[Allegedly at Marcos' directive, the NPC entered into contract negotiations with Westinghouse.
A government negotiating committee comprised of three technical, commercial and legal
officials met with Westinghouse in lengthy negotiations. One government representative
purportedly recalled, however, that Westinghouse refused to negotiate any critical contract
terms:
... Westinghouse knew that it had the President's support and that NPC could not go to any
other supplier for the nuclear plant. Therefore Westinghouse could get whatever terms it
wanted, and NPC was powerless to bargain effectively....
Among the terms in the Westinghouse draft contract considered by the legal panel, was the
arbitration clause, Article 24. One member of the NPC negotiating committee recalled that
 Westinghouse was intransigent and indicated that the draft contract was nonnegotiable.
Because of prior bad experience with arbitration, NPC wanted the procedural protection
available in a judicial forum.... Apparently Westinghouse continued to insist on the inclusion of
the arbitration clause and the parties were soon at an impasse. According to plaintiffs,
however, Marcos repeatedly intervened and, with minor changes to the arbitration clause and
other provisions, the contract was eventually executed.] ...
The initial question raised by this motion is whether the plaintiffs' allegations of bribery may
be considered in determining whether the action should be stayed pending arbitration.
Defendants argue that under the doctrine announced by the Supreme Court in Prima Paint
Corp., the allegations are properly directed to the arbitration panel and not the court....
[U]nder either §3 or 4, the arbitration clause is to be treated as conceptually “separable” from
the remainder of the contract. “[I]n passing upon a §3 application for a stay while the parties
arbitrate, a federal court may consider only issues relating to the making and performance of
the agreement to arbitrate.”Prima Paint, 388 U.S. at 404....
The result in Prima Paint is not wholly logical. It leaves federal courts with the rather rare and
P "198" narrow issue of whether fraud was directed specifically to the arbitration clause while passing
P "199" the more frequent and usually more complex question of whether fraud was directed to the
entire contract to the arbitration panel, a group chosen more for their technical knowledge
than their legal skills. This approach also seems to run counter to §2's broad declaration that a
written arbitration agreement be considered valid and enforceable “save upon such grounds
as exist at law or equity for the revocation of any contract.” Nonetheless, subsequent Supreme
Court cases have confirmed that Prima Paint is alive and healthy and, if nothing else, the case
has come to stand as an expression of the Court's militant determination to enforce arbitration
agreements freely chosen by the parties. The challenge for the party who believes himself to
be the victim of a fraud and wishes to fight it out in court is to demonstrate that the fraud was
specifically directed to the arbitration clause or to convince the court to craft some exception
to the Prima Paint doctrine.
Plaintiffs first argue that bribery should not be treated as fraud in the inducement but as a
species of fraud in factum (or fraud in the execution) that vitiates NPC's assent to the
agreement and makes the contract void ab initio. Plaintiffs, relying primarily upon Cancanon v.
Smith Barney, Harris Upham & Co., 805 F.2d 998 (11th Cir. 1986), argue that the defense of fraud
in factum creates an exception to Prima Paint's separability rule. Cancanon was a securities
fraud action brought by purchasers of a money market account who alleged that the defendant
brokerage firm wasted their principal in unauthorized trading. The account agreement, a form
contract, contained an arbitration clause and the defendant moved for an order compelling
arbitration pursuant to §4 of the [FAA]. Plaintiffs, who did not speak English, argued that since
defendant represented that the contract was for a money market account, plaintiffs had never
assented to a contract for a securities account. Plaintiffs argued that this fraud in factum, as
opposed to fraud in the inducement, voided the entire contract including the arbitration
clause and therefore overcame the Prima Paint separability doctrine.
The Cancanon Court adopted the plaintiffs' position. Citing the Restatement of Contracts, the
court observed that “[w]here misrepresentation of the character or essential terms of a
proposed contract occurs, assent to the contract is impossible. In such a case there is no
contract at all.” Thus, “where the allegation is one of fraud in factum, i.e., ineffective assent to
the contract, the issue is not subject to resolution pursuant to an arbitration clause contained
in the contract document.”
Several other cases have taken positions consistent with this approach. In Par-Knit Mills, Inc. v.
Stockbridge Fabrics Co., 636 F.2d 51 (3d Cir. 1980), for instance, the defendant argued that
certain documents, which the plaintiff contended were contracts, were signed only as
confirmations of delivery dates. The court observed that the “mere execution of a document ...
even assuming that it is executed by a corporate agent, does not negate the factual assertion
that such signature was not intended to represent a contractual undertaking.” If such a defense
were mounted against a motion to compel arbitration under §4 of the Act, and if the
P "199" allegations were set forth in an affidavit, a proceeding held before the case was committed to
P "200" arbitration and limited to the issue of whether or not an agreement had been reached would
be appropriate. See also Interocean Shipping Co. v. National Shipping & Trading Corp., 462 F.2d
673, 676 (2d Cir. 1972); Dougherty v. Mieczkowski, 661 F.Supp. 267, 274-75 (D. Del. 1987).
Even if allegations of fraud in factum created an exception to Prima Paint doctrine, however,
the allegations in the complaint do not set forth such a claim. As the Cancanon court made
clear, fraud in factum exists where there is a “misrepresentation of the character or essential
terms” of a contract. As the authors of the Restatement expressed it:
If a misrepresentation as to the character or essential terms of a proposed contract induces
conduct that appears to be a manifestation of assent by one who neither knows nor has
reasonable opportunity to know of the character or essential terms of the proposed contract,
his conduct is not effective as a manifestation of assent.
Restatement of Contracts (Second) §163. As noted in explanatory comments accompanying this
section, “[t]he party may believe that he is not assenting to any contract or that he is assenting
to a contract entirely different from the proposed contract.”Id., comment a. See also Langley v.
Federal Deposit Ins. Corp., 484 U.S. 86 (1987) (fraud in factum is “the sort of fraud that procures a
party's signature to an instrument without knowledge of its true nature or contents”); Southwest
Administrators, Inc. v. Rozay's Transfer, 791 F.2d 769, 774 (9th Cir. 1986) (“[fraud in inducement]
induces a party to assent to something he otherwise would not have; [fraud in factum] induces
a party to believe the nature of his act is something entirely different than it actually is.”); 12
Williston on Contracts §1488 (3d ed. 1970).
 These explanations demonstrate that the fraud in factum doctrine is inapposite in the present
situation. There is no question but that the NPC officials negotiating the contract were fully
aware of the nature of its terms; that is why they resisted the Westinghouse draft and why
Marcos, in turn, was repeatedly forced to bring pressure to bear in order to override their
opposition. Plaintiffs do not claim, nor can they, that they were duped or deceived as to the
nature or terms of the agreement as they must in order to make out a claim for fraud in factum.
They understood the contract all too well.
What plaintiffs' actually allege is a defense of duress or coercion: Marcos allegedly received
payments in return for which he used his power and influence to force the NPC to assent to an
oppressive, one-sided agreement. Cancanon itself, however, takes pains to distinguish these
defenses from those of fraud in factum. In Merrill Lynch, Pierce, Fenner & Smith v. Haydu, 637
F.2d 391 (5th Cir. 1981), a stock brokerage customer who signed options trading agreements with
arbitration clauses claimed that she had been distracted and coerced by high pressure sales
talk amounting under the circumstances to confusion, undue influence and duress. The
P "200" Cancanon court observed that “[t]hese were not allegations of ineffective assent, but rather
P "201" of fraud in the inducement of a contract.... Thus the [Haydu] court properly held that these
allegations were subject to resolution by arbitration.”
Plaintiffs argue that coercion through bribery is a form of coercion so different in degree and
kind that it rises to the level of fraud in factum. Perhaps there is some form of coercion so
extreme that is equivalent to a lack of assent. That is not this case, however, and plaintiffs'
attempts to force the doctrine to fit their allegations would contort the doctrine beyond
recognition. (63)
Alternatively, if plaintiffs could demonstrate that the coercion or duress were directed
specifically to the arbitration clause, this would satisfy Prima Paint and it would be
appropriate to have a hearing on this issue. It is clear that plaintiffs have raised a material
issue of fact with respect to whether or not the “commission” payments specifically induced
assent to the arbitration clause. As plaintiffs' own papers demonstrate, however, any payments
ultimately received by Marcos could not be the basis for voiding the contract or any of its
clauses since Marcos was not acting as a third party who coerced the NPC to contract but as the
ultimate authority of the nation who had full power to commit the NPC to the contract. [The
court considered in detail the political and legal structure of the Philippines in supporting this
conclusion.] ...
[Finally, plaintiffs alleged that the powerplant contract was awarded in violation of Philippine
competitive bidding rules.] Even if the award of the contract in derogation of ... competitive
bidding requirements were illegal under Philippines law, this defense goes to the entire
contract as a whole and not to the arbitration clause exclusively. Therefore, under the Prima
Paint doctrine, this would be a matter for the arbitration panel to consider. In conclusion,
plaintiffs' allegations of bribery, even if true, do not make the contract void or voidable since
the recipient of the payments, Marcos, had the authority to compel NPC to contract with
Westinghouse....
FIRST OPTIONS OF CHICAGO v. KAPLAN
514 U.S. 938 (1995) [excerpted above at pp. 81-84]
UNCITRAL MODEL LAW
Articles 7, 16 & 34 [excerpted below at pp. 1013, 1016, 1019-20]
P "201"
P "202"
FRENCH CODE OF CIVIL PROCEDURE
Book IV, Articles 1458 & 1466 [excerpted above at p. 77]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Articles 178 & 186 [excerpted below at pp. 1033, 1034]
Notes on Fraudulent Inducement and Fraud in Connection with International Arbitration
Agreements
1. Application of separability doctrine in disputes over alleged fraudulent inducement of
underlying contract. As Prima Paint illustrates, the separability doctrine has been applied to
claims that the parties' underlying contract was fraudulently induced. Under most developed
national arbitration statutes, claims that the parties' underlying contract was fraudulently
induced are held not to compromise an arbitration clause included in the contract. Judgment
of 30 May 1994, XX Y.B. Comm. Arb. 745 (Tokyo High Court) (1995) (fraud in connection with
underlying contract is to be arbitrated); Judgment of 13 February 1978, VI Y.B. Comm. Arb. 228
(Corte di Appello di Napoli) (1981).
2. Allocation of power to decide disputes over fraud or fraudulent inducement in connection
with the underlying contract. Disputes over the alleged fraudulent inducement of the parties'
underlying contract raise issues of the allocation of competence. Specifically, are disputes
over fraud or fraudulent inducement in connection with the underlying contract for resolution
by the arbitrators or by national courts? What effect does the separability doctrine have on the
answer to this question?
 (a) Allocation of power to decide disputes over alleged fraudulent inducement of underlying
contract. As discussed above, most developed national arbitration statutes allocate
power between courts and arbitrators to decide disputes over the existence and validity
of arbitration agreements. See supra pp. 74-95. These allocations under national law can
extend to disputes over alleged fraud or fraudulent inducement in connection with the
parties' underlying contract. Prima Paint illustrates the handling of these issues under the
FAA in the United States.
(b) Allocation of power to decide disputes over fraudulent inducement or fraud in connection
with underlying contract under institutional arbitration rules. Consider the application of
Article 21 of the UNCITRAL Arbitration Rules, Article 6 of the 1998 ICC Rules, Article 23 of
the LCIA Rules, and Article 15 of the AAA International Rules to claims of fraudulent
inducement or fraud in connection with the underlying contract. How does each provision
seek to deal with the allocation of power to resolve disputes over fraud or fraudulent
inducement in connection with the underlying contract? See also supra pp. 84-85.
3. Allocation of power to resolve disputes over fraudulent inducement of underlying contract
under the FAA. One consequence of the Prima Paint holding has been to affect the allocation of
power under the FAA to resolve disputes over the fraudulent inducement of the underlying
contract.
(a) Prima Paint's allocation of power to resolve disputes over fraudulent inducement of the
underlying contract. How did Prima Paint allocate the power to resolve disputes over the
alleged fraudulent inducement of the parties' underlying contract? Did the Prima Paint
Court permit judicial resolution of the claim that the parties' underlying contract had
been fraudulently induced? What role did the separability doctrine play in the Court's
analysis?
Following Prima Paint, the FAA has been consistently interpreted to provide that claims
that the underlying contract was fraudulently induced presumptively do not compromise
an arbitration clause contained within that contract. Prima Paint held, among other
P "202" things, that, under the FAA, a claim that the parties' underlying contract was fraudulently
P "203" induced did not affect the validity of an arbitration clause contained within that
agreement. As discussed above, this conclusion has been widely regarded as an
application of the separability doctrine. See supra pp. 71-73.
Since Prima Paint, decisions of the U.S. Supreme Court under the FAA have strictly
adhered to the distinction between (fraud and other challenges) directed to the parties'
underlying contract and fraud directed specifically to the arbitration agreement. See
Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24 (1983);
Southland Corp. v. Keating, 465 U.S. 1, 11 (1984); Perry v. Thomas, 482 U.S. 483, 491 n.8
(1987). Thus, in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., the Supreme Court
held that “courts should remain attuned to well-supported claims that the agreement to
arbitrate resulted from the sort of fraud or overwhelming economic power that would
provide grounds ‘for the revocation of any contract.’” 473 U.S. at 627 (emphasis added).
What is the character of the allocation of power resulting from the Court's holding in
Prima Paint? Can this allocation be altered by agreement?

(b) U.S. lower courts' allocation of power to resolve disputes over fraudulent inducement of
underlying contract. Most U.S. lower court decisions since Prima Paint have summarily
refused to hear claims that the underlying contract containing the parties' arbitration
agreement was induced by fraud, holding that the arbitrators have the competence to
resolve such disputes. See, e.g., Ferro Corp. v. Garrison Indus., Inc., 142 F.3d 926 (6th Cir.
1998) (claim that underlying agreement was fraudulently induced is arbitrable); Union-
mutual Stock Life Ins. Co. v. Beneficial Life Ins. Co., 774 F.2d 524, 528-29 (1st Cir. 1985); In re
Oil Spill by Amoco Cadiz, 659 F.2d 789 (7th Cir. 1981); Merrill Lynch, Pierce, Fenner & Smith v.
Haydu, 637 F.2d 391, 398 (5th Cir. 1981); N&D Fashions, Inc. v. DHJ Industries, Inc., 548 F.2d
722 (8th Cir. 1976); Erving v. Virginia Squires Basketball Club, 468 F.2d 1064 (2d Cir. 1972);
Acquaire v. Canada Dry Bottling, 906 F.Supp. 819, 825 (E.D.N.Y. 1995) (claims of fraudulent
inducement of underlying contract must be submitted to arbitration); Newton v. Snap-on
Tools Corp., 783 F.Supp. 1019 (E.D. Ky. 1991); Al-Salamah Arabian Agencies Co. v. Reece, 673
F.Supp. 748 (M.D.N.C. 1987); Brener v. Becker Paribas, Inc., 628 F.Supp. 442, 446 (S.D.N.Y.
1985); Joseph Muller Corp. v. Commonwealth Petrochemicals, Inc., 334 F.Supp. 1013 (S.D.N.Y.
1971); Cooper v. Computer Credit Systems, Inc., 336 N.Y.S.2d 380 (App. Div. 1972); Pinkis v.
Network Cinema Corp., 512 P.2d 751 (Wash. Ct. App. 1973). See generally Stempel, A Better
Approach to Arbitrability, 65 Tulane L. Rev. 1377 (1991).
4. Rationale for application of separability doctrine to fraudulent inducement of underlying
contract. Why shouldn't a court (rather than an arbitrator) decide claims that the parties'
entire underlying contract was procured by fraud? If one party claims that the parties'
underlying contract, including the arbitration clause, is either voidable or void, then is not that
party entitled to judicial resolution of its claim?
5. Relevance of §4 of FAA to allocation of competence to decide claims of fraudulent
inducement of underlying contract. Section 4 of the FAA provides that a district court shall
order the parties to arbitration if “the making of the agreement for arbitration or the failure to
comply [with such agreement] is not in issue.” The Court in Prima Paint reasoned that this
language reflected a distinction between “the arbitration clause itself” and “the contract
generally.” See supra pp. 64-66. Under this theory, a claim of fraudulent inducement directed
to the underlying contract would not necessarily put “in issue” the existence or validity of the
 arbitration clause – and therefore could be arbitrated (assuming a sufficiently broad
arbitration clause). Is this persuasive?
6. Allocation of power to resolve disputes over claims of fraudulent inducement of arbitration
agreement itself. Suppose that a party claims that it was fraudulently induced to enter into an
arbitration agreement. For example, as in Westinghouse, a party may claim specifically that
the inclusion of an arbitration clause in a contract was fraudulently induced. Who has the
power to resolve such claims?
How are claims that an arbitration agreement was fraudulently induced different from claims
that no arbitration agreement was ever formed? Is it easier, or more difficult, to conclude that
arbitrators may decide fraudulent inducement claims than defective formation claims? Why?
Note that a fraudulent inducement claim would ordinarily acknowledge assent to an
arbitration agreement, but dispute the legal significance of that assent.
(a) National arbitration legislation. Consider again how various national arbitration statutes,
excerpted above, see supra pp. 88-90, would treat claims that the parties' arbitration
agreement was fraudulently induced.
(b) Institutional arbitration rules. Consider again Article 21 of the UNCITRAL Rules, Article 6 of
P "203" the ICC Rules, Article 23 of the LCIA Rules, and Article 15 of the AAA International Rules.
P "204" Note that each of these provisions seeks to grant the arbitral tribunal competence to
resolve challenges to the formation or validity of the arbitration agreement. See supra pp.
84-85. What effect does this grant of competence have, where one party challenges the
validity of the agreement making the grant?
7. Allocation of power under the FAA to resolve disputes over claims of fraudulent inducement
of arbitration agreement. Under the FAA, where a party alleges that there was fraud in
procuring the arbitration agreement itself – as distinguished from the parties' underlying
agreement – that is generally an issue for judicial resolution. This exception was expressly
recognized in Prima Paint. See 388 U.S. at 403-4.
(a) U.S. Supreme Court precedent considering claims that arbitration agreement was
fraudulently induced. There is little U.S. precedent considering claims that an arbitration
agreement itself (as distinct from the underlying contract) was procured by fraud. The
leading Supreme Court case is Moseley v. Electronic & Missile Facilities, Inc., 374 U.S. 167
(1963), where the Court held that a claim that an arbitration agreement itself had been
fraudulently procured, as part of a fraudulent scheme, was not arbitrable. “We believe
that, as alleged here, the issue goes to the arbitration clause itself, since it is contended
that it was to be used to effect the fraudulent scheme.” 374 U.S. at 171. Justice Black's
concurring opinion explained that “fraud in the procurement of an arbitration contract ...
makes it void and unenforceable and ... this question of fraud is a judicial one, which
must be determined by a court.”Id. at 172 (Black, J., concurring). Note that the Court in
Prima Paint distinguished Moseley on the grounds that it involved a challenge to the
arbitration clause itself. See supra pp. 65-66.
(b) Lower U.S. court decisions considering claims of fraud in the inducement of the arbitration
agreement itself. Applying Moseley, lower U.S. courts have almost uniformly required
judicial resolution of claims that an arbitration agreement itself was fraudulently
induced, but then have generally been very reluctant to hold that an agreement to
arbitrate was procured by fraud. Cancanon, which is discussed in detail in Westinghouse,
is a good example of this. For other lower U.S. court precedents, see Arnold v. Arnold Corp.,
920 F.2d 1269 (6th Cir. 1990) (rejecting claim that arbitration agreement itself was
fraudulently induced and denying §4 trial of issue; “we believe that this conclusory
allegation could be inserted into any complaint”); C.B.S. Employees Federal Credit Union v.
Donaldson, Lufkin & Jenrette Securities Corp., 912 F.2d 1563 (6th Cir. 1990) (court must
determine claim that arbitration clause is part of fraudulent scheme); Cohen v. Wedbush,
Noble, Cooke, Inc., 841 F.2d 282 (9th Cir. 1988) (court to resolve claim that broker failed to
“inform [customer] of the meaning and effect of the arbitration clause”; rejecting fraud
claim based on non-disclosure of meaning and effect of arbitration clause); Letizia v.
Prudential Bache Securities, Inc., 802 F.2d 1185 (9th Cir. 1986) (permitting party to litigate
claim that arbitration clause itself was procured by fraud); Waterside Ocean Navigation
Co. v. International Navigation, 737 F.2d 150 (2d Cir. 1984); Gouger v. Bear, Stearns & Co.,
823 F.Supp. 282 (E.D. Pa. 1993) (a party may avoid enforcement of an arbitration clause if
it can be shown that the agreement to arbitrate was procured by fraud in the
inducement,”, but rejecting argument that arbitration clause was void because fiduciary
failed to explain legal effects of clause to counterparty); Axtell v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 744 F.Supp. 194 (E.D. Ark. 1990) (rejecting claim that arbitration
agreement was not disclosed); Al Salamah Arabian Agencies Co. v. Reese, 673 F.Supp. 748,
749-50 (M.D.N.C. 1987); Southern Seas Navigation v. Petroleos Mexicanos, 606 F.Supp. 692
(S.D.N.Y. 1985); Masthead Mac Drilling Corp. v. Fleck, 549 F.Supp. 854 (S.D.N.Y. 1982) (court
rejects fraudulent inducement claim premised on non-disclosure of one party's close
relations with individual named in arbitration clause as arbitrator); Coleman v. National
Movie-Dine, 449 F.Supp. 945 (E.D. Pa. 1978); Todd v. Oppenheimer & Co., 78 F.R.D. 415
(S.D.N.Y. 1978).
For one of the very few cases finding fraudulent inducement of the arbitration agreement
itself, see Michele Amoroso e Figli v. Fisheries Dev. Corp., 499 F.Supp. 1074 (S.D.N.Y. 1980).
 (c) Majority view of lower U.S. courts – fraud must be confined “solely” to the arbitration
agreement. Several U.S. courts of appeals have apparently held that a claim of fraudulent
inducement is arbitrable unless the fraud was directed solely towards the arbitration
agreement. For example, the Seventh Circuit rejected an effort to avoid arbitration,
reasoning that the plaintiff:
nowhere contends that the alleged fraud in the inducement applied solely to the
arbitration clause. Its claim of fraud applies equally to all provisions of the contract. Thus
... the district court properly concluded that Prima Paint precludes the court from
addressing that claim.
Schacht v. Beacon Insurance Co., 742 F.2d 386, 389-90 (7th Cir. 1984). See also Campaniello
P "204" Imports Ltd v. Saporiti Italia, 117 F.3d 655 (2d Cir. 1997) (generalized claim of fraudulent
P "205" inducement of underlying contract, lacking “some substantial relationship between the
fraud or misrepresentation and the arbitration clause,” does not satisfy Prima Paint); Riley
v. Kingsley Underwriting Agencies, Ltd, 969 F.2d 953, 960 (10th Cir. 1992) (must “show that
the arbitration provision ... was a product of fraud”); Teledyne, Inc. v. Kone Corp., 892 F.2d
1404, 1410 (9th Cir. 1989) (case must “be submitted to arbitration unless there is a
challenge to the arbitration provision which is separate and distinct from any challenge
to the underlying contract”); Bhatia v. Johnston, 818 F.2d 418, 421-22 (5th Cir. 1987);
Unionmutual Stock Life Ins. Co. v. Beneficial Life Ins. Co., 774 F.2d 524, 529 (1st Cir. 1985)
(“independent challenge to the making of the arbitration clause itself”); Amoco Transp.
Co. v. Bugsier Reederei & Bergungs AG, 659 F.2d 789, 794-95 (7th Cir. 1981); Brener v. Becker
Paribas, Inc., 628 F.Supp. 442, 446 (S.D.N.Y. 1985) (“The court will become involved only if
there is a specific allegation [directed towards] the arbitration clause itself, standing
apart from the overall agreement”); Jarvis v. Dean Witter Reynolds, Inc., 614 F.Supp. 1146,
1149 (D. Vt. 1985); Coleman v. National Movie-Dine, Inc., 449 F.Supp. 945 (E.D. Pa. 1978)
(“must be addressed to the arbitration clause per se”); Rowland v. Paine Webber, Inc., 6
Cal.Rptr.2d 20 (Calif. Ct. App. 1992) (fraud claim must be directed specifically to
arbitration clause to warrant judicial resolution); Shearson Lehman Brothers, Inc. v.
Kilgore, 871 S.W.2d 925 (Tex. Ct. App. 1994) (“in order to avoid arbitration, the claim of
fraudulent inducement must focus specifically on the negotiation and acceptance of the
arbitration provision”).
(d) Minority view of lower U.S. courts – fraud need not be limited solely to the arbitration
agreement. Other lower courts have taken a narrower view, concluding that so long as a
claim is made that the arbitration agreement was fraudulently induced, that claim must
be judicially resolved, even if the same fraud was directed as well to the underlying
agreement. Chastain v. Robinson-Humphey Co., 957 F.2d 851 (11th Cir. 1992) (if a party
challenges “the very existence of any agreement, including the existence of an agreement
to arbitrate ... there is no presumptively valid general contract which would trigger the
district court's duty to compel arbitration ... before sending any such grievances to
arbitration, the district court itself must first decide whether or not” an agreement
exists); C.B.S. Employees Federal Credit Union v. Donaldson, Lufkin & Jenrette Securities
Corp., 912 F.2d 1563 (6th Cir. 1990); Comprehensive Merchandise Cat., Inc. v. Madison Sales
Corp., 521 F.2d 1210, 1213 (7th Cir. 1975) (“grand scheme that permeated the entire
contract”); Rush v. Oppenheimer & Co., 681 F.Supp. 1045, 1053 (S.D.N.Y. 1988) (court must
resolve claims of fraud “that pertain to both the principal agreement as a whole and the
arbitration agreement in particular”); Housekeeper v. Lourie, 333 N.Y.S.2d 932 (App. Div.
1972); Main v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 136 Cal.Rptr. 378 (Cal. Ct. App.
1977). Even under this view, however, a party cannot argue that the arbitration provisions
of an agreement are tainted merely because there was fraud relating only to other
material provisions of the contract. Schneider, Inc. v. Research-Cotrell, Inc., 474 F.Supp.
1179 (W.D. Pa. 1979).
(e) Treatment of fraudulent inducement claims in Westinghouse. How are these foregoing
interpretations of Moseley applied in practice? Consider the Westinghouse case; how
should the claim of fraudulent inducement of an arbitration clause be resolved? In
Westinghouse, the plaintiffs alleged that the entire powerplant contract, including the
arbitration clause, was fraudulently induced through the alleged purchase of Marcos's
political influence through secret bribes. Given that Marcos's intervention was allegedly
directed to the arbitration clause specifically, as well as to other portions of the contract,
was the Prima Paint/Moseley standard for fraudulent inducement of the arbitration
agreement not satisfied? Note that the Westinghouse court concluded (a) that plaintiffs
had raised triable issues as to whether unlawful payments “specifically induced assent to
the arbitration clause,” but that (b) the “ultimate authority” in the Philippines agreed to
the clause and it could not therefore be challenged. Are there likely to be many cases in
which a party targets fraudulent inducement solely at procuring an arbitration clause?
(f) Effect of First Options on fraudulent inducement claims directed at arbitration agreement.
What effect does First Options have on the allocation of power under the FAA to decide
claims that an arbitration agreement was fraudulently induced? Suppose that the
arbitration agreement in question provides expressly that disputes regarding its validity
(including by reason of fraudulent inducement) are to be decided by the arbitrators?
Suppose that this provision of the arbitration agreement is said to have been
fraudulently induced?
 (g) Application of Prima Paint, Moseley, and First Options to arbitration agreements
incorporating institutional rules. Reread UNCITRAL Rules Article 21(1) and ICC Rules Article
6. As we have seen, each of these provisions states specifically that the arbitral tribunal
shall have the power to determine the existence and validity of the arbitration
agreement itself.
Suppose that a party agrees to arbitrate under one of the foregoing sets of institutional
P "205" rules, but later asserts that the arbitration agreement itself was fraudulently induced.
P "206" Under Prima Paint, Moseley, and Cancanon, the fraudulent inducement claim would
ordinarily be subject to judicial resolution. Does the parties' “agreement” to the
institutional rules have any effect on the outcome of the case? In answering this
hypothetical, consider First Options' requirement for “clear and unmistakable” evidence
of an agreement to arbitrate questions of arbitrability. See supra pp. 90-93. Would this
standard be satisfied by incorporation of institutional rules granting arbitrators power to
decide claims that arbitration agreement itself was fraudulently induced?

8. Allocation of power to decide fraudulent inducement claim where parties' arbitration

agreement does not provide for arbitral consideration. The Prima Paint Court observed that the
parties' arbitration agreement was “easily broad enough to encompass Prima Paint's claim
that ... the consulting agreement [was] procured by fraud.” 388 U.S. at 405. (The arbitration
clause in Prima Paint provided “any controversy or claim arising out of or relating to this
Agreement, or the breach thereof” would be arbitrated. 388 U.S. at 405.)
(a) Parties' ability under the FAA to alter separability of arbitration clause and allocation of
power to decide challenges to underlying contract. The “separability doctrine” is largely
subject to the parties' agreement. Indeed, as discussed above, the separability doctrine
is more correctly referred to as the “separability presumption,” which may be altered by
contrary agreement. See supra p. 73. Thus, nothing precludes parties from agreeing to
arbitration agreements that provide for judicial resolution of claims of fraudulent
inducement or other invalidity of the underlying contract. In Prima Paint, for example, the
Supreme Court referred to a case in which the parties “intended to withhold such issues
[i.e., fraudulent inducement] from the arbitrators and to reserve them for judicial
resolution.” 388 U.S. at 402-03 n.9 (citing El Hoss Engineering & Transport Co. v. American
Independent Oil Co., 289 F.2d 346 (2d Cir. 1961)), See also I.S. Joseph Co. v. Michigan Sugar
Co., 803 F.2d 396, 399-400 (8th Cir. 1986); In re Kinoshita & Co., 287 F.2d 951 (2d Cir. 1961).
(b) Arbitration agreement does not extend to claims that underlying contract was fraudulently
induced. It is also possible that the parties' arbitration agreement does not extend to
claims that the underlying contract was fraudulently induced. For example, an arbitration
clause might expressly exclude challenges to the validity or legality of the underlying
contract, or might be narrowly drafted (and interpreted) to extend only to the
construction of the contract's terms. In these instances, the arbitrator would generally not
have the power, under the FAA, to resolve claims that the underlying contract was
fraudulently induced.
(c) Presumption under the FAA that existent arbitration agreement has broad scope. As
discussed above, First Options and other authorities make it clear that the FAA requires
interpreting existent arbitration clauses broadly. See supra pp. 91-93 & infra pp. 317-18.
What effect does this have on the exception, recognized in Prima Paint, for arbitration
agreements that leave challenges to the existence, validity, or legality of underlying
contracts for judicial resolution?
Most decisions have held that the “pro-arbitration” rule of interpretation of arbitration
clauses, see supra pp. 91-93 & infra pp. 315-16, suffices to include claims of fraudulent
inducement of the underlying agreement within the category of arbitrable issues. Peoples
Security Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809 (4th Cir. 1989) (reversing
district court holding that arbitration clause excluded claims that underlying agreement
was fraudulently induced); Stateside Machinery Co. v. Alperin, 526 F.2d 480, 481 (3d Cir.
1976); Georgia Power Co. v. Cimarron Coal Corp., 526 F.2d 101, 106 (6th Cir. 1975); Griffin v.
Semperit of America, Inc., 414 F.Supp. 1384 (S.D. Tex. 1976).

9. “Fraud in the factum” affecting the underlying contract. As Westinghouse indicates, a few
lower U.S. courts have held that courts must resolve claims that, because of “fraud in the
factum,” there was never any underlying contract at all – as opposed to a fraudulently induced
contract.
 (a) Lower U.S. court decisions holding that claims of “fraud in the factum” affecting underlying
contract require judicial resolution. In the words of one U.S. Court of Appeals, “where the
allegation is one of fraud in the factum, i.e., ineffective assent to the contract, the issue is
not subject to resolution pursuant to an arbitration clause contained in the contract
documents”; the court described fraud in the factum as “misrepresentation of the
character or essential terms of a proposed contract [in such a fashion that] assent to the
contract is impossible [and] there is no contract at all.”Cancanon v. Smith Barney, Harris,
Upham & Co., 805 F.2d 998 (11th Cir. 1986). See also Kyung In Lee v. Pacific Bullion (New
York) Inc., 788 F.Supp. 155 (E.D.N.Y. 1992) (if a party's signature were forged on a contract,
it would be absurd to require arbitration”).
A number of other U.S. lower courts have also adopted the view that well-pleaded claims
of “fraud in the factum” affecting the underlying contract are for judicial resolution. See
P "206" Chastain v. Robinson-Humphrey Co., 957 F.2d 851, 855 (11th Cir. 1992) (following Cancanon);
P "207" Par-Knit Mills v. Stockbridge Fabrics, 636 F.2d 51, 55 (3d Cir. 1980) (no arbitration of claim
that corporate employee who signed contract with arbitration clause lacked authority to
bind company); T & R Enterprises, Inc. v. Continental Grain Co., 613 F.2d 1272, 1278 (5th Cir.
1980); Acquaire v. Canada Dry Bottling, 906 F.Supp. 819 (E.D.N.Y. 1995); Jones v. Sea Tow
Services Freeport New York, Inc., 828 F.Supp. 1002 (E.D.N.Y. 1993) (following Cancanon);
Kyung In Lee v. Pacific Bullion, Inc., 788 F.Supp. 155, 157 (E.D.N.Y. 1992) (claims of fraud in
the factum of underlying contract, based on alleged forgery of signature, must be
considered by court); Republic of the Philippines v. Westinghouse Elec. Corp., 714 F.Supp.
1362, 1368-69 (D.N.J. 1989); New England Mackintosh Co. v. Carleton Woolen Mills, Inc., 1988
U.S. Dist. Lexis 14179 (D. Mass. 1988); Dougherty v. Mieczkowski, 661 F.Supp. 267 (D. Del.
1987).

(b) Lower U.S. court decisions holding that fraud in the factum claims are arbitrable. Other
lower U.S. courts have rejected the distinction between fraud in the factum and
fraudulent inducement. These decisions have held that claims of fraud in the factum as to
the underlying agreement are generally for the arbitrators. See R.M. Perez & Assoc., Inc. v.
Welch, 960 F.2d 534 (5th Cir. 1992); Villa Garcia v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
833 F.2d 545 (5th Cir. 1987); Hall v. Shearson Lehman Hutton, Inc., 708 F.Supp. 711 (D. Md.
1989) (arbitrator to resolve whether one party forged other party's signature on
agreement containing arbitration clause); Ketchum v. Bloodstock, 685 F.Supp. 786, 788-89
(D. Kan. 1988).
(c) Scope of “fraud in the factum” exception. As Westinghouse illustrates, the scope of the
exception for claims of fraud in the factum is ill-defined. Fraud in the factum involves
cases of forgery and substitution or alteration of a document. See Restatement (Second) of
Contracts §163 (1981). In addition, however, fraud in the factum ordinarily encompasses
other examples of deceit concerning the essential terms of a contract, such that “there is
no contract at all.” Id. Possible examples include misrepresenting the contents of a
document, as in Cancanon, or the legal consequences of an agreement.
Why did the alleged bribery in Westinghouse not fall within the “fraud in the factum”
doctrine? Assume that one contracting party bribes an officer of another contracting
party to sign a contract. Would that not constitute deceit as to the essential terms of the
agreement? Is it a satisfactory answer to say that the aggrieved contracting party knew
that the contract had objectionable features, without knowing of the bribery?

(d) Who should decide claims of fraud in the factum? Should fraud in the factum be a subject
for judicial, rather than arbitral, resolution? How is fraud in the factum different from
claims of fraudulent inducement, duress, or illegality?
10. What law governs claims of fraudulent inducement and fraud? When a court or a arbitral
tribunal considers claims that an arbitration agreement, or the underlying contract, was
obtained through fraud or the like, it must necessarily apply some legal standard of “fraud.”
What law governs issues of fraud and/or fraudulent inducement of (a) underlying contract, and
(b) arbitration agreement? Consider again the discussions above of the law governing the
underlying contract and the arbitration agreement. See supra pp. 68, 107-08.
Does the same substantive law necessarily govern claims of fraud and/or fraudulent
inducement of the underlying contract and of the arbitration agreement? Consider what the
agreements in Westinghouse provided. What substantive laws should have applied to claims
that the underlying contract and the arbitration agreement were fraudulently induced?
Do claims of fraud and fraudulent inducement raise special choice of law issues, not
applicable to other issues (such as contract interpretation or performance)? Why? See
Restatement (Second) Conflict of Laws §201 (“The effect of misrepresentation, duress, undue
influence and mistake upon a contract is determined by the law selected by application of the
[generally-applicable conflicts] rules of §§187-88”).
What if an arbitration provision contains a choice-of-law clause? Does the parties' chosen law
apply to claims that the arbitration provision was fraudulently induced? See Restatement
(Second) Conflict of Laws §201 comment (1971) (“The fact that a contract was entered into by
reason of misrepresentation – does not necessarily mean[] that a choice-of-law provision
contained therein will be denied effect. This will only be done if the misrepresentation ... was
responsible for the complainant's adherence to the provision.”).
11. Law applicable to claims of fraud or fraudulent inducement in connection with the
arbitration agreement under the FAA. What is the source of the substantive rules applicable to
 issues of fraud and/or fraudulent inducement? What country's fraud rules were applied in
Westinghouse?
(a) Possible application of U.S. state law. Prior to First Options, most lower U.S. courts applied
federal common law standards of fraud to challenges to the validity of domestic
arbitration agreements. See, e.g., Cohen v. Wedbush, Noble, Cooke, Inc., 841 F.2d 282 (9th
P "207" Cir. 1988) (applying “traditional common law principles,” based principally on federal
P "208" precedents); Cancanon v. Smith Barney, Harris Upham & Co., 805 F.2d 998 (11th Cir.
1986). See also Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1,
24-25 (1983). Compare Main v. Merrill Lynch, Pierce, Fenner & Smith, 136 Cal.Rptr. 378, 386
n.5 (Cal. Ct. App. 1977) (applying state law of fraud). As discussed elsewhere, First Options
likely requires application of generally-applicable state law rules with respect to issues
of validity of domestic arbitration agreements. See supra p. 116 & infra pp. 349-53. This
probably extends to issues of fraudulent inducement in connection with domestic
arbitration agreements.
(b) Possible application of foreign law. If a U.S. court considers claims that an international
arbitration agreement was fraudulently induced, why should U.S. law necessarily apply to
those claims? For example, suppose that the Westinghouse court had considered the
fraud in the factum argument made by the Republic of the Philippines. Would U.S. or
Philippine law have been applicable? Why shouldn't Philippine law have applied?
(c) Possible application of federal common law. As discussed above, most U.S. courts have
applied U.S. federal common law standards to all issues of the validity of international
arbitration agreements, even where the parties' choice of law clause or conflict of laws
rules clearly pointed towards the applicability of foreign law. See supra pp. 114-16. Is this
appropriate? Recall the discussion above concerning choice of law applicable to
arbitration agreements. See supra pp. 95-117. Recall also Ledee and its requirement for
“internationally neutral” defenses, as well as Article 178 of the Swiss Law on Private
International Law.
Suppose that arguably applicable foreign law contained either: (a) a very low standard,
applicable to all contracts, for fraudulent inducement; or (b) a very low standard,
applicable only to arbitration agreements, for fraudulent inducement. For example,
suppose that Philippines law permitted invalidation of arbitration agreements if there
was “cause to suspect” fraudulent inducement. Should U.S. courts apply this standard? Is
it consistent with the policies of the FAA and the Convention?

12. Substantive standards of fraud and fraudulent inducement under the FAA. Assume that
federal common law standards of fraud and fraudulent inducement apply to international
arbitration agreements in U.S. courts. What should these standards provide? What sources
should be considered in developing these standards? U.S. sources? international or foreign
sources? both?
13. Fraudulent inducement/fraud and the New York Convention. Fraudulent inducement as a
ground for non-enforcement of an arbitration agreement is not specifically mentioned in the
New York Convention; for that matter, neither are fraud in the factum, duress, waiver, or
illegality. Are these bases for nonenforcement encompassed within Articles II(3) and V(1)(a) of
the Convention, which set forth exception to enforcement for “null and void” or “invalid”
arbitration agreements? Why didn't the Westinghouse court refer to the New York Convention?
For New York Convention cases dealing with claims of fraud, see Riley v. Kingsley Underwriting
Agencies, Ltd, 969 F.2d 953, 960 (10th Cir. 1992); Technetronics, Inc. v. Leybold-Geaeus GmbH, 1993
U.S. Dist. Lexis 7683 (E.D. Pa. 1993).
2. Illegality of International Arbitration Agreements
It is hornbook law in developed legal systems that an illegal agreement is generally not
enforceable. (64) International transactions, touching the laws of two or more nations, provide
fertile grounds for claims of illegality. Thus, it is frequently argued in international disputes
that an underlying commercial contract is illegal, and that the unenforceability of the
underlying contract vitiates the arbitration clause. Alternatively, parties may challenge the
legality of an arbitration agreement itself (as distinct from the underlying contract).
P "208"
P "209"
Claims that the parties' underlying contract, or their arbitration agreement, is illegal raise
issues which are similar to those affecting other grounds for challenging the validity of
arbitration agreements. Thus, illegality claims give rise to questions concerning the
separability doctrine, the allocation of power between national courts and arbitrators, and the
choice of applicable law. We consider each of these issues below.
In addition, illegality claims can also give rise to special questions, not present in other
contexts. First, as discussed above, national law in many countries imposes various restrictions
on the legality and/or validity of arbitration agreements, which are not applicable to other
types of contracts. (65) That is, national law will permit parties to enter into underlying
contracts dealing with particular subjects (e.g., oil concessions), but will not permit (or give
effect to) agreements to arbitrate those subjects. For example, as we have seen, national law
may deny recognition to agreements to arbitrate certain types of employment disputes,
securities claims, tort claims, and the like. (66)
Second, many developed national laws impose narrow limits on challenges that are directed
specifically at the legality of arbitration clauses. For example, the FAA has been interpreted as
 preempting state (and apparently foreign) laws that forbid arbitration of particular types of
claims or that single out arbitration agreements for special disfavor. (67)
Likewise, also as described below, the New York Convention arguably imposes limits on the
types of challenges that can be directed specifically to the validity or legality of an arbitration
agreement. (68) The materials excerpted below illustrate the foregoing principles. First, the
JOC Oil award, excerpted below, provides an excellent example of an international arbitral
tribunal's handling of separability and choice of law issues in this context. Second,
Southland Corp. v. Keating and Ledee v. Ceramiche Ragno, excerpted below, illustrate the
preemptive effect of the FAA on national illegality rules in both domestic and international
cases. Also excerpted below are provisions from the UNCITRAL Model Law and the Swiss Law on
Private International Law, which illustrate other limitations on challenges to the legality of
arbitration agreements. Third, Ledee and the awards in ICC Case No. 5294 and ICC Case No. 6149
illustrate limitations placed by the New York Convention on national law illegality rules
directed at arbitration agreements. Finally, consider §202 of the Restatement (Second) Conflict
of Laws, which addresses some of the choice of law issues that illegality claims present.
SOUTHLAND CORPORATION v. KEATING
465 U.S. 1 (1984) [excerpted below at pp. 342-47]
P "209"
P "210"
REPUBLIC OF THE PHILIPPINES v. WESTINGHOUSE ELECTRIC CORPORATION
714 F.Supp. 1362 (D.N.J. 1989) [excerpted above at pp. 197-201]
LEDEE v. CERAMICHE RAGNO
684 F.2d 184 (1st Cir. 1982) [excerpted above at pp. 98-100]
FINAL AWARD IN ICC CASE NO. 5294 OF 22 FEBRUARY 1988
XIV Y.B. Comm. Arb. 137 (1989) (©) [excerpted above at pp. 78-80]
INTERIM AWARD IN ICC CASE NO. 6149 OF 1990
XX Y.B. Comm. Arb. 41 (1995) (©) [excerpted above at pp. 104-07]
ALL-UNION EXPORT-IMPORT ASSOC. SOJUZNEFTEEXPORT (MOSCOW) v. JOC OIL, LTD
[excerpted above at pp. 59-63]
RESTATEMENT (SECOND) CONFLICT OF LAWS (1971)
§202
(1) The effect of illegality upon a contract is determined by the law selected by application of
the rules of §§187-188.
(2) When performance is illegal in the place of performance, the contract will usually be denied
enforcement.
JORDANIAN LAW NO. 35 OF 1983
[excerpted above at p. 103.]
P "210"
P "211"
KINGDOM OF SAUDI ARABIA ARBITRATION REGULATIONS
Royal Decree M/46 dated 12-7-1403 (April 25, 1983)
Article 3 [excerpted above at p. 162]
Notes on Illegality in Connection With International Arbitration Agreements
1. Application of separability doctrine to claims that the underlying contract is illegal. How does
the separability doctrine apply to challenges to the legality of the parties' underlying
contract? If a band of robbers agree to divide their loot, and to arbitrate any resulting
disagreements, does the separability doctrine insulate the arbitration clause from the
illegality of the underlying contract?
2. Allocation of power under national arbitration legislation to decide disputes over legality of
underlying contract. Like other disputes over the validity of international arbitration
agreements, challenges to the legality of both arbitration clauses and underlying contracts
give rise to questions regarding the allocation of power to resolve such disputes. Consider
again the provisions of leading national arbitration statutes and institutional arbitration rules
excerpted and discussed above, see supra pp. 74-95. How do these authorities allocate power
between arbitrators and national courts to decide challenges to the legality of the parties'
underlying contract?
National courts have found it difficult to allocate authority to consider claims of illegality.
Consider the following excerpt from a leading English decision on the allocation of authority to
consider claims of illegality in connection with an arbitration agreements:
[In] Harbour Assurance Co (UK) Ltd v. Kansa General International Insurance Co Ltd... the Court of
Appeal held that the arbitration clause in an insurance contract was separate from the main
contract with the effect that (a) invalidity of the main contract did not deprive the arbitrator of
jurisdiction, and (b) the arbitrator had jurisdiction to decide the question of illegality of the
main contract.
 But the fact that in a contract alleged to be illegal the arbitration clause may not itself be
infected by the illegality, does not mean that it is always so, and does not mean that an
arbitration agreement that is separate may not be void for illegality. There may be illegal or
immoral dealings which are, from an English law perspective, incapable of being arbitrated
because an agreement to arbitrate them would itself be illegal or contrary to public policy
under English law. The English court would not recognize an agreement between the
highwaymen to arbitrate their differences any more than it would recognize the original
agreement to split the proceeds.... [The court cited] a case concerned with betting and an
arbitration provision collateral to that contract, Joe Lee Ltd v. Lord Dalmeny [1927] 1 Ch 300,
[which] recognized the possibility of an agreement containing any arbitration clause of such a
nature that the arbitration clause itself was invalid. It must also follow that an arbitration
agreement made separately in relation to an illegal or immoral dispute would not be
recognized....Soleimany v. Soleimany [1998] 3 WLR 811.
Compare the following English decision, rendered in the same year as the foregoing excerpt
from Soleimany.
There can be no doubt that as a matter of language the arbitration clause in the consultancy
agreement was expressed in terms wide enough to cover the issue whether the agreement was
illegal and void by reason of a common or unilateral intention to bribe Kuwaiti officials. The
approach to the question whether as a matter of English public policy an agreement to
arbitrate that issue should be treated as enforceable must be determined by considerations
P "211" similar to those deployed by the United States Supreme Court in the context of statutory
P "212" illegality in relation to the antitrust legislation in Mitsubishi Motors Corporation v. Soler
Chrysler-Plymouth Inc. It is necessary to consider both on the one hand the desirability of
giving effect to the public policy against enforcement of corrupt transactions and on the other
hand the public policy of sustaining international arbitration agreements. One consequence of
the arbitrators being accorded jurisdiction might be that they gave effect to a contract which
on the face of the award was held to involve the payment of bribes. It would then be a matter
for consideration at the enforcement stage whether, although the arbitrators had jurisdiction
to determine the issue, the award should be enforced because they had exceeded their
jurisdiction in giving effect to an illegal contract or had misconducted themselves or because
enforcement would be contrary to public policy. If, however, the arbitrators found facts on the
basis of which they rightly concluded that the underlying contract did not involve the payment
of bribes, their award would ordinarily be enforced notwithstanding that it might be objected
that their findings of fact were in truth mistaken. Thus, in determining whether English public
policy would deny jurisdiction to arbitrators to determine the illegality issue consideration has
to be given to the weight that ought to be attached to the risk that arbitrators might reach the
wrong decision in a way which could not be challenged and thereby give effect to an underlying
contract which the courts would have declined to enforce.
In the present case, the parties selected arbitration by an impressively competent
international body, the ICC. The English court would be entitled to assume that arbitrators
appointed were of undoubted competence and ability, well able to understand and determine
the particular issue of illegality arising in this case. That issue involves no consideration of
complex principle of law capable only of being safely determined by an English court. Insofar
as it involves determination of questions of fact, that is an everyday feature of international
arbitration. The opportunity for erroneous and uncorrectable findings of fact arises in all
international arbitration. If much weight were to be attached to that consideration it is
difficult to see that arbitrators would ever be accorded jurisdiction to determine issues of
illegality. Westacre Investments Inc. v. Jugoimport – SDPR Holdings Co., 4 All ER 570 [1998].
3. Allocation of power under the FAA to decide disputes over legality of underlying contract. The
Westinghouse court rejected, in the final paragraph of the opinion excerpted above, the
argument that it should consider challenges to the legality of the parties' underlying
agreement. See supra p. 201. What is the basis of the Westinghouse decision on this issue? Is it
supported by other precedent under the FAA? What does Prima Paint suggest?
(a) Lower U.S. court decisions holding that arbitrators must resolve claims that underlying
contract is illegal. A number of lower U.S. courts have reached the same result as that in
Westinghouse, typically relying on Prima Paint and the separability doctrine. See, e.g.,
National Rail Passenger Corp. v. Consolidated Rail Corp., 892 F.2d 1066 (D.C. Cir. 1990) (“if
the parties have validly agreed to submit a dispute to arbitration, we see no reason not
to enforce that agreement. If the arbitrator construes the contract so as to require
someone to commit an illegal act, a court can then refuse to enforce the arbitrator's
decision. A court cannot, however, bypass the arbitration process simply because a
public policy issue might arise.”); Lawrence v. Comprehensive Business Services Co., 833
F.2d 1159 (5th Cir. 1987) (claim that underlying contract violated Texas Public Accountancy
Act must be arbitrated); Russolillo v. Thomson McKinnon Securities, Inc., 694 F.Supp. 1042,
1045 (D. Conn. 1988) (“since the claim of illegality or violation of public policy is not
specifically directed to the arbitration clause itself, the broad arbitration clause requires
arbitration of the claim that the contract as a whole was made illegally”); Ferrara SpA v.
United Grain Growers Ltd, 441 F.Supp. 778, 782 (S.D.N.Y. 1977) (claim that underlying
agreement violated Italian foreign exchange controls).
 (b) Lower U.S. court decisions holding that courts must resolve claims that underlying contract
is illegal. Contrary to Westinghouse, a few lower U.S. courts (usually applying state law)
have held that challenges to the legality of the underlying contract require judicial
resolution. See, e.g., Durst v. Abrash, 253 N.Y.S.2d 351 (App. Div. 1964), aff'd, 266 N.Y.S.2d
806 (1966) (“If usurious agreements could be made enforceable by the simple device of
employing arbitration clauses the courts would be surrendering their control over public
policy.”); Kramer & Uchitelle, Inc. v. Eddington Fabrics Corp., 43 N.E.2d 493 (N.Y. 1942) (no
arbitration under agreement invalid under federal price control regulations); Metro Plan
Inc. v. Miscione, 15 N.Y.S.2d 35 (App. Div. 1939) (no arbitration of claim that underlying
P "212" contract was usurious). See also Michele Amoruso e Figli v. Fisheries Dev. Corp., 499 F.Supp.
P "213" 1074 (S.D.N.Y. 1980) (rejecting claim that underlying contract violated Foreign Agent
Registration Act); Dickstein v. DuPont, 320 F.Supp. 150 (D. Mass. 1970) (“claim of illegality is
a matter for this court and not the arbitrators” in case involving alleged antitrust
violations).
4. Rationale for requiring arbitration of claims that underlying contract is illegal. Is it in fact
sensible to require arbitration of claims that the parties' underlying contract is illegal?
Suppose that an arbitration clause is included in a contract for payment of unlawful bribes or
sale of unlawful weapons. Should a court require arbitration of claims arising from that
unlawful agreement? For a casual affirmative response, see National Rail Passenger Corp. v.
Consolidated Rail Corp., 892 F.2d 1066 (D.C. Cir. 1990). Compare the different analysis of the
English court in Soleimany v. Soleimany [1998] 3 WLR 811, supra p. 211. How are claims that an
underlying contract is illegal different from claims that it was fraudulently induced? What
types of interests and parties are typically protected by rules of illegality (as compared to
rules regarding fraudulent inducement)?
5. Authorities holding that illegality of underlying contract invalidates arbitration clause. A
number of national court decisions and other authorities hold that the illegality of a contract
invalidates an arbitration clause contained in the contract. Judgment of 15 June 1987, Neue
Juristische Wochenschrift, 9 December 1987, at 3193 (Bundesgerichtshof, Germany) (arbitration
clause invalid because underlying contract violated German Stock Exchange Law); Durst v.
Abrash, 253 N.Y.S.2d 351 (App. Div. 1964), aff'd, 266 N.Y.S.2d 806 (1966); Kramer & Uchitelle, Inc. v.
Eddington Fabrics Corp., 43 N.E.2d 493 (N.Y. 1942).
6. Authorities holding that illegality of underlying contract does not invalidate arbitration
clause. In contrast to the authorities cited in the preceding Note, a number of national court
decisions and other authorities hold that the illegality of a contract does not invalidate an
arbitration clause contained in the contract. Mesa Operating Limited Partnership v. Louisiana
Interstate Gas Corp., 797 F.2d 238 (5th Cir. 1986) (alleged illegality of underlying contract for
failure to obtain state regulatory approval); Island Territory of Curacao v. Solitron Devices, Inc.,
489 F.2d 1313 (2d Cir. 1973), cert. denied, 416 U.S. 986 (1974); Hodge Brothers, Inc. v. DeLong Co.,
942 F.Supp. 412 (W.D. Wis. 1996) (“A party may not invalidate an arbitration clause by attacking
the legality of the underlying contract containing that clause.”); Societe Fosset v. Societe
Carapelli, 1963 Bull. Civ. I, No. 246, at 208 (claim for termination of underlying contract for
impossibility and illegality does not affect arbitration clause); Interim Award in ICC Case No.
4145 of 1983, XII Y.B. Comm. Arb. 97, 100 (1987) (“the question of validity or nullity of the main
contract, for reasons of public policy, illegality or otherwise, is one of merits and not of
jurisdiction, the validity of the arbitration clause having to be considered separately from the
validity of the main contract”).
7. Provisions of national law rendering certain arbitration agreements illegal. Most legal
systems contain restrictions or prohibitions directed specifically and exclusively towards
arbitration agreements (as distinct from underlying substantive contracts). The provisions
excerpted above from the Jordanian, Saudi and various other national arbitration statutes are
illustrative of these restrictions. How do these provisions compare to generalized illegality
claims directed at underlying contracts? How, if at all, do such differences affect the allocation
of power to decide claims of illegality? Rules of illegality directed specifically towards
arbitration agreements are generally categorized under the heading of non-arbitrability, which
we discuss in detail below. See infra pp. 243-95.
8. Allocation of power under the FAA to resolve disputes over legality of arbitration agreement.
How does the FAA allocate power to resolve disputes over the legality of arbitration
agreements? Suppose that one party to an arbitration agreement challenges its legality. Can or
must an arbitrator resolve this challenge? Compare this question to the allocation of power
over other disputes (such as defective formation and fraud). See supra pp. 114-16, 175-80, 202-
07. Also compare the related topic of non-arbitrability. See infra pp. 243-95.
 (a) Lower U.S. court decisions holding that courts must resolve disputes over legality of
arbitration agreement. Lower U.S. courts have generally held, without detailed analysis,
that claims of illegality of the arbitration agreement itself require judicial resolution
under §§4 or 203 of the FAA. The treatment of the separability doctrine in Prima Paint and
Moseley provide the rationale for these decisions. Felkner v. Dean Witter Reynolds, Inc.,
800 F.2d 1466, 1468 (9th Cir. 1986) (“For purposes of claims covered by the CFTC
regulations, arbitration agreements that do not conform to section 1803(b) are void”);
Russolillo v. Thomson McKinnon Securities, Inc., 694 F.Supp. 1042, 1045 (D. Conn. 1988);
Island Territory of Curacao v. Solitron Devices, Inc., 489 F.2d 1313, 1320 (2d Cir.), cert. denied,
416 U.S. 986 (1973); McDonnell Douglas Corp. v. Kingdom of Denmark, 607 F.Supp. 1016,
1020 (E.D. Mo. 1985); Antco Shipping Co. v. Sidermar SpA, 417 F.Supp. 207 (S.D.N.Y. 1976);
Rhone Mediterranee etc. v. Achille Lauro, 712 F.2d 50 (3d Cir. 1983), Alphagraphics
P "213" Franchising, Inc. v. Stebbins, 617 So.2d 463 (Fla. Ct. App. 1993) (whether arbitration
P "214" agreement was “void or voidable ... is not subject to arbitration but must be heard by
the trial court before arbitration can proceed”). The same approach is taken by U.S.
courts to the related subject of claims of non-arbitrability. See infra pp. 243-94.
 (b) Lower U.S. court decisions holding that challenges to legality of arbitration clause must be
narrowly focussed. Lower U.S. courts have rejected efforts to characterize arbitration
clauses as illegal based on general challenges to the legality of the underlying contract
(or to the relief potentially awardable by the tribunal on the merits of the parties'
dispute). Instead, U.S courts have required that challenges to the legality of arbitration
agreements must be directed specifically to the arbitration clause itself; if not, then the
dispute will be presumptively for the arbitral tribunal. National Rail Passenger Corp. v.
Consolidated Rail Corp., 892 F.2d 1066 (D.C. Cir. 1990) (“A court cannot ... bypass the
arbitration process simply because a public policy issue might arise [in the
arbitration].”); Lawrence v. Comprehensive Business Serv. Co., 833 F.2d 1159 (5th Cir. 1987)
(even if underlying contract was void from inception, arbitration clause still enforceable);
Hodge Bros., Inc. v. DeLong Co., 942 F.Supp. 412 (W.D. Wis. 1996) (illegality of underlying
contracts held not to affect validity of arbitration agreement); McDonnell Douglas Corp. v.
Kingdom of Denmark, 607 F.Supp. 1016, 1020 (E.D. Mo. 1985) (“under some narrow
circumstances, public policy may be grounds for denying the enforcement of an
arbitration agreement”; court will order arbitration absent showing tribunal will be
“asked to rule on matters of national security in contravention of a policy of the United
States”).
Consider also Antco Shipping Co., Ltd v. Sidemar SpA, 417 F.Supp. 207 (S.D.N.Y. 1976), which
involved a contract to ship oil from Libya to the Bahamas. Disputes arose under the
contract, and an arbitration was initiated in New York (pursuant to an arbitration clause
in the parties' contract, which specified New York as the arbitral seat). One party sought
to enjoin the arbitration, on the grounds that the underlying contract violated public
policy. The public policy objection was based upon a clause in the oil shipment contract,
which forbid shipment from any port in Israel; this “excluding Israel” clause was said to
violate the U.S. Export Administration Act of 1969.
A U.S. district court rejected the public policy objection, reasoning:
Assuming that Antco has correctly described the derivation of the “excluding Israel”
phrase, I hold that its presence and effect in this contract do not offend the public policy
of the United States as declared in the Export Administration Act of 1969 and its
accompanying regulations. That is because the Sidermar/Antco contract of affreightment
does not involve, in any meaningful sense, United States exporters, or exports from the
United States. This is a contract between an Italian shipowner and a Bahamian charterer
for the ocean carriage of cargoes from Mediterranean ports to Carribean or, at Antco's
option, American ports, in which event the contract would give rise to imports, not
exports, in respect of the United States. Antco attempts to endow the contract with a U.S.
export flavor by reference to the provision in Article 9 that Sidermar intended to perform
the contract “with combined carriers which will load dry cargoes for their own account as
back-haul voyage to Mediterranean.”
But even if I assume that the eastbound dry cargo voyages were from the United States
ports (there is no evidence on the point before me), they do not bear so close a
relationship to the obligations of the parties before the Court as to bring the export
statute into play, or to invalidate the contract in consequence. The only purpose of
referring to the back-haul trade in the Sidermar/Antco contract is to explain why
Sidermar might not be able to give Antco “exact scheduling” in respect of loading dates
in the Mediterranean.
Antco argues that certain phrases in the statute are so broad that they should be
regarded as declaring a public policy entirely independent of the export context. It is
true that Section 3(5) of the statute, 50 U.S.C.App. §2402(5), contains phrases that,
considered in isolation, would appear to declare a general policy against any “restrictive
trade practices or boycotts fostered or imposed by foreign countries against other
countries friendly to the United States.” However, the implementation given by statute
and regulations alike to the statute's declarations of policy relate solely to control of
exports from the United States. I am not disposed to extend the boundaries of that
implementation beyond what the Congress and executive branch themselves have done,
particularly where the effect of such an extension would be to deprive parties of
bargained-for contractual benefits and remedies.
Is this persuasive?

P "214"
P "215"
9. Limitations under the FAA on claims that arbitration agreement is illegal or invalid. Under the
FAA, narrow limits are imposed on claims that arbitration agreements are illegal.
 (a) Limitations imposed by FAA on claims that arbitration agreement is illegal under state law.
As Southland illustrates, U.S. state law not infrequently imposes special limits on the
legality of arbitration agreements – for example, by purporting to render particular
categories of claims non-arbitrable. Some of these state law limits are described
elsewhere. See supra pp. 41-43 & infra pp. 245-49.
The U.S. Supreme Court has made it clear, in Southland and elsewhere, that the domestic
FAA preempts most such state laws. These decisions hold that the FAA preempts almost
all state laws that render agreements to arbitrate particular categories of claims
unenforceable or illegal. See Allied-Bruce Terminix Co. v. Dobson, 513 U.S. 265 (1995)
(preempting Alabama statute invalidating pre-dispute arbitration agreements); Doctor's
Associates Inc. v. Casarotto, 517 U.S. 681 (1996) (preempting Montana statute requiring
“prominent” disclosure of arbitration agreements); Perry v. Thomas, 482 U.S. 483 (1987);
infra pp. 331-58. These decisions hold that state law or public policy will not provide a
basis for invalidating an arbitration agreement, unless the law or public policy is
generally applicable to all contracts, rather than specifically targeted at agreements to
arbitrate. See infra pp. 349-53. For one of the few decisions holding an arbitration
agreement invalid under state public policy, see Field v. Liberty Mutual Ins. Co., 769
F.Supp. 1135 (D. Haw. 1991) (holding that state public policy precludes enforcement of
arbitration clause that permitted relitigation in court if award exceeded specified
amount).
Note the combined effect of the FAA's preemption of state prohibitions directed
specifically against arbitration agreements and the general requirement (flowing from
the separability doctrine) that arbitrators resolve claims that the parties' underlying
contract is unlawful under state law: virtually all bases for judicial challenges based on
illegality under state law or state public policy are foreclosed (except in judicial review
of arbitral awards). That is, the FAA substantively preempts most state law rules directed
towards the legality of arbitration agreements, while it presumptively requires that
arbitrators resolve most challenges to the legality of the underlying contract.

(b) Limitations imposed by the FAA and New York Convention on claims that arbitration
agreement is illegal or invalid under federal law. The FAA itself contains no provisions
rendering arbitration agreements illegal or invalid (other than the “writing” requirement)
as a matter of federal law. Nevertheless, other federal statutes may prohibit agreements
to arbitrate particular categories of claims. As described in detail below, however, in
Mitsubishi Motors Corp. v. Soler Chrysler Plymouth Inc., 473 U.S. 614 (1985) (antitrust claims
are arbitrable in international dispute), and similar decisions, the Supreme Court
narrowly limited the circumstances in which a federal law will be held to render
particular arbitration agreements invalid. See infra pp. 280-83. When federal law does
render arbitration agreements invalid, the claims at issue are usually deemed “non-
arbitrable.” See infra pp. 243-95.
Article II(1) of the New York Convention has been interpreted to permit signatory states to
treat categories of claims as “incapable of settlement by arbitration” – or non-arbitrable.
See infra pp. 243-45. As Mitsubishi Motors and similar decisions illustrate, U.S. courts have
seldom been willing to find that claims fit within this exception. See infra pp. 245-95.

(c) Limitations imposed by FAA and New York Convention on claims that the arbitration
agreement is illegal under non-U.S. law. Suppose that the statutory prohibition in
Southland had been imposed by Mexican, rather than Californian, law. Would Southland
have been decided any differently? There is little U.S. precedent dealing with the effect
of foreign law restrictions on arbitration agreements in U.S. courts under the FAA. Most
U.S. decisions have refused to give effect to foreign statutory restrictions that single
arbitration agreements out for special disfavor. See supra pp. 114-16, 165-66 & infra pp.
353-56; Becker Autoradio U.S.A., Inc. v. Becker Autoradiowerk GmbH, 585 F.2d 39, 43 n.8 (3d
Cir. 1978) (dicta that U.S. court would not apply “the law of state X [that] will not enforce,
or gives very limited effect to arbitration clauses”); Meadows Indemnity Co. v. Baccala &
Shoop Ins. Serv., Inc., 760 F.Supp. 1036, 1043 (E.D.N.Y. 1991) (rejecting defense to action to
compel arbitration where defendant argued that arbitration agreement was not
enforceable in arbitral situs because claims were non-arbitrable; applying “emphatic
federal policy” favoring arbitration); Marchetto v. DeKalb Genetics Corp., 711 F.Supp. 936
(N.D. Ill. 1989) (rejecting claim that arbitration agreement was void under Italian law
because it applied to tort claims and because non-parties were sued: “the possibility
that Italian law might divest a panel of Italian arbitrators is not determinative”); Ferrara
SpA v. United Grain Growers, Ltd, 441 F.Supp. 778, 781 (S.D.N.Y. 1977) (refusing to give effect
to “purported Italian law rule [that] appears to be a special requirement governing
P "215" agreements to arbitrate, but inapplicable to other contractual terms and conditions”).
P "216" Are these decisions, disregarding foreign mandatory laws, wise? How would Article
178(2) of the Swiss Law on Private International Law resolve cases where an arbitration
agreement was said to be illegal under foreign law?
Suppose that Southland had involved a U.S. and a Mexican party, and a Mexican
statutory prohibition against arbitration of this dispute. How would it have been
decided? What if Southland had involved a Mexican arbitral situs? What if it had involved
two Mexican parties?

10. Applying First Options' allocation of power between courts and arbitrators to resolve
 disputes over legality of arbitration agreement. As discussed above, First Options requires
judicial resolution of questions of arbitrability unless there is “clear and unmistakable”
evidence that the parties have agreed to arbitrate these issues. See supra pp. 114-17. It is
unclear how First Options' allocation of power between courts and arbitrators applies to
disputes about the legality of an arbitration agreement.
Consider the Westinghouse case: would First Options require “clear and unmistakable” evidence
that the parties' underlying contract was legal, before permitting the dispute to be referred to
arbitration? The better answer is that First Options does not impose any such requirement,
insofar as disputes about the legality of the parties' underlying contract are concerned. Rather,
First Options would appear to (a) leave challenges to the legality of the underlying contract to
arbitration (under Prima Paint and the separability doctrine); and (b) require judicial
resolution of challenges to the legality of the arbitration agreement, unless there is clear and
unmistakable evidence that the parties had agreed that such challenges were to be arbitrated.
Suppose that the arbitration clause in Westinghouse included a sentence that: “All disputes
relating to the formation and validity of this arbitration agreement (including the legality
thereof) shall be resolved by the arbitrators.” Is this “clear and unmistakable” evidence of an
agreement to arbitrate issues of legality? What if a party challenges the legality, and thus
validity, of the arbitration agreement containing this clause? Mustn't a court decide the
challenge? Suppose that the arbitration clause in the Westinghouse contract provided for
arbitration under the 1998 ICC Rules, and specifically Article 6 thereof. Does Article 6 provide
“clear and unmistakable” evidence of an agreement to arbitrate claims that the parties'
arbitration agreement was illegal?
11. Arbitrators' power to consider and resolve claims that arbitration agreement is illegal.
Reread the Final Award in ICC Case No. 5294 of 22 February 1988 and the Interim Award in ICC
Case No. 6149. In both cases, parties raised claims that the relevant arbitration agreement was
illegal, citing Egyptian and Jordanian legislation that was said to dictate this result. How did
the two arbitral tribunals respond? Did they cease deliberations and await national court
proceedings? Note that in ICC Case No. 5294 Egyptian judicial proceeding were underway.
The willingness of the tribunals in ICC Case No. 5294 and ICC Case No. 6149 to consider and
resolve claims of illegality, specifically directed to the arbitration agreement, is
representative of contemporary international practice.
12. Choice of law applicable to claims that arbitration agreement is illegal. What substantive
law did the arbitrators in ICC Case No. 5294 and ICC Case No. 6149 apply to the issue of
illegality? Note the tribunal's effort, in each case, to reject the illegality claim under all
conceivably applicable laws. Which law, in each case, does the tribunal appear to have
regarded as primarily applicable?
Consider the choice of law issues that arise in connection with international arbitration
agreements. See supra pp. 43-47, 93-117. What law is ordinarily applicable to an arbitration
agreement? Do questions of legality give rise to special choice of law issues? See Restatement
(Second) Conflict of Laws §202 (1971). What if the law of the arbitral situs provides that the
arbitration agreement is illegal? Compare Ledee v. Ceramiche Ragno, 684 F.2d 184 (1st Cir 1982).
What if the law governing the arbitration agreement provides that it is legal, but the law of a
judicial enforcement forum provides that it is illegal?
13. Treatment of illegality claims in the Westinghouse decision. The Westinghouse court
summarily dismisses the argument that illegality of the underlying power plant contract – for
failure to follow Philippine competitive bidding rules – precluded arbitration. Treating
illegality like fraudulent inducement in Prima Paint, the Westinghouse court held that
challenges to the legality of the underlying contract did not affect the arbitration clause and
that those claims were therefore arbitrable.
Is this sensible? Should national courts compel arbitration of claims under a contract for the
payment of bribes, the purchase of cocaine, or money laundering? Is analysis affected at all by
the fact that the Philippines government was invoking its own law to invalidate a contract it
made?
P "216"
P "217"
3. Unconscionability and Duress In Connection With International Arbitration Agreements
Basic principles of contract law in most jurisdictions provide that unconscionable agreements,
or agreements obtained through duress, are unenforceable. (69) When international disputes
arise, parties sometimes argue either that contracts containing arbitration provisions, or the
arbitration agreements themselves, are unconscionable and that this precludes enforcement
of the arbitration clause.
Consider the following materials, which illustrate the application of rules regarding
unconscionability, duress, and related doctrines to international arbitration agreements. The
decision in Gutierrez v. Academy Corp. (70) is representative of unconscionability rules in the
domestic U.S. context. The decision in Brower v. Gateway 2000, Inc. (71) illustrates an
international application, of sorts, by a U.S. court. Finally, the decision in the Judgment of 17
February 1989, by a German appellate court, raises various choice of law issues.
GUTIERREZ v. ACADEMY CORPORATION
967 F.Supp. 945 (S.D. Tex. 1997)
KENT, DISTRICT JUDGE. On March 24, 1997, Plaintiff filed her Second Amended Original
Complaint alleging that Defendant discriminated against her in violation of Title VII, and
 constructively discharged her. Now before the Court is Defendant's Motion to Stay Litigation
and to Compel Arbitration of May 19, 1997. For the reasons set forth below, the Motion is
GRANTED.
Plaintiff began working for Defendant in October, 1991. On May 2, 1992, Plaintiff signed a
document entitled “Waiver, Release of Claims, Indemnification and Arbitration.” In exchangt
for receiving medical and other benefits under Defendant's Work Related Accident Program for
Academy Employees, Plaintiff agreed to submit to final and binding arbitration for “any and all
disputes, claims and/or disagreements,” specifically including “any claim of discrimination or
other claim relating to any violation of the Texas Commission on Human Rights Act, Title VII of
the Civil Rights Act, the Equal Pay Act, Age Discrimination in Employment Act, Rehabilitation
Act or any other law.” In the agreement, the parties specified that it would be governed by the
FAA.
P "217"
P "218"
Despite her signing of this arbitration agreement, after Plaintiff was terminated, she filed suit
against Defendant in this Court and did not submit to arbitration. Defendant now seeks to
compel Plaintiff to arbitrate her claims pursuant to her agreement and stay this action until
the completion of the arbitration. Plaintiff opposes arbitration and alleges that the agreement
is unenforceable on the grounds that the arbitration clause is unconscionable. Specifically,
Plaintiff claims that on the day she signed the agreement, she asked to take the agreement
home to her paralegal husband and to an attorney for legal advice but was told that she had to
sign it that day or she would lose the opportunity for the benefits offered under the agreement.
Moreover, Plaintiff claims that there was an inequality in bargaining positions when she signed
the agreement.
Section 2 of the FAA provides that agreements to arbitrate are “valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of any
contract.” Section 3 of the Act requires this Court to stay litigation of any issue referable to
arbitration under a written agreement, as long as the applicant for the stay is not in default in
proceeding with such arbitration. This provision is mandatory; if the issues in a case are within
the reach of the agreement, the district court has no discretion to deny the stay.
This case presents a different set of facts than many compulsion of arbitration cases. In this
case, the arbitration clause under which Plaintiff's claims fall is not simply a clause in an
employment contract or other contract, as is true in many cases. Rather, it is part of an
agreement the whole subject of which is arbitration, release of claims, and indemnification.
The relevance of this distinction comes into play in deciding whether Plaintiff's complaints
regarding the unconscionability of the agreement and the unequal bargaining positions are to
be decided by the court or by an arbitrator. Most cases involving this issue concern arbitration
clauses in employment or other contracts and hold that if a plaintiff's complaints regarding the
enforceability of the clause relate to the entire contract, they must be decided by an
arbitrator, but if they relate to the arbitration clause itself, the court must decide them. See
Rojas v. TK Communications, Inc., 87 F.3d 745, 749 (5th Cir. 1996) (finding that, because plaintiff's
claim that her employment agreement was an unconscionable contract of adhesion related to
the entire agreement, rather than just the arbitration clause, the FAA required that her claims
be heard by an arbitrator); R.M. Perez & Assoc., Inc. v. Welch, 960 F.2d 534, 538 (5th Cir. 1992)
(finding that if a plaintiff's claim of fraud relates to the arbitration clause itself, the court
should adjudicate the fraud claim, but if it relates to the entire agreement, the FAA requires
that the fraud claim be decided by an arbitrator).
The Court follows these cases and holds that in a case such as this, involving an arbitration,
release, and indemnification agreement, if a plaintiff's claims regarding the enforceability of
the agreement relate to the entire agreement, they must be decided by an arbitrator. But
P "218" where a plaintiff's claims are directed at particular clauses, this Court is obligated to interpret
P "219" those clauses according to the law and decide the plaintiff's claims. In this case, Plaintiff's
complaints regarding the enforceability of the agreement is an attack on the agreement and
the formation of the agreement, not on any clause in particular. As stated above, Plaintiff
contends that she was not given time to seek legal advice before signing the agreement and
that there was an inequality in bargaining positions when the agreement was formed. The Court
finds that it is for the arbitrator to decide whether Plaintiff's allegations are true and
meritorious and whether they are sufficient to invalidate the entire agreement.
The Court would offer the arbitrator some guidance in evaluating the enforceability of an
agreement such as the one in this case. It is important to ascertain whether this agreement was
extended to all employees of like class and circumstance or whether it was offered to one or a
few individual employees to forestall or impede those individuals' access to the courts. The
Court would look harshly upon an attempt by an employer to forestall specific litigation by an
individual by presenting him or her with such an agreement. The arbitrator also may want to
consider whether the consideration for such an agreement was reasonable in the
circumstances. Furthermore, it is important that the choice of responses were clearly
presented to the employees and that the employer made them aware of the benefits and
disadvantages of the choice made.
As employers enter a global economy and a changing world of employment relationships, it is
likely that agreements such as the one before the Court will become more common. If
American companies are going to be competitive in this changing world, the legal system must
allow them to respond to and implement changes in the employment relationship and other
circumstances to make sure they are efficiently run with the best employees possible. The
Court's only concern is that these changes not trample the rights of employees, especially
where Congress has enacted specific statutes to protect them....
 BROWER v. GATEWAY 2000, INC.
676 N.Y.S.2d 569 (App. Div. 1998)
MILONAS, JUSTICE PRESIDING. Appellants are among the many consumers who purchased
computers and software products from defendant Gateway 2000 through a direct-sales system,
by mail or telephone order. As of July 3, 1995, it was Gateway's practice to include with the
materials shipped to the purchaser along with the merchandise a copy of its “Standard Terms
and Conditions Agreement” and any relevant warranties for the products in the shipment. The
Agreement begins with a “NOTE TO CUSTOMER,” which provides, in slightly larger print than the
remainder of the document, in a box that spans the width of the page: “This document contains
Gateway 2000's Standard Terms and Conditions. By keeping your Gateway 2000 computer
P "219" system beyond thirty (30) days after the date of delivery, you accept these Terms and
P "220" Conditions.” The document consists of 16 paragraphs, and, as is relevant to this appeal,
paragraph 10 of the agreement, entitled “DISPUTE RESOLUTION,” reads as follows:
Any dispute or controversy arising out of or relating to this Agreement or its interpretation shall
be settled exclusively and finally by arbitration. The arbitration shall be conducted in
accordance with the Rules of Conciliation and Arbitration of the International Chamber of
Commerce. The arbitration shall be conducted in Chicago, Illinois, U.S.A. before a sole
arbitrator. Any award rendered in any such arbitration proceeding shall be final and binding
on each of the parties, and judgment may be entered thereon in a court of competent
jurisdiction.
Plaintiffs commenced this action on behalf of themselves and others similarly situated for
compensatory and punitive damages, alleging deceptive sales practices in seven causes of
action, including breach of warranty, breach of contract, fraud and unfair trade practices. In
particular, the allegations focused on Gateway's representations and advertising that
promised “service when you need it,” including around-the-clock free technical support, free
software technical support and certain on-site services. According to plaintiffs, not on;y were
they unable to avail themselves of this offer because it was virtually impossible to get through
to a technician, but also Gateway continued to advertise this claim notwithstanding numerous
complaints and reports about the problem.
Insofar as is relevant to appellants, who purchased their computers after July 3, 1995, Gateway
moved to dismiss the complaint based on the arbitration clause in the Agreement. Appellants
argued that the arbitration clause is invalid under UCC 2-207, unconscionable under UCC 2-302
and an unenforceable contract of adhesion. Specifically, they claimed that the provision was
obscure; that a customer could not reasonably be expected to appreciate or investigate its
meaning and effect; that the International Chamber of Commerce (“ICC”) was not a forum
commonly used for consumer matters; and that because ICC headquarters were in France, it
was particularly difficult to locate the organization and its rules. To illustrate just how
inaccessible the forum was, appellants advised the court that the ICC was not registered with
the Secretary of State, that efforts to locate and contact the ICC had been unsuccessful and
that apparently the only way to attempt to contact the ICC was through the United States
Council for International Business, with which the ICC maintained some sort of relationship.
In support of their arguments, appellants submitted a copy of the ICC's Rules of Conciliation
and Arbitration and contended that the cost of ICC arbitration was prohibitive, particularly
given the amount of the typical consumer claim involved. For example, a claim of less than
P "220" $50,000 required advance fees of $4,000 (more than the cost of most Gateway products), of
P "221" which the $2000 registration fee was nonrefundable even if the consumer prevailed at the
arbitration. Consumers would also incur travel expenses disproportionate to the damages
sought, which appellants' counsel estimated would not exceed $1,000 per customer in this
action, as well as bear the cost of Gateway's legal fees if the consumer did not prevail at the
arbitration; in this respect, the ICC rules follow the “loser pays” rule used in England. Also,
although Chicago was designated as the site of the actual arbitration, all correspondence must
be sent to ICC headquarters in France.
The IAS court dismissed the complaint as to appellants based on the arbitration clause in the
Agreements delivered with their computers. We agree with the court's decision and reasoning
in all respects but for the issue of the unconscionability of the designation of the ICC as the
arbitration body.
First, the court properly rejected appellants' argument that the arbitration clause was invalid
under UCC 2-207. Appellants claim that when they placed their order they did not bargain for,
much less accept, arbitration of any dispute, and therefore the arbitration clause in the
agreement that accompanied the merchandise shipment was a “material alteration” of a
preexisting oral agreement. Under UCC 2-207(2), such a material alteration constitutes
“proposals for addition to the contract” that become part of the contract only upon appellants'
express acceptance. However, as the court correctly concluded, the clause was not a “material
alteration” of an oral agreement, but, rather, simply one provision of the sole contract that
existed between the parties. That contract, the court explained, was formed and acceptance
was manifested not when the order was placed but only with the retention of the merchandise
beyond the 30 days specified in the Agreement enclosed in the shipment of merchandise.
Accordingly, the contract was outside the scope of UCC 2-207.
In reaching its conclusion, the [trial] court took note of the litigation in Federal courts on this
very issue, and, indeed, on this very arbitration clause. In Hill v. Gateway 2000, Inc., 105 F.3d
1147, cert. denied, ... U.S. ..., plaintiffs in a class action contested the identical Gateway contract
in dispute before us, including the enforceability of the arbitration clause. As that court framed
the issue, the “[t]erms inside Gateway's box stand or fall together. If they constitute the parties'
 contract because the Hills had an opportunity to return the computer after reading them, then
all must be enforced.” The court then concluded that the contract was not formed with the
placement of a telephone order or with the delivery of the goods. Instead, an enforceable
contract was formed only with the consumer's decision to retain the merchandise beyond the
30-day period specified in the agreement. Thus, the agreement as a whole, including the
arbitration clause, was enforceable....
Second, with respect to appellants' claim that the arbitration clause is unenforceable as a
contract of adhesion, in that it involved no choice or negotiation on the part of the consumer
but was a “take it or leave it” proposition, we find that this argument, too, was properly
rejected by the [trial] court. Although the parties clearly do not possess equal bargaining
power, this factor alone does not invalidate the contract as one of adhesion. As the [trial] court
P "221" observed, with the ability to make the purchase elsewhere and the express option to return
P "222"
the goods, the consumer is not in a “take it or leave it” position at all; if any term of the
agreement is unacceptable to the consumer, he or she can easily buy a competitor's product
instead – either from a retailer or directly from the manufacturer – and reject Gateway's
agreement by returning the merchandise. The consumer has 30 days to make that decision.
Within that time, the consumer can inspect the goods and examine and seek clarification of
the terms of the agreement; until those 30 days have elapsed, the consumer has the
unqualified right to return the merchandise, because the goods or terms are unsatisfactory or
for no reason at all.
While returning the goods to avoid the formation of the contract entails affirmative action on
the part of the consumer, and even some expense, this may be seen as a trade-off for the
convenience and savings for which the consumer presumably opted when he or she chose to
make a purchase of such consequence by phone or mail as an alternative to on-site retail
shopping. That a consumer does not read the agreement or thereafter claims he or she failed
to understand or appreciate some term therein does not invalidate the contract any more than
such claim would undo a contract formed under other circumstances....
Finally, we turn to appellants' argument that the [trial] court should have declared the contract
unenforceable, pursuant to UCC 2-302, on the ground that the arbitration clause is
unconscionable due to the unduly burdensome procedure and cost for the individual
consumer. The [trial] court found that while a class-action lawsuit, such as the one herein, may
be a less costly alternative to the arbitration (which is generally less costly than litigation),
that does not alter the binding effect of the valid arbitration clause contained in the
agreement.
As a general matter, under New York law, unconscionability requires a showing that a contract
is “both procedurally and substantively unconscionable when made.” That is, there must be
“some showing of ‘an absence of meaningful choice on the part of one of the parties together
with contract terms which are unreasonably favorable to the other party.’” The ... purpose of
this doctrine is not to redress the inequality between the parties but simply to ensure that the
more powerful party cannot “surprise” the other party with some overly oppressive term.
As to the procedural element, a court will look to the contract formation process to determine
if in fact one party lacked any meaningful choice in entering into the contract, taking into
consideration such factors as the setting of the transaction, the experience and education of
the party claiming unconscionability, whether the contract contained “fine print,” whether the
seller used “high-pressured tactics” and any disparity in the parties' bargaining power. None of
these factors supports appellants' claim here. Any purchaser has 30 days within which to
thoroughly examine the contents of their shipment, including the terms of the Agreement, and
seek clarification of any term therein. The Agreement itself, which is entitled in large print
“STANDARD TERMS AND CONDITIONS AGREEMENT,” consists of only three pages and 16
P "222" paragraphs, all of which appear in the same size print. Moreover, despite appellants' claims to
P "223" the contrary, the arbitration clause is in no way “hidden” or “tucked away” within a complex
document of inordinate length, nor is the option of returning the merchandise, to avoid the
contract, somehow a “precarious” one. We also reject appellants' insinuation that, by using the
word “standard,” Gateway deliberately meant to convey to the consumer that the terms were
standard within the industry, when the document clearly purports to be no more than
Gateway's “standard terms and conditions.”
With respect to the substantive element, which entails an examination of the substance of the
agreement in order to determine whether the terms unreasonably favor one party, we do not
find that the possible inconvenience of the chosen site (Chicago) alone rises to the level of
unconscionability. We do find, however, that the excessive cost factor that is necessarily
entailed in arbitrating before the ICC is unreasonable and surely serves to deter the individual
consumer from invoking the process. Barred from resorting to the courts by the arbitration
clause in the first instance, the designation of a financially prohibitive forum effectively bars
consumers from this forum as well; consumers are thus left with no forum at all in which to
resolve a dispute. In this regard, we note that this particular claim is not mentioned in the Hill
decision, which upheld the clause as part of an enforceable contract.
While it is true that, under New York law, unconscionability is generally predicated on the
presence of both the procedural and substantive elements, the substantive element alone may
be sufficient to render the terms of the provision at issue unenforceable. Excessive fees, such
as those incurred under the ICC procedure, have been grounds for finding an arbitration
provision unenforceable or commercially unreasonable (see, e.g., Matter of Teleserve Systems,
659 N.Y.S.2d 659).
In [another case involving a Gateway arbitration clause], the Federal District Court stated that
it was “inclined to agree” with the argument that selection of the ICC rendered the clause
 unconscionable, but concluded that the issue was moot because Gateway had agreed to
arbitrate before the American Arbitration Association (“AAA”) and sought court appointment of
the AAA pursuant to Federal Arbitration Act, 9 U.S.C. §5. The court accordingly granted
Gateway's motion to compel arbitration and appointed the AAA in lieu of the ICC. Plaintiffs in
that action (who are represented by counsel for appellants before us) contend that costs
associated with the AAA process are also excessive, given the amount of the individual
consumer's damages, and their motion for reconsideration of the court's decision has not yet
been decided. While the AAA rules and costs are not part of the record before us, the parties
agree that there is a minimum, nonrefundable filing fee of $500, and appellants claim each
consumer could spend in excess of $1,000 to arbitrate in this forum.
Gateway's agreement to the substitution of the AAA is not limited to the [other case involving
Gateway]. Gateway's brief includes the text of a new arbitration agreement that it claims has
been extended to all customers, past, present and future (apparently through publication in a
quarterly magazine sent to anyone who has ever purchased a Gateway product). The new
arbitration agreement provides for the consumer's choice of the AAA or the ICC as the arbitral
P "223" body and the designation of any location for the arbitration by agreement of the parties, which
P "224" “shall not be unreasonably withheld.” It also provides telephone numbers at which the AAA
and the ICC may be reached for information regarding the “organizations and their
procedures.”
As noted, however, appellants complain that the AAA fees are also excessive and thus in no way
have they accepted defendant's offer (see UCC 2-209); because they make the same claim as to
the AAA as they did with respect to the ICC, the issue of unconscionability is not rendered moot,
as defendant suggests. We cannot determine on this record whether the AAA process and costs
would be so “egregiously oppressive” that they, too, would be unconscionable. Thus, we modify
the order on appeal to the extent of finding that portion of the arbitration provision requiring
arbitration before the ICC to be unconscionable and remand to Supreme Court so that the
parties have the opportunity to seek appropriate substitution of an arbitrator pursuant to the
Federal Arbitration Act (9 U.S.C. §1 et seq.), which provides for such court designation of an
arbitrator upon application of either party, where, for whatever reason, one is not otherwise
designated (9 U.S.C. §5)....
JUDGMENT OF 17 FEBRUARY 1989 OF HANSEATISCHES OBERLANDESGERICHT, HAMBURG
XV Y.B. Comm. Arb. 455 (1990)
[A German shipping company ordered from the respondent, a Japanese shipyard, the design
and construction of a ship for a price of DM 46.5 million. The claimant, an assignee of the
German shipping company, initiated judicial proceedings against the respondent in German
courts on the ground that the price charged by the respondent was inflated since it included,
among other things, a large commission which had been paid to a company in Monrovia,
Liberia. The claimant also asserted that the interest which respondent received on the whole
amount paid was excessive. The claimant alleged tortious misconduct by the respondent and
based its claims for damages on German tort law.
The respondent objected to the German judicial proceedings on the ground that the claimant
was bound by an arbitration agreement contained in the underlying shipbuilding contract. The
relevant arbitration clause read as follows: “All disputes arising out of or in connection with
this Contract shall be referred to and finally settled by arbitration held by The Japan Shipping
Exchange, Inc. in accordance with the provisions of the Rules of Maritime Arbitration of the
Exchange. Arbitration shall take place in Tokyo, in English language. The award made by the
arbitrators shall be final and binding upon the parties hereto.” A German appellate court
upheld the arbitration clause, in the judgment excerpted below.] ...
[T]he Japanese Civil Code of Procedure does not contain a provision similar to Section 1025(2)
of the amended German Civil Code of Procedure. Pursuant to this section, an arbitration
agreement is invalid if one of the parties has used any superiority it has by virtue of its
P "224" economic or social position in order to constrain the other party to enter into the agreement or
P "225" to accept conditions therein, resulting in one party having an advantage over the other in
the procedure, in particular, with respect to the appointment of the arbitrators....
Beyond that, however, a German court has also to consider whether the arbitration agreement
which is valid under foreign law corresponds to German public policy, because this
correspondence determines whether a German citizen who calls upon a German court is to be
given legal protection or whether protection is to be refused because of the jurisdiction of the
arbitral tribunal which has been agreed upon. This Court considers the provision of Section
1025(2) as part of German public policy of the law on arbitration agreements. That provision
prohibits “unconscionable” contracts which go against the judgment of all reasonable and fair
men....
It is true that for the German party considerable difficulty is caused by the seat of the arbitral
tribunal having been agreed upon in Tokyo given the great distance, the language problems
and the foreign culture, whereas the Japanese defendant has the typical advantage of being on
his homeground. But that would apply mutatis mutandis if a German city had been agreed
upon as the seat of the arbitral tribunal. From that alone it cannot be concluded that an
economic or social superiority was used. After all, the arbitral procedure must take place
somewhere.
However, it may be considered as a defect of the arbitration clause that the arbitral tribunal
shall have its seat in the country of one of the contracting parties at all. An international
arbitral procedure should in principle take place in a “neutral” third country under the
chairmanship of someone from a third country. This is in fact required by the principle of
 “arm's length” or of “fair trial”, which should also and especially apply in an arbitral procedure.
That corresponds to the views of renowned representatives of international arbitration in
general and especially if a state enterprise or – as here – a corporation of national importance
is a party to the agreement....
The reasons for this are obvious: If the arbitral procedure takes place in the country of one
party, the chairman is, as a rule, a citizen of that country and, together with the arbitrator
appointed by the party concerned gives rise to a national preponderance in the arbitral
tribunal. Furthermore, the judicial control of the arbitral procedure – perhaps in a challenge
procedure or if the arbitral award is attacked – will also be exercised by judge of one party's
nationality, if one disregards the rare exceptions where the parties have waived the possibility
of control by the courts from the beginning, as has recently been made possible in Belgium ...
and in Switzerland (Article 192 of the new [Swiss Law on Private International Law]).... There
should, indeed, be no suspicion against an independent judge of a civilized country that he
would not decide impartially and objectively and – if required by the legal situation – also in
the disfavor of the party of his nationality, or even of his State itself. Nevertheless, such a judge
is said to be impartial, but not “neutral.” This means that despite all his personal integrity the
judge is, so to speak, “biased” in respect of the legal culture of his country, its position of
interest and its whole way of thinking, and that therefore in borderline cases his award could
turn out different – already the theoretical possibility permits the reservation – from the case
in which a citizen of a third country were called upon to make the decision.
P "225"
P "226"
This view which – in any event with respect to the person of the chairman – has always been
taken into due account worldwide in all football matches, has developed in the field of
international arbitration, into a general principle of law. Currently, countless international
arbitration proceedings take place in the country of one of the contracting parties with a non
“neutral” chairman without – as far as can be seen – a court ever having taken offence at that
and having declared a corresponding arbitration clause to be invalid. This is – still –
acceptable to the international legal community. It is true that the practice of choosing a third
country for international arbitration proceedings is predominant nowadays.... But a general
belief in the necessity (opinio necessitatis) of proceeding in that way has not yet been formed.
For example, Art. 2(6) under 3 of the Rules of Arbitration of the International Chamber of
Commerce provides in its first sentence that the sole arbitrator or the chairman of an arbitral
tribunal should have the nationality of a different country. However, the second sentence
allows exceptions to this principle. A “neutral” country as the seat of the arbitral tribunal is
also not prescribed in these rules of arbitration which have been agreed upon worldwide.
Consequently in this regard also, this Court cannot deny the validity of the arbitration clause
under consideration....
The contracting parties have accepted arbitration of the “Japan Shipping Exchange, Inc.” under
the “Tokyo Maritime Arbitration Rules.” The claimant has put forward nothing against this
arbitration, and furthermore an analysis of the ‘Rules’ by this Court has not given rise to any
objections. In particular, the ability to be an arbitrator does not depend on the membership of
a specific association which, if one party is a member and the other is not, would mean the
invalidity of the arbitration clause, as has been decided by the Bundesgerichtshof (BGHZ 51,
255). The list of arbitrators is also open – at least pursuant to the “Ordinary Rules,” which apply
to a higher sum in dispute as is presently at stake.”
Notes on Unconscionability and Duress In Connection with International Arbitration
Agreements
1. Application of separability doctrine to claims that underlying contract is unconscionable. Is
there any reason that the separability doctrine should not apply to claims that the parties'
underlying contract was procured by duress or is unconscionable? If physical coercion or
blackmail was used to procure someone's signature on a document, can it be that the
arbitration provision contained in that document might be valid? Does this mean that the
separability doctrine is irrelevant to claims of duress or unconscionability?
2. Allocation of power to decide claims that underlying contract is unconscionable. Like other
defenses to the validity of arbitration agreements, claims of unconscionability and duress
raise issues as to the respective roles and competence of courts and arbitrators. Consider
again the excerpts from leading national arbitration statutes and institutional arbitration
rules. See supra pp. 84-95. How are disputes about unconscionability and duress of the
underlying contract dealt with? Do such claims raise different issues from disputes over fraud,
illegality, or formation defects? Note that the German appellate court in the Judgment of 17
February 1989 itself considered the question of unconscionability. Given the character of the
challenge to the arbitration clause, could the arbitrator have resolved it?
3. Allocation of power under the FAA to decide claims that underlying contract is
P "226" unconscionable. U.S. courts have not frequently considered how the FAA allocates power to
P "227" resolve claims that the underlying contract is unconscionable. How do Gutierrez and Gateway
deal with the allocation of power between courts and arbitrators? Is there any reason that the
separability doctrine and Prima Paint's basic analysis should not apply to claims of
unconscionability or duress? See supra pp. 55-74. Under Prima Paint and the separability
doctrine, claims that the underlying contract was unconscionable would presumptively be for
resolution by the arbitrators.
 (a) Lower U.S. court decisions holding that claims that underlying contract is unconscionable
are for judicial resolution. A few U.S. courts have treated claims that the parties'
underlying contract is unconscionable, or was obtained through duress, as an issue for
judicial resolution, and have usually then rejected the claim. David L. Threlkeld & Co. v.
Metallgesellschaft, Ltd, 923 F.2d 245 (2d Cir.), cert. dismissed, 112 S.Ct. 17 (1991); Adams v.
Merrill Lynch Pierce Fenner & Smith, 888 F.2d 696 (10th Cir. 1989) (rejecting claim that
arbitration agreement was contained in contract of adhesion); McCain Foods Ltd v. Puerto
Rico Supplies, Inc., 766 F.Supp. 58 (D.P.R. 1991) (rejecting unsupported and conclusory
claims of duress); Miller and Co. v. China Nat'l Minerals Import & Export Corp., 1991 WL
171268 (N.D. Ill. 1991) (court decides whether arbitration agreement is unconscionable):
Ferrara, SpA v. United Grain Growers, 441 F.Supp. 778, 781 (S.D.N.Y. 1977), aff'd mem., 580
F.2d 1044 (2d Cir. 1978) (rejecting claim that arbitration should not be required where
there was no “allegation of fraud or duress in the signing or inducement of the contracts,
and the cases do not involve parties of substantially unequal bargaining power or
sophistication”).
(b) Lower U.S. court decisions holding that claims that underlying contract is unconscionable
are for arbitrators. In contrast, most lower U.S. courts have cited Prima Paint as authority
for referring claims of duress or unconscionability of the parties' underlying contract to
arbitration. See Merrill Lynch, Pierce Fenner & Smith, Inc. v. Haydu, 637 F.2d 391, 398 & n.11
(5th Cir. 1981); Gutierrez v. Academy Corp., 967 F.Supp. 945 (S.D. Tex. 1997) (claims of
unconscionability went to agreement as a whole, not merely arbitration clause, to be
resolved by arbitrator, not court); WMX Technologies, Inc. v. Jackson, 932 F.Supp. 1372 (M.D.
Ala. 1996); Acquaire v. Canada Dry Bottling, 906 F.Supp. 819, 826 (E.D.N.Y. 1995) (claims of
duress, directed to underlying contract, must be considered by arbitrator, not court);
Nilsen v. Prudential-Bache Sec., 761 F.Supp. 279, 287 (S.D.N.Y. 1991); Southside Internists
Group PC Money Purchase Pension Plan v. Janus Capital Corp., 741 F.Supp. 1536 (N.D. Ala.
1990); Dale v. Prudential Bache Sec., Inc., 719 F.Supp. 1164, 1169 (E.D.N.Y. 1989); Hall v.
Prudential-Bache Securities, Inc., 662 F.Supp. 468, 470 (C.D. Calif. 1987); Dougherty v.
Mieczkowski, 661 F.Supp. 267 (D. Del. 1987); Malison v. Prudential-Bache Securities, Inc., 654
F.Supp. 101, 105 (W.D.N.C. 1987); Arent v. Shearson/American Express, Inc., 633 F.Supp. 770,
772 (D. Mass. 1985); Brener v. Becker Paribas, Inc., 628 F.Supp. 442, 446 (S.D.N.Y. 1985);
Leone v. Advest, Inc., 624 F.Supp. 297 (S.D.N.Y. 1985); Sharp Elec. Corp. v. Branded Products,
Inc., 604 F.Supp. 239 (S.D.N.Y. 1984); Janmort Leasing, Inc. v. Econo-Car Int'l, Inc., 475
F.Supp. 1282, 1286, 1289-92 (E.D.N.Y. 1979).
4. Allocation of power to decide claims that arbitration agreement is unconscionable. Consider
again the provisions of national arbitration legislation and institutional arbitration rules
excerpted above. See supra pp. 84-95. How do these provisions deal with claims that the
parties' arbitration agreement itself is unconscionable? What do Article 6 of the ICC Rules,
Article 15 of the AAA International Rules, and Article 23 of the LCIA Rules provide with respect to
claims of unconscionability or duress in relation to the arbitration agreement?
Are there peculiarities about claims of unconscionability or duress that make them
inappropriate for arbitration? If an arbitration agreement is unconscionable, how can an
arbitrator acting pursuant to the agreement reasonably decide the unconscionability claim?
Note that claims of unconscionability, directed at arbitration agreements, will often concern
the means of selecting the arbitrators or the arbitral procedures. The decisions in Judgment of
17 February 1989 and Gateway 2000 illustrate this. Does this argue against permitting
arbitrators to decide unconscionability claims directed at arbitration agreements?
5. Allocation of power under the FAA over claims that arbitration agreement is unconscionable.
As Gateway 2000 illustrates, claims that the agreement to arbitrate itself was unconscionable
or obtained by duress are generally held to be the subject of judicial resolution under the FAA,
although establishing a sufficient factual predicate to prevail on such a claim is very difficult.
Doctor's Associates, Inc. v. Distajo, 107 F.3d 126 (2d Cir. 1997) (rejecting claims that arbitration
clause was unconscionable); Doctor's Associates, Inc. v. Stuart, 85 F.3d 975 (2d Cir. 1996)
(rejecting claim that arbitration clause was unconscionable because of AAA's filing fees, cost of
travelling to arbitral situs, cost of arbitrator's fees and alleged bias of AAA); Hellenic Lines v.
P "227" Louis Dreyfus Corp., 372 F.2d 753 (2d Cir. 1967); Twi Lite Int'l, Inc. v. Anam Pacific Corp., 1996 WL
P "228" 637, 843 (N.D. Cal. 1996) (rejecting claim that arbitration agreement was unconscionable); Sharp
Elec. Corp. v. Branded Products, Inc., 604 F.Supp. 239 (S.D.N.Y. 1984); E.F. Hutton & Co. v. Schank,
456 F.Supp. 507 (D. Utah 1976). See also 24 Hour Fitness, Inc. v. Superior Court, 66 Cal.App.4th
1199 (Calif. Ct. App. 1998); Stimlen v. Supercuts, Inc., 51 Cal.App.4th 1519 (Calif. Ct. App. 1997).
Nonetheless, at least some U.S. courts have required arbitration of claims that an arbitration
clause is unconscionable. See WMX Technologies, Inc. v. Jackson, 932 F.Supp. 1372 (M.D. Ala.
1996) (alleged lack of mutuality claim could, as a matter of law, only apply to entire contract,
and was therefore for judicial resolution).
What effect does First Options have on the allocation of power under the FAA between national
courts and arbitrators to decide claims that an arbitration agreement is unconscionable?
Suppose that an arbitration clause provides specifically that unconscionability claims will be
subject to arbitration. Does this constitute “clear and unmistakable” evidence of an agreement
to arbitrate such claims?
Note that the arbitration clause in Gateway incorporated the ICC Rules. Consider again Article 6
of the 1998 ICC Rules. What effect did the Gateway court give to Article 6? Is this consistent with
First Options? On the other hand, given the objections to the alleged costs and inconvenience of
an ICC arbitration, could those objections have properly been arbitrated?
 6. Choice of law applicable to unconscionability claims. Claims of unconscionability and duress
present choice of law issues: what law defines the degree of unfairness of duress which will
invalidate an agreement? Consider what law the courts in Gateway and Judgment of 17 February
1989 applied to claims that the parties' arbitration agreement was unconscionable. Did either
court apply (a) the law governing the arbitration agreement, or (b) absent that, the law
governing the underlying contract or the law of the arbitral situs? Why not?
Note the German court's conclusion in Judgment of 17 February 1989 that issues of
unconscionability, at least as directed to the parties' arbitration agreement, implicated
German public policies which were mandatorily applicable to protect a German litigant. Is this
analysis persuasive? Compare the analysis (or result) in Gateway.
Lower U.S. courts have devoted little attention to the question whether state or federal law
governs claims of unconscionability and duress. Most decisions appear to apply federal
common law, even in domestic cases. Cohen v. Wedbush, Noble, Cooke, Inc., 841 F.2d 282 (9th
Cir. 1988); Bayma v. Smith Barney, Harris Upham & Co., 784 F.2d 1023, 1024 (9th Cir. 1986); Hall v.
Prudential-Bache Securities, Inc., 662 F.Supp. 468, 471 (C.D. Calif. 1987); E.F. Hutton & Co. v.
Schank, 456 F.Supp. 507, 510 (D. Utah 1976). Compare Webb v. Investacorp, Inc., 89 F.3d 252 (5th
Cir. 1996) (unconscionability governed by state law); S+L+H SpA v. Miller-St. Nazianz Inc., 988
F.2d 1518 (7th Cir. 1993) (duress governed by state law); 24 Hour Fitness, Inc. v. Superior Court, 66
Cal.App.4th 1199 (Calif. Ct. App. 1998); Stimlen v. Supercuts, Inc., 51 Cal.App.4th 1519 (Calif. Ct.
App. 1997).
Following First Options, it appears likely that generally-applicable state law unconscionability
rules will apply to unconscionability challenges under the domestic FAA. See supra pp. 114-17 &
infra pp. 350-56. Federal common law standards likely govern international arbitration
agreements subject to the New York Convention. See supra pp. 114-17 & infra pp. 350-56.
Lower U.S. courts have apparently not considered whether foreign law can govern the issues of
duress and unconscionability – for example, where the parties' underlying contract and
arbitration agreement are governed by foreign law and the arbitration is to be conducted in a
foreign country. Consider §201 of the Restatement (Second) Conflict of Laws (1971), which deals
with the law applicable to issues of duress and undue influence. How would §201 deal with
selecting the law applicable to unconscionability of an arbitration agreement?
7. Reluctance of national courts to find international arbitration agreements unconscionable.
The German court's reluctance in Judgment of 17 February 1989 to invalidate the parties'
arbitration agreement on unconscionability grounds is representative of judicial decisions for
developed jurisdictions. For other authority, see Judgment of 14 July 1995, XXI Y.B. Comm. Arb.
643 (Hertogenbusch Gerechtshof) (1996) (rejecting claim that enforcement of arbitration clause
would be “unjustly onerous”: “an arbitration such as this is certainly not unusual and is
frequently chosen for efficiency's sake”); Judgment No. 8469 of 11 July 1992, XXII Y.B. Comm. Arb.
715 (Corte di Cassazione) (1997).
8. Reluctance of U.S. courts to find arbitration agreements unconscionable under the FAA. In
general, claims of unconscionability and duress in procuring an arbitration clause have fared
poorly in U.S. courts.

P "228" (a) Form contracts. The fact that an arbitration clause was included in a form contract clearly
P "229" does not render the clause per se unenforceable under the FAA. Coleman v. Prudential-
Bache Securities, Inc., 802 F.2d 1350 (11th Cir. 1986); Webb v. R. Rowland & Co., 800 F.2d 803
(8th Cir. 1986); Surman v. Merrill Lynch, Pierce, Fenner & Smith, 733 F.2d 59 (8th Cir. 1984);
Arkoosh v. Dean Witter & Co., 415 F.Supp. 535 (D. Neb. 1976); 24 Hour Fitness, Inc. v. Superior
Court, 66 Cal.App.4th 1199 (Calif. Ct.App. 1998).
(b) Disparity in bargaining power. U.S. courts have also refused to hold arbitration agreements
per se unenforceable because there was a disparity in the parties' bargaining power.
Webb v. Investacorp., Inc., 89 F.3d 252 (5th Cir. 1996) (arbitration clause not
unconscionable); Great Western Mortgage Corp. v. Peacock, 110 F.3d 222 (3d Cir. 1997)
(rejecting challenge to arbitration agreement on grounds of disparity in parties'
bargaining power); Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110, 1118
(3d Cir. 1993) (same).
(c) Ignorance of arbitration clause. National courts have generally rejected claims that an
arbitration clause is unenforceable because a party was not informed of its presence in a
written contract it signed. N & D Fashions, Inc. v. DHJ Industries, Inc., 548 F.2d 722 (8th Cir.
1977); Southeastern Enameling Corp. v. General Bronze Corp., 434 F.2d 330 (5th Cir. 1970);
Snap-On Tools Corp. v. Vetter, 1993 U.S. Dist. Lexis 16707 (D. Montana 1993); Ferrara SpA v.
United Grain Growers, Ltd, 441 F.Supp. 778 (S.D.N.Y. 1977); Avila Group, Inc. v. Norma J. of
California, 426 F.Supp. 537 (S.D.N.Y. 1977). See also Judgment No. 8469 of 11 July 1992, XXII
Y.B. Comm. Arb. 715 (Corte di Cassazione) (1997) (“it is the party signing a contract in a
foreign language who has the burden to ascertain the meaning of the clauses prepared by
the other party”).
 (d) Procedural advantages or defects. U.S. courts have generally been skeptical of claims that
the terms of an arbitration agreement unconscionably favor one party (for example, with
respect to selection of the situs, fees, or arbitral procedures). J.B. Harris Inc. v. Razei Bar
Indus. Ltd, 181 F.3d 82 (2d Cir. 1999) (rejecting argument that arbitration in Israel would be
prohibitively expensive); Webb v. Investacorp, Inc., 89 F.3d 252 (5th Cir. 1996) (rejecting
unconscionability argument based on allegation that arbitral forum was more favorable
and convenient to one party); Doctor's Associates, Inc. v. Stuart, 85 F.3d 975 (2d Cir. 1996)
(rejecting claim that arbitration clause was unconscionable because of AAA's filing fees,
cost of travelling to arbitral situs, cost of arbitrator's fees and alleged bias of AAA); Arnold
v. Arnold Corp., 920 F.2d 1269 (“Appellant's contention that the arbitration clause was
inserted in the contract as a device to prevent appellant adequate discovery does not
constitute a well-supported or well-founded claim of fraud in the inducement of the
agreement to arbitrate”).
Nonetheless, several U.S. decisions have held that arbitration agreements which grant
one party significant procedural advantages over the other will not be enforced. Stirlen v.
Supercuts, Inc., 51 Cal.App.4th 1519 (Calif. Ct. App. 1997) (“provisions of arbitration
agreements unduly advantageous to one party at the expense of the other will not be
judicially enforced”); Armendariz v. Foundation Health Psychcare Services, Inc., 80
Cal.Rptr.2d 255 (Calif. Ct. App. 1998) (limitation of remedies in adhesion arbitration
agreement unenforceable).
In one recent decision, a claim of unconscionability was rejected where a small U.S.
company was forced to arbitrate before a Chinese state-related arbitral institution
against a Chinese state-owned entity. China Resource Products (U.S.A.) Ltd v. Fayda Int'l,
Inc., 747 F.Supp. 1101 (D. Del. 1990). The court emphasized, however, that the party
challenging the arbitration agreement had been aware of the connections between the
proposed arbitral institution and its counter-party at the time it entered into the
transaction.

(e) Costs of arbitral procedure. As Gateway 2000 suggests, some U.S. courts have relied upon
the financial aspects of arbitral procedures in holding arbitration agreements
unenforceable. E.g., Matter of Teleserve Systems, 659 N.Y.S.2d 659 (N.Y. 1997); Cole v. Burns
Int'l Security Services, 105 F.3d 1465 (D.C. Cir. 1997) (arbitration agreement, required as a
condition of employment, cannot validly require former employee to pay any portion of
arbitrators' fees).
Is Gateway's refusal to enforce the arbitration clause in question justified? Why is it that
the ICC procedures were unconscionably expensive? Suppose that some of Gateway's
customers were businesses. Would the ICC arbitration clause still be unenforceable?
Suppose that a small, financially-strapped business had ordered 250 Gateway computers,
at a total cost of $500,000. Would the applicable ICC arbitration clauses be
unconscionable?
Suppose that a party to an arbitration clause is based in a country affected by economic
difficulties and that the hard currency needed to pay the ICC's fees cannot be obtained.
Under the Gateway rationale, does this make the parties' arbitration agreement
unenforceable?

P "229" 9. Asymmetrical or otherwise “unequal” arbitration agreements. Claims of unconscionability

P "230" are not infrequently made against so-called “asymmetrical” arbitration agreements, which
permit one party to commence arbitration, or, at its option, litigation, but which do not allow
the other party to do so. Most U.S. courts have upheld such arrangements. Becker Autoradio
U.S.A., Inc. v. Becker Autoradiowerk GmbH, 585 F.2d 39, 47 n.15 (3d Cir. 1978) (“no such doctrine of
complete mutuality as a matter of federal law;” upholding clause that permitted one party to
litigate or arbitrate, while requiring other party to arbitrate); WMX Technologies, Inc. v. Jackson,
932 F.Supp. 1372 (M.D. Ala. 1996); Snap-On Tools Corp. v. Vetter, 838 F.Supp. 468 (D. Montana
1993) (rejecting claim that arbitration agreement was void for lack of mutuality because one
party had express right to seek provisional injunctive relief in aid of arbitration); W.L. Jorden &
Co. v. Blythe Indus., Inc., 702 F.Supp. 282, 284 (N.D. Ga. 1988) (“where the agreement to arbitrate
is integrated into a larger unitary contract, the consideration for the contract as a whole covers
the arbitration clause as well”); Willis Flooring v. Howard S. Lease Const., 656 P.2d 1184 (Alas.
1983) (“As one clause is a larger contract, the [asymmetrical arbitration] clause is binding to the
same extent that the contract as a whole is binding.... We see no unfairness, nor any coercion,
inherent in this resolution of the case.... Arbitration is not so clearly more or less fair than
litigation that it is unconscionable to give one party the right of forum selection.”); In re Marcia
L. Pate, 198 B.R. 871 (Bankr. S.D. Ga. 1996) (rejecting argument that arbitration clause was invalid
because it permitted one party, but not the other, to pursue litigation instead of arbitration);
Kahman Floor Co. v. Jos. L. Muscarelle, 481 A.2d 553 (N.J. Super. 1984) (upholding arbitration
clause which permitted one party, but not the other, to initiate arbitration; rejecting argument
that agreement lacked mutuality).
On the other hand, some U.S. courts have refused to enforce an arbitration clause giving one
party, but not the other, the right to demand arbitration. Hull v. Norcom, Inc., 750 F.2d 1547
(11th Cir. 1985) (refusing to require arbitration where only one party was bound to arbitrate).
State courts have been particularly sceptical of asymmetrical arbitration agreements. See
Stirlen v. Supercuts, Inc., 51 Cal.App.4th 1519 (Calif. Ct. App. 1997); Arcata Graphics Corp. v. Silin,
399 N.Y.S.2d 738 (App. Div. 1977) (refusing to enforce arbitration clause which one party, but not
the other, could invoke); Hull Dye & Print Works, Inc. v. Riegel Textile Corp., 325 N.Y.S.2d 782
 (App. Div. 1971); Firedoor Corp. of America v. R.K. & A. Jones, 366 N.Y.S.2d 433 (App. Div. 1975)
(“manifestly unfair to allow the seller to elect between arbitration and court action and to
deny the buyer the same right”); R. W. Roberts Constr. Co. v. St. John's River, 423 So.2d 630 (Fla.
Ct. App. 1982) (“mutuality of obligation is a requirement”).
10. Validity of arbitration agreement selecting inconvenient or otherwise defective arbitral
situs. Suppose that the parties' arbitration agreement selects an arbitral situs that is (or
becomes) unreasonably inconvenient to one party. Is this inconvenience a grounds for
challenging the validity of the arbitration agreement, including on the basis of
unconscionability or mistake? National courts have virtually always rejected such claims (at
least outside the consumer context). See infra pp. 596-609 & supra pp. 228-29.
Suppose that political, security, or other conditions in the contractually-selected arbitral situs
change, making one party reluctant or unwilling to go there. Does that render the arbitration
agreement invalid? Again, courts have virtually always answered in the negative.
11. Common law standards of unconscionability. In most U.S. jurisdictions, unconscionability
has required a showing like that demanded in Gateway. Courts have looked to both
“procedural” and “substantive” elements of an agreement, and its formation, in order to
determine whether it was so one-sided and oppressive as to be unenforceable. See
Restatement (Second) Contracts §208 (1981); J. Calamari & J. Perillo, The Law of Contracts 316-27
(1977).
12. Common law standards for duress. Establishing duress has been held in common law
jurisdictions to require a showing of a wrongful act or threat compelling involuntary
submission. Most efforts to meet this standard have failed. See supra p. 228; Acquaire v. Canada
Dry Bottling, 906 F.Supp. 819, 826 (E.D.N.Y. 1995) (rejecting claim that arbitration clause was
product of duress); Rust v. Drexel Firestone, Inc., 352 F.Supp. 715 (S.D.N.Y. 1972). Contra Pittsfield
Weaving Co. v. Grove Textiles, 430 A.2d 638 (N.H. 1981); Wheeler v. St. Joseph Hospital, 63
Cal.App.3d 345, 775 (1976) (arbitration clause in hospital admission contract held
unconscionable).
Claims of duress have been particularly likely to fail in cases involving international
arbitration agreements under the New York Convention. S+L+H SpA v. Miller-St. Nazianz, Inc.,
988 F.2d 1518 (7th Cir. 1993) (rejecting claim that arbitration clause was procured by economic
duress); Riley v. Kingsley Underwriting Agencies, Ltd, 969 F.2d 953 (10th Cir. 1992); Hellenic Lines,
Ltd v. Louis Dreyfus Corp., 372 F.2d 753, 758 (2d Cir. 1967); Meadows Indemnity Co. v. Baccala &
Shoop Ins. Serv., Inc., 760 F.Supp. 1036 (E.D.N.Y. 1991); Transmarine Seaways Corp. v. Marc Rich &
Co., 480 F.Supp. 352, 358 (S.D.N.Y. 1979).
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P "231"
13. Allocation of power over claims of insufficient notice of arbitration agreement. Claims that a
party was ignorant of an arbitration provision have been sent to arbitration in most cases
under the FAA. Houston General Ins. Co. v. Realex Group, NV, 776 F.2d 514 (5th Cir. 1985); Triton
Lines, Inc. v. Steamship Mutual Underwriting Ass'n, 707 F.Supp. 277 (S.D. Tex. 1989). They have
been retained for judicial disposition (and usually rejected) in others. N & D Fashions, Inc. v.
DHJ Industries, Inc., 548 F.2d 722 (8th Cir. 1977); Southeastern Enameling Corp. v. General Bronze
Corp., 434 F.2d 330 (5th Cir. 1970); Snap-On Tools Corp. v. Vetter, 1993 U.S. Dist. Lexis 16707 (D.
Montana 1993); Ferrara SpA v. United Grain Growers, Ltd, 441 F.Supp. 778 (S.D.N.Y. 1977); Avila
Group, Inc. v. Norma J. of California, 426 F.Supp. 537 (S.D.N.Y. 1977)
4. Lack of Capacity To Conclude International Arbitration Agreement
A party's lack of capacity to have entered into an arbitration agreement is recognized under
most national laws as a basis for resisting enforcement of the agreement. (72) Likewise, Article
V(1)(a) of the New York Convention permits a national court to deny recognition to an award if
the parties to the arbitration agreement “were, under the law applicable to them, under some
incapacity.” (73)
The requirement that a party must have the requisite capacity to enter into a binding
arbitration agreement is often little different from the role of capacity in other areas of the
law. Generally-applicable contract defenses going to capacity – such as incompetence,
minority, and the like – will apply in the context of arbitration agreements, just as they do
elsewhere. (74) In addition, however, various national laws impose special requirements with
respect to the capacity of parties to enter into arbitration agreements (i.e., restrictions on the
power of government related entities to arbitrate certain disputes).
The materials excerpted below illustrate the ways in which issues of capacity arises in
international commercial arbitration. First, consider Article V(1)(a) of the New York Convention
and the excerpts from the UNCITRAL Model Law and the Swiss Law on Private International Law.
Then review the decisions in Centroamericanos, SA v. Refinadora Costarricense de Petroleos, SA,
(75) and B.V. Bureau Wijsmuller v. United States of America. (76) Finally, consider §198 of the
Restatement (Second) Conflict of Laws.
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P "232"
NEW YORK CONVENTION
Article V(1)(a) [excerpted at p. 988 below]
UNCITRAL MODEL LAW
Article 34(2)(a)(1) [excerpted at p. 1019 below]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
 Article 177(2) [excerpted at p. 1033 below]
CENTROAMERICANOS, SA v. REFINADORA COSTARRICENSE DE PETROLEOS, SA
1989 U.S. Dist. LEXIS 5429 (S.D.N.Y. 1989)
EDELSTEIN, UNITED STATES DISTRICT JUDGE. Petitioner, Buques Centroamericanos, SA
(“Bucesa”), has filed the instant petition to confirm an arbitration award against respondent
Refinadora Costarricense de Petroleos, SA (“Recope”), pursuant to the [FAA] and the [New York]
Convention.
Both Recope and Bucesa are Costa Rican corporations. They entered an affreightment
agreement for the transport of crude oil from the Caribbean to Costa Rica. The agreement
contained a broad arbitration clause that provided for the submission to arbitration in New
York or London of “[a]ny and all differences and disputes of whatsoever nature arising out of
this Charter.” A dispute arose over the contract and Bucesa initiated an arbitration proceeding.
Three hearings were held before a panel of three arbitrators and the panel awarded Bucesa $
243,779.44 plus interest against Recope.
Recope contends that the award should not be confirmed on the ground that the arbitration
agreement was invalid. According to respondent, Recope is and, at the time it entered the
agreement, was a corporation wholly owned by the Government of Costa Rica. Recope contends
that under the laws of Costa Rica an agreement to arbitrate by a government-owned
corporation must be approved by the Costa Rican legislature. Recope contends that this
agreement is null and void because it was not approved by the legislature.
P "232" Recope acknowledges that it raised the same arguments before the arbitrator and that they
P "233" were rejected. Its legal basis for opposing the confirmation by this court is Article V(1)(a) of
the Convention, which provides that confirmation of an arbitration award may be refused upon
proof that:
The parties to the agreement ... 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[.]
Recope thus concludes that the arbitration agreement was invalid and that Recope was “under
some incapacity,” namely the purported bar under the laws of Costa Rica. As there is no doubt
that the parties have executed an agreement to arbitrate, the only issue is whether that
agreement is valid.
As noted, the issues raised by Recope were also raised before the arbitrators. Arbitrators have
the power to decide all questions necessary to dispose of the issue submitted. Federal
Commerce & Navigation Co. v. Kanematsu-Gosho Ltd, 457 F.2d 387, 389 (2d Cir. 1972). The
arbitrators in this case found that the arbitration agreement, by its terms was governed by the
laws of New York and further, that under the laws of New York the agreement is enforceable.
Finally, the arbitrators found that by entering into the agreement to arbitrate and by attending
three arbitration hearings Recope had waived any sovereign immunity it might have had.
The findings of an arbitrator are not to be disturbed unless they are in “manifest disregard” of
the law. Wilko v. Swan, 346 U.S. 427, 436 (1953). To review arbitration awards de novo would
frustrate the very purpose of arbitration. The findings of the arbitrators were not only not in
manifest disregard, but are well founded on the law and correct. The parties voluntarily
entered an arbitration agreement specifying that New York law would govern the agreement.
Recope participated in three hearings before the arbitrators and submitted to them the same
issues it raises now before this court. Now it comes before this court and contends that the
arbitrators had no authority to make the findings that they made. This position is simply not
tenable.
The court finds that the arbitrators' award was well founded and that none of the grounds
articulated in Article V of the Convention have been proved by Recope. Accordingly, Bucesa's
petition to confirm is hereby granted.
B.V. BUREAU WIJSMULLER v. UNITED STATES OF AMERICA AS OWNER OF THE WARSHIP JULIUS A.
FURER
1976 A.M.C. 2514 (S.D.N.Y. 1976)
HAIGHT, DISTRICT JUDGE. Plaintiff B.V. Bureau Wijsmuller (“Wijsmuller”), a professional marine
salvage company, moves this court for an order, pursuant to [§206 of the FAA] directing
P "233" defendant United States of America to proceed to arbitration of plaintiff's salvage claim in
P "234" London, in accordance with the terms of a Lloyd's open form salvage agreement (“LOF”)
signed by the Captain of defendant's warship Julius A. Furer prior to rendition by Wijsmuller of
the salvage services which form the subject matter of this action. The Government contends
that it is not bound by the LOF or the provisions for arbitration which it contains. Accordingly,
the Government contends, the motion to compel arbitration must be denied, and the case go
forward in this court pursuant to the provisions of the Public Vessels Act, 46 U.S.C. §78....
The court concludes that the United States is not bound by the LOF, and accordingly is not
required to participate in arbitration of Wijsmuller's claim for salvage. Accordingly the present
motion is denied.
The facts, insofar as they bear upon this motion, may be briefly stated. The Julius A. Furer is a
warship of the United States Navy. On June 30, 1974 the vessel stranded off the coast of The
Netherlands. Plaintiff Wijsmuller, one of the leading maritime salvage companies in the world,
 directed four salvage tugs to the assistance of the Furer. Before commencing assistance to the
warship, Wijsmuller's representative on the scene obtained the signature of the Captain of the
Furer, Commander S.H. Edwards, to the LOF, also known as the Lloyd's “no cure-no pay” salvage
agreement, or the Lloyd's Standard Form of Salvage Agreement. It does not appear from the
papers before me that Commander Edwards consulted higher authority before signing the LOF,
and I assume for the purpose of this discussion that he did not do so.
The LOF, known throughout the maritime industry and in use by salvors for many years,
provides for submission of the salvor's claim for salvage compensation to binding arbitration
in London, before an arbitrator appointed by the Committee of Lloyd's. The arbitration
agreement (LOF, para. 10) provides that the arbitration will be held in accordance with English
law. The LOF also provides for the giving of security by the owner of the salved property (ship or
cargo); and further provides (para. 5) that, pending completion of security, the salvor has a
maritime lien on the property salved, which shall not without the consent of the salvor be
removed from the place of safety to which the property has been brought until security has
been furnished.
The Furer was freed from the strand on July 1, 1974. Wijsmuller filed its complaint in this court,
pursuant to the Public Vessels Act, which provides:
A libel in personam in admiralty may be brought against the United States, or a petition
impleading the United States, for damages caused by a public vessel of the United States, and
for compensation for towage and salvage services, including contract salvage, rendered to
public vessel of the United States: Provided, That the cause of action arose after the 6th day of
April, 1920.
In its complaint, Wijsmuller reserved the right to demand arbitration in accordance with the
LOF. By its present motion, Wijsmuller seeks an order directing the United States to proceed to
arbitration before Mr. G.R.A. Darling, Q.C., the arbitrator appointed by Lloyd's.
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P "235"
The Government, while conceding that “during the period of the strand, the plaintiff provided
some assistance during attempts to float the Furer,” has consistently taken the position that it
is not bound by the terms of the LOF, and is not required to submit to arbitration before Mr.
Darling or anyone else in London. The Government contends that Wijsmuller's salvage
compensation must be fixed by this court in accordance with principles of maritime law
declared by the federal courts sitting in admiralty....
Absent an express waiver of sovereign immunity, no suit lies against the sovereign. Prior to
execution of the Public Vessels Act and its related statutes, the only means of pressing an
affirmative claim against the United States for the acts of one of its vessels was by a special
act of Congress. The armor of sovereign immunity has now been put aside by the statutes in
question; but it is equally well settled that suits against the United States must conform strictly
to the provisions of the enabling statutes.
The initial question, therefore, is whether by enacting the Public Vessels Act Congress intended
to waive the sovereign immunity of the United States in such a manner as to require the
Government to submit to arbitration in London, in accordance with contractual terms such as
those contained in the LOF. That question must clearly be answered in the negative. While the
Public Vessels Act permits suits against the United States for salvage services rendered to one
of its public vessels, the venue of such a suit is the United States District Court which is
appropriate in the circumstances of the case. Arbitration in London, before an arbitrator
appointed by the Committee of Lloyd's or any other body, is entirely inconsistent with the
statutory scheme....
The fact that Commander Edwards, the commanding officer of the Furer, signed the LOF is of no
legal consequence. Indeed, it would have made no difference if the Chief of Naval Operations
had chanced to be upon the Furer, and had executed the contract himself. That is because only
the Congress can remove or tailor the armor of the sovereign's immunity from suit; no officer or
representative, regardless of rank, good intentions, or innocent misapprehension of his powers,
has the requisite authority. In United States v. Shaw, 309 U.S. 495, 500, the Supreme Court
stated generally that:
Without specific statutory consent, no suit may be brought against the United States. No officer
by his action can confer jurisdiction. Even when suits are authorized they must be brought only
in designated courts....
Wijsmuller also contends that the United States is bound to arbitrate in London under the LOF,
as the result of the following provision in the Public Vessels Act, 46 U.S.C. §786:
The Attorney General of the United States is authorized to arbitrate, compromise, or settle any
claim on which a libel or cross libel would lie under the provisions of this chapter, and for
which a libel or cross libel has actually been filed.
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P "236"
This argument is specious. The statute does no more than to confer authority upon the Attorney
General to arbitrate claims which would otherwise be justiciable in the district courts. By no
stretch of the imagination can such limited authority be expanded so as to include the
distinguished arbitrator appointed by the Committee of Lloyd's. Accepting arguendo the
doubtful proposition that the Attorney General has the authority to delegate his arbitrator's
function to the Lloyd's arbitrator, the record in this case makes it clear that he declines to do
so.
 But Wijsmuller contends that all the foregoing principles and lines of authority are changed by
the adherence of the United States, in 1970, to the [New York] Convention. Several courts,
including the Supreme Court, have had occasion to observe that adherence by the United
States to the Convention reflects an expression of public policy in favor of resolving
international commercial disputes through arbitration. Scherk; Parsons & Whittemore.
However, it does not follow that by adhering to the Convention the United States agreed to do
away with limitations upon the waiver of sovereign immunity contained in other statutes.
Certainly, neither the Convention nor the implementing statute contain express provisions to
that effect, the argument must therefore be one of necessary implication. But there are
formidable obstacles in the path of such an implication.
Thus, Article XIV of the Convention provides:
A Contracting State shall not be entitled to avail itself of the present Convention against other
Contracting States except to the extent that it is itself bound to apply the Convention.
This provision recognizes that a “Contracting State” may or may not be bound by the provisions
of the Convention, depending upon its expressions of will or intent on the point. Furthermore,
adherence of the United States to the Convention was accompanied by the following
reservation, among others:
The United States of America will apply the Convention only to differences arising out of legal
relationships, whether contractual or not, which are considered as commercial under the
national law of the United States.
Whatever uncertainties may arise when agencies of government engage in commercial
transactions, relations arising out of the activities of warships have never been regarded as
“commercial” within the context of sovereign immunity. In addition, the Convention itself
recognizes that in certain circumstances the forum court may decline to enforce an agreement
providing for arbitration elsewhere. Thus, Article II(3) provides:
The court of a Contracting State, when seized of an action in a matter of respect of which the
P "236" parties have made an agreement within the meaning of this article, shall, at the request of one
P "237" of the parties, refer the parties to arbitration, unless it finds that the said agreement is null
and void, inoperative or incapable of being performed.
While the cases cited supra in this section hold that the “null and void” concept is to be given a
narrow construction within the context of arbitration agreements in commercial contracts
between private parties, I have no hesitation in holding that the present arbitration
agreement, contained in the LOF contract, is “null and void” in respect of the United States
because of the sovereign immunity principles discussed previously....
RESTATEMENT (SECOND) CONFLICT OF LAWS (1971)
Section 198
(1) The capacity of the parties to contract is determined by the law selected by application of
the [generally applicable choice of law principles set forth in] §§187-188.
(2) The capacity of a party to contract will usually be upheld if he has such capacity under the
local law of the state of his domicile.
Notes on Capacity to Enter Into International Arbitration Agreements
1. Lack of capacity under the New York Convention. Article II of the New York Convention, which
deals with recognition of arbitration agreements, does not make express reference to lack of
capacity as a ground for challenging an agreement to arbitrate. Most authorities have
concluded, however, that lack of capacity is a ground for challenging the validity of an
arbitration agreement under Article II. Many authorities (like Wijsmuller) have also cited Article
V(1)(a) of the Convention in connection with challenges to arbitration agreements based upon a
lack of capacity. As noted above, Article V(1)(a) provides for non-recognition of arbitral awards
if the parties to an arbitration agreement “were, under the law applicable to them, under some
incapacity.”
Is there any reason not to apply Article V(1)(a) by analogy to arbitration agreements? Is there
any reason that the Convention's drafters might have intended to exclude lack of capacity as a
defense to enforcement of an arbitration agreement, while permitting it for awards?
2. Allocation of power to resolve disputes over capacity to enter into underlying contract and
arbitration agreement. Who decides challenges to the capacity of a party to enter into an
underlying contract? How does the separability doctrine apply to issues of capacity directed at
the underlying contract?
Consider the excerpts from the UNCITRAL Model Law, Swiss Law on Private International Law,
and French Code of Civil Procedure. See supra pp. 76-77. How do these provisions deal with
challenges to the capacity of a party to have made an arbitration agreement? How did the
Wijsmuller court proceed with respect to the allocation of power to resolve the United States'
capacity objection? What differences are there between disputes concerning capacity and
disputes concerning fraud, formation, illegality, or unconscionability?
3. Choice of law issues relating to capacity. Disputes about a party's capacity raise choice of
law questions: is capacity determined by the law of the party's domicile or place of
incorporation, by the law governing the party's arbitration agreement, or by some other law?
Relying on Article V(1)(a)'s statement that capacity is determined “under the law applicable to”
the party, some commentators have suggested that the Convention contains a choice of law
rule selecting the law of the party's domicile or place of organization. W. Craig, W. Park & J.
 Paulsson, International Chamber of Commerce Arbitration §5.02, at p. 61 n.7 (2d ed. 1990).
The better view, however, is that Article V(1)(a) does not address the question of applicable
law, leaving it to national courts to apply their own conflict of laws rules. A. van den Berg, The
P "237" New York Convention of 1958 276 (1981); A. Redfern & M. Hunter, International Commercial
P "238" Arbitration 148 (2d ed. 1991). The point is of practical importance, because contemporary
conflict of laws doctrine on the issues of capacity is generally pro-enforcement. See infra p. 238;
Restatement (Second) Conflict of Laws §198 (1971).
What substantive law was applied to the issue of capacity in Centroamericanos and Wijsmuller?
First, consider whether the court in Centroamericanos applied the law of Costa Rica. Should it
have? Suppose that the parties' agreement contained a choice-of-law clause selecting some
law other than that of Costa Rica.
Second, consider what law the court in Wijsmuller applied to issues of capacity. Was there a
choice-of-law clause in Wijsmuller? Why did it not require application of English law to
determine the capacity of the United States to enter into an arbitration agreement?
Consider Article 177(2) of the Swiss Law on Private International Law. Is it a choice-of-law rule?
Suppose that the arbitration clause in Wijsmuller had selected Switzerland as the arbitral
situs. Would Article 177(2) have permitted the United States to invoke its alleged sovereign
immunity or lack of capacity?
4. State's capacity to enter into arbitration agreements. As Centroamericanos and Wijsmuller
illustrate, a recurrent issue relating to capacity arises from efforts by sovereign states to
disavow their arbitration agreements, citing national legislation restricting the power of
government departments or entities to conclude binding arbitration agreements. As Wijsmuller
illustrates, U.S. law provides that the United States generally cannot enter into enforceable
arbitration agreements. That is not the case in many other developed states, including
Switzerland, England, and Greece. Swiss Law on Private International Law Article 177(2); M.
Mustill & S. Boyd, Commercial Arbitration 151 (2d ed. 1989); Court of Appeal of Athens, Decision
No. 3894 of 1976, XIV Y.B. Comm. Arb. 634 (1989) (Greek Ministry of Trade bound by international
arbitration agreement, notwithstanding domestic law imposing conditions on arbitration by
government entities). See generally Note, Authority of Government Corporations to Submit
Disputes to Arbitration, 49 Colum. L. Rev. 97 (1949); Boeckstiegel, States in the International
Arbitral Process, 2 Arb. Int'l 22 (1986).
In general, neither arbitral tribunals nor national courts have allowed sovereign states to rely
on their own laws to disown their arbitration agreements. Revere Copper and Brass v. Overseas
Private Investment Corp., 17 I.L.M. 1321 (1978); Judgment of 24 February 1994, XXII Y.B. Comm. Arb.
682 (Paris Cour d'Appel) (1997) (rejecting foreign state entity's claim that it was not bound by
arbitration agreement); Interim Award in ICC Case No. 7263 of 1994, XXII Y.B. Comm. Arb. 92, 100
(1997) (states and public bodies “cannot avail themselves of the incapacity and lack of
authorization deriving from their national laws”); Judgment of 21 June 1983, XXI Y.B. Comm. Arb.
627 (Casablanca Court of Appeal) (1996) (“Doctrine and jurisprudence constantly recognize the
validity of an arbitration agreement concluded by a State or State agency where the contract
for which the arbitration agreement is concluded is an international contract and is governed
by private law”); Preliminary Award of 14 January 1982, XI Y.B. Comm. Arb. 97, 103-04 (1986) (“It is
a recognized principle of international law that a State is bound by an arbitration clause
contained in an agreement entered into by the State itself or by a company owned by the
State”); Battifol, Arbitration Clauses Concluded Between French Government-Owned Enterprises
and Foreign Private Parties, 7 Colum. J. Trans. L. 32 (1968); W. Craig, W. Park & J. Paulsson,
International Chamber of Commerce Arbitration §5.02 (2d ed. 1990); Boeckstiegel, States in the
International Arbitral Process, 2 Arb. Int'l 22 (1986). Wijsmuller is an unfortunate departure from
this trend.
Several U.S. lower courts have considered arguments that state agencies or instrumentalities
lack the capacity, as a matter of state law, to conclude binding arbitration agreements.
American Airlines, Inc. v. Louisville & Jefferson C.A.B., 269 F.2d 811, 816 (6th Cir. 1959); Litton RCS,
Inc. v. Pennsylvania Turnpike Commission, 376 F.Supp. 579 (E.D. Pa. 1974). Some lower courts
have indicated that the FAA preempts state law-imposed incapacity, unless the relevant state
law is clear and express. Litton RCS, Inc. v. Pennsylvania Turnpike Comm'n, 376 F.Supp. 579, 588
(E.D. Pa. 1974).
5. The principle of favorem validitatis. As discussed above, some authorities apply a
“validation” principle to selecting the law applicable to international arbitration agreements.
See supra p. 112. Should the same principle apply to issues of capacity?
Compare §198 of the Restatement (Second) Conflict of Laws (1971) with Article 177(2) of the Swiss
Law on Private International Law. Also compare Article 34(2)(i) of the UNCITRAL Model Law.
Is Article 177(2) of the Swiss Law on Private International Law an unwarranted interference with
the sovereignty of foreign states? Why should Swiss law dictate whether a foreign legislative (or
constitutional) protection of national sovereignty is valid? When does Article 177(2) apply? Is
that a complete answer?
6. Centroamericanos and Wijsmuller. Compare the results in Centroamericanos and Wijsmuller.
Can the courts' – the U.S. courts' – conclusions be reconciled? How?
7. Authority of parties' representatives or agents to enter into arbitration agreement. Another
P "238" recurrent issue in international arbitration is the capacity (or authority) of the individual who
P "239" executes an arbitration agreement to bind the party that he acted for. All developed legal
systems recognize the power or capacity of one individual or legal entity to enter into binding
legal acts on behalf of another. The circumstances in which such representation will validly
 occur is generally governed by the law of agency, rather than rules concerning capacity.
For decisions considering challenges to agent's authority to agree to arbitration or forum
selection clauses, see Herlofson Mgt A/S v. Ministry of Supply, Kingdom of Jordan, 765 F.Supp. 78
(S.D.N.Y. 1991) (no arbitration agreement because signatory lacked actual or apparent authority
to bind principal); Triton Container Int'l Ltd v. M/S Itapage, 774 F.Supp. 1349 (M.D. Fla. 1990); In
the Matter of the Arbitration Between Herlofson Mgt A/S and Ministry of Supply, 765 F.Supp. 78
(S.D.N.Y. 1991) (no actual or apparent authority; applying Restatement (Second) Agency);
Maritime Ventures Int'l Inc. v. Caribbean Trading & Fidelity, Ltd, 689 F.Supp. 1340 (S.D.N.Y. 1988);
Award in Case No. 9246 of March 1996, XXII Y.B. Comm. Arb. 28 (1997) (rejecting argument that
respondent's chairman lacked capacity to enter into arbitration agreement).
5. Waiver of Right to Arbitrate
Like other contractual rights, the right to arbitrate is subject to waiver. Waiver has been
recognized by national courts as a defense to enforcement of arbitration agreements under
Article II(3) of the New York Convention (77) and national arbitration legislation. Under the
UNCITRAL Model Law, for example, Article 8(1) provides for the enforcement of arbitration
agreements by national courts, provided that the party invoking the agreement request its
enforcement “not later than when submitting his first statement on the substance of the
dispute.” (78)
In the United States, where the FAA applies, (79) it appears settled in both domestic and
international matters that waiver is defined by federal common law. The U.S. Supreme Court
has squarely held that: “[as] a matter of federal law, any doubts concerning the scope of
arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the
construction of the contract language itself or an allegation of waiver, delay, or a like defense
to arbitrability.” (80)
P "239"
P "240"
The FAA and the pro-arbitration policies underlying the Act have been interpreted as
disfavoring the waiver of a party's right to arbitrate. Doubt as to the existence of a waiver is
resolved against finding a waiver, and the party seeking to establish waiver bears a heavy
burden. (81) “A waiver of arbitration ‘is not to be lightly inferred.’” (82)
Waiver is usually a fact-driven issue. Although no clearly established rules exist, waiver
typically requires knowledge of a right to arbitrate, actions inconsistent with that right (usually
involving delay), and (less clearly) prejudice to the adverse party. (83) Mere delay in
commencing arbitration is generally said not to constitute a waiver. (84) The same is generally
true of failure to comply entirely with the parties' arbitration agreement or applicable
institutional rules in commencing arbitration. (85) Courts often take into account the apparent
motives of the party that has allegedly waived its right to arbitrate. (86)
P "240" U.S courts have generally applied the foregoing principles narrowly, particularly in cases under
P "241" the New York Convention. (87) A party's commencement of judicial proceedings and
participation in substantial discovery in those proceedings would often constitute a waiver of
arbitration. (88) That can be true even if litigation is pursued as to only a part of an arbitrable
dispute. (89) On the other hand, some decisions have declined to find a waiver where a party
commenced litigation of claims or counterclaims that it subsequently sought to arbitrate. (90)
Similarly, filing motion to dismiss on the merits, without raising the arbitration agreement, has
also been held not to constitute a waiver. (91) And, at least in some circumstances, seeking
provisional measures from a national court has been held not to constitute a waiver. (92)
Like other defenses to the enforcement of arbitration agreements, waiver raises questions of
the respective roles of courts and arbitration. U.S. courts are divided over the question
whether claims that one party has waived its right to arbitrate are for judicial resolution or for
P "241" the arbitral tribunal to decide. The weight of authority is that such claims are for the courts,
P "242" (93) although there are contrary holdings. (94) After First Options, the proper analysis would
appear to be that claims of waiver are capable of arbitration, but that such a result requires
“clear and unmistakable” evidence of an agreement to arbitrate questions of waiver. (95)
Some institutional arbitration rules either expressly or impliedly provide that the right to
arbitrate may not be waived. (96) U.S. courts have generally refused to enforce these
provisions. (97) On the other hand, a few lower courts have given at least some weight to “no
waiver” clauses, contained in arbitration agreements. (98)
P "242"
P "243"
D. The Non-Arbitrability Doctrine (99)
1. Introduction to Non-Arbitrability Doctrine
As described above, the New York Convention contains various exceptions to the general
obligation, set forth in Article II, to enforce written arbitration agreements. (100) In particular,
Article II(1) does not require arbitration of disputes that are not “capable of settlement by
arbitration.” Similarly, Article V(2)(a) provides that an arbitration award need not be
recognized if “[t]he subject matter of the difference is not capable of settlement by arbitration
under the law” of the country where recognition is sought. Together, these provisions permit the
assertion of non-arbitrability defenses to the enforcement of arbitration agreements and
awards under the Convention. Other international arbitration conventions and treaties contain
similar exceptions. (101)
Article II(3) requires the enforcement of arbitration agreements, provided that they are not
 “null and void,” without any reference to a non-arbitrability or public policy defense. It has
been suggested that, as a consequence, arbitration agreements must be enforced, even if they
pertain to non-arbitrable claims and if the resulting award would be therefore unenforceable
P "243" under Article V(2)(a) or (b). (102) Neither courts nor most commentators have accepted this
P "244" view, generally reasoning that non-arbitrability defenses permitted by Article II(1) and
Article V(2) are incorporated by Article II(3)'s “null and void” exception. (103)
As noted above, Article II(1) of the New York Convention does not require recognition of
arbitration agreements unless they concern a “subject-matter capable of settlement by
arbitration.” (104) Like other exceptions under Article II and V, the non-arbitrability doctrine
raises a threshold choice of law question: what law(s) apply to determine whether a claim or
dispute is non-arbitrable for purposes of Article II(3)? (105) Among commentators, there is no
agreement on what governing law should apply. Indeed, “[a]greement on the conclusion that
there is disagreement seems to be the only common denominator that one can find between
arbitrators, courts, and publicists regarding the question which is the applicable law on
arbitrability.” (106)
Several choices are possible. First, the Convention might be regarded as establishing (albeit
almost entirely by implication) a uniform international definition of non-arbitrability, from
which no nation could deviate. (107) Second, the law governing the parties' arbitration
agreement might define non-arbitrability, as Articles II(1) and V(1)(a) imply. (108) Third, non-
arbitrability might be defined by the law of the place where the arbitration is conducted and
the award made, as also implied by Article V(1)(a). (109) Fourth, the law of the nation in which
enforcement of an award will eventually be sought might define non-arbitrability, as Article
V(2)(a) and (b) specifically contemplate. (110) Fifth, the law of the judicial forum where an
P "244" arbitration agreement is sought to be enforced could govern non-arbitrability. (111) And finally,
P "245" non-arbitrability might be defined by the law that provides the basis for the relevant
substantive claim. (112) These various possibilities are discussed below. (113)
To make matters even more complex, different national laws might be relevant at different
stages in the enforcement process. For example, in a judicial proceeding to enforce an
arbitration agreement, the court might look either to its own law, the curial law, or the law
governing the arbitration agreement – without considering the law in the place where any
award would be enforced. Conversely, a decision to enforce an arbitration award might look
only to the law of the enforcement forum – without considering whether the arbitration
involved claims that were not arbitrable under foreign law. Finally, some authorities have
suggested a cumulative application of various of the potentially applicable laws. (114)
There is little considered discussion of the foregoing choice of law issues by national courts. As
we will see below, where U.S. federal law provides the basis for allegedly non-arbitrable
claims, U.S. courts have generally applied federal U.S. law to issues of non-arbitrability, both
at the stages of enforcing arbitration agreements and arbitral awards. (115) In contrast, where a
claim is allegedly non-arbitrable under foreign law, U.S. courts appear to require that foreign
non-arbitrability doctrines satisfy either U.S. federal or “international” standards. (116)
Finally, like other disputes over arbitration agreements, non-arbitrability issues can arise in
both national courts and arbitral proceedings. (117) That necessarily also raises questions over
the allocation of competence between national courts and arbitral tribunals to decide issues
of non-arbitrability. (118)
2. Historical Development of the Non-Arbitrability Doctrine
Virtually all nations treat some categories of claims as incapable of resolution by arbitration.
Claims are ordinarily deemed “non-arbitrable” because of their perceived public importance
or a felt need for formal judicial procedures and protections. The types of claims that are non-
arbitrable differ from nation to nation. Among other things, various nations refuse to permit
P "245" arbitration of disputes concerning labor or employment grievances; (119) intellectual property;
P "246" (120) competition (antitrust) claims; (121) real estate; (122) domestic relations; (123) and
franchise relations. (124) More broadly, some nations forbid arbitration of “all matters in the
realm of public policy.” (125)
For much of the 20th century, the non-arbitrability doctrine flourished. Many national courts
interpreted local statutory and other protections expansively, often concluding that particular
claims or types of disputes were non-arbitrable. The areas identified above are leading
examples of this trend.
Similarly, until fairly recently, federal law in the United States treated a number of claims as
non-arbitrable. (126) The FAA itself contains no provisions dealing expressly with the subject of
non-arbitrability. (127) Prohibitions on the arbitrability of claims under U.S. law were based,
therefore, on other statutes or public policies. (128) As discussed below, U.S. statutes have
seldom dealt expressly with the subject of non-arbitrability, thus leaving development of the
doctrine largely to the courts. (129)
The U.S. Supreme Court's first modern treatment of the non-arbitrability doctrine was Wilko v.
Swan, (130) excerpted below. There, an investor brought an action in federal district court
against his brokers under the federal Securities Act of 1933. The plaintiff sought damages for
alleged misrepresentations in connection with his purchase of securities. The defendants
sought to stay the plaintiff's action, relying on an arbitration provision in their margin
agreement with the plaintiff.
The Supreme Court rejected the defendants' arguments, reasoning that, while Congress wished
to encourage arbitration generally, “it has enacted the Securities Act to protect the rights of
P "246" investors and has forbidden a waiver of any of those rights, by means of a specific statutory
P "246"
P "247" anti-waiver provision.” (131) The Court concluded that “[r]ecognizing the advantages that
prior agreements for arbitration may provide for the solution of commercial controversies, we
decide that the intention of Congress concerning the sale of securities is better carried out by
holding invalid such an agreement for arbitration of issues arising under the Act.” (132)
Relying on Wilko, lower federal courts fashioned a variety of applications of the non-
arbitrability doctrine during the 1960s and 1970s, designed to protect perceived public values
or legislative objectives. Claims touching on patent rights were deemed to involve the public
interest, and thus to be inappropriate for arbitration. (133) Likewise, most federal courts of
appeals concluded that federal antitrust claims were too important to be left to “private”
arbitration. (134) Federal RICO, bankruptcy, Carriage of Goods by Sea Act (“COGSA”), and other
claims were similarly deemed non-arbitrable by various lower courts. (135)
At the same time, the Supreme Court concluded that other categories of federal statutory
claims were also non-arbitrable under the FAA. In Alexander v. Gardner-Denver Co., (136) the
Court held that statutory claims for damages under Title VII of the Civil Rights Act of 1964 were
not precluded by a prior arbitral award rejecting the plaintiff's allegations; among other things,
the Court suggested that certain Title VII claims were non-arbitrable. (137) The same result was
reached in Barrentine v. Arkansas-Best Freight System, Inc., (138) under the Fair Labor
Standards Act. (139) In both cases, the Court emphasized the important “public” rights at issue
and the perceived inability of the arbitral process satisfactorily to resolve disputes concerning
such rights. (140)
3. Selected Materials on Historical Development of Non-Arbitrability Doctrine
It is not always clear whether a particular claim is non-arbitrable. Of course, where legislation
specifically addresses the subject, little discussion will ordinarily be necessary. Several
P "247" examples of such legislation are excerpted below, including sections from the UNCITRAL Model
P "248" Law, the Arkansas and Iowa arbitration statutes, the Jordanian Merchandise Maritime Law,
and Article 806 of the Italian Code of Civil Procedure.
Often, however, legislation does not expressly address the subject of non-arbitrability –
particularly in international matters. The federal antitrust, securities, and employment
discrimination statutes in the United States are good examples. In these circumstances,
national courts must resolve issues of non-arbitrability by reference to implied legislative
intent and the competing policies of the New York Convention and a particular regulatory
regime.
The U.S. Supreme Court's decision in Wilko v. Swan, excerpted below, illustrates the difficulties
that non-arbitrability issues present for national courts in the absence of legislative guidance.
In reading the Court's decision, consider the policies underlying the non-arbitrability doctrine
and the types of circumstantial evidence of legislative intent deemed relevant to the question
of non-arbitrability. In contrast, compare the analysis in the Judgment of the Bologna Tribunal
of July 18, 1987, which is also excerpted below. The judgment of the Bologna Tribunal was later
reversed. See Judgment of 21 December 1991, XVIII Y.B. Comm. Arb. 422 (Court of Appeal of
Bologna) (1993).
UNCITRAL MODEL LAW
Articles 1(5), 6, & 34(2) [excerpted below at pp. 1012, 1013, 1019-20]
JORDANIAN LAW NO. 35 OF 1983
[excerpted above at p. 103]
INTERIM AWARD IN ICC CASE NO. 6149 OF 1990
[excerpted above at pp. 104-07]
ARKANSAS CODE OF 1987 ANNOTATED
§16-108-201
(a) A written agreement to submit any existing controversy to arbitration arising between the
parties bound by the terms of the writing is valid, enforceable, and irrevocable, save upon such
grounds as exist at law or in equity for the revocation of any contract.
P "248" (b) A written provision to submit to arbitration any controversy thereafter arising between the
P "249" parties bound by the terms of the writing is valid, enforceable, and irrevocable, save upon
such grounds as exist at law or in equity for the revocation of any contract; provided, that this
subsection shall have no application to personal injury or tort matters, employer-employee
disputes, nor to any insured or beneficiary under any insurance policy or annuity contract.
IOWA CODE ANNOTATED
§679A.1
1. A written agreement to submit to arbitration an existing controversy is valid, enforceable,
and irrevocable unless grounds exist at law or in equity for the revocation of the written
agreement.
2. A provision in a written contract to submit to arbitration a future controversy arising
between the parties is valid, enforceable, and irrevocable unless grounds exist at law or in
equity for the revocation of the contract. This subsection shall not apply to any of the following:
a. A contract of adhesion.
 b. A contract between employers and employees.
c. Unless otherwise provided in a separate writing executed by all parties to the contract,
any claim sounding in tort whether or not involving a breach of contract.
ITALIAN CODE OF CIVIL PROCEDURE
Article 806
The parties may have arbitrators settle the disputes arising between them, excepting those
provided for in Article 409 and 442 [regarding labor, social security, and obligatory medical aid
disputes], those regarding issues of personal status and marital separation and those disputes
that cannot be the subject of a compromise.
WILKO v. SWAN
346 U.S. 427 (U.S. Supreme Court 1953)
JUSTICE REED. This action by petitioner, a customer, against respondents, partners in a
securities brokerage firm, was brought in the United States District Court for the Southern
District of New York, to recover damages under §12(2) of the Securities Act of 1933. The
complaint alleged that ... petitioner was induced by Hayden, Stone and Company to purchase
P "249" 1,600 shares of the common stock of Air Associates ... by false representations.... Without
P "250" answering the complaint, the respondent moved to stay the trial of the action pursuant to §3
of the [FAA] until an arbitration in accordance with the terms of identical margin agreements
was had.... (141) Finding that the margin agreements provide that arbitration should be the
method of settling all future controversies, the District Court held that the agreement to
arbitrate deprived petitioner of the advantageous court remedy afforded by the Securities Act,
and denied the stay. A divided Court of Appeals concluded that the Act did not prohibit the
agreement to refer future controversies to arbitration, and reversed.
The question is whether an agreement to arbitrate a future controversy is a “condition,
stipulation, or provision binding any person acquiring any security to waive compliance with
any provision” of the Securities Act which §14 declares “void.” ... In response to a Presidential
message urging that there be added to the ancient rule of caveat emptor the further doctrine
of “let the seller also beware,” Congress passed the Securities Act of 1933.... To effectuate this
policy, §12(2) created a special right to recover for misrepresentation which differs
substantially from the common-law action in that the seller is made to assume the burden of
proving lack of scienter. The Act's special right is enforceable in any court of competent
jurisdiction – federal or state – and removal from a state court is prohibited. If suit be brought
in a federal court, the purchaser has a wide choice of venue [and] the privilege of nation-wide
service of process....
Petitioner argues that §14 shows that the purpose of Congress was to assure that sellers could
not maneuver buyers into a position that might weaken their ability to recover under the
Securities Act.... He reasons that the arbitration paragraph of the margin agreement is a
stipulation that waives “compliance with” the provision of the Securities Act, set out in the
margin, conferring jurisdiction of suits and special powers. (142)
Respondent asserts that arbitration is merely a form of trial to be used in lieu of a trial at law,
P "250" and therefore no conflict exists between the Securities Act and the [FAA] either in their
P "251" language or in the congressional purposes in their enactment. Each may function within its
own scope, the former to protect investors and the latter to simplify recovery for actionable
violations of law by issuers or dealers in securities. Respondent is in agreement with the Court
of Appeals that the margin agreement arbitration paragraph does not relieve the seller from
either liability or burden of proof imposed by the Securities Act. We agree that in so far as the
award in arbitration may be affected by legal requirements, statutes or common law, rather
than by considerations of fairness, the provisions of the Securities Act control. This is true even
though this proposed agreement has no requirement that the arbitrators follow the law....
The words of §14 void any “stipulation” waiving compliance with any “provision” of the
Securities Act. This arrangement to arbitrate is a “stipulation,” and we think the right to select
the judicial forum is the kind of “provision” that cannot be waived under §14 of the Securities
Act.... While a buyer and seller of securities, under some circumstances, may deal at arm's
length on equal terms, it is clear that the Securities Act was drafted with an eye to the
disadvantages under which buyers labor. Issuers of and dealers in securities have better
opportunities to investigate and appraise the prospective earnings and business plans
affecting securities than buyers....
When the security buyer, prior to any violation of the Securities Act, waives his right to sue in
courts, he gives up more than would a participant in other business transactions. The security
buyer has a wider choice of courts and venue. He thus surrenders one of the advantages the Act
gives him and surrenders it at a time when he is less able to judge the weight of the handicap
the Securities Act places upon his adversary.
Even though the provisions of the Securities Act, advantageous to the buyer, apply, their
effectiveness in application is lessened in arbitration as compared to judicial proceedings.
Determination of the quality of a commodity or the amount of money due under a contract is
not the type of issue here involved. This case requires subjective findings on the purpose and
knowledge of an alleged violator of the Act. They must be not only determined but applied by
the arbitrators without judicial instruction on the law. As their award may be made without
explanation of their reasons and without a complete record of their proceedings, the
arbitrators' conception of the legal meaning of such statutory requirements as “burden of
proof,” “reasonable care” or “material fact” cannot be examined. Power to vacate an award is
 limited. While it may be true, as the Court of Appeals thought, that a failure of the arbitrators
to decide in accordance with the provisions of the Securities Act would “constitute grounds for
vacating the award pursuant to §10 of the Federal Arbitration Act,” that failure would need to
be made clearly to appear. In unrestricted submissions, such as the present margin
agreements envisage, the interpretations of the law by the arbitrators in contrast to manifest
disregard are not subject, in the federal courts, to judicial review for error in interpretation.
The [FAA] contains no provision for judicial determination of legal issues such as is found in the
English law. As the protective provisions of the Securities Act require the exercise of judicial
P "251" direction to fairly assure their effectiveness, it seems to us that Congress must have
P "252"
intended §14 to apply to waiver of judicial trial and review....
JUSTICE JACKSON, concurring. I agree with the Court's opinion insofar as it construes the
Securities Act to prohibit waiver of a judicial remedy in favor of arbitration by agreement
made before any controversy arose. I think thereafter the parties could agree upon
arbitration....
JUDGMENT OF THE BOLOGNA TRIBUNALE OF JULY 18, 1987
XVII Y.B. Comm. Arb. 534 (1992) (©)
[The case arose from an Italian company's (“Coveme”) termination of its distribution agreement
with a French manufacturer (“CFI”); following termination, CFI informed Coveme that it was
bound by a non-competition clause in the terminated agreement, and Coveme commenced
judicial proceedings in Italy seeking a declaration that the non-competition clause violated
the European Communities' competition laws (broadly similar to U.S. antitrust laws). After CFI
sought an order compelling arbitration, the Bologna court handed down the following
decision.]
We must firstly ascertain whether the Italian courts have jurisdiction to hear the dispute
between Coveme and CFI, because the latter relies on the last clause in the contract of 25 July
1974, according to which all disputes arising under the contract are referred to arbitration
before the International Chamber of Commerce.
CFI ... also maintains that Italian law does not apply to the issue of the arbitrability of the
matter, and that French law applies (the contract was concluded in Paris). According to Article
27 of the Preliminary Dispositions to the Civil Code (143) and to [the New York Convention],
there is no doubt that, contrary to defendant's theory, Italian law applies to review
arbitrability. Italian law regulates the jurisdiction issue and the form of the proceedings
(Article 27 supra) and also applies to the court's review of the jurisdiction issue under Articles II
and V of the said Convention.
Authoritative doctrine and case law (144) make clear that Article II(3) of the said Convention
provides that jurisdiction must be denied if the arbitration clause is null and void, inoperative
or incapable of being performed, and that this review can only take place in light of the
national law. This principle becomes even clearer if Article II(3) is read in conjunction with
P "252" Article V(2)(a) of the same Convention, which subordinates the efficacy of the arbitral award to
P "253" the requirement that its subject matter be capable of settlement by arbitration, according
to the law of the State where recognition and enforcement are sought. This provision not only
applies to the field which it directly regulates (the efficacy of an arbitral award already
rendered); it also applies when the court obtains its own jurisdiction in the presence of an
arbitration clause or agreement for international arbitration. It would be totally useless to
recognize the jurisdiction of the arbitrator if the award, when rendered, could in no way be
enforced in the legal system of the court which has jurisdiction.
This said, we must ascertain whether, according to Articles 806 (145) and 808 CCP, it is possible
to arbitrate the issue of the nullity of the clause in the contract of 25 July 1974, according to
which Coveme could not sell similar products for a period of two years following the
termination of the contract. This nullity would ensue from the clause's being at odds with
imperative provisions of EC competition law, particularly ... Article 85 of the EEC Treaty, which
provides for the nullity of all agreements which can hinder trade among Member States, and
Article 2 of the EC Commission Regulation no.67/67, dated 22 March 1967, which provides that
the term of a non-competition agreement cannot exceed the period one year after the contract
is completed. According to this thesis, the nullity of the clause concerns the clause's conflict
with imperative provisions and cannot, therefore, ... be capable of settlement by arbitration.
The Court holds that this thesis must be accepted, leaving aside any examination on the
merits.... Indeed, it has been noted by authoritative doctrine that according to Article 806 CCP,
which refers to Article 1966 CC, only the courts can decide matters in which the freedom of the
parties to settle their disputes is limited by provisions of public law and public interest. It is
beyond doubt that this is the case here, because it is the conflict with imperative provisions
that are relied upon [by Coveme]. Hence, the parties are not free to settle the issue of this
nullity, which could be objected to by any interested party and also ex officio (Article 1417 CC).
All agreements on this issue would also be null and voice.... We hold that the arbitration clause
is null and void as far as this nullity is concerned. Therefore, the courts have jurisdiction to
hear the case.
Notes on Historical Development of Non-Arbitrability Doctrine
1. Rationale for non-arbitrability doctrine. Why is there a non-arbitrability doctrine? Consider
the reasons advanced in Wilko for concluding, based on scant statutory support, that federal
securities claims are non-arbitrable, and the rationale of the Bologna Tribunale for holding EC
competition law defenses non-arbitrable. Are these reasons persuasive?
 (a) Public values. In both Wilko and the Bologna Tribunale decision, the courts reasoned that
the claims at issue embodied “public” values that had importance transcending the
particular plaintiff's case. Is that a coherent suggestion? Aren't all statutory claims
P "253" important? Doesn't the common law tort and contract system embody vital “public”
P "254" values? Why is Mr. Wilko's securities fraud claim more important than the claim of a
victim of an environmental disaster, fraudulent real estate practices, or breach of a
billion-dollar contract?
(b) Arbitral procedures. Wilko also emphasizes the differences between judicial and arbitral
procedures – limited discovery, no jury, no appellate review, and informal evidentiary
and pleading rules. It was, of course, these characteristics of arbitration that has
prompted Congress and other national legislatures to enact national arbitration statutes
(like the FAA), encouraging arbitration. See supra pp. 245-46. Do these features of the
arbitral process argue against the arbitrability of some categories of claims?
Consider the following description of the arbitral process, drawn from a Supreme Court
opinion holding that employment discrimination claims are non-arbitral:
Arbitral procedures, while well suited to the resolution of contractual disputes, make
arbitration a comparatively inappropriate forum for the final resolution of rights created
by Title VII. This conclusion rests first on the special role of the arbitrator, whose task is to
effectuate the intent of the parties rather than the requirements of enacted legislation.
Where the collective-bargaining agreement conflicts with Title VII, the arbitrator must
follow the agreement. To be sure, the tension between contractual and statutory
objectives may be mitigated where a collective-bargaining agreement contains
provisions facially similar to those of Title VII. But other facts may still render arbitral
processes comparatively inferior to judicial processes in the protection of Title VII rights.
Among these is the fact that the specialized competence of arbitrators pertains primarily
to the law of the shop, not the law of the land. Parties usually choose an arbitrator
because they trust his knowledge and judgment concerning the demands and norms of
industrial relations. On the other hand, the resolution of statutory or constitutional issues
is a primary responsibility of courts, and judicial construction has proved especially
necessary with respect to Title VII, whose broad language frequently can be given
meaning only by reference to public law concepts.
Moreover, the factfinding process in arbitration usually is not equivalent to judicial
factfinding. The record of the arbitration proceedings is not as complete; the usual rules
of evidence do not apply; and rights and procedures common to civil trials, such as
discovery, compulsory process, cross-examination, and testimony under oath, are often
severely limited or unavailable. See Bernhardt v. Polygraphic Co., 350 U.S. 198, 203 (1956);
Wilko v. Swan, 346 U.S. at 435-437. And as this Court has recognized, “arbitrators have no
obligation to the court to give their reasons for an award.”United Steelworkers of America
v. Enterprise Wheel & Car Corp., 363 U.S. at 598. Indeed, it is the informality of arbitral
procedure that enables it to function as an efficient, inexpensive, and expeditious means
for dispute resolution. This same characteristic, however, makes arbitration a less
appropriate forum for final resolution of Title VII issues than the federal courts....
Alexander v. Gardner-Denver Co., 415 U.S. 36, 58 (1974).
Recall also Joseph Story's description of the arbitration process in 1845, as “rusticum
judicium.” See supra p. 165.

(c) Unequal bargaining power. There are suggestions in various non-arbitrability discussions
that the doctrine is related to unconscionability – certain classes of litigants will not be
permitted to waive particular statutory protections against economically powerful
entities. Note, for example, the prevalence of the non-arbitrability doctrine in franchisor
franchisee, investor, and employment contexts. See supra pp. 245-46; American Safety
Equipment Corp. v. J.P. Maguire & Co., 391 F.2d 821 (1968).
(d) Legislative intent. At least in the United States, the ultimate touchstone of the non-
arbitrability doctrine is what Congress intended: did it want a particular statutory claim
to be excluded from the FAA's general regime? That partially explains Wilko, which relied
on language of §14 of the 1933 Securities Act, forbidding any waiver of rights under the
Act.
2. Prospective waivers – future v. existing disputes. Private parties are, of course, free to settle
law suits they have commenced almost any kind of claim (including employment
discrimination, securities, real estate, and domestic relations claims). They are also free to
enter into enforceable settlements of such claims before commencing litigation. See Justice
Jackson's concurrence in Wilko. Lower courts have likewise repeatedly upheld agreements to
P "254"
arbitrate existing disputes involving otherwise non-arbitrable statutory claims. See Coenen v.
P "255" R.W. Pressprich & Co., 453 F.2d 1209 (2d Cir. 1972), cert. denied, 406 U.S. 949 (1972) (antitrust
claims); Power Replacements, Inc. v. Air Preheater Co., 426 F.2d 980 (9th Cir. 1970) (antitrust
claims); Moran v. Paine, Webber, Jackson & Curtis, 389 F.2d 242 (3d Cir. 1968) (federal securities
claim); Lawson Fabrics, Inc. v. Akzona, Inc., 355 F.Supp. 1146 (S.D.N.Y. 1973) (Lanham Act and
Textile Fiber Products Identification Act Claims). See also Pitofsky, Arbitration and Antitrust
Enforcement, 44 N.Y.U.L. Rev. 1072, 1079-80 n.31 (1969).
Nevertheless, the Court held in Wilko that a party could not prospectively agree to arbitrate
future securities claims. Is that sensible? See also Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc., 473 U.S. 614, 637 n.19 (1985) (antitrust claims can be arbitrated, but cannot be
prospectively waived). Under Wilko, could a party be required to perform an arbitration
 agreement entered into after a dispute involving Securities Act claims had arisen?
Historically, both in the United States and elsewhere, agreements to arbitrate future disputes
were regarded with particular suspicion. See supra pp. 156-57, 165. This suspicion continues to
be reflected in the U.S. state statutes excerpted above.
3. Potential non-arbitrability of sovereignty and natural resource disputes in developing
nations. As we have seen, historically, many developing nations, or at least portions of their
governmental and legal communities, viewed international arbitration with considerable
reserve and occasional hostility. See supra pp. 29-30, 156-57. Among other things, international
arbitration was (and, to some extent, still is) seen as dominated by Western interests and
arbitrators, unduly sensitive to the policies and needs of developing countries, and
unacceptably expensive for non-Western entities. See, e.g., Sornarajah, The UNCITRAL Model
Law: A Third World Viewpoint, 6 J. Int'l Arb. 7 (1989); Kassis, The Questionable Validity of
Arbitration and Awards Under the Rules of the International Chamber of Commerce, 6 J. Int'l Arb.
79 (1989). It has been urged that disputes involving significant sovereign interests (like natural
resource development projects) be deemed non-arbitrable. Sornarajah, The UNCITRAL Model
Law: A Third World Viewpoint, 6 J. Int'l Arb. 7, 16 (1989). What are the pros and cons of this
proposal? from whose perspective?
4. Arbitrability of sovereignty and natural resource disputes under FAA. The courts and
legislatures in the United States and other developed countries have generally rejected claims
that disputes involving issues of sovereignty or natural resources are inherently non-arbitrable.
As described below, the Foreign Sovereign Immunities Act contains detailed provisions
concerning the enforcement of arbitration agreements and awards against foreign states. See
infra pp. 390-93.
5. Act of state doctrine not applicable to enforcement of arbitral awards. In the early 1980s, one
lower U.S. court held that, even where the Foreign Sovereign Immunities Act permits
enforcement, the act of state doctrine does not allow the enforcement of an arbitral award
concerning claims of expropriation. In Libyan Am. Oil Co. (LIAMCO) v. Socialist People's Libyan
Arab Jamahirya, 482 F.Supp. 1176 (D.D.C. 1980), vacated mem., 684 F.2d 1032 (D.C. Cir. 1981), the
district court denied enforcement of an arbitration award after concluding that the
expropriation dispute between the parties underlying the award was within the scope of the
act of state doctrine. The lower court decision in LIAMCO was plainly wrong. Following
submissions from the U.S. Government the opinion was vacated. 684 F.2d 1032 (D.C. Cir. 1981).
More important, legislation was enacted in 1988 ensuring that the lower courts' error would not
be repeated. See 9 U.S.C. §15 (“Enforcement of arbitral agreements, confirmation of arbitral
awards, and execution upon judgments based on orders confirming such awards shall not be
refused on the basis of the Act of State Doctrine.”). Section 15 applies by its terms to the
enforcement of arbitration agreements.
6. Differences in national law treatments of non-arbitrability. Article 806 of the Italian Code of
Civil Procedure defines various categories of non-arbitrable disputes under Italian law.
Compare those categories to U.S. law, both under the Arkansas and Iowa statutes and under the
FAA, and to the views of writers from developing states that issues of state sovereignty and
natural resources are non-arbitrable. Note the dramatically different treatment of labor
disputes: in the United States, federal law and policy has long affirmatively encouraged
arbitration of labor disputes. See United Steelworkers of America v. Enterprise Wheel & Car Corp.,
363 U.S. 593 (1960). Is there any common theme to the non-arbitrability exceptions adopted in
different nations?
7. Authority of arbitrators to consider public law claims. Why couldn't the arbitrator in Wilko
have considered and resolved federal securities law claims exactly like a district judge would
have? Or, why couldn't the arbitrator in Bologna Tribunale have considered the EC competition
law claims? Note that the Wilko Court accepted that the arbitrator could have considered
securities claims, but for §14 of the Securities Act, just as he could consider contract claims.
Note also the decision of the arbitral tribunal in ICC Case No. 6149.
P "255"
P "256"
Compare the apparently different attitude towards this topic in Alexander v. Gardner-Denver
Co., quoted above, suggesting that an arbitrator cannot consider non-contractual claims:
The arbitrator, however, has no general authority to invoke public laws that conflict with the
bargain between the parties: (146)
“An arbitrator is confined to interpretation and application of the collective bargaining
agreement; he does not sit to dispense his own brand of industrial justice. He may of course
look for guidance from many sources, yet his award is legitimate only so long as it draws its
essence from the collective bargaining agreement.... United Steelworkers of America v.
Enterprise Wheel & Car Corp., 363 U.S. 593, 597 (1960).”
If an arbitral decision is based “solely upon the arbitrator's view of the requirements of
enacted legislation,” rather than on an interpretation of the collective-bargaining agreement,
the arbitrator has ‘exceeded the scope of the submission,’ and the award will not be enforced.
Alexander v. Gardner-Denver Co., 415 U.S. 36, 56-57 (1974). Doesn't this language mean that an
arbitrator could never consider statutory (or other non-contractual) claims? If so, isn't this out
of step with contemporary U.S. doctrine? Suppose the parties' arbitration clause encompasses
such claims and there is nothing in the statutory language or legislative history to indicate the
claim is non-arbitrable? If an arbitrator can decide an existing public law dispute, why is he
incapable of deciding a future dispute? (As discussed below, the U.S. Supreme Court's decision
in Mitsubishi Motors Corp. v. Soler-Chrysler Plymouth Inc., 473 U.S. 614 (1985) (excerpted below),
 expressly upholds an arbitrator's authority to consider federal antitrust and other public law
claims, save where Congress requires otherwise. See infra pp. 264-71. Likewise, the European
Court of Justice has expressly held that EC competition law claims are arbitrable. See infra pp.
271-73.
8. Relationship between “non-arbitrability,” “illegality,” and “public policy” as grounds for
resisting enforcement of arbitration agreements. As discussed in detail above, Article II(3) of
the New York Convention does not require the enforcement of arbitration agreements that are
“null and void.” See supra pp. 157-60. This exception includes defenses based on the illegality
of the arbitration agreement. See supra pp. 208-16. Claims of illegality are often based upon
national law prohibitions against the arbitration of particular claims or disputes. E.g., Riley v.
Kingsley Underwriting Agencies, Ltd, 969 F.2d 953 (10th Cir. 1992) (illegality allegedly based on
U.S. securities laws); Meadows Indemnity Co. v. Baccala & Shoop Ins. Serv. Inc., 760 F.Supp. 1036
(S.D.N.Y. 1991) (non-arbitrability based on Guernsey law); Marchetto v. DeKalb Genetics Corp., 711
F.Supp. 936 (N.D. Ill. 1989) (invalidity based on Italian law). Such claims can be, and often are,
treated interchangeably as either “non-arbitrability” defenses under Article II(1) or “null and
void” defenses under Article II (3). See, for example, the Bologna Tribunale's decision. See also
A. van den Berg, The New York Convention of 1958 152-54 (1981).
Similarly, the enforcement of an arbitration agreement can be resisted on the grounds that it
violates public policy – again, a defense closely related both to non-arbitrability and illegality.
See, e.g., Rhone Mediterranee etc. v. Achille Lauro, 712 F.2d 50 (3rd Cir. 1983) (arbitration
agreement required procedure allegedly in violation of arbitral situs' laws); McDonnell Douglas
Corp. v. Kingdom of Denmark, 607 F.Supp. 1016 (E.D. Mo. 1985) (arbitration of national security
matters alleged to violate U.S. public policy); Antco Shipping Co. v. Sidermar SpA, 417 F.Supp.
207 (S.D.N.Y. 1976) (considering whether agreement was “null and void” under Article II(3) where
illegality and public policy arguments were raised).
9. Arbitrators' refusal to accept jurisdiction on public policy grounds. Arbitral tribunals have
sometimes invoked “international” public policy as a basis for refusing to exercise jurisdiction.
Several well-publicized ICC awards arose out of disputes over what were alleged to be
P "256" contracts for the payment of illegal bribes. When one party to such contracts invoked ICC
P "257" arbitration to recover amounts owing, the arbitrators declined to hear the case, explaining:
It cannot be contested that there exists a general principle of law recognized by civilized
nations that contracts which seriously violate bonos mores or international public policy are
invalid or at least unenforceable and that they cannot be sanctioned by courts or arbitrators....
Thus, jurisdiction must be declined in this case.... In concluding that I have no jurisdiction,
guidance has been sought from general principles denying arbitrators to entertain disputes of
this nature rather than from any national rules on arbitrability.
See J. Lew, Applicable Law in International Commercial Arbitration 553-55 (1978) (summarizing
and excerpting award).
In recent years, however, the practice of tribunals has more often been to take jurisdiction in
cases involving illegal contracts, but to hold the agreement void:
“arbitral jurisprudence has evolved profoundly in respect of contracts contrary to public
policy.... Old awards considered that such disputes were not susceptible of being submitted to
arbitration (ICC Case No. 1110 of 1963.) However, in recent awards, arbitrators have
systematically refused to reject their jurisdiction and have decided, when necessary, upon the
nullity of the underlying contract (ICC Case Nos. 2730,... 2930,... [and] 3916).” Schwartz, The
Domain of Arbitration and Issues of Arbitrability: The View From the ICC, in Tenth Joint
ICC/AAA/ICSID Colloquium on International Arbitration (1993), at 4 n.6 (quoting unpublished ICC
award).
10. Arbitrability of claims involving reformation of parties' contract. Parties sometimes include
openended provisions in their contracts, requiring various acts such as good faith negotiations
of a new agreement, price adjustments in cases of hardship, and the like. In general, national
courts have held that claims under such clauses are arbitrable. See Georgia Power Co. v.
Cimarron Coal Corp., 526 F.2d 101 (6th Cir. 1975) (price adjustment by “mutual consent” in case of
“gross inequities”); American Home Assurance Co. v. American Fidelity & Casualty Co., 356 F.2d
690 (2d Cir. 1966) (reduction in premiums “on a basis to be mutually arranged”); Aeronaves de
Mexico SA v. Triangle Aviation Services, Inc., 389 F.Supp. 1388 (S.D.N.Y. 1974), aff'd, 515 F.2d 504
(2d Cir. 1975) (increases in services charges “will be negotiated to the satisfaction of both
parties”). Compare Necchi v. Necchi Sewing Machine Sales Corp., 348 F.2d 693 (2d Cir. 1965), cert.
denied, 383 U.S. 909 (1966) (refusing to order arbitration of alleged breach of clause that parties
shall examine the possibility of executing a new and, it is hoped, long term distributorship
agreement for the same territory and at such terms and conditions as will be then discussed
and defined”).
4. Narrowing of the Non-Arbitrability Doctrine
During the 1980s, many national courts in developed jurisdictions brought the expansion of the
non-arbitrability doctrine to a fairly decisive end. In Europe, a series of judicial decisions held
that EC competition claims were arbitrable (subject to subsequent judicial review). (147)
Similar conclusions were reached by other national courts with respect to national
competition laws and other “public law” claims. (148)
Likewise, in the United States, two U.S. Supreme Court decisions, both excerpted below,
concluded that federal securities and antitrust claims could be arbitrated, at least when they
arose from “international” transactions. In Scherk v. Alberto-Culver Co., the Supreme Court
P "257" distinguished Wilko and held that a claim under the Securities Exchange Act of 1934 was
P "257"
P "258" arbitrable, provided that it arose from an “international” transaction. And, in Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., the Court held that federal antitrust claims were
also arbitrable, again provided that they arose from an “international” transaction. (149)
More recently, the Supreme Court expressly overruled Wilko v. Swan, holding in two decisions
that claims – either domestic or international – under both the Racketeer Influenced and
Corrupt Organizations Act (“RICO”) and the Securities Exchange Act are arbitrable. (150) In
another decision, after remarking that [i]t is by now clear that statutory claims may be the
subject of an arbitration agreement,” (151) the Court held that claims under the Age
Discrimination in Employment Act are arbitrable. (152) And lower courts have permitted the
arbitration of antitrust claims in purely domestic matters. (153)
The U.S. Supreme Court's decisions in Scherk and Mitsubishi are excerpted below. In reading
the two decisions, keep in mind how an arbitration is actually conducted, by whom, and
subject to what safeguards; consider whether the Court's faith in the arbitration process is well-
placed. Also, devote careful attention to the Court's treatment of choice of law issues, and
particularly the question what substantive law would be applied by the arbitrators to resolve
the parties' claims. Finally, compare the decision of the European Court of Justice in Eco Swiss
China Time Ltd v. Benetton Int'l NV.
SCHERK v. ALBERTO-CULVER CO.
417 U.S. 506 (U.S. Supreme Court 1974)
JUSTICE STEWART. Alberto-Culver Co., the respondent, is an American company incorporated in
Delaware with its principal office in Illinois. It manufactures and distributes toiletries.... During
the 1960's Alberto Culver ... approached the petitioner Fritz Scherk, a German citizen residing
P "258" at the time of [this litigation] in Switzerland. Scherk was the owner of three interrelated
P "259" business entities, organized under the laws of Germany and Liechtenstein.... [After
negotiations in both Europe and the United States] a contract was signed in Vienna, Austria,
which provided for the transfer of the ownership of Scherk's enterprises to Alberto-Culver,
along with all rights held by these enterprises to trademarks in cosmetic goods.... In addition,
the contract contained an arbitration clause providing that “any controversy or claim [that]
shall arise out of this agreement or the breach thereof” would be referred to arbitration before
the International Chamber of Commerce in Paris, France, and that “[t]he laws of the State of
Illinois, USA shall apply to and govern this agreement, its interpretation and performance.” ...
Nearly one year [after execution of the contract] Alberto-Culver allegedly discovered that the
trademark rights purchased under the contract were subject to substantial encumbrances....
[Thereafter] Alberto-Culver commenced this action for damages and other relief in a Federal
District Court in Illinois, contending that Scherk's fraudulent representations concerning the
status of the trademark rights constituted violations of §10(b) of the Securities Exchange Act of
1934, and Rule 10b-5 promulgated thereunder. In response, Scherk filed a motion to ... to stay
the action pending arbitration in Paris pursuant to the agreement of the parties. Alberto-
Culver, in turn, opposed this motion.... [T]he District Court denied Scherk's motion to dismiss,
and ... granted a preliminary order enjoining Scherk from proceeding with arbitration, [citing]
Wilko v. Swan, 346 U.S. 427....
In Wilko v. Swan, this Court ... found that “[t]wo policies, not easily reconcilable, are involved in
this case.” On the one hand, the [FAA] stressed “the need for avoiding the delay and expense of
litigation,” and directed that [arbitration] agreements be “valid, irrevocable, and enforceable”
in federal courts. On the other hand, the Securities Act of 1933 was “[d]esigned to protect
investors” ... by creating “a special right to recover for misrepresentation....” In particular, ...
[the] Court ruled that an agreement to arbitrate “is a ‘stipulation,’ and [that] the right to select
the judicial forum is the kind of ‘provision’ that cannot be waived under §14 of the Securities
Act.” ...
Alberto-Culver, relying on this precedent, contends that ... its agreement to arbitrate disputes
arising under the contract with Scherk is similarly unenforceable in view of its contentions that
Scherk's conduct constituted violations of the Securities Exchange Act of 1934.... [T]he
respondent's reliance on Wilko in this case ignores the significant and, we find, crucial
differences between the agreement involved in Wilko and the one signed by the parties here.
Alberto-Culver's contract ... was a truly international agreement. Alberto-Culver is an American
corporation with its principal place of business and the vast bulk of its activity in this country,
while Scherk is a citizen of Germany whose companies were organized under the laws of
Germany and Liechtenstein. The negotiations leading to the signing of the contract in Austria
and to the closing in Switzerland took place in the United States, England and Germany, and
involved consultations with legal and trademark experts from each of those countries and from
P "259" Liechtenstein. Finally, and most significantly, the subject matter of the contract concerned the
P "260" sale of business enterprises organized under the laws of and primarily situated in European
countries, whose activities were largely, if not entirely, directed to European markets.
Such a contract involves considerations and policies significantly different from those found
controlling in Wilko. In Wilko, quite apart from the arbitration provision, there was no question
but that the laws of the United States generally, and the federal securities laws in particular,
would govern disputes arising out of the stock-purchase agreement. The parties, the
negotiations, and the subject matter of the contract were all situated in this country, and no
credible claim could have been entertained that any international conflict-of-laws problems
would arise. In this case, by contrast, in the absence of the arbitration provision considerable
uncertainty existed at the time of the agreement, and still exists, concerning the law
applicable to the resolution of disputes arising out of the contract. (154)
Such uncertainty will almost inevitably exist with respect to any contract touching two or more
 countries, each with its own substantive laws and conflict-of-laws rules. A contractual provision
specifying in advance the forum in which disputes shall be litigated and the law to be applied
is, therefore, an almost indispensable precondition to achievement of the orderliness and
predictability essential to any international business transaction. Furthermore, such a
provision obviates the danger that a dispute under the agreement might be submitted to a
forum hostile to the interests of one of the parties or unfamiliar with the problem area
involved. (155)
A parochial refusal by the courts of one country to enforce an international arbitration
agreement would not only frustrate these purposes, but would invite unseemly and mutually
destructive jockeying by the parties to secure tactical litigation advantages. In the present
case, for example, it is not inconceivable that if Scherk had anticipated that Alberto-Culver
would be able in this country to enjoin resort to arbitration he might have sought an order in
France or some other country enjoining Alberto-Culver from proceeding with its litigation in the
United States. Whatever recognition the courts of this country might ultimately have granted to
the order of the foreign court, the dicey atmosphere of such a legal no-man's-land would surely
damage the fabric of international commerce and trade, and imperil the willingness and
ability of businessmen to enter into international commercial agreements....
P "260" In Wilko the Court reasoned that “[w]hen the security buyer, prior to any violation of the
P "261" Securities Act waives his right to sue in courts, he gives up more than would a participant in
other business transactions. The security buyer has a wider choice of courts and venue. He thus
surrenders one of the advantages the Act gives him....” In the context of an international
contract, however, these advantages become chimerical since, as indicated above, an
opposing party may by speedy resort to a foreign court block or hinder access to the American
court of the purchaser's choice.
[Recalling its decision in Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), upholding a
contractual forum selection clause, the Court reasoned that an] agreement to arbitrate before
a specified tribunal is, in effect, a specialized kind of forum-selection clause that posits not
only the situs of suit but also the procedure to be used in resolving the dispute. (156) The
invalidation of such an agreement in the case before us would not only allow the respondent to
repudiate its solemn promise but would, as well, reflect a “parochial concept that all disputes
must be resolved under our laws and in our courts.... We cannot have trade and commerce in
world markets and international waters exclusively on our terms governed by our laws, and
resolved in our courts.” (157) For all these reasons we hold that the agreement of the parties in
this case to arbitrate any dispute arising out of their international commercial transaction is to
be respected and enforced by the federal courts in accord with the explicit provisions of the
Arbitration Act. (158)
P "261"
P "262"
JUSTICE DOUGLAS, DISSENTING.... There has been much support for arbitration of disputes; and
it may be the superior way of settling some disagreements. If A and B were quarrelling over a
trademark and there was an arbitration clause in the contract, the policy of Congress in
implementing the [New York] Convention would prevail. But the Act does not substitute an
arbiter for the settlement of disputes under the 1933 and 1934 Acts. Article II(3) of the
Convention [permits U.S. courts to decline to enforce agreements that are “null and void,
inoperative or incapable of being performed.] (159) But §29(a) of the 1934 Act makes
agreements to arbitrate liabilities under §10 of the Act “void” and “inoperative.” Congress has
specified a precise way whereby big and small investors will be protected and the rules under
which the Alberto-Culvers of this Nation shall operate. They or their lawyers cannot waive those
statutory conditions, for our corporate giants are not principalities of power but guardians of a
host of wards unable to care for themselves. It is these wards that the 1934 Act tries to
protect.... It is important that American standards of fairness in security dealings govern the
destinies of American investors until Congress changes these standards....
It has been recognized that the 1934 Act, including the protections of Rule 10b-5, applies when
foreign defendants have defrauded American investors, particularly when, as alleged here,
they have profited by virtue of proscribed conduct within our boundaries. This is true even
when the defendant is organized under the laws of a foreign country, is conducting much of its
activity outside the United States, and is therefore governed largely by foreign law. (160) The
language of §29 of the 1934 Act does not immunize such international transactions, and the
[New York] Convention provides that a forum court in which a suit is brought need not enforce
P "262" an agreement to arbitrate which is “void” and “inoperative” as contrary to its public policy.
P "263" (161) When a foreign corporation undertakes fraudulent action which subjects it to the
jurisdiction of our federal securities laws, nothing justifies the conclusion that only a diluted
version of those laws protects American investors....
An arbitral award can be made without explication of reasons and without development of a
record, so that the arbitrator's conception of our statutory requirement may be absolutely
incorrect yet functionally unreviewable, even when the arbitrator seeks to apply our law. We
recognized in Wilko that there is no judicial review corresponding to review of court decisions.
The extensive pretrial discovery provided by the Federal Rules of Civil Procedure for actions in
district court would not be available. And the wide choice of venue provided by the 1934 Act, 15
U.S.C. §78aa, would be forfeited. The loss of the proper judicial forum carries with it the loss of
substantial rights. (162)
When a defendant, as alleged here, has, through proscribed acts within our territory, brought
itself within the ken of federal securities regulation, a fact not disputed here, those laws –
P "263" including the controlling principles of Wilko – apply whether the defendant is foreign or
P "264" American, and whether or not there are transnational elements in the dealings. Those laws
P "264"
are rendered a chimera when foreign corporations or funds – unlike domestic defendants – can
nullify them by virtue of arbitration clauses which send defrauded American investors to the
uncertainty of arbitration on foreign soil, or, if those investors cannot afford to arbitrate their
claims in a far-off forum, to no remedy at all....
MITSUBISHI MOTORS CORP. v. SOLER CHRYSLER-PLYMOUTH, INC.
473 U.S. 614 (U.S. Supreme Court 1985)
JUSTICE BLACKMUN. The principal question presented by these cases is the arbitrability,
pursuant to the [FAA] and the [New York] Convention of claims arising under the Sherman Act,
15 U.S.C. §1 et seq., and encompassed within a valid arbitration clause in an agreement
embodying an international commercial transaction.
[Mitsubishi Motors Corporation (“Mitsubishi”) is a Japanese corporation that manufactures
automobiles in Tokyo, Japan. Mitsubishi is a joint venture between Chrysler International
(“CISA”), a Swiss corporation owned by Chrysler Corporation, and Mitsubishi Heavy Industries, a
Japanese corporation. Soler Chrysler-Plymouth, Inc. (“Soler”), is a Puerto Rico corporation.
Soler entered into a distributor agreement with CISA that provided for the sale by Soler of
Mitsubishi-manufactured vehicles within a designated area. At the same time, CISA, Soler, and
Mitsubishi entered into a sales procedure agreement (“sales agreement”) that provided for the
direct sale of Mitsubishi products to Soler and governed the terms and conditions of such
sales. Paragraph VI of the Sales Agreement, labeled Arbitration of Certain Matters, provides:
All disputes, controversies or differences which may arise between [Mitsubishi] and [Soler] out
of or in relation to Articles I-B through V of this Agreement or for the breach thereof, shall be
finally settled by arbitration in Japan in accordance with the rules and regulations of the Japan
Commercial Arbitration Association.
Soler failed to maintain the sales volume specified in its agreements and requested that
Mitsubishi delay or cancel shipment of several orders. Mitsubishi and CISA refused, and
Mitsubishi later brought an action against Soler in the District of Puerto Rico under the Federal
Arbitration Act and the Convention. Mitsubishi sought an order, pursuant to 9 U.S.C. §4 and 201,
to compel arbitration. Shortly after filing the complaint, Mitsubishi filed a request for
arbitration before the Japan Commercial Arbitration Association seeking damages from Soler
for breach of the parties' sales agreement. Soler denied the allegations and counterclaimed
P "264" against both Mitsubishi and CISA under the Sherman Act; the Puerto Rico competition statute;
P "265" and the Puerto Rico Dealers' Contract Act. In the counterclaim premised on the Sherman Act,
Soler alleged that Mitsubishi and CISA had conspired to divide markets in restraint of trade.
The Court of Appeals held that antitrust claims were “non-arbitrable” and permitted Soler's
suit to proceed. The Supreme Court initially concluded that the parties' arbitration agreement
was broadly enough drafted to encompass Soler's antitrust claims. See infra pp. 303-07.
We now turn to consider whether Soler's antitrust claims are non arbitrable even though it has
agreed to arbitrate them. In holding that they are not, the Court of Appeals followed the
decision of the Second Circuit in American Safety Equipment Corp. v. J.P. Maguire & Co., 391 F.2d
821 (1968). Notwithstanding the absence of any explicit support for such an exception in either
the Sherman Act or the [FAA], the Second Circuit there reasoned that “the pervasive public
interest in enforcement of the antitrust laws, and the nature of the claims that arise in such
cases, combine to make ... antitrust claims ... inappropriate for arbitration.” We find it
unnecessary to assess the legitimacy of the American Safety doctrine as applied to agreements
to arbitrate arising from domestic transactions. As in Scherk v. Alberto-Culver Co., 417 U.S. 506
(1974), we conclude that concerns of international comity, respect for the capacities of foreign
and transnational tribunals, and sensitivity to the need of the international commercial system
for predictability in the resolution of disputes require that we enforce the parties' agreement,
even assuming that a contrary result would be forthcoming in a domestic context.
Even before Scherk, this Court had recognized the utility of forum selection clauses in
international transactions. [One example is the Court's decision in The Bremen v. Zapata Off-
Shore Co., 407 U.S. 1 (1972), which] clearly eschewed a provincial solicitude for the jurisdiction
of domestic forums.... The Bremen and Scherk establish a strong presumption in favor of
enforcement of freely negotiated contractual choice-of-forum provisions. Here, as in Scherk,
that presumption is reinforced by the emphatic federal policy in favor of arbitral dispute
resolution. And at least since this Nation's accession in 1970 to the Convention ... that federal
policy applies with special force in the field of international commerce. Thus, we must weigh
the concerns of American Safety against a strong belief in the efficacy of arbitral procedures for
the resolution of international commercial disputes and an equal commitment to the
enforcement of freely negotiated choice-of-forum clauses.
At the outset, we confess to some skepticism of certain aspects of the American Safety doctrine.
As distilled by the First Circuit, the doctrine comprises four ingredients [, all of which we find
insufficient.].... [First, the] mere appearance of an antitrust dispute does not alone warrant
invalidation of the selected forum on the undemonstrated assumption that the arbitration
clause is tainted. A party resisting arbitration of course may attack directly the validity of the
agreement to arbitrate. Moreover, the party may attempt to make a showing that would
warrant setting aside the forum-selection clause – that the agreement was “[a]ffected by fraud,
P "265" undue influence, or overweening bargaining power”; that “enforcement would be unreasonable
P "266" and unjust”; or that proceedings “in the contractual forum will be so gravely difficult and
inconvenient that [the resisting party] will for all practical purposes be deprived of his day in
court.”The Bremen, 407 U.S. at 12, 15, 18. But absent such a showing – and none was attempted
here – there is no basis for assuming the forum inadequate or its selection unfair.
[Second,] potential complexity should not suffice to ward off arbitration. We might well have
 some doubt that even the courts following American Safety subscribe fully to the view that
antitrust matters are inherently insusceptible to resolution by arbitration, as these same
courts have agreed that an undertaking to arbitrate antitrust claims entered into after the
dispute arises is acceptable.... [A]daptability and access to expertise are hallmarks of
arbitration. The anticipated subject matter of the dispute may be taken into account when the
arbitrators are appointed, and arbitral rules typically provide for the participation of experts
either employed by the parties or appointed by the tribunal....
[Third,] for similar reasons, we also reject the proposition that an arbitration panel will pose
too great a danger of innate hostility to the constraints on business conduct that antitrust law
imposes. International arbitrators frequently are drawn from the legal as well as the business
community; where the dispute has an important legal component, the parties and the arbitral
body with whose assistance they have agreed to settle their dispute can be expected to select
arbitrators accordingly.
We are left, then, with the core of the American Safety doctrine – the fundamental importance
to American democratic capitalism of the regime of the antitrust laws. Without doubt, the
private cause of action plays a central role in enforcing this regime.... The treble-damages
provision wielded by the private litigant is a chief tool in the antitrust enforcement scheme,
posing a crucial deterrent to potential violators. The importance of the private damages
remedy, however, does not compel the conclusion that it may not be sought outside an
American court. Notwithstanding its important incidental policing function, the treble-
damages cause of action conferred on private parties by §4 of the Clayton Act, and pursued by
Soler here by way of its third counterclaim, seeks primarily to enable an injured competitor to
gain compensation for that injury. “§4 ... is in essence a remedial provision.” ...
There is no reason to assume at the outset of the dispute that international arbitration will not
provide an adequate mechanism. To be sure, the international arbitral tribunal owes no prior
allegiance to the legal norms of particular states; hence, it has no direct obligation to
vindicate their statutory dictates. The tribunal, however, is bound to effectuate the intentions
of the parties. Where the parties have agreed that the arbitral body is to decide a defined set
of claims which includes, as in these cases, those arising from the application of American
antitrust law, the tribunal therefore should be bound to decide that dispute in accord with the
P "266" national law giving rise to the claim. (163) And so long as the prospective litigant effectively
P "267" may vindicate its statutory cause of action in the arbitral forum, the statute will continue to
serve both its remedial and deterrent function.
Having permitted the arbitration to go forward, the national courts of the United States will
have the opportunity at the award enforcement stage to ensure that the legitimate interest in
the enforcement of the antitrust laws has been addressed. The Convention reserves to each
signatory country the right to refuse enforcement of an award where the “recognition or
enforcement of the award would be contrary to the public policy of that country.” Article V(2)
(b). While the efficacy of the arbitral process requires that substantive review at the award-
enforcement stage remain minimal, it would not require intrusive inquiry to ascertain that the
tribunal took cognizance of the antitrust claims and actually decided them. (164)
As international trade has expanded in recent decades, so too has the use of international
arbitration to resolve disputes arising in the course of that trade.... If [international arbitral
institutions] are to take a central place in the international legal order, national courts will
need to “shake off the old judicial hostility to arbitration,” and also their customary and
understandable unwillingness to cede jurisdiction of a claim arising under domestic law to a
foreign or transnational tribunal. To this extent, at least, it will be necessary for national courts
P "267" to subordinate domestic notions of arbitrability to the international policy favoring
P "268" commercial arbitration. (165) Accordingly, we “require this representative of the American
business community to honor its bargain,” by holding this agreement to arbitrate
“enforce[able] ... in accord with the explicit provisions of the Arbitration Act.”
JUSTICE STEVENS, DISSENTING. This Court's holding rests almost exclusively on the federal
policy favoring arbitration of commercial disputes and vague notions of international comity
arising from the fact that the automobiles involved here were manufactured in Japan. I
respectfully dissent.... [First, the parties' arbitration agreement does not encompass Soler's
antitrust claims, see infra pp. 305-07, especially in light of this Court's past decisions holding
various statutory claims non-arbitrable.] ...
[The] Court has repeatedly held that a decision by Congress to create a special statutory
remedy renders a private agreement to arbitrate a federal statutory claim unenforceable.
Thus, ... the express statutory remedy provided in the Ku Klux Act of 1871, (166) the express
statutory remedy in the Securities Act of 1933, (167) the express statutory remedy in the Fair
Labor Standards Act, (168) and the express statutory remedy in Title VII of the Civil Rights Act of
1964, (169) each provided the Court with convincing evidence that Congress did not intend the
protections afforded by the statute to be administered by a private arbitrator. The reasons
that motivated those decisions apply with special force to the federal policy that is protected
by the antitrust laws.... It was Chief Justice Hughes who characterized the Sherman Antitrust Act
as “a charter of freedom” that may fairly be compared to a constitutional provision. See
Appalachian Coals, Inc. v. United States, 228 U.S. 344, 359-360 (1933). In United States v.
Philadelphia National Bank, 374 U.S. 321, 371 (1963), the Court referred to the extraordinary
“magnitude” of the value choices made by Congress in enacting the Sherman Act....
In view of the history of antitrust enforcement in the United States, it is not surprising that all
of the federal courts that have considered the question have uniformly and unhesitatingly
concluded that agreements to arbitrate federal antitrust issues are not enforceable. In a
landmark opinion for the Court of Appeals for the Second Circuit, Judge Feinberg wrote:
P "268" “A claim under the antitrust laws is not merely a private matter. The Sherman Act is designed
P "269" to promote the national interest in a competitive economy; thus, the plaintiff asserting his
rights under the Act has been likened to a private attorney-general who protects the public's
interest.... Antitrust violations can affect hundreds of thousands – perhaps millions – of people
and inflict staggering economic damage.... We do not believe that Congress intended such
claims to be resolved elsewhere than in the courts.... [I]t is also proper to ask whether contracts
of adhesion between alleged monopolists and their customers should determine the forum for
trying antitrust violations. American Safety Equipment Corp. v. J. P. Maguire & Co., 391 F.2d 821,
826 827 (1968) (footnote omitted).”
This Court would be well advised to endorse the collective wisdom of the distinguished judges
of the Courts of Appeals who have unanimously concluded that the statutory remedies
fashioned by Congress for the enforcement of the antitrust laws render an agreement to
arbitrate antitrust disputes unenforceable. Arbitration awards are only reviewable for manifest
disregard of the law, 9 U.S.C. §§10, 207, and the rudimentary procedures which make
arbitration so desirable in the context of a private dispute often mean that the record is so
inadequate that the arbitrator's decision is virtually unreviewable. (170) Despotic decision-
making of this kind is fine for parties who are willing to agree in advance to settle for a best
approximation of the correct result in order to resolve quickly and inexpensively any
contractual dispute that may arise in an ongoing commercial relationship. Such informality,
however, is simply unacceptable when every error may have devastating consequences for
important businesses in our national economy and may undermine their ability to compete in
world markets. (171) Instead of “muffling a grievance in the cloakroom of arbitration,” the
public interest in free competitive markets would be better served by having the issues
resolved “in the light of impartial public court adjudication.” (172)
The Court assumes for the purposes of its decision that the antitrust issues would not be
arbitrable if this were a purely domestic dispute, but holds that the international character of
P "269" the controversy makes it arbitrable. The holding rests on vague concerns for the international
P "270" implications of its decision and a misguided application of Scherk v. Alberto-Culver Co., 417
U.S. 506 (1974). Before relying on its own notions of what international comity requires, it is
surprising that the Court does not determine the specific commitments that the United States
has made to enforce private agreements to arbitrate disputes arising under public law. As the
Court acknowledges, the only treaty relevant here is the [New York Convention].... However, the
United States, as amicus curiae, advises the Court that the Convention “clearly contemplates”
that signatory nations will enforce domestic laws prohibiting the arbitration of certain subject
matters. This interpretation is ... beyond doubt.
Article II(3) of the Convention ... [does not apply] (I) if the agreement “is null and void,
inoperative or incapable of being performed,” Article II(3), or (ii) if the dispute does not
concern “a subject matter capable of settlement by arbitration,” Article II(1).... The latter clause
plainly suggests the possibility that some subject matters are not capable of arbitration under
the domestic laws of the signatory nations, and that agreements to arbitrate such disputes
need not be enforced.... [Moreover, if] an arbitration award is “contrary to the public policy of
[a] country” called upon to enforce it, or if it concerns a subject matter which is “not capable of
settlement by arbitration under the law of that country,” the Convention does not require that
it be enforced. Articles V(2)(a) and (b). Thus, reading Articles II and V together, the Convention
provides that agreements to arbitrate disputes which are non-arbitrable under domestic law
need not be honored, nor awards rendered under them enforced. (173)
It is clear then that the international obligations of the United States permit us to honor
Congress' commitment to the exclusive resolution of antitrust disputes in the federal courts.
The Court today refuses to do so, offering only vague concerns for comity among nations. The
courts of other nations, on the other hand, have applied the exception provided in the
Convention, and refused to enforce agreements to arbitrate specific subject matters of concern
to them. (174) It may be that the subject-matter exception to the Convention ought to be
reserved – as a matter of domestic law – for matters of the greatest public interest which
involve concerns that are shared by other nations. The Sherman Act's commitment to free
competitive markets is among our most important civil policies. This commitment, shared by
other nations which are signatory to the Convention, is hardly the sort of parochial concern that
we should decline to enforce in the interest of international comity.... [Scherk v. Alberto Culver
P "270" Co. is not relevant. In Scherk, the Court] based its decision on the [fact] that the outcome in
P "271" Wilko was governed entirely by American law whereas in Scherk foreign rules of law would
control and, if the arbitration clause were not enforced, a host of international conflict-of laws
problems would arise.... That distinction fits this case precisely, since I consider it perfectly
clear that the rules of American antitrust law must govern the claim of an American automobile
dealer that he has been injured by an international conspiracy to restrain trade in the
American automobile market.... The merits of those claims are controlled entirely by American
law.... When Mitsubishi enters the American market and plans to engage in business in that
market over a period of years, it must recognize its obligation to comply with American law and
to be subject to the remedial provisions of American statutes....
LEDEE v. CERAMICHE RAGNO
684 F.2d 184 (1st Cir. 1982) [excerpted above at pp. 98-100]
ECO SWISS CHINA TIME LTD v. BENETTON INT'L NV
9 Mealey's Int'l Arb. Rep. B-1 (1999) (European Court of Justice 1999)
[The ECJ first considered] whether a national court to which application is made for annulment
of an arbitration award must grant such an application where, in its view, that award is in fact
 contrary to Article 85 of the Treaty although, under domestic procedural rules, it may grant
such an application only on a limited number of grounds, one of them being inconsistency with
public policy, which, according to the applicable nationallaw, is not generally to be invoked on
the sole ground that, because of the terms or the enforcement of an arbitration award, effect
will not be given to a prohibition laid down by domestic competition law.
It is to be noted, first of all, that, where questions of Community law are raised in an arbitration
resorted to by agreement, the ordinary courts may have to examine those questions, in
particular during review of the arbitration award, which may be more or less extensive
depending on the circumstances and which they are obliged to carry out in the event of an
appeal, for setting aside, for leave to enforce an award or upon any other form of action or
review available under the relevant national legislation....
[I]t is for those national courts and tribunals to ascertain whether it is necessary for them to
make a reference to the Court under Article 177 of the Treaty in order to obtain an
interpretation or assessment of the validity of provisions of Community law which they may
need to apply when reviewing an arbitration award....
Next, it is in the interest of efficient arbitration proceedings that review of arbitration awards
should be limited in scope and that annulment of or refusal to recognise an award should be
possible only in exceptional circumstances.
P "271" However, according to Article 3(g) of the EC Treaty (now, after amendment, Article 3(1)(g) EC),
P "272" Article 85 of the Treaty constitutes a fundamental provision which is essential for the
accomplishment of the tasks entrusted to the Community and, in particular, for the functioning
of the internal market. The importance of such a provision led the framers of the Treaty to
provide expressly, in Article 85(2) of the Treaty, that any agreements or decisions prohibited
pursuant to that article are to be automatically void.
It follows that where its domestic rules of procedure require a national court to grant an
application for annulment of an arbitration award where such an application is founded on
failure to observe national rules of public policy, it must also grant such an application where
it is founded on failure to comply with the prohibition laid down in Article 85(1) of the Treaty.
That conclusion is not affected by the fact that the New York Convention ... which has been
ratified by all the Member States, provides that recognition and enforcement of an arbitration
award may be refused only on certain specific grounds, namely where the award does not fall
within the terms of the submission to arbitration or goes beyond its scope, where the award is
not binding on the parties or where recognition or enforcement of the award would be contrary
to the public policy of the country where such recognition and enforcement are sought (Article
V(1)(c) and (e) and II(b) of the New York Convention).
For the reasons stated in paragraph 36 above, the provisions of Article 85 of the Treaty may be
regarded as a matter of public policy within the meaning of the New York Convention.
Lastly, it should be recalled that ... arbitrators, unlike national courts and tribunals, are not in
a position to request this Court to give a preliminary ruling on questions of interpretation of
Community law. However, it is manifestly in the interest of the Community legal order that, in
order to forestall differences of interpretation, every Community provision should be given a
uniform interpretation, irrespective of the circumstances in which it is to be applied. It follows
that, in the circumstances of the present case ... Community law requires that questions
concerning the interpretation of the prohibition laid down in Article 85(1) of the Treaty should
be open to examination by national courts when asked to determine the validity of an
arbitration award and that it should be possible for those questions to be referred, if
necessary, to the Court of Justice for a preliminary ruling.
The answer ... must therefore be that a national court to which application is made for
annulment of an arbitration award must grant that application if it considers that the award in
question is in fact contrary to Article 85 of the Treaty, where its domestic rules of procedure
require it to grant an application for annulment founded on failure to observe national rules of
public policy ...
[Next, the ECJ considered] whether Community law requires a national court to refrain from
applying domestic rules of procedure according to which an interim arbitration award which is
in the nature of a final award and in respect of which no application for annulment has been
P "272" made within the prescribed time-limit acquires the force of res judica and may no longer be
P "273" called in question by a subsequent arbitration award, even if this is necessary in order to
examine, in proceedings for annulment of the subsequent award, whether an agreement which
the interim award held to be valid in law is nevertheless void under Article 85 of the Treaty.
According to the relevant domestic rules of procedure, application for annulment of an interim
arbitration award which is in the nature of a final award may be made within a period of three
months following the lodging of that award at the registry of the court having jurisdiction in the
matter.
Such a period, which does not seem excessively short compared with those prescribed in the
legal systems of the other Member States, does not render excessively difficult or virtually
impossible the exercise of rights conferred by Community law.
Moreover, domestic procedural rules which, upon the expiry of that period, restrict the
possibility of applying for annulment of a subsequent arbitration award proceeding upon an
interim arbitration award which is in the nature of a final award, because it has become res
judicata, are justified by the basic principles of the national system, such as the principle of
legal certainty and acceptance of res indicata, which is an expression of that principle.
 In those circumstances, Community law does not require a national court to refrain from
applying such rules, even if this is necessary in order to examine, in proceedings for annulment
of a subsequent arbitration award, whether an agreement which the interim award held to be
valid in law is nevertheless void under Article 85 of the Treaty.
The answer ... must therefore be that Community law does not require a national court to
refrain from applying domestic rules of procedure according to which an interim arbitration
award which is in the nature of a final award and in respect of which no application for
annulment has been made within the prescribed time-limit acquires the force of res judicata
and may no longer be called in question by a subsequent arbitration award, even if this is
necessary in order to examine, in proceedings for annulment of a subsequent arbitration
award, whether an agreement which the interim award held to be valid in law is nevertheless
void under Article 85 of the Treaty....
Notes on Evolution of the Non-Arbitrability Doctrine
1. New York Convention's exception for matters “not capable of settlement by arbitration.”
Could the Supreme Court, consistently with the New York Convention, have held that U.S.
federal securities and antitrust claims are not arbitrable? In footnotes, the Court in Scherk and
Mitsubishi concluded that the Convention does not require enforcement of agreements to
arbitrate a “subject matter [not] capable of settlement by arbitration.” Moreover, the Court in
both cases was of the view that the Convention would not have prohibited a holding that
securities and antitrust claims were non-arbitrable. Is that assumption correct?
Does the Convention impose any limits to the types of “subject matter” that a nation
categorizes as non-arbitrable? Suppose that a nation forbids arbitration of any issue involving
natural resources, or any dispute with a state entity. Suppose that a nation permits arbitration
of certain disputes in domestic cases, but not in international ones. Consider again the court's
opinion in Ledee. What is its view of the Convention's limits on national “non-arbitrability”
defenses?
P "273"
P "274"
Note also that in President Nixon's statement accompanying U.S. ratification of the New York
Convention, he observed that
the requirement that the agreement apply to a matter capable of settlement by arbitration is
necessary in order to take proper account of laws in force in many countries which prohibit
submission of certain questions to arbitration. In some of the United States, for example,
disputes affecting the title to real property are not arbitrable.
Senate Executive Document E, 90th Cong., 2d Sess. 19 (1968).
As described above, many authorities have concluded that Contracting States are free under
the Convention to define categories of disputes and claims that they regard as not capable of
settlement by arbitration under the Convention. See supra pp. 160, 243-45. Note that Ledee and
some other authorities are inconsistent with this view, instead suggesting international limits
on nations' ability to define claims or issues as non-arbitrable. See supra pp. 113-15, 243-45.
2. Availability of non-arbitrability exception to enforcement of arbitration agreements under the
Convention. Article II of the New York Convention is not particularly well-drafted. Article II(1)
provides that an arbitration agreement need not be enforced if it concerns a “subject matter
[not] capable of settlement by arbitration,” and Article V(2) repeats that exception in the
context of enforcing arbitral awards. Article II(3), however, requires courts to refer parties to
arbitration agreements without mentioning any “non-arbitrability” exception. Some authorities
have concluded that this permits an argument that arbitration agreements must be enforced
under Article II(3), notwithstanding Article II(1), even if they concern non-arbitrable claims.
(a) Suggestions that Article II(3) does not permit non-arbitrability exception. There have been
suggestions that the omission of any non-arbitrability exception in Article II(3) requires
national courts to compel arbitration of non-arbitrable claims. Haight, Convention on the
Recognition and Enforcement of Foreign Arbitral Awards: Summary Analysis of Record of
United Nations Conference 27-28 (1958). These suggestions rest on the drafting history of
the Convention, where it was specifically observed that Article II(1)'s non-arbitrability
exception was not linked to Article II(3).
(b) Authorities recognizing non-arbitrability exception under Article II(3). Notwithstanding the
Convention's legislative history, both the Court and the dissents in Scherk and Mitsubishi
concluded that Article II(3) permits national courts to refuse to refer parties to arbitration
on “non-arbitrability” grounds, even though Article II(3) does not itself contain such an
exception. Is that a fair reading of Article II – including Article II(1)? What would be the
logic of a different reading? Would it make sense to require courts to refer parties to
arbitation on a claim that appeared likely to produce an award on a non-arbitrable
subject? Why might this be sensible?
3. Decisions by national courts on non-arbitrability. For a different approach than that of
Mitsubishi to issues of non-arbitrability under Article II(1) of the Convention, consider the
Decision of the Bologna Tribunale of July 18, 1987, excerpted above. See supra pp. 252-53.
Compare the results and reasoning in the Bologna decision and the Scherk/Mitsubishi cases.
Which is more persuasive?
For other decisions by national courts considering whether particular claims are or are not
arbitrable, see Compagnie Francaise Techinique d'Etancheite v. Dechavanne, XX Y.B. Comm. Arb.
656 (Grenoble Ct. App. 1993) (labor dispute arising from international labor agreement
 arbitrable); Judgment of 28 April 1992, XVIII Y.B. Comm. Arb. 143 (Swiss Federal Tribunal) (1993)
(European Community competition law claims arbitrable); Judgment of May 19, 1983 [1993] Rev.
Arb. 478 (Paris Court of Appeal) (European Community competition law claims arbitrable);
Judgment of 29 March 1991 [1991] Rev. Arb. 478 (Paris Court of Appeal) (public policy issues
arbitrable); Judgment of 21 December 1991, XVIII Y.B. Comm. Arb. 422 (Court of Appeal of
Bologna) (1993) (European Community competition law claims arbitrable); Judgment of 6
December 1963. 1964 Nederlandse Jurisprudentie No. 43 (Hoge Raad) (Dutch competition law
claims arbitrable); Hi-Fert Pty Limited v. Kinkiang Maritime Carriers, 7 Mealey's Int'l Arb. Rep. C-1
(N.S.W. Australia 1997) (rejecting argument that claims under Australian Trade Practices Act are
non-arbitrable); Attorney General of New Zealand v. Mobil Oil New Zealand Ltd [1989] 2 N.Z.L.R.
629 (New Zealand competition law claims arbitrable). See also ICC, Competition and Arbitration
Law (1993).
4. Arbitrability of EC competition law claims and defenses. The European Union has adopted
competition laws that are broadly similar to the antitrust laws of the United States. During the
past two decades, the European Court of Justice (“ECJ”) has made clear that EC competition
P "274" claims and defenses may be arbitrated (subject to subsequent judicial review). In a 1982
P "275" decision, the ECJ held:
“... if questions of Community law are raised in an arbitration resorted to by agreement the
ordinary courts may be called upon to examine them either in the context of their
collaboration with arbitration tribunals, in particular in order to assist them in certain
procedural matters or to interpret the law applicable, or in the course of a review of an
arbitration award – which may be more or less extensive depending on the circumstances –
and which they may be required to effect in case of an appeal for objection, in proceedings for
leave to issue the execution or by any other method of recourse available under the relevant
national legislation.” Nordsee Deutsche Hochseefischereei GmbH v. Reederei Mond
Hochseefischerei AG& Co. KG, [1982] ECR 1095, at para. 14.
Similarly, in the Eco Swiss decision, excerpted above, the ECJ again declared that an
arbitration agreement could validly encompass EC competition claims (subject again to
judicial review of any resulting award). Consider the ECJ's analysis in Eco Swiss. Why are EC
competition law claims arbitrable? Compare the ECJ's analysis to that of the U.S. Supreme
Court.
5. Law governing non-arbitrability defense to enforcement of arbitration agreement under
Article II(1) of the New York Convention. Article II(1) of the New York Convention requires courts
of Contracting States to “recognize” arbitration agreements which are subject to the
Convention, provided that they concern “a subject matter capable of settlement by
arbitration.” What law governs the question of non-arbitrability when a court considers a claim
that an international arbitration agreement, subject to the New York Convention, should not be
enforced on non-arbitrability grounds?
(a) “Not capable of settlement by arbitration.” What does it mean for a subject matter to be
“not capable of settlement by arbitration”? Wouldn't it be possible as a practical matter,
to settle almost any dispute by arbitration? There might be situations where evidence
was physically unavailable or parties could not participate in arbitral proceedings. Even
these unusual circumstances would not fall comfortably within Article II(1)'s exception for
issues “not capable of settlement by arbitration” (and would instead more readily be
covered by Article II(3)'s exception for arbitration agreements that are “incapable of
being performed,” see supra pp. 159-61).
Article II(1)'s exception for issues that are “not capable of settlement by arbitration” is
generally applied where national law forbids or restricts the arbitrability of particular
claims or disputes. The Jordanian statute at issue in ICC Case No. 6149 is an example of
this sort of national legislation. Other examples can include employer-employee
relations, tort claims, certain types of public law claims, and the like. See supra pp. 243-
47 & infra pp. 280-82.

(b) Possible application of forum's law to determine non-arbitrability. In Mitsubishi and Scherk,
the Court apparently looked exclusively to U.S. law to determine whether antitrust and
securities claims were capable of settlement by arbitration in international disputes.
Commentators have also generally concluded that the enforcing forum's law should
govern issues of non-arbitrability (rather than the law of the arbitral situs, the law
governing the arbitration agreement, the substantive law of the claims in question, or the
law of the place the award will be enforced). A. van den Berg, The New York Convention of
1958 153 (1981) (“all courts [have] decided the question of arbitrability exclusively under
their own law and [have] not take[n] account of the law of the country where the
arbitration was to take place or was taking place”); Haight, Convention on the Recognition
and Enforcement of Foreign Arbitral Awards: Summary Analysis of Record of United Nations
Conference, May/June 1958 at 28 (1958). Is the application of the forum's laws sensible?
Both Scherk and Mitsubishi involved the arbitrability of U.S. statutory claims. What
nation's standard would the Mitsubishi and Scherk Courts have looked to if foreign
statutory claims were at issue? Suppose, for example, that a U.S. court was asked to
compel arbitration of competition law claims under European Union and German law.
Would U.S. law apply? Or would EU and German rules of non-arbitrability apply?
 (c) Possible application of uniform international standard to determine non-arbitrability. The
Mitsubishi Court could have concluded that Article II itself contained or referred to some
international standard of arbitrability. That is, Article II(1) might be interpreted as
establishing a uniform international definition of those disputes whose subject matter is
“capable of settlement by arbitration.” Under this view, Contracting States would be
obliged to enforce arbitration agreements except where they concerned a subject matter
falling within Article II(1)'s international definition of non-arbitrability. Even if national
law provided that a dispute was non-arbitrable, the arbitration agreement would be
enforceable (under Article II) if Article II(1)'s international definition of non-arbitrability
was not satisfied.
P "275" This possibility, which is outlined above (supra p. 274), was arguably the approach of the
P "276" Ledee and Rhone Mediterranee courts, excerpted and discussed above. See also Riley v.
Kingsley Underwriting Agencies, Ltd, 969 F.2d 953 (10th Cir. 1992); Meadows Indemnity Co.
Ltd v. Baccala & Shoop Ins. Serv., Inc., 1991 U.S. Dist. Lexis 4144 (E.D.N.Y. 1991) (“The
determination of whether a type of claim is ‘not capable of settlement by arbitration’
under Article II(1) must be made on an international scale, with reference to the laws of
the countries party to the Convention.”). Reconsider the hypothetical above concerning
European Union and German competition law. What result would be reached under the
Ledee analysis?
What textual basis exists for interpreting Article II as establishing a uniform international
standard of non-arbitrability? Consider the phrase in Article II(1) “not capable of
settlement by arbitration.” What does it suggest. Consider Article V(2)(a).
Consider the award in ICC Case No. 6194. How does it suggest that Article II(1) should be
interpreted? Isn't the Jordanian law a non-arbitrability rule?
Consider the Ledee court's analysis of Article II(3). Ledee concludes that Article II of the
Convention imposes an international standard of neutrality that “preempts” national laws
that single out arbitration agreements for special disfavor. How would that analysis take
account of Article II(1)? How might it influence the interpretation of Article II(1)?
Does the Convention, as interpreted by Ledee, forbid Congress from enacting a statute
prohibiting arbitration of, for example, race discrimination or antitrust claims? In
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., the Supreme Court indicated that
the Convention permits signatory states to define particular types of disputes as “non-
arbitrable.” Other authorities have generally agreed. Ledee's suggestion that the
Convention only permits “internationally neutral” defenses is, therefore, not easy to
square with Mitsubishi's reading of the Convention. Is it consistent with the Convention's
broader purposes of encouraging international arbitration?

(d) Possible interpretation of Article II(1) as overriding discriminatory national laws. As

discussed above, Article II(1) of the New York Convention could be interpreted as
overriding material law non-arbitrability rules that discriminate against international or
foreign arbitration agreements. Article II(1) might also be interpreted as overriding non-
arbitrability provisions of national law that discriminate against international or foreign
arbitration agreements. See supra pp. 113-14. For example, under this approach,
provisions invalidating agreements to arbitrate in a foreign arbitral situs or under foreign
law would be overridden. Alternatively, provisions of national law subjecting
international arbitration agreements to more rigorous requirements than applicable to
domestic arbitration agreements would be overridden. Consider whether the Ledee
opinion or the award in ICC Case No. 6194 adopt either such an interpretation.
(e) Possible application of non-arbitrability rules of substantive law creating claim or defense.
Alternatively, it is at least conceivable that a U.S. court should also (or exclusively) look
to the law of the state whose substantive law governs the parties' relations.
For example, suppose that the parties' agreement and substantive claims are governed
by the laws of State A, but that State A's law renders the parties' dispute non-arbitrable.
U.S. courts have applied U.S. rules of non-arbitrability. See Meadows Indemnity Co. v.
Baccala & Shoop Ins. Services, Inc., 1991 U.S. Dist. Lexis 4144 (E.D.N.Y. 1991); Marchetto v.
DeKalb Genetics Corp., 711 F.Supp. 936, 939 (N.D. Ill. 1989) (refusing to consider claim that
Italian fraud claims were non-arbitrable under Italian law); Judgment of 24 November
1994, XXI Y.B. Comm. Arb. 635 (Rotterdam Rechtbank) (1996) (refusing to consider possible
non-arbitrability of dispute under law of third state (other than arbitral situs or
enforcement forum), when that law was not relied on in arbitral proceedings).
On the other hand, it is frequently argued, therefore, that non-arbitrability is governed by
the law creating the substantive right. Goldman, La situation en France, in ICC, Competition
and Arbitration Law at 113-114 (1993) (“it is for the nation that has promulgated the
[purportedly non-arbitral] law to decide if its application, which is part of its economic
public policy, can be referred to private arbitrators”) (translation); Idot, Introductory
Report in ICC, Competition and Arbitration Law, at 53 (1993).
 (f) Possible application of non-arbitrability rules of arbitral situs. Article II(3)'s reference to
agreements that are “incapable of being performed” could incorporate the law of the
arbitral situs. But again, U.S. courts have rejected this. Rhone Mediterranee etc. v. Achille
Lauro, 712 F.2d 50, 53-54 (3rd Cir. 1983) (refusing to apply Italian law, allegedly
invalidating arbitration agreement, where Italy was arbitral forum); Meadows Indemnity
Co. v. Baccala & Shoop Ins. Serv., Inc., 1991 U.S. Dist. Lexis 4144 (E.D.N.Y. 1991) (same, with
Guernsey law); Marchetto v. DeKalb Genetics Corp., 711 F.Supp. 936 (N.D. Ill. 1989) (same,
with Italian law).
P "276" Reconsider the hypothetical set forth above and assume that EU and German
P "277" competition law claims are asserted, arising out of an agreement governed by German
law, in an arbitration to be conducted in Germany. What nation's non-arbitrability rules
should a U.S. court apply?
In ICC Case No. 5946, the arbitral tribunal assumed that the public policy of the arbitral
situs was binding on an international arbitration conducted within the situs. That is, of
course, a matter of forum law. In Switzerland, the weight of opinion is that issues of non-
arbitrability are governed solely by Swiss law (and in particular Article 177 of the Swiss
Law on Private International Law). Lalive, Pouderet & Reymond, Le Droit de l'Abritrage
Interne et International en Suisse 308 (1989).
Why in ICC Case No. 5946 should Swiss public policy be implicated by an award of
punitive damages available under the parties' chosen law, where neither party is Swiss
and the conduct occurred outside Switzerland?

(g) Possible application of non-arbitrability rules of the substantive law agreed upon by the
parties. In ICC Case No. 6379, excerpted above, the arbitral tribunal refused to apply
Belgian law, which granted certain non-waivable statutory protections. The tribunal
based its refusal in substantial part on the conclusion that Italian law, selected by the
parties to govern their relations, would not recognize the mandatory character of Belgian
law. Note that, if Italian law would have permitted application of Belgian law, then the
tribunal apparently would have applied the Belgian statute.
Is the approach taken in ICC Case No. 6379 sensible? Some commentators have taken the
position that private choice-of-law clauses cannot dictate the law applicable to non-
arbitrability. Mayer, Mandatory Rules of Law in International Arbitration, 2 Arb. Int'l 274,
290 (1986) (“Non-arbitrability is ... so mandatory that not only are the parties legally
incapable of avoiding it by stipulating their contract to be subject to another governing
law, but the parties may not waive the right to invoke it before a national judge of the
State in question”); Idot, Introductory Report in ICC, Competition and Arbitration Law 52-53
(1993).

(h) Application of non-arbitrability rules of law governing the arbitration agreement. Some
commentators have suggested applying the law chosen by the parties to govern their
arbitration agreement to determine non-arbitrability. W. Craig, W. Park & J. Paulsson,
International Chamber of Commerce Arbitration 81 (2d ed. 1990). Note that the parties are
generally free to select this law. How does this accord with the notion of “mandatory”
national law?
(i) Article V(2)(a)'s choice of law rules. As we have seen, a number of authorities have
suggested that Article II(1) incorporates the choice of law rules of Article V(2)(a). See supra
pp. 244-45. As discussed below, Article V(2)(a) provides that enforcement may be denied
a Convention award if the “subject matter of the difference is not capable of settlement
by arbitration under the law of that country.” If Article V(2)(a) permits an award to be
denied enforcement based upon the law of the enforcement forum, should not Article II(1)
incorporate a similar reference to national law?
On the other hand, can one not read Article V(2)(a) as creating a narrow exception to
enforcement of awards in particular places, while Article II(1) conspicuously omits any
reference to national law and contains only an international standard? That is, Article V(2)
(a) merely allows a national court not to enforce an arbitral award in the narrow instance
where its own public policy forbids doing so, without implying any broader invalidity of
either the award or underlying agreement in other forums. And, under this view, would not
almost any dispute be “capable of settlement by arbitration” for purposes of Article II(1)?
Note that Article V(2)(a) refers to the non-arbitrability rules of the judicial enforcement
for an award. How would this apply in the context of arbitration agreements? Would it not
mean that every national court would apply a different (ie., its own) non-arbitrability law
to the enforcement of an arbitration agreement? Is that sensible?

6. The rationale of Scherk. What was the basis for the Court's opinion in Scherk? Consider its
reliance on possible conflicts between U.S. law and judicial orders, and those of foreign courts.
Is this a persuasive reason for requiring arbitration of a non-waivable federal claim? Consider
in particular the language of §§14 and 29 in the Securities Act and the Securities Exchange Act.
Does this not fairly clearly forbid agreements to waive access to federal courts? Should Scherk
have been decided differently?
7. Mitsubishi's rationale for non-arbitrability doctrine. If, as discussed above, supra pp. 274-75,
the Convention does not require arbitration of antitrust claims, why should the Supreme Court
have done so in Mitsubishi? Consider the following explanation from Mitsubishi:
 The utility of the Convention in promoting the process of international commercial arbitration
P "277" depends upon the willingness of national courts to let go of matters they normally would think
P "278" of as their own.... [W]e decline to subvert the spirit of the United States' accession to the
Convention by recognizing subject matter exceptions where Congress has not expressly
directed the courts to do so.
Is that persuasive?
8. Justice Stevens' Mitsubishi dissent. Consider Justice Stevens' positions on Scherk and
Mitsubishi: he agreed with the Court in Scherk, but he dissents in Mitsubishi. According to Justice
Stevens, the difference between the two cases lay in choice of law considerations – in Scherk,
there was “the critical importance of the foreign-law issues,” while in Mitsubishi“the merits of
[the antitrust] claims are controlled entirely by American law.” Is any of this correct, and if so,
does it matter?
It is true, of course, that much of the challenged conduct in Scherk occurred in Europe, while in
Mitsubishi the challenged activities took place primarily in the United States. Note, however,
that: (a) the parties' choice-of-law agreement in Scherk (but not in Mitsubishi) chose the law of
a U.S. jurisdiction to govern the underlying contract; (b) the federal securities laws would very
likely have applied extraterritorially to the disputed transactions in Scherk, because of their
significant U.S. contacts, see G. Born, International Civil Litigation in United States Courts 607-15
(3d ed. 1996); and (c) Swiss law would have had some relevance to the antitrust claims in
Mitsubishi, governing at a minimum the interpretation of the parties' obligations and
termination rights. Why, therefore, did Justice Stevens think foreign law was relevant in Scherk,
but not in Mitsubishi? Is it not, in fact, the other way around?
Even assuming Justice Stevens' choice-of-law analysis was correct, why is the existence of
“foreign-law issues” relevant to determining what Congress intended as to the arbitrability of
particular statutory claims? Consider the Court's suggestion in Scherk that foreign courts might
interfere with, or refuse to enforce the judgments of, U.S. courts in securities proceedings. Is
that a persuasive reason for permitting arbitration of an otherwise non-arbitrable claim?
Would not Japanese and Swiss courts have acted similarly in Mitsubishi if the U.S. litigation
proceeded?
9. International/domestic distinction. The Mitsubishi Court held that an arbitration clause
contained in an international contract was enforceable, even as to federal antitrust claims. The
Court expressly refused to decide whether the same result would apply in a purely domestic
context, rather than in “an international commercial transaction.” The Court based its decision
to treat international and domestic transactions in potentially different ways on the New York
Convention's spirit and on “concerns of international comity, respect for the capacities of
foreign and transnational tribunals, and sensitivity to the need of the international commercial
system for predictability in the resolution of disputes.” Similar reasoning underlay the Court's
decision in Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974). Exactly what are the special needs
for predictability in the “international commercial system”?
After Mitsubishi, the characterization of a contract as “international,” rather than domestic,
may be of importance in determining the arbitrability of at least some types of statutory
claims in the United States. However, recent Supreme Court decisions illustrate a readiness to
enforce most arbitration agreements, even in the purely domestic context. See Shearson
American Express v. McMahon, 482 U.S. 220 (1987) (Securities Exchange Act and RICO claims
arbitrable, even in purely domestic context); Rodriguez de Quijas v. Shearson/American Express,
Inc., 490 U.S. 477 (1989) (Securities Act claims arbitrable); Kowalski v. Chicago Tribune Co., 854
F.2d 168 (7th Cir. 1988) (antitrust claim arbitrable in domestic context); Bird v. Shearson
Lehman/American Express, Inc., 926 F.2d 116 (2d Cir. 1991) (ERISA claims are arbitrable).
Other nations also distinguish between domestic and international arbitration and the scope
of public policy defenses in each. See, e.g., Carbonneau, The Elaboration of a French Court
Doctrine on International Commercial Arbitration: A Study in Liberal Civilian Judicial Creativity, 55
Tulane L. Rev. 1 (1980).
10. Criticism of Mitsubishi. Although the Court's decision was widely applauded in much of the
arbitration community, Mitsubishi has also provoked sharp criticism. Consider the following
remarks about Mitsubish:
if such fundamental issues as antitrust matters (and RICO claims) can be submitted to
arbitration, what possible limits could there be to the reach of arbitrability in the
international ... context? The confusing and potentially dangerous shift of domestic public law
concerns to the enforcement stage is likely to be ineffectual, destined to act as the shadow of a
P "278" safeguard rather than a genuine means of protection.... The Court's rush to eradicate all
P "279" national legal constraints not only compromises legitimate national concerns, but also
threatens the integrity of international arbitral adjudication itself, frustrating its normal
tendency to seek guidance and appropriate limits from external factors.
Carbonneau, The Exuberant Pathway to Quixotic Internationalism: Assessing the Folly of
Mitsubishi, 19 Vand. J. Trans. L. 263, 297-98 (1986). See also Lipner, International Antitrust Law: To
Arbitrate or Not to Arbitrate, 19 Geo. Wash. J. Int'l & Econ. 395 (1985). Compare Park, Private
Adjudicators and the Public Interest: The Expanding Scope of International Arbitration, 12 Brook. J.
Int'l L. 629, (1986); Lowenfeld, The Mitsubishi Case: Another View, 2 Arb. Int'l 178 (1986).
11. Procedural efficacy of arbitration of “public law” claims. Does the arbitration process allow
for adequate presentation and consideration of federal securities, antitrust, and other public
law claims?
 (a) Importance of procedures. Note the various aspects of arbitration (much valued by its
proponents) which trouble the dissents in Scherk and Mitsubishi – lack of appeal,
confidentiality, lack of U.S.-style discovery, non-judicial decision maker, lack of formal
rules of evidence, and (frequently, in the United States) even the absence of a reasoned
award. Even if these features of arbitration do not amount to what Justice Stevens terms
“despotic decision-making” in his Mitsubishi dissent, do they render arbitration
inadequate for resolving “public” law claims? If so, is it because arbitrators are more
likely than judges to make mistakes in applying public law claims? Is this risk greater for
public law claims than private law claims? What are the broader economic and social
consequences of errors in each case? See Shearson/American Express, Inc. v. McMahon,
482 U.S. 220 (1987) (“the mistrust of arbitration that formed the basis for the Wilko opinion
in 1953 is difficult to square with the assessment of arbitration that has prevailed since
that time”).
(b) Historic concerns about arbitral procedures. Consider again the Court's comments in
Alexander v. Gardner-Denver Co., expressing concerns similar to those of Justice Stevens'
dissent in Mitsubishi. See supra p. 254. Are these concerns consistent with the Court's
opinion in Mitsubishi? Note that the Court recently observed in Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20 (1991), that the “mistrust of the arbitral process”
reflected in Alexander v. Gardner-Denver Co., “has been undermined by our recent
arbitration decisions.” Nevertheless, in holding that claims under the Age Discrimination
in Employment Act could be arbitrated, the Court relied in part on the fact that the
relevant institutions' arbitration rules called for written opinions. Id. Is the Court's greater
comfort with arbitration a function of arbitration's greater resemblance to the Court? Is
that appropriate?
(c) Arbitrators need not be lawyers qualified in affected jurisdiction (or lawyers at all).
International arbitrators are often lawyers (or retired judges), but they are not always U.S.
lawyers. Does that affect the arbitrability of U.S. statutory claims? Suppose that a panel
of French, English, and Egyptian arbitrators is required to decide issues under the
Sherman or Clayton Acts. Will they fairly and competently be able to decide such claims?
See Lowenfeld, The Mitsubishi Case: Another View, 2 Arb. Int'l 178, 181-82 (1986) (an
arbitrator can “learn enough U.S. antitrust law (or European competition law) in the
course of an arbitration to be able to resolve the questions put to him”); Mitsubishi
Motors, 473 U.S. at 633-34 n.18 (“The obstacles confronted by the arbitration panel in this
case, however, should be no greater than those confronted by any judicial or arbitral
tribunal required to determine foreign law.”). Is that enough?
(d) Minimal discovery in arbitration. We explore in detail below, infra pp. 469-95, the subject
of discovery in international arbitration. For present purposes, it is enough to observe
that although discovery is available in arbitration, it is very often significantly more
limited in scope than in U.S. litigation, typically does not permit pre-trial depositions,
hardly ever extends to third parties, and is often not enforced through compulsory
process. Are these differences enough to require reexamination of the Mitsubishi holding?
Recall the widely-held view that “the heart of any United States antitrust case is the
discovery of business documents. Without them there is virtually no case.”In re Uranium
Antitrust Litigation, 480 F.Supp. 1138, 1155 (N.D. Ill. 1979).
(e) Minimal substantive review. As discussed in detail below, there is no appeal from an
arbitral award and the standard of judicial review in enforcement actions is highly
deferential. See infra pp. 797-814. In general, only if the arbitrator seriously misapplies
the law will a national court in a developed jurisdiction disturb the award; in
international matters subject to the New York Convention even this defense may not be
available to him. See infra pp. 809-10. Does the almost unfettered, unreviewable
discretion of arbitrators on substantive issues argue against permitting them to hear
antitrust claims?
P "279" (f) Relevance of procedural issues to standard of judicial review. Even if the various
P "280" procedural features of arbitration noted above do not suffice to render antitrust (or
other public law) claims non-arbitrable, should these features have any consequences for
judicial review of any award? For example, should courts scrutinize the arbitrators'
conclusions more rigorously because of the procedural “shortcomings” of the arbitral
process in dealing with public law claims?
12. Viability of Mitsubishi's and Eco Swiss's “second look” theory. In requiring arbitration of
antitrust claims, Mitsubishi relies in significant part on the ability of U.S. courts to take a
“second look” at the award: “Having permitted the arbitration to go forward, the national
courts of the United States will have the opportunity at the award-enforcement stage to ensure
that the legitimate interest in the enforcement of the antitrust laws has been addressed.”Eco
Swiss also stresses the importance of national courts in reviewing arbitral awards dealing with
EC competition law issues.
From a procedural perspective, is it clear that particular courts will in fact have an opportunity
to take a “second look” at an arbitrator's antitrust decision? For example, awards made outside
the United States, but dealing with the U.S antitrust laws, ordinarily will be subject to review
only where they were made, and not in U.S. courts. See infra pp. 704-08, 792-93. The prevailing
party may seek enforcement of the award outside the United States, and not in U.S. courts.
Ultimately, the sole opportunity for a second look might well be in a renewed antitrust action
in U.S. courts, where the prevailing party in the arbitration would be obliged to raise the
arbitral award as preclusive.
Suppose that arbitrators do apply the U.S. (or EC) antitrust laws – notwithstanding a contrary
choice-of-law by the parties that was intended to be exclusive. If a party is either held liable
under U.S. (or EC) law, or denied the opportunity to recover for otherwise wrongful conduct, can
it then challenge the award in a non-U.S. (or non-EC) court for the tribunal's excess of authority
or disregard for contractual terms?
13. Future v. existing disputes. The majority in Mitsubishi reasons that, if arbitration can
satisfactorily resolve an existing dispute, then there is no reason that arbitral procedures
cannot suffice for future disputes. Isn't that a fairly compelling point? How does Justice Stevens
reply to this?
14. Showing required for statutory non-arbitrability under U.S. law after Mitsubishi. As noted
above, the Mitsubishi Court observed that Article II(1) of the New York Convention does not
require enforcement of arbitration agreements unless the agreements involve a “subject
matter capable of settlement by arbitration.” 473 U.S. at 639 n.21. The Court also acknowledged
that “[d]oubtless, Congress may specify categories of claims it wishes to reserve for decision by
our own Courts without contravening ... the Convention.” Nonetheless, the Mitsubishi Court held
that Congress had not in fact specified antitrust claims as non-arbitrable. The Court's analysis
in Scherk was the same.
The Mitsubishi Court formulated a high standard for holding a statutory claim non-arbitrable:
“We must assume that if Congress intended the substantive protection afforded by a given
statute to include protection against waiver of the right to a judicial forum, that intention will
be deducible from text or legislative history.”Id. at 628. The Court also said that claims will be
deemed arbitrable unless Congress “expressly directed” a contrary result. Id. at 639-40 n.21.
See also Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 226-27 (1987) (reversing
Wilko).
Is this standard appropriate? Is it likely that Congress considered issues of arbitrability when
enacting statutes like the antitrust laws?
15. Arbitrability of selected categories of disputes in the United States. U.S. courts have
considered the arbitrability of a variety of categories of disputes.
(a) Carriage of Goods by Sea Act. Before and after Mitsubishi was decided, some courts held
that COGSA claims were non-arbitrable. State Establishment for Agricultural Product
Trading v. M/V Wesermunde, 838 F.2d 1576, 1581 (11th Cir. 1988), cert. denied, 488 U.S. 916
(1988); Organes Enterprises, Inc. v. The M/V Khalij Frost, 1989 AMC 1460 (S.D.N.Y. 1989);
Siderius, Inc. v. M. V. Ida Prima, 513 F.Supp. 916, 921 (S.D.N.Y. 1985). Other courts have
rejected this result, concluding that nothing in COGSA sufficiently precludes arbitration.
Citrus Marketing Board of Israel v. M/V Ecuadorian Reefer, 1990 W.L. 252363 (D. Mass. Dec.
28, 1990).
In Vimar Seguros y Reaseguros, SA v. M/V Sky Reefer, 515 U.S. 528 (1995), the Supreme
Court resolved this division among lower U.S. courts. The Court held that “COGSA does not
forbid selection of [a] foreign [arbitral] forum.” It reasoned, much like the Mitsubishi
Court, that arbitration is merely a procedural mechanism which does not compromise
COGSA's substantive statutory protections.
 (b) Bankruptcy. Parties to international arbitration agreements sometimes end up in some
P "280" form of bankruptcy in their home jurisdiction. In the United States, that generally results
P "281" in filing for protection and other measures under the federal Bankruptcy Code. Is a
debtor who has sought protection under the Bankruptcy Code obliged to honor a
preexisting arbitration agreement or can it require disputes with third parties to be
resolved before the bankruptcy court? See generally Westbrook, The Coming Encounter:
International Arbitration and Bankruptcy, 67 Minn. L. Rev. 595 (1983). Lower U.S. courts are
divided as to whether debtors are obliged to perform arbitration agreements,
notwithstanding the automatic stay provision of 11 U.S.C. §362.
Many U.S. courts have required debtors to perform their arbitration agreements. In re
Beckemeyer, 206 B.R. 466 (Bankr. W.D. Tenn. 1997) (staying adversary proceeding before
Bankruptcy Court, based on parties' arbitration agreement, after concluding that debtor
would suffer little prejudice from being required to participate); Societe National
Algerienne v. Distigas Corp., 80 B.R. 606 (D. Mass. 1987) (ordering international arbitration);
In re R.M. Cordova Int'l, Inc., 77 B.R. 441 (Bankr. D.N.J. 1987) (same); In re Mor-Ben Ins. Trust
Corp., 73 B.R. 644 (9th Cir. B.A.P. 1987); In re Morgan, 28 B.R. 3 (9th Cir. 1983); Hart Ski Mfg.
Co. v. Maschinenfabrik Hennecke, 711 F.2d 845 (8th Cir. 1983); Fotochrome, Inc. v. Copal Co.,
Ltd, 517 F.2d 512 (2d Cir. 1975); In re Dollar Corp, No. 88 08473-5 (Bankr. E.D. Minn. Jan. 30,
1992); Quinn v. C.G.R., 48 B.R. 367 (D. Col. 1985); Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth, Inc., No. 85-538 (D.P.R. April 14, 1986). Contra Zimmerman v. Continental Airlines,
712 F.2d 55 (3d Cir. 1983), cert. denied, 464 U.S. 1038 (1984); Braniff Airways, Inc. v. United Air
Lines, Inc., 33 B.R. 33 (Bankr. N.D. Tex. 1983); Coar v. Brown, 29 B.R. 806 (Bankr. N.D. Ill.
1983).
A number of courts have held that the arbitrability of claims related to a U.S. bankruptcy
“largely depend[s] on whether [the bankruptcy court has] core jurisdiction to adjudicate
the claims that defendants seek to [arbitrate].”In re Barney's Inc., 206 B.R. 336 (S.D.N.Y.
1997); Hays & Co. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 885 F.2d 1149 (3d Cir. 1989);
In re United States Lines, Inc., 199 B.R. 465 (S.D.N.Y. 1996); In re Spectrum Information
Technologies, Inc., 183 B.R. 360 (Bankr. E.D.N.Y. 1995); In re Hupp Industries, Inc., 157 B.R.
360 (N.D. Ohio 1993) (“submission of ... noncore matters to arbitration presents no conflict
with the Bankruptcy Code”).

(c) Antitrust. U.S. courts have held antitrust claims arbitrable in both international and
domestic cases. George Fischer Foundry Systems, Inc. v. Adolph H. Hottinger Maschinenbau
GmbH, 1995-1 Trade Cases (CCH) ??70,019 (6th Cir. 1995); Acquaire v. Canada Dry Bottling,
906 F.Supp. 819, 837 (E.D.N.Y. 1995) (domestic antitrust claims held arbitrable); Syscomm
Int'l Corp. v. Synoptics Communications, 856 F.Supp. 135, 139 (E.D.N.Y. 1994) (same); Hough
v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 757 F.Supp. 283, 286 (S.D.N.Y.) Aff'd, 946 F. 2d
883 (2d Cir. 1991); In re Hops Antitrust Litigation, 1988-2 Trade Cases (CCH) 68,121 (E.D. Mo.
1987) (requiring arbitration under New York Convention of antitrust claims against German
defendants); Genna v. Lady Foot Int'l Inc., 1986-2 Trade Cases (CCH) 67,317 (E.D. Pa. 1986)
(domestic antitrust claim); Cindy's Candle Co. v. WNS Inc., 714 F.Supp. 973 (N.D. Ill. 1989);
Eagle-Picher Indus. v. Asbestos Claims Facility, Inc., No. C 1-88-196 (S.D.N.Y. June 23, 1988).
See also Dalhuisen, The Arbitrability of Competition Issues, 11 Arb. Int'l 151 (1995).
(d) Patent, copyright, and trademark claims. In the United States, patent disputes historically
were non-arbitrable. In 1983, Congress enacted legislation reversing this rule and
specifically providing that patent disputes were arbitrable. See supra p. 247; In re Medical
Engineering Corp., 1992 WL 217763 (Fed. Cir. 1992) (patent infringement dispute arbitrable);
Rhone-Poulenc Specialities Chiniques v. SCM Corp., 769 F.2d 1569 (Fed. Cir. 1985) (patent
infringement claim arbitrable); LBS Inc. v. Metro Canada Logistics Inc., 28 F.Supp.2d 1297
(copyright infringement claims arbitrable).
U.S. lower courts have also held that copyright disputes, includes issues of validity,
infringement, and ownership are arbitrable under U.S. law. McMahan Sec. Co. v. Forum
Capital Markets, 35 F.3d 82 (2d Cir. 1994) (complex copyright issues arbitrable); Folkways
Music Publishers, Inc. v. Weiss, 989 F.2d 108 (2d Cir. 1993) (copyright ownership arbitrable);
Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191 (7th Cir. 1987) (copyright
validity arbitrable); Kamakazi Music Corp. v. Robbins Music Corp., 684 F.2d 228 (2d Cir.
1982). See also Blessing, Arbitrability of Intellecttual Property Disputes, 12 Arb. Int'l 191
(1996).
Similarly, U.S. courts have held that trademark issues are arbitrable. Necchi Sewing
Machine Sales Corp. v. Necchi SpA, 369 F.2d 579 (2d Cir. 1966) (trademark dispute
arbitrable); Alexander Binzel Corp. v. Nu-Tecsys Corp., 1992 WL 26932 (N.D. Ill. 1992) (same);
Givenchy SA v. William Stuart Indus. (Far East) Ltd, 1986 WL 3358 (S.D.N.Y. 1986) (same). See
also Aerojet-General Corp. v. Machine Tool Works, 895 F.2d 736 (Fed. Cir. 1990) (trade
secrets dispute arbitrable).

P "281" (e) Section 1337. A striking example of the decline of the non-arbitrability doctrine involves
P "282" claims under 19 U.S.C. §1337, which authorizes the International Trade Commission to
investigate unfair trade practices. Although the Commission is responsible for conducting
the investigation, both the Federal Circuit and the Commission itself have held that an
international arbitration agreement renders a §1337 claim arbitrable. Farrel Corp. v.
United States International Trade Commission, 949 F.2d 1147 (Fed. Cir. 1991).
 (f) Employee Retirement Income Security Act. Lower courts have generally held that ERISA
claims are arbitrable. Kramer v. Smith Barney, 80 F.3d 1080 (5th Cir. 1996) (ERISA claims
arbitrable); Pritzker v. Merrill Lynch, Pierce, Fenner & Smith, 7 F.3d 1110, 1119 (3d Cir. 1993);
Bird v. Shearson Lehman/American Express, Inc., 926 F.2d 116 (2d Cir. 1991), cert. denied,
501 U.S. 1251 (1991); Arnulfo P. Sulit, Inc. v. Dean Witter Reynolds, 847 F.2d 475 (8th Cir. 1998);
Bevere v. Oppenheimer & Co., 862 F.Supp. 1243 (D.N.J. 1994); Fox v. Merrill Lynch & Co., 453
F.Supp. 561 (S.D.N.Y. 1978). Compare Lewis v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 431
F.Supp. 271 (E.D. Pa. 1977); Central States etc. v. Tank Transport, Inc., 779 F.Supp. 947 (N.D.
Ill. 1991).
(g) Age Discrimination in Employment Act. In Gilmer v. Interstate/Johnson Lane Corp., 500 U.S.
20 (1991), the Supreme Court held that claims under the ADEA are arbitrable.
(h) Employment discrimination claims under Title VII. In the wake of Mitsubishi, McMahon, and
Gilmer, lower courts have generally held that Title VII claims are arbitrable. Prudential
Ins. Co. v. Lai, 42 F.3d 1299 (9th Cir. 1994) (Title VII claims arbitrable where employee
“knowingly agreed” to relinquish judicial rights); Willis v. Dean Witter Reynolds, Inc., 948
F.2d 305 (6th Cir. 1991) (Title VII claims arbitrable); Alford v. Dean Witter Reynolds, Inc., 939
F.2d 229 (5th Cir. 1991); Johnson v. Hubbard Broadcasting, Inc., 940 F.Supp. 1447 (D. Minn.
1996); Cherry v. Wertheim Schroder and Co., 868 F.Supp. 830 (D.S.C. 1994) (same). See also
Fletcher v. Kidder, Peabody & Co., 601 N.Y.S.2d 686 (Ct. Apps. 1993) (state employment
discrimination claims held arbitrable).
Some U.S. courts have held that arbitration agreements which are required as a
mandatory condition of employment cannot be enforced with respect to Title VII claims.
Duffield v. Robertson Stephens Co., 144 F.3d 1182 (9th Cir. 1998). Other U.S. courts have
imposed significant procedural limits on arbitration agreements which are required as
part of an employment relationship. Hoffman v. Aaron Kamhi, Inc., 927 F.Supp. 640
(S.D.N.Y. 1996) (in deciding whether arbitration clause encompassed employee's statutory
claims, court required that clause put employee on notice of waiver of such claims); Cole
v. Burns Int'l Security Services, 105 F.3d 1465 (D.C. Cir. 1997) (arbitration agreement,
required as a condition of employment, cannot validly require former employee to pay
any portion of arbitrators' fees).

(i) Insurance regulators' claims. Lower court precedent dealing with claims by insurance
regulators is split. Compare Bennett v. Liberty Nat'l Fire Ins. Co., 968 F.2d 969 (9th Cir. 1992);
Life of America Ins. Co. v. Aetna Life Ins. Co., 744 F.2d 409 (5th Cir. 1984); Philipps v. Lincoln
Nat'l Health etc., 774 F.Supp. 1297 (D. Colo. 1991); Triton Lines, Inc. v. Steamship Mutual
Underwriting Ass'n, 707 F.Supp. 277 (S.D. Tex. 1989) (McCarran-Ferguson Act does not create
exception to FAA permitting state non-arbitrability statute to render agreement to
arbitrate unenforceable) with Washburn v. Corcoran, 643 F.Supp. 554 (S.D.N.Y. 1986)
(relying on McCarran-Ferguson Act and New York statute to hold claims by state insurance
liquidators non-arbitrable) and Corcoran v. Ardra Ins. Co., 566 N.Y.S.2d 575 (1990), cert.
denied, 111 S.Ct. 2260 (1991) (New York Convention and FAA do not require arbitration of
claims by state insurance liquidator).
(j) Miscellaneous other U.S. claims. In general, U.S. courts have held miscellaneous other
claims which have come before them arbitrable. Saari v. Smith Barney, Harris Upham &
Co., 968 F.2d 877 (9th Cir. 1992) (Employee Polygraph Protection Act claim is arbitrable);
Simula, Inc. v. Autoliv, Inc., 1999 U.S. App. Lexis 8273 (9th Cir. 1999) (Lanham Act); Doctor's
Associates, Inc. v. Distajo, 107 F.3d 126, 133 (2d Cir. 1997) (Lanham Act); Gingiss Int'l, Inc. v.
Bormet, 58 F.3d 328, 332 (7th Cir. 1995) (Lanham Act).
16. The FAA's preemption of U.S. state non-arbitrability rules. The U.S. Supreme Court's
decisions in Scherk, Mitsubishi, and the other cases cited above, all concerned arguments that
claims under particular federal statutes were non-arbitrable. As we have seen, U.S. state
statutes and judicial decisions also purport to render certain types of claims non-arbitrable.
That is true, for example, under various state laws with respect to tort claims. See Ark. Stat.
Ann. §34-511 (Supp. 1983); Iowa Code Ann. §679A.1(a) (West Supp. 1984-85); Kan. Stat. Ann. §5-401
(1982); S.C. Code Ann. §15-48-10(b)(4) (Supp. 1983); Tex. Rev. Civ. Stat. Ann. Article 224(c) (Supp.
1984).). It is also true in some states with respect to real estate claims. See Mich. Comp. Laws
Ann. §600-5005 (Supp. 1984-85) Mont. Code Ann. §27-5-101 (1983); N.D. Cent. Code §32-29-01
(Supp. 1983); Ohio Rev. Code Ann. §2711.01 (1981); Ore. Rev. Stat. §33.210 (1983).
The Supreme Court has summarily rejected arguments under both the domestic FAA and the
P "282" New York Convention that state law can preclude arbitration of particular categories of claims.
P "283" In Southland Corp. v. Keating, 465 U.S. 1 (1984), excerpted below, the Court considered what
effect to give a California state statute that invalidated certain arbitration agreements relating
to franchise investments. The California Supreme Court had held that, notwithstanding the
parties' agreement to arbitrate, the state statute rendered the agreement unenforceable. The
U.S. Supreme Court rejected that view, holding that “Congress intended to foreclose state
legislative attempts to undercut the enforceability of arbitration agreements.” 465 U.S. at 16.
The Court left open the possibility of asserting “general contract defenses such as fraud to
avoid enforcement of an arbitration agreement.”
Not long thereafter, in Perry v. Thomas, 482 U.S. 483 (1987), the Supreme Court agait rejected a
claim that state law rendered a claim non-arbitrable. The Court held that the FAA preempted a
California statute requiring judicial resolution of claims for “wages.” Emphasizing the
“unmistakable conflict” between the two legislative regimes, the Court concluded that “under
the Supremacy Clause, the state statute must give way.”Id. at 488.
 More recently, in Allied-Bruce Terminix Co. v. Dobson, the Supreme Court again held that the
FAA preempts state laws purporting to render particular claims or disputes non-arbitrable. 513
U.S. 265 (1995) (preempting Alabama statute invaliding agreements to arbitrate future
disputes). Lower U.S. court decisions have held that other state legislative efforts to foreclose
or limit arbitration of particular categories of claims are preempted by the FAA. See infra pp.
331-58; S+L+H SpA v. Miller-St. Nazianz Inc., 988 F.2d 1518 (7th Cir. 1993) (Wisconsin Fair
Dealership Law's prohibition on arbitration of certain disputes preempted); Saturn Distribution
Corp. v. Williams, 905 F.2d 719 (4th Cir. 1989); Securities Indus. Ass'n v. Connolly, 883 F.2d 1114 (1st
Cir. 1989), cert. denied, 110 S.Ct. 2559 (1990); In re Marcia L. Pate, 198 B.R. 871 (Bankr. S.D. Ga. 1996)
(FAA preempts Georgia state statutory bar against arbitration clauses in consumer
transactions).
During the early 1990s, some U.S. lower courts interpreted the Supreme Court's decision in Volt
as permitting application of state non-arbitrability rules where the parties had agreed to the
application of the state's law. Armco Steel Co. v. CSX Corp., 790 F.Supp. 311 (D.D.C. 1991). Other
lower courts rejected this conclusion. Saturn Distribution Corp. v. Williams, 905 F.2d 719 (4th Cir.
1989); Securities Ass'n v. Connolly, 883 F.2d 1114 (1st Cir. 1989), cert. denied, 110 S.Ct. 2559 (1990);
infra pp. 351-56. The latter view was clearly better attuned to the FAA's purposes and the
desires of the parties. Consistent with this, in Mastrobuono v. Shearson Lehman Hutton, Inc., 514
U.S. 52 (1995), the Supreme Court considered the effect of its decision in Volt in a case
presenting the question whether a choice-of-law clause incorporated a state law prohibition
against arbitrators awarding punitive damages. The Court interpreted Volt narrowly, holding
that a choice-of-law clause selecting state substantive law did not ordinarily make state non-
arbitrability doctrines applicable.
Similarly, in Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681 (1996), the Supreme Court held
that §2 of the FAA preempted a Montana state statute which required that arbitration
agreements appear in all capital letters, underlined, and on the first page of the contract. The
Court's analysis very likely limits Volt yet further, confining it to state law rules which are
clearly supportive of the arbitral process. See infra pp. 358-80.
5. Contemporary Non-Arbitrability, Choice of Law, and Enforcement Issues
As a consequence of legislative actions and judicial decisions in various developed
jurisdictions during the past two decades, most public law claims are capable of being
arbitrated. For example, after Mitsubishi, federal antitrust claims cannot be litigated in a U.S.
court when they are subject to a valid arbitration agreement, but instead must be arbitrated.
(175) The same conclusion applies to EC competition claims in the European Union, (176) and to
national competition law claims in most European and other developed jurisdictions. (177)
P "283"
P "284"
National court decisions expanding the arbitrability of public law claims leave open a cluster
of complex issues that are only now beginning to be addressed in international arbitration.
First, as we have seen, international commercial arbitration routinely raises difficult choice of
law questions, including questions relating to the law applicable to the substance of the
parties' dispute. (178) These choice of law questions must be resolved, among other things, to
select the applicable law for antitrust (or other public law) claims asserted by a party in
arbitration. They must also be resolved to determine what effect should be given, both in
terms of interpretation and enforceability, to choice-of-law agreements selecting particular
nations' laws in cases where public law claims are asserted.
Second, beyond choice of law questions, the role of national courts that are requested to
enforce or vacate arbitral awards where antitrust (or other public law) claims were raised
remains unsettled. Are traditional national law standards relating to the recognition and
enforcement of arbitral awards applicable? Or are these rules rendered inapplicable, or
modified, in the public law context?
The following appellate decision, in a recent U.S. securities law case, provides a provocative
starting point for examining these issues. In reading the case, keep in mind the then-somewhat
exaggerated warnings in Justice Douglas' dissenting opinion in Scherk, that the Court was
rendering the protections of the federal securities laws “a chimera” and was sending
“defrauded American investors to the uncertainty of arbitration on foreign soil ... [or] to no
remedy at all.” (179) Compare those warnings with the Mitsubishi Court's mixture of faith in the
arbitral process and insistence on some level of continuing judicial involvement in the parties'
dispute. Finally, consider the court's response in Roby to the needs of international businesses
for a sensible, unified dispute resolution process for transnational transactions.
ROBY v. CORPORATION OF LLOYD'S
996 F.2d 1353 (2d Cir. 1993)
MESKILL, CIRCUIT JUDGE. [This case arose from the financial misfortunes of Lloyds of London
(“Lloyd's”); Lloyd's is not a company, but an insurance market, located in London, that is similar
to the New York Stock Exchange. Lloyd's has various governing bodies that promulgate
regulations and enforce compliance therewith by “syndicates,” which seek to attract investors
and to use capital obtained from investors to finance various insurance underwriting activities.
In the late 1980s, many Lloyd's syndicates sustained very substantial losses, in part because of
the need to pay amounts owed to insureds.
P "284"
P "285"
The present case arose when a large number of American citizens and residents filed suit in the
United States against Lloyd's. The plaintiffs were all “Names” in Lloyd's – that is, investors in
 various Lloyd's syndicates which provided funds to underwrite insurance risk. The plaintiffs had
all been solicited, in the United States, by various Lloyd's entities and representatives, and
had agreed to invest in particular Lloyd's syndicates.
All Names, and all the plaintiffs, signed several agreements that contained broad choice of law
and choice of forum clauses. The “General Undertaking,” between each Name and the
governing bodies of Lloyd's, provided:
“Each party hereto irrevocably agrees that the courts of England shall have exclusive
jurisdiction to settle any dispute and/or controversy of whatsoever nature arising out of or
relating to the [Name's] membership of and/or underwriting of insurance business at, Lloyd's.”
Another section of the General Undertaking provided in equally broad terms that English law
governed disputes between the parties.
Another agreement, entitled the “Members' Agent's Agreement,” between the Names and
others, provided:
“Any dispute, difference, question or claim relating to this Agreement which may arise between
the Agent and the Name shall be referred at the request of either party to arbitration in
London ...”
Other agreements, between the names and various other Lloyd's-related entities, contained
substantially the same arbitration clause.
Notwithstanding these provisions, various disappointed U.S. Names filed suit against Lloyd's
and most entities connected to it in U.S. federal courts. They asserted claims under the U.S.
securities laws and RICO claims; they apparently did not assert common law fraud claims, or
claims under English law. On appeal from a district court decision holding that the plaintiffs'
claims had to be arbitrated or submitted to the English courts, the Second Circuit considered
the Names' argument that the arbitration clauses/choice of law clauses in their agreements
either did not reach their U.S. statutory claims, or, if they did, those clauses were
unenforceable. The Court of Appeals did not decide whether the plaintiffs had stated
cognizable claims under the U.S. securities laws, but assumed for purposes of its decision that
they had.]
The Roby Names first contended that, because the choice of law clauses require the
application of English law, the Roby Names' United States statutory claims cannot possibly be
covered under the agreements. It defies reason to suggest that a plaintiff may circumvent
forum selection and arbitration clauses merely by stating claims under laws not recognized by
P "285" the forum selected in the agreement. A plaintiff simply would have to allege violations of his
P "286" country's tort law or his country's statutory law or his country's property law in order to
render nugatory any forum selection clause that implicitly or explicitly required the
application of the law of another jurisdiction. We refuse to allow a party's solemn promise to
be defeated by artful pleading. In the absence of other considerations, the agreement to
submit to arbitration or the jurisdiction of the English courts must be enforced even if that
agreement tacitly includes the forfeiture of some claims that could have been brought in a
different forum....
The Roby Names argue that the public policy codified in the antiwaiver provisions of the
securities laws renders unenforceable any agreement that effectively eliminates compliance
with those laws. The Securities Act provides that “any ... stipulation ... binding any person
acquiring any security to waive compliance with any provision of this subchapter ... shall be
void.” 15 U.S.C. §77n. Similarly, the Securities Exchange Act states, “any ... stipulation ... binding
any person to waive compliance with any provision of this chapter or of any rule or regulation
thereunder ... shall be void.” 15 U.S.C. §78cc(a).
According to the undisputed testimony of a British [sic] attorney, neither an English court nor
an English arbitrator would apply the United States securities laws, because English conflict of
law rules do not permit recognition of foreign tort or statutory law. From this, the Roby Names
conclude that the contract clauses work to waive compliance with the securities laws and
therefore are void. We note at the outset that Wilko v. Swan, 346 U.S. 427 (1953), has been
squarely overruled. See Rodriguez de Quijas v. Shearson/American Express, 490 U.S. 477, 484
(1989). Wilko held that an agreement to arbitrate future controversies was void under the
antiwaiver provision of the Securities Act. We do not doubt that judicial hostility to arbitration
has receded dramatically since 1953 and that the arbitral forum is perfectly competent to
protect litigants' substantive rights. In the words of the Mitsubishi Court, quoted by both the
Rodriguez and McMahon Courts, “by agreeing to arbitrate a statutory claim, a party does not
forgo the substantive rights afforded by the statute; it only submits to their resolution in an
arbitral, rather than a judicial, forum.” 473 U.S. at 628. If the Roby Names objected merely to
the choice of an arbitral rather than a judicial forum, we would reject their claim immediately,
citing Rodriguez and McMahon. However, the Roby Names argue that they have been forced to
forgo the substantive protections afforded by the securities laws, not simply the judicial forum.
We therefore do not believe that Rodriguez and McMahon are controlling....
The Tenth Circuit recently addressed this exact issue in a similar context in Riley v. Kingsley
Underwriting Agencies, Ltd, 969 F.2d 953 (10th Cir.), cert. denied, 113 S.Ct. 658 (1992). Relying
primarily on four Supreme Court precedents, Carnival Cruise Lines v. Shute, 113 L.Ed.2d 622
(1991); Mitsubishi, 473 U.S. at 614; Scherk, 417 U.S. at 506; The Bremen, 407 U.S. at 1, the Riley
Court concluded that “when an agreement is truly international, as here, and reflects numerous
contacts with the foreign forum, the Supreme Court has quite clearly held that the parties'
choice of law and forum selection provisions will be given effect.” 969 F.2d at 957; Bonny v.
P "286" Society of Lloyd's, 784 F.Supp. 1350, 1353 (N.D. Ill. 1992) (drawing the same conclusion). While we
P "287"
P "287" agree with the ultimate result in Riley, we are reluctant to interpret the Supreme Court's
precedent quite so broadly.
The Supreme Court certainly has indicated that forum selection and choice of law clauses are
presumptively valid where the underlying transaction is fundamentally international in
character. See, e.g., The Bremen, 407 U.S. at 15. (180) ... This presumption of validity may be
overcome, however, by a clear showing that the clauses are “‘unreasonable’ under the
circumstances.” The Bremen, 407 U.S. at 10. The Supreme Court has construed this exception
narrowly: forum selection and choice of law clauses are “unreasonable” (1) if their
incorporation into the agreement was the result of fraud or overreaching, 407 U.S. at 12-13; (2) if
the complaining party “will for all practical purposes be deprived of his day in court,” due to
the grave inconvenience or unfairness of the selected forum, 407 U.S. at 18; (3) if the
fundamental unfairness of the chosen law may deprive the plaintiff of a remedy, 111 S. Ct. at
1528; or (4) if the clauses contravene a strong public policy of the forum state, 407 U.S. at 15.
In this case, we can easily dispose of the first two factors. The Roby Names do not contend that
they were fraudulently induced into agreeing to the forum selection, choice of law or
arbitration clauses. Nor do we believe it gravely inconvenient for the Roby Names to litigate in
London; they found it convenient enough to travel there for their mandatory interviews, and, in
any event, many of them presently are prosecuting actions there. Moreover, nothing in the
record suggests that the English courts would be biased or otherwise unfair, and United States
courts consistently have found them to be neutral and just forums. Finally, the Roby Names
have not presented any convincing evidence that the chosen arbitral forum would be biased in
any way.
As to the third factor, we note that it is not enough that the foreign law or procedure merely be
different or less favorable than that of the United States. See, e.g., Mitsubishi, 473 U.S. at 629;
Medoil v. Citicorp, 729 F.Supp. 1456, 1460 (S.D.N.Y. 1990). Instead, the question is whether the
application of the foreign law presents a danger that the Roby Names “will be deprived of any
remedy or treated unfairly.”Piper Aircraft Co. v. Reyno, 454 U.S. 235, 254-55 (1981) (emphasis
added) (in forum non conveniens context). As we explain below ..., we believe the Roby Names
have ample remedies under English law.
We depart somewhat from the Riley Court with respect to the fourth factor. We believe that
there is a serious question whether United States public policy has been subverted by the
P "287" Lloyd's clauses.... The Supreme Court in The Bremen wrote, “[a] contractual choice-of-forum
P "288" clause should be held unenforceable if enforcement would contravene a strong public policy
of the forum in which suit is brought.” 407 U.S. at 15. By including antiwaiver provisions in the
securities laws, Congress made clear its intention that the public policies incorporated into
those laws should not be thwarted.
The framers of the securities laws were concerned principally with reversing the common law
rule favoring “caveat emptor.” To this end, the securities laws are aimed at prospectively
protecting American investors from injury by demanding “full and fair disclosure” from issuers.
Private actions exist under the securities laws not because Congress had an overwhelming
desire to shift losses after the fact, but rather because private actions provide a potent means
of deterring the exploitation of American investors. We believe therefore that the public
policies of the securities laws would be contravened if the applicable foreign law failed
adequately to deter issuers from exploiting American investors.
In this sense, the securities laws somewhat resemble the antitrust laws at issue in Mitsubishi.
The Mitsubishi Court enforced a clause providing that all disputes arising under a contract
between a Puerto Rican corporation and a Japanese corporation be submitted for arbitration
by the Japan Commercial Arbitration Association. The Court recognized that private actions
under the Sherman Act, 15 U.S.C. §1 et seq., play a “central role” in promoting the national
interest in a competitive economy. Like private actions in the securities context, private
actions under the Sherman Act serve primarily a deterrent purpose. Nevertheless, the
Mitsubishi Court held that a Japanese arbitration panel, applying United States antitrust law,
adequately would further the deterrent purpose of the Sherman Act, despite the panel's lack of
allegiance to United States' interests. The Court indicated quite clearly in dicta, however, that
“in the event the choice-of-forum and choice-of-law clauses operated in tandem as a
prospective waiver of a party's right to pursue statutory remedies for antitrust violations, we
would have little hesitation in condemning the agreement as against public policy.” (181)
We are concerned in the present case that the Roby Names' contract clauses may operate “in
tandem” as a prospective waiver of the statutory remedies for securities violations, thereby
circumventing the strong and expansive public policy in deterring such violations. We are
cognizant of the important reasons for enforcing such clauses in Lloyd's' agreements. Lloyd's is
a British concern which raises capital in over 80 nations. Its operations are clearly
international in scope. There can be no doubt that the contract clauses mitigate the
uncertainty regarding choice of law and forum inherent in the multinational affairs of Lloyd's.
P "288" Comity also weighs in favor of enforcing the clauses. Yet we do not believe that a United States
P "289" court can in good conscience enforce clauses that subvert a strong national policy,
particularly one that for over fifty years has served as the foundation for the United States
financial markets and business community. In this case, the victims of Lloyd's' alleged
securities violations are hundreds of individual American investors, most of whom were
actively solicited in the United States by Lloyd's representatives. We believe that if the Roby
Names were able to show that available remedies in England are insufficient to deter British
issuers from exploiting American investors through fraud, misrepresentation or inadequate
disclosure, we would not hesitate to condemn the choice of law, forum selection and
arbitration clauses as against public policy. For the reasons set forth ... below, however, we
 conclude that the Roby Names have failed to make such a showing. We are satisfied not only
that the Roby Names have several adequate remedies in England to vindicate their
substantive rights, but also that in this case the policies of ensuring full and fair disclosure and
deterring the exploitation of United States investors have not been subverted....
English common law provides remedies for knowing or reckless deceit, negligent
misrepresentation, and even innocent misrepresentation.... While the Roby Names might have
been able to sue “controlling persons” under the United States securities laws and establish
liability without proving reliance, it certainly is not unfair for English law to require proof of
actual misconduct and reliance. Furthermore, we are skeptical that “controlling person”
liability could be established against many of the defendants here.... [We] believe that the
available remedies and potential damages recoveries suffice to deter deception of American
investors....
Finally, although, as the Roby Names observe, §14 of the Lloyd's Act of 1982 exempts the
Corporation of Lloyd's (and its officers and employees) from liability, no other entity within
Lloyd's is exempt. Moreover, even the Corporation of Lloyd's is not exempt for acts “done in
bad faith.” ... We conclude that the Roby Names have adequate remedies in England to
vindicate their statutory fraud and misrepresentation claims.... That RICO provides treble
damages and seeks to deter persistent misconduct does not dissuade us from our view that the
Roby Names' contract clauses must be enforced. As we have explained, the Roby Names have
adequate potential remedies in England and there are significant disincentives to deter
English issuers from unfairly exploiting American investors. Although the remedies and
disincentives might be magnified by the application of RICO, we cannot say that application of
English law would subvert the policies underlying that statute....
EUROPEAN CONVENTION ON THE LAW APPLICABLE TO CONTRACUAL OBLIGATIONS
Articles 3(3) and 7(1)
P "289" 3(3). The fact that the parties have chosen a foreign law, whether or not accompanied by the
P "290" choice of a foreign tribunal, shall not, where all the other elements connected with the
situation at the time of the choice are relevant to one country only, prejudice the application
of rules of the law of that country which cannot be derogated from by the contract, hereinafter
called “mandatory rules”.
7(1). When applying under this Convention the law of a country, effect may be given to the
mandatory rules of the law of another country with which the situation has a close connection
if, and in so far as, under the law of the latter country, those rules must be applied whatever
the law applicable to the contract. In considering whether to give effect to those mandatory
rules, regard shall be had to their nature and purpose and to the consequences of their
application or non-application.
RESTATEMENT (SECOND) CONFLICT OF LAWS (1971)
Section 187
(1) The law of the state chosen by the parties to govern their contractual rights and duties will
be applied if the particular issue is one which the parties could have resolved by an explicit
provision in their agreement directed to that issue.
(2) The law of the state chosen by the parties to govern their contractual rights and duties will
be applied, even if the particular issue is one which the parties could not have resolved by an
explicit provision in their agreement directed to that issue, unless either
(a) the chosen state has no substantial relationship to the parties or the transaction and
there is no other reasonable basis for the parties' choice, or
(b) the application of the law of the chosen state would be contrary to a fundamental policy
of a state which has a materially greater interest than the chosen state in the
determination of the particular issue and which under the rule of §188, would be the
state of the applicable law in the absence of an effective choice of law by the parties.
(3) In the absence of a contrary indication of intention, the reference is to the local law of the
state of the chosen law.
Notes on Choice of Law Issues Under Non-Arbitrability Doctrine
1. Power of arbitral tribunals to consider public policy and statutory claims. International
agreements often contain choice-of-law clauses, as well as arbitration provisions. That was true
in Scherk, Mitsubishi, and Roby. Suppose an agreement with an arbitration clause also contains
a choice-of-law clause that unambiguously excludes U.S. law (including the antitrust laws) as
the law applicable to disputes between the parties. How should an arbitral tribunal resolve
antitrust or other U.S. public law claims when such a choice of law clause exists?
For example, how should the arbitration tribunal in Mitsubishi handle the antitrust claims
asserted by Soler Chrysler-Plymouth? Given the parties' choice-of-law clause, could the
tribunal have applied U.S. antitrust laws if Mitsubishi objected? On what legal theory? Consider
Justice Blackmun's suggestion that:
[T]he international arbitral tribunal owes no prior allegiance to the legal norms of particular
P "290" states; hence, it has no direct obligation to vindicate their statutory dictates. The tribunal,
P "291" however, is bound to effectuate the intentions of the parties. Where the parties have agreed
that the arbitral body is to decide a defined set of claims which includes, as in these cases,
those arising from the application of American antitrust law, the tribunal therefore should be
 bound to decide that dispute in accord with the national law giving rise to the claim.
Is that persuasive? Isn't the Court ignoring a critical conflict of laws issue – namely, why it is
that U.S. antitrust laws should have been intended to apply to the parties' dispute (when the
parties agreed to a Swiss choice-of-law clause)? Why were they? What conflict of laws rules are
applicable to tell us this?
Consider Restatement (Second) Conflict of Laws §187 (1971), and Articles 3 and 7 of the Rome
Convention, excerpted above. Under the principles of private international law reflected in
these and other sources, and accepted generally in the United States, Europe, and elsewhere,
the parties' designation of a national law to exclusively govern their relations will not operate
to override mandatory national laws of other countries that have sufficiently close connections
to the parties' dispute. International arbitration tribunals face complex conflict of laws issues,
but this principle will no doubt be applicable under most systems of conflict of laws rules that
are selected.
2. Mitsubishi's treatment of choice-of-law clause excluding U.S. public policy or statutory
claims. Putting aside the arbitrator's conflict of laws decision, how will a U.S. court asked to
enforce an arbitral agreement or award dealing with U.S. antitrust claims react if the tribunal
clearly would (or has already) refused to apply U.S. law to these claims? In a footnote, the Court
in Mitsubishi strongly suggests that, where antitrust claims are concerned, such an arbitration
agreement or award would not be enforced by U.S. courts:
in the event the choice-of-forum and choice-of-law clauses operated in tandem as a
prospective waiver of a party's right to pursue statutory remedies for antitrust violations, we
would have little hesitation in condemning the agreement as against public policy. 473 U.S. at
637 n.21.
What authority supports the Mitsubishi Court's refusal to enforce a contractual waiver of
antitrust claims? Is it merely an interpretation of the antitrust laws? Do the antitrust laws
contain any provision authorizing courts to ignore the FAA's general rule that arbitral awards
are enforceable, 9 U.S.C. §§9, 207? Contrast the Mitsubishi Court's insistence on such a statutory
provision with respect to enforcement of the parties' arbitration agreement.
3. Treatment of public policy and statutory claims under Mitsubishi and Bremen – a
comparison.Mitsubishi's treatment of “prospective waivers” of statutory claims is difficult to
square with the result in Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). In Bremen, the Court
enforced a forum selection clause where it appeared clear that the foreign forum would not
apply U.S. law (which included important protections for the plaintiff that were imposed by
U.S. public policy). Note, however, that the Court in Bremen emphasized that the case involved
a dispute arising from activities conducted outside the United States. Note also that Bremen
suggested, and some lower courts have held, that, as to “essentially American” disputes, forum
selection clauses that result in a waiver of substantive statutory rights are not enforceable. See
G. Born, International Civil Litigation in United States Courts 410-14, 427-30 (3d ed. 1996).
Suppose Mitsubishi had involved conduct having little or no relation to the United States – a
distributorship termination in Peru or Russia, for example. Would the Court still forbid forum
selection/choice-of-law clauses that excluded the U.S. antitrust laws? Why should this
hypothetical be treated differently from the actual facts in Mitsubishi? Suppose Mitsubishi had
involved conduct with equally substantial connections to both the United States and Japan?
How would Bremen have treated activities with this sort of U.S. nexus? Why shouldn't
substantive statutory claims be “waivable” to the same extent in the context of arbitration as
in the context of judicial forum selection clauses?
4. Interpretation of choice-of-law clauses affecting public law claims. Is it clear that the Swiss
choice-of-law clause in Mitsubishi or the English choice-of-law clause in Roby was meant by the
parties to exclude U.S. antitrust or securities law claims? What else might the choice-of-law
clause mean? Could it have been intended to mean that English law would affirmatively apply,
including to interpreting the parties' contract, but without displacing or excluding foreign
statutory rights? Should a court ordinarily err on the side of extending ambiguous choice-of-
law clauses to exclude, or to leave standing, public law claims?
P "291" Note the Court's remark in Roby that there was uncontested evidence that English conflict of
P "292" laws rules would not permit the assertion of U.S. securities law claims in English courts or
arbitration. Why do you think that this evidence was not contested?
5. The Roby decision. Is the Second Circuit's decision in Roby consistent with Mitsubishi?
(a) Prospective waivers of federal statutory rights. How does the Roby decision comport with
the Court's comment in Mitsubishi about “prospective waivers” of antitrust rights? Is it
possible that securities law claims are simply entitled to less protection under U.S. law
than antitrust claims? Note that although the securities laws contain provisions
specifically forbidding waivers of their protections, see Wilko v. Swan, supra, no analogous
provision exists under the antitrust laws. Compare First Commercial Financial Group, Inc. v.
Baghdoian, 812 F.Supp. 837 (W.D. Ill. 1993) (holding that tribunal's refusal to give effect to
contractual indemnification provision was required by Commodity Exchange Act: if the
tribunal had “disregard[ed] §4 of the CEA” this “would have afforded statutory grounds to
vacate whatever decision it would have reached” as an improper “prospective waiver of
the CEA”).
 (b) Importance of comparable foreign remedies. Under the Roby analysis, how is a U.S. court
to conclude that foreign law and remedies are comparable to U.S. ones? Is it remotely
conceivable that Congress intended such a test for arbitrability? Reread Justice Douglas'
dissent in Scherk, where he wrote: “When a foreign corporation undertakes fraudulent
action which subjects it to the jurisdiction of our federal securities laws, nothing justifies
the conclusion that only a diluted version of those laws protects American investors.”
Does Roby permit such dilution?
(c) Defects in Roby's analysis. Note the Roby court's reliance on Piper Aircraft, a forum non
conveniens decision involving state law claims. Is it persuasive to cite the “adequate
alternative forum” requirement for state law claims in diversity actions as authority in
cases involving federal law claims with specific antiwaiver provisions? See Hall, No Way
Out: An Argument Against Permitting Parties To Opt Out of U.S. Securities Laws in
International Transactions, 97 Colum. L. Rev. 57 (1997) (criticizing Roby); Richards v. Lloyd's
of London, 107 F.3d 1422, 1429-30 (9th Cir. 1997) (criticizing and rejecting Roby, overruled,
135 F.3d 1289 (9th Cir. 1998) (en banc)); Gavett American Endeavor Fund Ltd v. Trueger, 112
F.3d 1017, 1022 (9th Cir. 1997) (same); Leshe v. Lloyds of London, 1995 WL 661090, *22 (S.D.
Tex. 1995), overruled, 121 F.3d 956 (5th Cir. 1997).
The Roby court also relies heavily on Bremen; it is true, of course, that in Bremen the Court
rejected an argument that enforcing a forum selection clause would result in the
application of English law, which would enforce an exculpatory clause that was not
enforceable, on public policy grounds, in the United States. As discussed above, however,
the Court in Bremen emphasized that the case involved conduct occurring outside the
United States and a public policy applicable only within the United States. In contrast, in
Roby, the defendants' allegedly unlawful conduct occurred within the United States and
was, by hypothesis, plainly subject to the U.S. securities laws.

6. The progeny of Roby – U.S. statutory claims may be excluded through combination of choice-
of-law and choice-of-forum clauses. The decision in Roby has been followed, almost uniformly,
in a series of U.S. appellate decisions involving federal securities, antitrust, and other statutory
claims. See Richards v. Lloyd's of London, 135 F.3d 1289, 1295 (9th Cir.) (en banc), cert. denied, 119
S.Ct. 365 (1998); Haynsworth v. The Corporation, 121 F.3d 956, 969 (5th Cir. 1997); Allen v. Lloyd's of
London, 94 F.3d 923, 929 (4th Cir. 1996); Simula, Inc. v. Autoliv, Inc., 1999 U.S. App. LEXIS 8273 (9th
Cir. 1999); Bonny v. Society of Lloyd's, 3 F.3d 156, 162 (7th Cir. 1993). See also Allen v. Lloyd's of
London, 94 F.3d 923, 929 (4th Cir. 1996) (choice of forum clause enforced per Roby); Haynsworth
v. Lloyd's of London, 121 F.3d 956, 967 (5th Cir. 1997) (same); Lipcon v. Underwriters at Lloyd's, 148
F.3d 1285, 1298 (11th Cir. 1998) (same); Shell v. R.W. Sturge, Ltd, 55 F.3d 1227, 1229 n.1 (6th Cir.
1995) (same); Ashenden v. Lloyd's of London, 1996 WL 717464, *4 (N.D. Ill. 1996) (same).
7. Mitsubishi revisited in the light of Roby and its progeny. Assume that Roby and its progeny
are good law; what do they imply about the treatment of antitrust claims in international
arbitration? Suppose, for example, that two sophisticated international companies agree
expressly to the application of Japanese (or European Union) competition laws to a course of
conduct that takes place in, and affects, both the United States and either Japan or Europe?
Would it matter what the content of those laws was, and how they compared with U.S. antitrust
laws? What does Roby suggest about the enforceability of such clauses? Does Roby's holding
extend to antitrust claims and other U.S. public law claims? Given the “anti-waiver” provisions
of §29 of the 1934 Act, can any less stringent standard apply to the securities laws than to the
P "292" antitrust laws? See Simula, Inc. v. Autoliv, Inc., 1999 U.S. App. LEXIS 8273 (9th Cir. 1999) (“it is
P "293" possible that the Swiss Tribunal might apply U.S. antitrust law to the dispute.... Moreover,
even if Swiss law is applied to the dispute, there has been no showing that it will not provide
Simula with sufficient protection”).
8. Litigation realities and the non-arbitrability doctine. If you were counsel for Mitsubishi, what
position would you take in the Swiss arbitration concerning the applicability of the U.S.
antitrust laws and concerning their arbitrability? What would happen if you argued – and
prevailed – that the Swiss choice-of-law provision excluded the antitrust laws? Could you
enforce your award in the United States? How important is that? Why?
9. “Second look” doctrine – judicial review of arbitral panel's application of U.S. antitrust law.
The Court in Mitsubishi clearly expected that the arbitral panel would apply U.S. antitrust laws.
Moreover, the Court contemplated a “second look” by U.S. courts at the dispute, and indicated
that non-recognition of an award would be appropriate if the tribunal did not take “cognizance
of the antitrust claims and actually decide[] them.”Mitsubishi also held, however, that a U.S.
court reviewing the arbitral panel's decision could engage in only “minimal” “substantive
review.” 473 U.S. at 638. This is consistent with U.S. law regarding the enforcement of domestic
arbitral awards, which only permits non-enforcement for a panel's “manifest disregard of law”
(and perhaps not even that). See infra pp. 797-814.
On the other hand, is it realistic to expect U.S. (or any national) courts to defer almost entirely
to decisions of private (often foreign) arbitrators on questions involving vital local public
policies? See Craig, Uses and Abuses of Appeal From Awards, 4 Arb. Int'l 174, 215-16 (1988)
(“However minimal, such second looks will happen because of the extreme sensitivity of the
matters currently referred to private decision-making.”); Park, Private Adjudicators and the
Public Interest: The Expanding Scope of International Arbitration, 12 Brook. J. Int'l L. 629, 642
(1986) (“The ‘second look’ doctrine is a problematic safety valve for ensuring that public law
issues receive proper consideration. If it calls for review on the merits, it disrupts the arbitral
process. But if it calls only for a mechanical examination of the face of the award, it may not
provide an effective check on an arbitrator who mentions the Sherman Act before he proceeds
 to ignore it.”); Becker, Antitrust and International Arbitration – The New American Synthesis, 13
Int'l Bus. Law. 445, 447 (1985).
Assuming that any review of arbitrators' decisions on antitrust claims will be extremely
limited, will this permit the effectuation of the policies underlying national mandatory laws
(such as the U.S. antitrust laws)? See Note, Judicial Review of Foreign Arbitral Awards on Antitrust
Matters After Mitsubishi Motors, 26 Colum. J. Transnat'l L. 407 (1988). Does the New York
Convention permit even this level of substantive review? Note, as discussed in detail below,
that the Convention requires the enforcement of foreign arbitral awards, subject to specified
exceptions – which do not include the arbitrators' mistake as to law or fact. Would the “public
policy” exception to the Convention permit non-recognition of an award that misapplied
national public laws? See infra p. 812.
10. Review of arbitral decisions dealing with jurisdictional reach of U.S. statutory claims. What if
an arbitral panel applies U.S. precedents governing the extraterritorial application of national
laws, and concludes that the antitrust laws do not apply to the defendant's conduct because it
lacked sufficient contacts with the United States? See Konkar Indomitable Corp. v. Fritzen
Schiffsagentur und Bereederungs GmbH, No. 80 Civ. 3230 (S.D.N.Y. 1981) (holding that award
refusing to apply Gold Clause legislation, because parties' transaction had insufficient U.S.
contacts, did not violate public policy); Antco Shipping Co. v. Sidermar SpA, 417 F.Supp. 207
(S.D.N.Y. 1976) (rejecting claim that U.S. public policy against boycott of Israel forbid order
compelling arbitration on grounds, inter alia, that policy did not apply to conduct with no U.S.
contacts).
11. Treble damages in international arbitration. The Mitsubishi Court left it to the arbitral panel
to decide whether to award treble damages. Suppose an arbitral panel that hears U.S.
antitrust claims applies substantive U.S. antitrust laws, but refuses to award treble damages.
Would Mitsubishi permit Soler to renew its U.S. judicial action or would U.S. courts recognize
the arbitral award as a bar to Soler's action? Compare the Mitsubishi Court's emphasis on the
preservation through arbitration of “statutory remedies,” which presumably include treble
damages, with its emphasis on the “remedial” purpose of the antitrust laws.
Consider the following comment from one proponent of international commercial arbitration:
As to the trebling of damages, my instinct, without any real authority, is that the rest of the
world views treble damages in antitrust cases as in some sense penal, and that arbitrators do
P "293" not award – possibly even lack authority to award – penal damages. Where an allegation of
P "294" violation of antitrust laws is raised, it seems reasonable to establish at the outset – i.e., in
the submission agreement or terms of reference – that the counterclaimant is entitled in the
arbitration only to actual damages ... Whether at a later stage the successful counterclaimant
could assert in a civil action his entitlement to treble damages, and how much, if any, of the
determination in the arbitration would be regarded as res judicata, may be left for the time
being as an unresolved issue.
Lowenfeld, The Mitsubishi Case: Another View, 2 Arb. Int'l 178, 189 (1986). See Tolson, Conflicts
Presented by Arbitral Awards of Punitive Damages, 4 Arb. Int'l 255 (1988). In some (but not all)
jurisdictions, arbitrators may award punitive, exemplary, or “moral” damages. Is this a
reasonable approach? If an arbitral tribunal can award punitive damages, why can't it multiply
actual damages by 3? On the other hand, if there really is some legal rule, recognized by “the
rest of the world,” that forbids awards of treble damages, can't this be understood as a
principle accepted by the parties in agreeing to international arbitration? Does Mitsubishi say
anything, one way or the other, about the need to recover treble damages? What does Roby
suggest?
In Shearson/American Express Inc. v. McMahon, 482 U.S. 220, 240-41 (1987), the Supreme Court
rejected the argument that RICO claims were non-arbitrable because of the availability of
treble damages in a civil RICO action. It was not clear, however, whether the Court concluded
that treble damage claims could be pursued in arbitration or that they could not; the Court
held only that the availability of compensatory damages in arbitration sufficed to permit
enforcement of the arbitration agreement. It remains unclear whether an award of single
damages would preclude recovery of the statutory multiple damages in a separate action.
Lower U.S. courts have thus far reached divergent results as to the obligation of arbitrators to
award treble damages where a federal statute provides for such relief. Compare Simula, Inc. v.
Autoliv, Inc., 1999 U.S. App. LEXIS 8273 (9th Cir. 1999) (“remedies in a foreign forum need not be
identical”) and Life of America Ins. Co. v. Aetna Life Ins. Co., 744 F.2d 409 (5th Cir. 1984) (declining
to decide in §4 proceeding whether treble damages were awardable under state law: “Until
arbitration establishes that Life of America is entitled to damages but must be denied treble
damages, its asserted rights under Texas law have not been impaired”) with PPG Industries, Inc.
v. Pilkington plc, 825 F.Supp. 1465 (D. Ariz. 1993) (“the Court directs that any damages
determination, or arbitral award, made by the arbitrators shall be determined according to
U.S. antitrust law irrespective of any conflict that may exist between those laws and the laws of
England.”).
12. Consequences of tribunal's refusal to consider statutory claim. Suppose that a tribunal
refuses to entertain a U.S. antitrust claim, on the grounds that it is excluded by the parties'
choice of law clause or otherwise. The obvious course for the tribunal to take then is to dismiss
the claim without prejudice to its assertion in a national court. Query what effect the pendency
of the arbitration has (a) on statute of limitations issues, and (b) on the plaintiff's ability to
pursue the antitrust claim before the arbitration concludes.
13. No stay of enforcement pending arbitral tribunal's decision on arbitrability. As Mitsubishi
suggests, U.S. courts have rejected requests that they decline to order or delay ordering
 arbitration until it is clear the arbitral tribunal will hear claims that are allegedly non-
arbitrable under the law of the arbitral situs. Simula, Inc. v. Autoliv, Inc., 1999 U.S. App. LEXIS
8273 (9th Cir. 1999); Rhone Mediterranee etc. v. Achille Lauro, 712 F.2d 50 (3d Cir. 1983); George
Fischer Foundry Systems, Inc. v. Adolph H. Hottinger Maschinenbau GmbH, 1995-1 Trade Cases
(CCH) ??70,019 (6th Cir. 1995) (“Mitsubishi stands for the proposition that arbitration should go
forward even if there is a chance that United States antitrust statutory rights will not be fully
recognized ... because the Zurich [arbitral] tribunal has yet to decide what law it will apply, this
case is not ripe for review.”); In re Hops Litigation, 655 F.Supp. 169 (E.D. Mo. 1987).
14. Possible judicial “supervision” of arbitration of public law claims. Under the FAA, U.S. courts
are generally forbidden from intervening in or considering interlocutory challenges to ongoing
arbitrations, save in the most exceptional circumstances. See infra pp. 461-68. Nevertheless,
some lower courts have proceeded differently where U.S. public law claims are involved. In
particular, some courts have ordered the parties to submit such claims, under U.S. law, to
arbitration and to furnish periodic reports on the progress of the arbitration. Cole v. Burns Int'l
Security Services, 105 F.3d 1465 (D.C. Cir. 1997) (conditioning arbitrability of Title VII dispute on
various “procedural safeguards” in arbitration proceedings, including “more than minimal
discovery,” punitive damages, and employee's exemption from paying arbitrators' fees).
P "294"
P "295"
This sort of “judicial supervision” has occurred even with respect to arbitrations sited outside
the United States. See PPG Industries, Inc. v. Pilkington plc, 825 F.Supp. 1465 (D. Ariz. 1993); MEL
v. Gotaas-Larsen Shipping Corp., No. 89-0602-CIV (S.D. Fla. July 17, 1990) (requiring reports every
three months on progress of arbitration of federal securities law claims in London).
15. The doctrine of “intertwining” and its U.S. demise. There continue to be claims that are “non-
arbitrable” under U.S. law, see supra pp. 280-81. When a dispute involves both arbitrable and
non-arbitrable claims, courts must decide what to do with those claims that cannot be pursued
in the arbitration. Until fairly recently, lower U.S. courts had applied an “intertwining doctrine,”
pursuant to which arbitrable claims that were intertwined with non-arbitrable claims would
not be arbitrated, but instead would be litigated. These courts reasoned, for example, that “by
declining to compel arbitration, the courts avoid bifurcated proceedings and perhaps
redundant efforts to litigate the same factual question twice.”Byrd v. Dean Witter Reynolds, Inc.,
726 F.2d 552 (9th Cir. 1984).
In Byrd v. Dean Witter Reynolds, Inc. the Supreme Court reversed in a unanimous opinion. It
reasoned that the FAA “leaves no place for the exercise of discretion by a district court, but
instead mandates that district courts shall direct the parties to proceed to arbitration on
issues as to which an arbitration agreement has been signed.” 470 U.S. 213 (1985). In contrast,
the presence of one non-arbitrable claim in a dispute renders the entire dispute non-
arbitrable under some foreign laws. Cremades, Spain, XII Y.B. Comm. Arb. 39, 43 (1987); Code of
Civil and Commercial Procedure of Guatemala Article 269. For suggestions that litigation of
non-arbitrable claims should be stayed pending arbitration of intertwined arbitrable claims,
see Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 20 n.23 (1983)
(decision to stay litigation of non-arbitrable claims “is one left to the district court ... as a
matter of its discretion to control its docket”). See also Buzbee, When Arbitrable Claims Are
Mixed with Nonarbitrable Ones: What's A Court to Do? 59 S. Tex. L. Rev. 663 (1998).
16. Tail wagging the dog. What if an antitrust claim is indisputably the central issue in a case,
involving most of the facts and money that are disputed? In those circumstances, even if the
antitrust claim falls within the parties' arbitration agreement, is Mitsubishi still applicable?
Consider the following: “if the antitrust claim is dominant, I would permit the district court so
to hold, and to say that all claims, even those clearly covered by the arbitration clause, are to
be submitted to the court. I believe that possibility is left open by the Supreme Court in
Mitsubishi, though the scenario is an improbable one.” Lowenfeld, The Mitsubishi Case: Another
View, 2 Arb. Int'l 178, 181 (1986). Of course, a bit of pleading ingenuity will ensure that this
scenario is not at all improbable; when it arises, does Mitsubishi really permit a district court
to hear antitrust (and other) claims covered by a valid arbitration agreement?
P "295"

References
1) There are limited (but important) categories of cases where international arbitration can
be required even without a specific agreement between the parties to arbitrate. This is
possible pursuant to some “bilateral investment treaties” (“BITs”), certain multilateral
conventions (e.g., the so-called Energy Charter), and national law. See infra pp. 191-95.
2) A. van den Berg, The New York Convention of 1958 144-45 (1981).
3) For commentary describing common law ambivalence towards arbitration agreements,
see Jones, De velopment of Commercial Arbitration, 21 Minn. L. Rev. 240 (1927); Jones, Three
Centuries of Commercial Arbitration in New York: A Brief Summary, 1956 Wash. U.L.Q. 193; F.
Kellor, American Arbitration: Its History, Functions and Achievement (1948); Mentschikoff,
Commercial Arbitration, 61 Colum. L. Rev. 846 (1961); Sayre, Development of Commercial
Arbitration Law, 37 Yale L. J. 595 (1927); Wolaver, The Historical Background of Commercial
Arbitration, 83 U. Pa. L. Rev. 132 (1934).
4) Home Ins. Co. v. Morse, 87 U.S. 445, 457-58 (1874) (agreement to arbitrate future disputes
illegal and void); Dickson Mfg. Co. v. American Locomotive Co., 119 F.Supp. 488 (M.D. Pa.
1902).
5) Tobey v. County of Bristol, 23 Fed. Cas. 1313, 1321-1323 (C.C.D. Mass. 1845). See also Red Cross
Line v. Atlantic Fruit Co., 264 U.S. 109 (1924); Home Insurance Co. v. Morse, 87 U.S. 445, 451
(1874); Rowe v. Williams, 97 Mass. 163 (1887).
6) See Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978 (2d Cir. 1942), for a
thorough review of the treatment of arbitration agreements at common law.
7) H.R. Rep. 96, 68th Cong., 1st Sess. 1 (1924); Sayre, Development of Commercial Arbitration
Law, 37 Yale L. J. 595 (1927).
8) Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 406 (2d Cir. 1959).
9) Naon, Arbitration in Latin America, 5 Int'l Arb. 137 (1989); S. Saleh, Commercial Arbitration in
the Arab Middle East 49-50 (1984); El-Ahdah, Enforcement of Arbitral Awards in the Arab
Countries, 11 Arb. Int'l 169 (1995).
10) See Kassis, The Questionable Validity of Arbitration and Awards Under the Rules of the
International Chamber of Commerce, 6 J. Int'l Arb. 79 (1989); Sornarajah, The UNCITRAL
Model Law: A Third World Viewpoint, 6 J. Int'l Arb. 7 (1989) (“there is a definite ambivalence
in the attitudes of developing countries towards international commercial arbitration”);
Afro-Asian Legal Consultative Committee, Report of the Seventeenth, Eighteenth and
Nineteenth Sessions held in Kuala Lumpur (1976), Baghdad (1977) and Doha (1978), at 131
(institutional arbitration rules do “not work out particularly favourably for the developing
countries in the matter of venue, choice of arbitrators, as also fees and charges leviable
by the institutions concerned”).
11) See infra pp. 162-63.
12) See infra pp. 163.
13) See supra pp. 13-17, 19-23, 29-36.
14) See supra pp. 21-24 & infra pp. 191-95.
15) See supra pp. 21-23.
16) See infra pp. 158-61, 165-66.
17) Geneva Protocol of 1923 Article 4(1); A. van den Berg, The New York Convention of 1958 129
(1981).
Although the phrase suggests an obligation affirmatively to compel arbitration, many
nations have not interpreted Article II(3) in this fashion. Thus, few states afford injunctive
relief (e.g., an order compelling arbitration equivalent to that available under §4 and
§206. E.g., Aksen, Application of the New York Convention by United States Courts, IV Y.B.
Comm. Arb. 341, 380 (1979). Rather, virtually all Convention states provide only for stays of
local judicial proceedings. See generally A. van den Berg, The New York Convention of 1958
129-39 (1981).
18) A. van den Berg, The New York Convention of 1958 135-37 (1981).
19) See infra pp. 165-66 & 354-57.
20) These requirements are discussed above at supra pp. 117-53 & infra pp. 380-85.
21) Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985). For a discussion of the
availability of forum non conveniens and other doctrines in actions under the FAA, see
infra pp. 400-07.
22) McCreary Tire & Rubber Co. v. CEAT, 501 F.2d 1032 (3d Cir. 1974); Cooper v. Ateliers de la
Motorbecane, S.A., 442 N.E.2d 1239 (N.Y. 1982). See Builders Federal (Hong Kong) Ltd v.
Turner Construction, 655 F.Supp. 1400, (S.D.N.Y. 1987) (rejecting argument that New York
Convention only permits “defensive,” and not “offensive,” motions to compel arbitration).
See also McMahon, Implementation of the U.S. Convention on Foreign Arbitral Awards in the
U.S., 2 J. Mar. L. & Comm. 735, 748-49 (1971) (citing “offensive” actions to compel).
23) See infra pp. 165-66; Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614,
626-27 (1985); Rhone Mediterranee etc. v. Achille Lauro, 712 F.2d 50 (3d Cir. 1983) (“Signatory
nations have effectively declared a joint policy that presumes the enforceability of
agreements to arbitrate”).
24) Scherk v. Alberto-Culver Co., 417 U.S. 506, 517 n.10 (1974).
The legislative history of the Convention's implementing legislation in the United States
reflected pro-arbitration policies. See H.R. Rep. No. 1181, 91st Cong. (1970), reprinted in
1970 U.S. Code, Cong. & Admin. News 3601 (“the provisions ... will serve the best interests
of Americans doing business abroad by encouraging them to submit their commercial
disputes to impartial arbitration for awards which can be enforced in both U.S. and
foreign courts”).
25) See infra pp. 165-66.
26) See A. van den Berg, The New York Convention of 1958 56 (1981) (“Originally, it was the
intention to leave the provisions concerning the formal validity of the arbitration
agreement and the obligatory referral to arbitration to a separate protocol. At the end of
the New York Conference of 1958, it was realized that this was not desirable. Article II was
drafted in a race against time, with, as a consequence, the omission of an indication as to
which arbitration agreements the Convention would apply.”).
27) A. van den Berg, The New York Convention of 1958 123-28, 177 (1981).
28) A. van den Berg, The New York Convention of 1958 123-28 (1981).
29) A. van den Berg, The New York Convention of 1958 158 (1981).
30) A. van den Berg, The New York Convention of 1958 159 (1981).
31) See infra pp. 187-89.
32) The non-arbitrability doctrine is discussed in detail below, see infra pp. 243-95.
33) For an overview of leading examples of such legislation, see supra pp. 30-34.
34) See infra pp. 163-64.
35) UNCITRAL Model Law, Article 8(1).
36) 9 U.S.C. §3.
37) Swiss Law on Private International Law, Article 178.
38) 956 F.Supp. 1131 (S.D.N.Y. 1997).
39) 684 F.2d 184 (1st Cir. 1982).
40) XX Y.B. Comm. Arb. 41 (1995).
41) 937 F.2d 469 (9th Cir. 1991).
42) XXI Y.B. Comm. Arb. 681 (Vaud Cantonal Court of Appeals 1993) (1996).
43) The three companies are herein referred to collectively as “Standard.”
44) Attached to the letter was a very explicit page-long “substitute arbitration clause,”
providing for arbitration in London pursuant to the Arbitration Act of Great Britain [sic].
45) The district court reasoned that an arbitrator can derive his or her power only from a
contract, so that when there is a challenge to the existence of the contract itself, the court
must first decide whether there is a valid contract between the parties. Although this
appears logical, it goes beyond the requirements of the statute and violates the clear
directive of Prima Paint, 388 U.S. at 404. See discussion below.
46) Article 2 of the Swiss Code of Obligations reads:
“When the parties have agreed with regard to all essential points, it is presumed that a
reservation of ancillary points is not meant to affect the binding nature of the contract.
Where agreement with regard to such ancillary points so reserved is not reached, the
judge shall determine them in accordance with the nature of the transaction. The
foregoing shall not affect the provisions regarding the form of contracts (Arts. 9-16).”
47) See W. Craig, W. Park & J. Paulsson, International Chamber of Commerce Arbitration §9.06,
at 164 (2d ed. 1990).
48) Astra Footwear Industry v. Harwyn Int'l, Inc., 442 F.Supp. 907 (S.D.N.Y. 1978).
49) W. Craig, W, Park & J. Paulsson, International Chamber of Commerce Arbitration §9.02, at
159-160 (2d ed. 1990).
50) W. Craig, W, Park & J. Paulsson, International Chamber of Commerce Arbitration §9.02, at
159-160 (2d ed. 1990).
51) Batson Yarn and Fabric Machinery Group, Inc. v. Saurer-Allma GmbH-Allgauer
Maschinenbau, 311 F.Supp. 68 (D.S.C. 1970) (court holds that first party to commence
arbitration had right to select forum).
52) See supra pp. 55, 155-67.
53) For commentary on BITs, see Comeaux & Kinsella, Reducing Political Right in Developing
Countries: Bilateral Ivestment Treaties, Stabilization Clauses, and MIGA & OPIC Investment
Insurance, 15 N.Y.L. Sch. J. Int'l & Comp. L. 1 (1994); Kishoiyian, The Utility of Bilateral
Investment Treaties in the Formulation of Customary International Law, 14 Nw. J. Int'l L. &
Bus. 327 (1994); Siqueiros, Bilateral Treaties on the Reciprocal Protection of Foreign
Investment, 24 Calif. W. Int'l L. J. 255 (1994); Parra, The Role of ICSID in the Settlement of
Investment Disputes, 16 ICSID News (1999); Paulsson, Arbitration Without Privity, 10 ICSID L.
Rev. 232 (1995); Unegbu, BITs and ICC Arbitration, 16 J. Int'l Arb. 93 (1999).
54) Paulsson, Arbitration Without Privity, 10 ICSID L. Rev. 232 (1995).
55) ICSID, Bilateral Investment Treaties, 1959-1996 Doc. ICSID/17 (30 May 1997) at 51. As of 1997,
Germany has entered into approximately 110 BITs, the United Kingdom had entered into
84, and Switzerland had entered into 76.
56) Parra, The Role of ICSID in the Settlement of International Investment Disputes, 16 ICSID
News 1 (1999).
57) See supra pp. 157-61. See also Westacre Investments Inc. v. Jugoimport-SDPR Holdings Co., 4
All ER 570 [1998] (identifying examples where an arbitration agreement might be invalid,
“such as fraud inducing the making of both the underlying contract and the agreement to
arbitrate, the effect of the statute rendering the underlying contract illegal, the absence
of consensus ad idem, non est factum, mistake as to the person making the contract, and
contracts of adhesion in which the arbitrator is in practice, the choice of the dominant
party.”).
58) 388 U.S. 395 (1967).
59) See infra pp. 202-03.
60) See Moseley v. Electronic & Missile Facilities, Inc., 374 U.S. 167 (1963); infra pp. 203-06.
61) See infra pp. 206-07.
62) See infra p. 206.
63) The plaintiffs' attempts to have the contract declared void ab initio have a hollow ring.
The PNPP contract was entered into some thirteen years ago. Although Marcos was
deposed in 1986, the new government continued to honor the terms of the contract until it
commenced this suit.
64) See K. Zweigert & H. Koetz, II Introduction to Comparative Law 61-70 (1987); Skladits,
Illegality of Prohibited Contracts, Comparative Aspects, in Twentieth Century Comparative
and Conflicts Law-Legal Essays in Honor of Hessel E. Yntema 221 (1961); Dwyer, Immoral
Contracts, 93 Law Q. Rev. 384 (1977); Restatement (Second) Contracts §§178-79, 192 (1981);
Dicey & Morris, The Conflict of Laws 1239-48, 1277-84 (12th ed. 1993).
65) See supra pp. 31-32, 166.
66) See supra pp. 8 & infra pp. 243-95.
67) See infra pp. 349-53.
68) See infra pp. 349-53.
©) International Council Commercial Arbitration.
©) International Council Commercial Arbitration.
69) K. Zweigert & H. Koetz, II Introduction to Comparative Law 94-112 (1987); Dawson, Economic
Duress: an Essay in Perspective, 45 Mich. L. Rev. 253 (1947); Cellini & Wertz, Unconscionable
Contract Provisions: A History of Unenforceability from Roman Law to the UCC, 42 Tulane L.
Rev. 193 (1967); Restatement (Second) Contracts §208 (1981); U.C.C. §2-302.
70) 967 F.Supp. 945 (S.D. Tex. 1997).
71) 676 N.Y.S. 2d 569 (App. Div. 1998).
72) The UNCITRAL Model Law also permits non-enforcement of an arbitration award if it
resulted from an arbitration agreement where a party was “under some incapacity.”
UNCITRAL Model Law, Article 34(2)(I). Article 34(2)(I) contains nothing that suggests an
implied choice of law determination by the Model Law.
73) See A. van den Berg, The New York Convention of 1958 288 (1981). Article V(1)(a)'s “lack of
capacity” exception was modelled on Article 2(1)(b) of the Geneva Convention of 1927. That
provision permitted non-enforcement of an arbitral award if the unsuccessful party could
demonstrate “that, being under a legal incapacity, he was not properly represented.” This
exception, which was limited to inadequate representation in the arbitral proceedings,
was included in nearly identical terms in early drafts of the New York Convention. U.N.
Doc. E/CONF.26/SR/17. It was, however, omitted from later drafts, on the grounds that it
would seldom apply. Id. At the final negotiation session, however, the Dutch delegate
moved to amend Article V(1)(a) to include a broader exception along the lines presently
contained in that subparagraph. U.N. Doc. E/CONF.26/SR.24. See A. van den Berg, The New
York Convention of 1958 275-76 (1981).
74) See generally Restatement (Second) Contracts §§12-16 (1981).
75) 1989 U.S. Dist. Lexis 5429 (S.D.N.Y. May 18, 1989).
76) 1976 A.M.C. 2514 (S.D.N.Y. 1976).
77) For U.S. decisions, see McDermott Int'l, Inc. v. Lloyds Underwriters of London, 944 F.2d 1199
(5th Cir. 1991); Sedco, Inc. v. Petroleus Mexicanos Mexican National Oil Co., 767 F.2d 1140,
1150 (5th Cir. 1985); I.T.A.D. Assoc., Inc. v. Podar Bros., 636 F.2d 75, 77 (4th Cir. 1981);
Application of ABN International Capital Markets Corp., 812 F.Supp. 418 (S.D.N.Y. 1993);
Rogers, Burgun, Shahine & Deschler, Inc. v. Dongsan Construction Co., 598 F.Supp. 754, 757
(S.D.N.Y. 1984).
78) UNCITRAL Model Law, Article 8(1).
79) Section 3 of the FAA requires the trial court to grant a stay of claims subject to an
arbitration agreement unless “the applicant for the stay is not in default in proceeding
with such arbitration.” 9 U.S.C. §3. “Default” has been interpreted to mean common law
“waiver.” In re Mercury Constr. Co., 656 F.2d 933, 939-40 (4th Cir. 1981), aff'd, 460 U.S. 1
(1983); Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402, 412 (2d Cir. 1959);
Michelin Tire Corp. v. Todd, 568 F.Supp. 622 (D. Md. 1983); Batson Yarn and Fabrics Mach.
Group Inc. v. Sauer-Allma GmbH-Allgauer Maschinenbau, 311 F.Supp. 68 (D.S.C. 1970); United
Nuclear Corp. v. General Atomic Co., 597 P.2d 290, 299 (N.M. 1979).
80) Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25 (1983). See
also Doctor's Associates, Inc. v. Distajo, 107 F.3d 126 (2d Cir. 1997) (waiver of right to
arbitrate subject to federal common law); Bridas Sociedad Anonima Petrolera Industrial y
Commercial v. International Standard Electric Corp., 490 N.Y.S.2d 711 (Sup. Ct. 1985) (waiver
governed by FAA); Downey v. Christensen, 825 P.2d 557 (Montana 1992) (waiver of right to
arbitration governed by FAA); Singer v. Jeffries & Co., Inc., 571 N.Y.S.2d 680 (Ct. App. 1991);
McCormick-Morgan, Inc. v. Whitehead Elec. Co., 345 S.E.2d 53 (Ga. Ct. App. 1986); Lounge-A-
Round v. GCM Mills, Inc., 109 Cal.3d 190 (Cal. Ct. App. 1980).
81) Moses H. Cone Memorial Hosp. v. Mercury Construction Corp., 460 U.S. 1, 24-25 (1983); Stone
v. E.F. Hutton & Co., 898 F.2d 1542, 1543 (11th Cir. 1990); Peterson v. Shearson/American
Express, Inc., 849 F.2d 464, 466 (10th Cir. 1988); Miller Brewing Co. v. Fort Worth Distrib. Co.,
781 F.2d 494, 496 (5th Cir. 1986); Rush v. Oppenheimer & Co., 779 F.2d 885 (2d Cir. 1985);
Tenneco Resins, Inc. v. Davy Int'l AG, 770 F.2d 416 (5th Cir. 1985); Merrill Lynch, Pierce, Fenner
& Smith Inc. v. Lecopulos, 553 F.2d 842 (2d Cir. 1977); Gavlik Constr. Co. v. H.F. Campbell Co.,
526 F.2d 777, 783 (3d Cir. 1975).
82) Com-tech Associates v. Computer Associates International, Inc., 753 F.Supp. 1078 (2d Cir.
1991), quoting, Rush v. Oppenheimer & Co., 779 F.2d 885, 887 (2d Cir. 1985).
83) Ritzel Communications, Inc. v. Mid-American Cellular Telephone Co., 989 F.2d 966 (8th Cir.
1993); Britton v. Co-op Banking Group, 916 F.2d 1405, 1412 (9th Cir. 1990); Reid Burton
Constr., Inc. v. Carpenters District Council, 614 F.2d 698 (10th Cir. 1980); Merrill Lynch, Pierce,
Fenner & Smith, Inc. v. Lecopulos, 553 F.2d 842 (2d Cir. 1977) (“a waiver of arbitration under
federal arbitration law cannot be found without a showing of substantial prejudice to the
party asserting” waiver); E.C. Ernst, Inc. v. Manhattan Constr. Co., 551 F.2d 1026 (5th Cir.);
Gavlik Constr. Co. v. H.F. Campbell Co., 526 F.2d 777 (3d Cir. 1975); Hilti, Inc. v. Oldach, 392
F.2d 368, 372 (1st Cir. 1968); Carcich v. Rederi A/B Nordie, 389 F.2d 692, 696 (2d Cir. 1968);
Weight Watchers of Quebec Ltd v. Weight Watchers Int'l, Inc., 398 F.Supp. 1057 (E.D.N.Y.
1975). Compare National Foundation for Cancer Research v. AG Edwards & Sons, Inc., 821
F.2d 772, 777 (D.C. Cir. 1987) (not requiring specific showing of prejudice). See generally
Annotation, Arbitration – Delay in Asserting Right, 25 A.L.R. 1171; Annotation, Waiver of
Arbitration Provision in Contract, 117 A.L.R. 301 & 161 A.L.R. 1426.
84) Rush v. Oppenheimer & Co., 779 F.2d 885, 887 (2d Cir. 1985); I.T.A.D. Associates, Inc. v. Podar
Bros., 636 F.2d 75 (4th Cir. 1981) (no waiver based “only [on] a passage of time between the
institution of the action and [the] motion to compel with not prejudice” to other party);
Halcon Int'l, Inc. v. Monsanto Australia, Ltd, 446 F.2d 156, 161 (7th Cir. 1971); Rogers, Burgun,
Shahine, & Deschler, Inc. v. Dongsan Const., 598 F.Supp. 754 (S.D.N.Y. 1984); Masthead Mac
Drilling Corp. v. Fleck, 549 F.Supp. 854 (S.D.N.Y. 1982); Batson Yarn and Fabric Machinery
Group, Inc. v. Sauer-Allma GmbH-Allgauer Maschinenbau, 311 F.Supp. 68, 72-73 (D.S.C. 1970).
85) Buhler, Inc. v. Reuter Recycling of Florida, Inc., 889 F.Supp. 1126 (D. Minn. 1995) (rejecting
argument that party waived right to arbitate by failing to comply with provision in
arbitration agreement requiring consolidation of claims).
86) City of Parksburg v. Turner Constr. Co., 617 F.2d 155, 156 (4th Cir. 1980) (“Our conclusion is
especially appropriate here, where the city's failure to demand arbitration was the result
not of bad faith or improper motive, but of an honest misappraisal of the appropriate
remedy.”); United Nuclear Corp. v. General Atomic Co., 597 P.2d 290, 302 (N.M. 1979). See also
Polar Communications Corp. v. Oncor Communications, Inc., 927 F.Supp. 894 (D. Md. 1996)
(granting party 15 days to seek to compel arbitration clause or waive rights under
arbitration agreement).
87) See cases cited supra notes 83-88; McDermott Int'l, Inc. v. Lloyds Underwriters of London,
944 F.2d 1199 (5th Cir. 1991) (requiring “explicit waiver of Convention rights” under federal
common law); Sedco, Inc. v. Petroleos Mexicanos Mexican Oil Co., 767 F.2d 1140, 1150 (5th
Cir. 1985) (applying FAA standards of waiver under Convention); Oriental Commercial and
Shipping Co. v. Rosseel, NV, 609 F.Supp. 75 (S.D.N.Y. 1985) (same).
88) Doctor's Assoc., Inc. v. Distajo, 66 F.3d 438 (2d Cir. 1995) (participation in substantial
discovery, for 15 month period, waived arbitration rights); Com-tech Associates v.
Computer Associates International, Inc., 753 F.Supp. 1078 (2d Cir. 1991) (finding waiver
where party requesting arbitration waited 18 months from filing of federal court
complaint by adverse party, asserted six defenses to complaint (but did not raise
arbitration agreement), participated in discovery and first sought arbitration four months
from trial date); Sweater, Bee by Banff, Ltd v. Manhattan Indus. Inc., 754 F.2d 457, 461 (2d
Cir.), cert. denied, 474 U.S. 819 (1985) (“litigation of substantial issues going to the merits
may constitute a waiver of arbitration”); Application of ABN International Capital Markets
Corp., 812 F.Supp. 418 (S.D.N.Y. 1993) (taking advantage of discovery procedures after filing
suit in Netherlands constitutes waiver of right to arbitrate); Weight Watchers of Quebec Ltd
v. Weight Watchers Int'l Inc., 398 F.Supp. 1057 (E.D.N.Y. 1975); Sulphur Export Corp. v.
Caribbean Clipper Lines, Inc., 277 F.Supp. 632, 634 (E.D. La. 1968) (participation in litigation
for 5 years is a waiver); United Nations Children's Fund v. S/S Norstern, 251 F.Supp. 833, 840
(S.D.N.Y. 1965) (defendant's failure to raise arbitration agreement prior to summary
judgment motion held a waiver); Barber & Ross Co. v. Cornell & Co., 242 F.Supp. 825 (D.D.C.
1965) (filing answer and litigating for four months constitutes waiver); Cargo Carriers Inc. v.
Erie & St. Lawrence Corp., 105 F.Supp. 638 (S.D.N.Y. 1952) (defendants' participation in
litigation, with extensive discovery, for one year constitutes waiver); Faberge Int'l Inc. v. Di
Pino, 491 N.Y.S.2d 345 (App. Div. 1985) (“Waiver requires an active participation in
litigation or other conduct inconsistent with an intent to reserve any issues for
arbitration.”).
89) Hoffman Constr. Co. v. Active Erectors and Installers, Inc., 969 F.2d 796 (1992) (litigation to
judgment of claim constitutes waiver of right to arbitrate closely-related RICO claim);
Gator Int'l AG v. Raymond Packer Co., 493 F.2d 938 (1st Cir. 1974) (“Submission of part of an
arbitrable matter to a court waives the submittor's right to insist upon arbitration of the
remainder”).
90) Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Lecopulos, 553 F.2d 842, 845 (2d Cir. 1977);
Demsey & Assocs., Inc. v. S.S. Sea Stern, 461 F.2d 1009 (2d Cir. 1972); Chatham Shipping Co. v.
Fertex S.S. Corp., 352 F.2d 291, 293 (2d Cir. 1965); Acquaire v. Canada Dry Bottling, 906
F.Supp. 819, 830 (E.D.N.Y. 1995) (defendants' three year delay, following commencement of
litigation, in seeking to compel arbitration held not a waiver; court cites lack of any
answer or discovery); Dancu v. Coopers & Lybrand, 778 F.Supp. 832 (E.D. Pa. 1991); Masthead
Mac Drilling Corp. v. Fleck, 549 F.Supp. 854 (S.D.N.Y. 1982) (no waiver where party filed
state court action, but obtained repeated extensions of service); In re Costa and Head
(Atrium), Ltd, 486 So.2d 1272 (Ala. 1986). Compare Hilti, Inc. v. Oldach, 392 F.2d 368 (1st Cir.
1968); Galion Iron Works & Mfg. Co. v. J.D. Adams Mfg. Co., 128 F.2d 411, 413 (7th Cir. 1942);
Cargo Carriers v. Erie & St. Lawrence Corp., 105 F.Supp. 638 (S.D.N.Y. 1952).
91) Rush v. Oppenheimer & Co., 779 F.2d 885 (2d Cir. 1985); Sweater Bee by Banff v. Manhattan
Indus., 754 F.2d 457 (2d Cir.), cert. denied, 474 U.S. 819 (1985).
92) Sauer-Getriebe KG v. White Hydraulic, Inc., 715 F.2d 348, 350-51 (7th Cir. 1983); infra p. 959-
60.
93) Doctor's Assoc., Inc. v. Distajo, 66 F.3d 438 (2d Cir. 1995) (claim of waiver of right to
arbitrate is for district court, not arbitrator); County of Durham v. Richards & Assoc., 742
F.2d 811, 815 (4th Cir. 1984); Commerce Park at DFW Freeport v. Mardian Constr. Co., 729 F.2d
334, 339 n.5 (5th Cir. 1984); Belke v. Merrill Lynch, Pierce, Fenner & Smith, 693 F.2d 1023, 1027
(11th Cir. 1982); O'Neel v. National Ass'n of Securities Dealers, 667 F.2d 804, 807 (9th Cir.
1982); Conticommodity Serv. v. Philip & Lion, 613 F.2d 1222, 1226 (2d Cir. 1980); Weight
Watchers of Quebec Ltd v. Weight Watchers Int'l, Inc., 398 F.Supp. 1057, 1059 (E.D.N.Y. 1975);
Batson Yarn and Fabrics Machinery Group, Inc. v. Sauer-Allma GmbH-Allgauer
Maschinenbau, 311 F.Supp. 68 (D.S.C. 1970); In re Tsakalotos Navigation Corp., 259 F.Supp.
210, 213 (S.D.N.Y. 1966); United Nuclear Corp. v. General Atomic Co., 597 P.2d 290, 299 (N.M.
1979); ADC Constr. Co. v. McDaniel Grading, Inc., 338 S.E.2d 733 (Ga. Ct. App. 1985)
(“timeliness of a request for arbitration, or time-barred defenses presented by one party,
are to be resolved by the arbitrators unless the contract expressly provides for resolution
by a court”); Annotation, 26 A.L.R.3d 604. Compare Boston Mutual Life Ins. Co. v. Insurance
Agents' Int'l Union, 258 F.2d 516 (1st Cir. 1958) (requiring “determination by the court, as a
preliminary matter, whether all the conditions precedent to arbitration have been
fulfilled”).
94) See Hanes Corp. v. Millard, 531 F.2d 585 (D.C. Cir. 1976); Halcon Int'l, Inc. v. Monsanto
Australia Ltd, 446 F.2d 156 (7th Cir. 1971) (argument that arbitration is barred by laches is
for arbitrators to determine, not courts); World Brilliance Corp. v. Bethlehem Steel Co., 342
F.2d 362, 364 (2d Cir. 1965); Lundell v. Massey-Ferguson Services NV, 277 F.Supp. 940 (N.D.
Iowa 1967); Auxiliary Power Corp. v. Eckhardt & Co., 266 F.Supp. 1020 (S.D.N.Y. 1966); Lowry
& Co. v. S.S. Le Moyne D'Iberville, 253 F.Supp. 396 (S.D.N.Y. 1966), appeal dismissed, 372 F.2d
123 (2d Cir. 1967). For a suggestion that, even if the parties' arbitration agreement provides
that issues of waiver are for the arbitrators (rather than the courts), a court considering a
§4 motion “must take into account equitable doctrines such as laches,”see Necchi Sewing
Machine Sales Corp. v. Carl, 260 F.Supp. 665, 667 (S.D.N.Y. 1966).
95) See supra pp. 90-93. It is not entirely clear that waiver would qualify as a question of
“arbitrability” within the meaning of First Options. The better view is that it would,
because it does not implicate the merits of the parties' dispute, and instead concerns the
continued validity of a right to arbitrate.
96) American Arbitration Association Rules Article 46(a) (“No judicial proceedings by a party
relating to the subject matter of the arbitration shall be deemed a waiver of the party's
right to arbitrate.”).
97) Doctors's Assoc., Inc. v. Distajo, 66 F.3d 438 (2d Cir. 1995) (AAA's “no waiver” clause does not
affect waiver analysis); Home Gas Corp. v. Walter's of Hadley, Inc., 532 N.E.2d 681, 685
(Mass. 1989) (“no waiver” clause in arbitration agreement does not prevent finding of
waiver of right to arbitrate); United Nuclear Corp. v. General Atomic Co., 597 P.2d 290, 306-7
(N.M. 1979) (“The parties are pr;cluded from contracting to exclude the court from
jurisdiction” over the question whether the right to arbitrate has been waived); Seidman &
Seidman v. Wolfson, 50 Cal. App.3d 826 (Ct. App. 1975); American Sugar Refining Co. v. The
Anaconda, 138 F.2d 765 (5th Cir. 1943), aff'd, 322 U.S. 42 (1944); Ocean Science & Eng., Inc. v.
International Geomarine Corp., 312 F.Supp. 825 (D. Del. 1970). See also Shay v. 746 Broadway
Corp., 409 N.Y.S.2d 69, 71 (Sup. Ct. 1978) (AAA's “no waiver” clause permits parties to seek
provisional measures in aid of arbitration, but does not extend to litigation on merits).
98) Jackson Trak Group, Inc. v. Mid States Port Authority, 751 P.2d 122, 129-30 (Kan. 1988);
Kostakos v. KSN Joint Venture No. 1, 491 N.E.2d 1322, 1326 (Ill. App. Ct. 1986) (“inclusion of
[“no waiver” clause] indicate[d] the parties' intention to favor arbitration and we will not
lightly waive this right”); Atlas v. 7101 Partnership, 440 N.E.2d 381, 383 (Ill. App. 1982).
99) For commentary, see Baker & Stabile, Arbitration of Antitrust Claims: Opportunities and
Hazards for Corporate Counsel, 48 Bus. Law. 395 (1993); Bedell, Harrison & Grant,
Arbitrability: Current Developments in the Interpretation and Enforceability of Arbitration
Agreements, 13 J. Cont. Law 1 (1987); Blessing, Arbitrability of Intellectual Property Disputes,
12 Arb. Int'l 191 (1996); Boeckstiegel, Public Policy and Arbitrability, in ICCA Congress Series
No. 3 (Sanders, ed., 1987); Buzbee, When Arbitrable Claims Are Mixed with Nonarbitrable
Ones: What's A Court To Do? 59 S. Tex. L. Rev. 663 (1998); Carbonneau, The Exuberant
Pathway to Quixotic Internationalism: Assessing the Folly of Mitsubishi, 19 Vand. J. Trans. L.
265 (1986); Lowenfeld, The Mitsubishi Case: Another View, 2 Arb. Int'l 178 (1986); Malcolm &
Segall, The Arbitrability of Claims Arising Under §10(b) of the Securities Exchange Act:
Should Wilko Be Extended?, 50 Alb. L. Rev. 725 (1986); McLaughlin, Arbitrability: Current
Trends in the United States, 12 Arb. Int'l 113 (1996); Park, Private Adjudicators and the Public
Interest: The Expanding Scope of International Arbitration, 12 Brooklyn J. Int'l L. 629 (1986);
Sterk, Enforceability of Agreements to Arbitrate: An Examination of the Public Policy
Defense, 2 Cardozo L. Rev. 481 (1981); Smit, Mitsubishi: It Is Not What It Seems To Be, 4 J.
Int'l Arb. 7 (1987); Comment, The Relaxation of Non-Arbitrability and Public Policy Checks on
U.S. and Foreign Arbitration: Arbitration Out of Control?, 65 Tulane L. Rev. 1661 (1991).
100) See supra pp. 157-61, 195-242.
101) See Inter-American Convention Article 5(2)(a); European Convention on International
Commercial Arbitration of 1961 Article VI(2).
102) See also G. Gaja, International Commercial Arbitration: New York Convention, I.D. n.43
(1984). As Justice Douglas observed in dissent in Scherk v. Alberto-Culver Co., 417 U.S. 506,
530-31 n.10 (1973) (Douglas, J., dissenting), citing, Haight, Convention on the Recognition and
Enforcement of Foreign Arbitral Awards: Summary Analysis of Record of United Nations
Conference, May/June 1958 (1958):
When Article II(3) was being discussed, the Israeli delegate pointed out that while a court
could, under the draft Convention as it then stood, refuse enforcement of an award which
was incompatible with public policy, ‘“the court had to refer parties to arbitration
whether or not such reference was lawful or incompatible with public policy.”’ ... [T]he
Article was ... adopted without any words linking agreements to the awards enforceable
under the Convention.
103) See Scherk v. Alberto-Culver Co., 417 U.S. 506, 520 n.15 (1973); Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth Inc., 473 U.S. 614, 639 n.21 (1985); A. van den Berg, The New York
Convention of 1958 152-54 (1981); S. Exec. Doc. E., 90th Cong., 2d Sess. 19 (1968) (State
Department interpretation that Article V(2) is applicable in action to enforce arbitration
agreement under Article II); Contini, International Commercial Arbitration: The United
Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 8 Am. J.
Comp. L. 283, 296 (1959); Comment, International Commercial Arbitration: The Nonarbitrable
Subject Matter Defense, 9 Den. J. Int'l L. & Pol'y 119 (1980); Comment, The Public Policy
Defense to Recognition and Enforcement of Foreign Arbitral Awards, 7 Cal. W. Int'l L. J. 228
(1977).
104) See supra p. 160.
105) See A. van den Berg, The New York Convention of 1958 152 (1981).
106) Bockstiegel, Public Policy and Arbitrability, in ICCA Congress Series No. 3, at 184 (Sanders,
ed. 1987).
107) See infra pp. 275-77. That is arguably the result in Ledee v. Ceramiche Ragno, 684 F.2d 184
(1st Cir. 1982), excerpted and discussed above at pp. 98-100, 112-15.
108) Article V(1)(a) permits non-recognition of an arbitral award if the parties' agreement was
“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.”See supra pp. 113-14.
109) See supra pp. 113-14.
110) See infra pp. 276-77.
111) A number of commentators have concluded that non-arbitrability is determined by the
law of the judicial forum where enforcement of an agreement is sought. See infra p. 275; A.
van den Berg, The New York Convention of 1958 152-53 (1981) (“it must be presumed that for
the enforcement of the arbitration agreement also the lex fori governs the question of
arbitrability.”) (citing other commentators); European Convention of 1961 Article VI(2) (“the
courts may also refuse recognition of the arbitration agreement if under the law of their
country the dispute is not capable of settlement by arbitration”).
112) See infra p. 276.
113) See infra pp. 275-77.
114) See the authorities cited by A. van den Berg, The New York Convention of 1958 154 (1981).
115) See infra p. 275.
116) Ledee v. Ceramiche Ragno, 684 F.2d 184 (1st Cir. 1982); infra pp. 275-76.
117) See supra pp. 103-07.
118) See supra pp. 74-95.
119) E.g., Compagnia Generale Construzioni v. Persanta, VI Y.B. Comm. Arb. 229 (Italy Corte di
Cassazione 1981) (no arbitration of labor dispute); California Labor Code §229 (no
arbitration of “wage” claims). Compare Compagnie Francaise Techinique d'Etancheite v.
Dechavanne, XX Y.B. Comm. Arb. 656 (Grenoble Ct. App. 1993) (labor dispute arising from
international labor agreement arbitrable).
120) E.g., Patentgesetz §36(c) (Germany); Japanese Code of Civil Procedure Article 786; French
Civil Code Article 2059.
121) E.g., Decision of the Bologna Tribunale on July 18, 1987, XVII Y.B. Comm. Arb. 534 (1992)
(Italian court holds claims under EC competition laws non-arbitrable). Compare Hi-Fert
Pty Limited v. Kinkiang Maritime Carriers, 12 Mealey's Int'l Arb. Rep. C-1 (N.S.W. Australia
1997) (rejecting argument that claims under Australian Trade Practices Act are non-
arbitrable).
122) E.g., Ohio Rev. Code Ann. §2711.01 (Page 1981).
123) E.g., Italian Code of Civil Procedure, Article 806.
124) E.g., NSU Auto Union AG v. SA Adelin Petit & Cie, V Y.B. Comm. Arb. 257 (Belgium Cour de
Cassation 1980) (no arbitration of franchisee's claims against franchisor); 10 C.P.R.A. §278
(Puerto Rico statute rendering dealership disputes non-arbitrable).
125) E.g., French Civil Code Article 2060; Quebec Civil Code Article 1926(2); Law of 24 May 1972
Article 7(4) (Denmark).
126) Similarly, at common law, different U.S. states regarded a wide range of disputes as non-
arbitrable. Even under many contemporary U.S. state arbitration statutes, designed to
facilitate the arbitral process, a considerable number of subjects are non-arbitrable. E.g.,
Ark. Stat. Ann. §34-511 (Supp. 1985) (not permitting enforcement of arbitration agreements
as to personal injury, tort, employer-employee, or insurance contract claims); Iowa Code
§679A.1(2) (1985) (same as to adhesion contracts, employer-employee contracts, and tort
claims (unless covered by a separate writing)); Ohio Rev. Code Ann. §2711.01 (Page 1981)
(same as to certain real estate disputes).
127) The only exception to this is 9 U.S.C. §15, which provides that the Act of State doctrine
does not permit non-enforcement of arbitration agreements or awards.
128) For example, as discussed below, federal securities claims were held non-arbitrable
because of §14 of the Securities Act. See infra pp. 249-52, 253-55.
129) See infra pp. 279-82.
130) 346 U.S. 427 (1953).
131) The Court relied principally on §14 of the Securities Act, which provides:
Any condition, stipulation, or provision binding any person acquiring any security to waive
compliance with any provision of this subchapter or of the rules and regulations of the
Commission shall be void. 15 U.S.C. §77n.
132) 346 U.S. at 438.
133) See Hanes Corp. v. Millard, 531 F.2d 585 (D.C. Cir. 1976); Tire & Rubber Co. v. Jefferson Chem.
Co., 182 U.S.P.Q. 70 (2d Cir. 1974); Zip Mfg. Co. v. Pep Mfg. Co., 44 F.2d 184, 186 (D. Del. 1930);
Diematic Mfg. Corp. v. Packaging Indus. Inc., 381 F.Supp. 1057 (S.D.N.Y. 1974). In 1982 and
1984, legislation rendering most patent disputes arbitrable was enacted. 35 U.S.C. §294 &
§135 (d). See infra p. 281.
134) Lake Communications, Inc. v. ICC Corp., 738 F.2d 1973 (9th Cir. 1984); University Life Ins. Co. v.
Unimarc Ltd, 699 F.2d 846 (7th Cir. 1983); Cobb v. Lewis, 488 F.2d 91 (5th Cir. 1974);
Helfenbein v. International Indus., Inc., 438 F.2d 1068 (8th Cir.), cert. denied, 404 U.S. 872
(1971); American Safety Equipment Corp. v. J.P. Maguire & Co., 391 F.2d 821 (2d Cir. 1968).
135) See infra pp. 279-82.
136) 415 U.S. 36 (1974).
137) 42 U.S.C. §§2000e-2000e17.
138) 450 U.S. 728 (1981).
139) 29 U.S.C. §§201-10.
140) See infra pp. 253-55.
141) “Any controversy arising between us under this contract shall be determined by
arbitration pursuant to the Arbitration Law of the State of New York, and under the rules
of either the Arbitration Committee of the Chamber of Commerce of the State of New York,
or of the American Arbitration Association, or of the Arbitration Committee of the New
York Stock Exchange or such other Exchange as may have jurisdiction over the matter in
dispute, as I may elect. Any arbitration hereunder shall be before at least three
arbitrators.”
142) 15 U.S.C. §77v(a). §22(a) provides:
The district courts of the United States ... shall have jurisdiction ... concurrent with State
and Territorial courts, of all suits in equity and actions at law brought to enforce any
liability or duty created by this subchapter. Any such suit or action may be brought in the
district wherein the defendant is found or is an inhabitant or transacts business, or in the
district where the sale took place, if the defendant participated therein, and process in
such cases may be served in any other district of which the defendant is an inhabitant or
wherever the defendant may be found. Judgments and decrees so rendered shall be
subject to review as provided in §§[1292-93] and [1254] of Title 28. No case arising under
this subchapter and brought in any State court of competent jurisdiction shall be
removed to any court of the United States....
©) International Council Commercial Arbitration.
143) Article 27 of the Preliminary Provisions to the Italian Civil Code reads:
Jurisdiction and form of the proceedings are regulated by the law of the place where the
proceedings are held.
144) The Court of First Instance referred to the decision rendered by the Supreme Court on 27
April 1979, no. 2429 Compagnia Generale Costruzioni COGECO SpA v. Piersanti, VI Y.B. Comm.
Arb. 229-230 (1981).
145) Article 806 of the Italian Code of Civil Procedure reads:
The parties may have arbitrators settle the disputes arising between them, excepting
those provided for in Articles 409 and 442 [regarding labour, social security and
obligatory medical aid disputes], those regarding issues of personal status and marital
separation and those disputes that cannot be the subject of a compromise.
146) “A proper conception of the arbitrator's function is basic. He is not a public tribunal
imposed upon the parties by superior authority which the parties are obliged to accept.
He has no general charter to administer justice for a community which transcends the
parties. He is rather part of a system of self-government created by and confined to the
parties. He serves their pleasure only, to administer the rule of law established by their
collective agreement.” Shulman, Reason, Contract, and Law in Labor Relations, 68 Harv. L.
Rev. 999, 1016 (1955). [Footnote in original.]
147) Nordsee Deutsche Hochseefischerei GmbH v. Reederer Mond Hochseefischerei AG, [1982] ECR
1095; Eco Swiss China Time Ltd v. Benetton Int'l NV, 9 Mealey's Int'l Arb. Rep. B-1 (1999).
148) See infra p. 274.
149) 473 U.S. 614 (1985). For some of the considerable commentary on Mitsubishi, see Allison,
Arbitration of Private Antitrust Claims in International Trade: A Study in the Subordination of
National Interests to the Demands of a World Market, 18 N.Y.U. Int'l L. & Pol'y 361 (1986);
Carbonneau, The Exuberant Pathway to Quixotic Internationalism: Assessing the Folly of
Mitsubishi, 19 Vand. J. Trans. L. 265 (1986); Cloud, Mitsubishi and the Arbitrability of Antitrust
Claims: Did the Supreme Court Throw the Baby Out With the Bathwater?, 18 L. & Pol'y Int'l
Bus. 341 (1986); Fox, Mitsubishi v. Soler and its Impact on International Commercial
Arbitration, 19 J. World Trade L. 579 (1985); Lipner, International Antitrust Laws: To Arbitrate
or Not to Arbitrate, 19 Geo. Wash. J. Int'l L. & Econ. 395 (1985); McLendon, Subject-Matter
Arbitrability in International Cases: Mitsubishi Motors Closes the Circle, 11 N.C.J. Int'l L. &
Comm. Reg. 81 (1986); Smit, Mitsubishi: It is Not What it Seems To Be, 4 J. Int'l Arb. 7 (1987);
Comment, 17 Seton Hall L. Rev. 448 (1987); Note, 19 Conn. L. Rev. 435 (1987); Note, 27 Harv.
Int'l L.J. 227 (1986).
150) Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987); Rodriguez de Quijas v.
Shearson/American Express, Inc., 490 U.S. 477 (1989) (overruling Wilko v. Swan, 346 U.S. 427
(1953)).
151) Gilmer v. Interstate/Johnson Lane Corp., 111 S.Ct. 1647, 1652 (1991).
152) Id.
153) See infra p. 280; Kowalski v. Chicago Tribune Co., 854 F.2d 168 (7th Cir. 1988) (antitrust claim
arbitrable in domestic context).
154) Together with his motion for a stay pending arbitration, Scherk moved that the complaint
be dismissed because the federal securities laws do not apply to this international
transaction. Since only the order granting the injunction was appealed, this contention
was not considered by the Court of Appeals and is not before this Court.
155) See Quigley, Accession by the United States to the United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1051 (1961). For
example, while the arbitration agreement involved here provided that the controversies
arising out of the agreement be resolved under “[t]he laws of the State of Illinois,” a
determination of the existence and extent of fraud concerning the trademarks would
necessarily involve an understanding of foreign law on that subject.
156) Under some circumstances, the designation of arbitration in a certain place might also be
viewed as implicitly selecting the law of that place to apply to that transaction. In this
case, however, “[t]he laws of the State of Illinois” were explicitly made applicable by the
arbitration agreement.
157) In The Bremen we noted that forum-selection clauses “should be given full effect” when “a
freely negotiated private international agreement [is] unaffected by fraud....” This
qualification does not mean that any time a dispute arising out of a transaction is based
upon an allegation of fraud, as in this case, the clause is unenforceable. Rather, it means
that an arbitration or forum-selection clause in a contract is not enforceable if the
inclusion of that clause in the contract was the product of fraud or coercion. Cf. Prima
Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395.
Although we do not decide the question, presumably the type of fraud alleged here could
be raised, under Article V of the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, in challenging the enforcement of whatever arbitral award is
produced through arbitration. Article V(2)(b) of the Convention provides that a country
may refuse recognition and enforcement of an award if “recognition or enforcement of the
award would be contrary to the public policy of that country.”
158) Our conclusion today is confirmed by international developments and domestic
legislation in the area of commercial arbitration subsequent to the Wilko decision.... In
1970 the United States acceded to the [New York Convention], and Congress passed
Chapter 2 of the [FAA] in order to implement the Convention....
The goal of the Convention, and the principal purpose underlying American adoption and
implementation of it, was to encourage the recognition and enforcement of commercial
arbitration agreements in international contracts and to unify the standards by which
agreements to arbitrate are observed and arbitral awards are enforced in the signatory
countries....
In their discussion of Article [II of the Convention], the delegates to the Convention voiced
frequent concern that courts of signatory countries in which an agreement to arbitrate is
sought to be enforced should not be permitted to decline enforcement of such
agreements on the basis of parochial views of their desirability or in a manner that would
diminish the mutually binding nature of the agreements. See G. Haight, Convention on the
Recognition and Enforcement of Foreign Arbitral Awards: Summary Analysis of Record of
United Nations Conference, May/June 1958, pp. 24-28 (1958). Without reaching the issue of
whether the Convention, apart from the considerations expressed in this opinion, would
require of its own force that the agreement to arbitrate be enforced in the present case,
we think that this country's adoption and ratification of the Convention and the passage
of Chapter 2 of the [FAA] provide strongly persuasive evidence of congressional policy
consistent with the decision we reach today.
159) The Convention also permits that arbitral awards not be recognized and enforced when a
court in the country where enforcement is sought finds that “[t]he recognition or
enforcement of the award would be contrary to the public policy of that country.” Article
V(2)(b). It also provides that recognition of an award may be refused when the arbitration
agreement “is not valid under the law to which the parties have subjected it,” in this case
the laws of Illinois. Article V(1)(a).
160) See, e.g., Leasco Data Processing Equipment Corp. v. Maxwell, 468 F.2d 1326, 1334-1339 (2d
Cir. 1972)....
161) A summary of the conference proceedings which led to the adoption of the United Nations
Convention was prepared by G. W. Haight, who served as a member of the International
Chamber of Commerce delegation to the conference. Haight, Convention on the
Recognition and Enforcement of Foreign Arbitral Awards: Summary Analysis of Record of
United Nations Conference, May/June 1958 (1958).
When Article II(3) was being discussed, the Israeli delegate pointed out that while a court
could, under the draft Convention as it then stood, refuse enforcement of an award which
was incompatible with public policy, “‘the court had to refer parties to arbitration
whether or not such reference was lawful or incompatible with public policy.’” Id., at 27.
The German delegate observed that this difficulty arose from the omission in Article II(3)
“‘of any words which would relate the arbitral agreement to an arbitral award capable of
enforcement under the convention.’”
Haight continues:
When the German proposal was put to a vote, it failed to obtain a two-thirds majority (13
to 9) and the Article was thus adopted without any words linking agreements to the
awards enforceable under the Convention. Nor was this omission corrected in the Report
of the Drafting Committee (L.61), although the obligation to refer parties to arbitration
was (and still is) qualified by the clause ‘unless it finds that the agreement is null and
void, inoperative or incapable of being performed.’ As the applicable law is not
indicated, courts may under this wording be allowed some latitude; they may find an
agreement incapable of performance if it offends the law or the public policy of the
forum. Apart from this limited opening, the Conference appeared unwilling to qualify the
broad undertaking not only to recognize but also to give effect to arbitral agreements.
Id. at 28 (emphasis added).
Whatever “concern” the delegates had that signatories to the Convention “not be
permitted to decline enforcement of such agreements on the basis of parochial views of
their desirability,” it would seem that they contemplated that a court may decline to
enforce an agreement which offends its law or public policy.
The Court also attempts to treat this case as only a minor variation of The Bremen v.
Zapata Off-Shore Co., 407 U.S. 1. In that case, however, the Court ... explicitly stated:
A contractual choice-of-forum clause should be held unenforceable if enforcement would
contravene a strong public policy of the forum in which suit is bought, whether declared
by statute or by judicial decision.
That is inescapably the case here, as §29 of the Securities Exchange Act and Wilko v. Swan
make clear. Neither §29, nor the Convention on international arbitration, nor The Bremen
justifies abandonment of a national public policy that securities claims be heard by a
judicial forum simply because some international elements are involved in a contract.
162) The agreements in this case provided that the “laws of the State of Illinois” are
applicable. Even if the arbitration court should read this clause to require application of
Rule 10b-5's standards, Alberto-Culver's victory would be Pyrrhic. The arbitral court may
improperly interpret the substantive protections of the Rule, and if it does its error will
not be reviewable as would the error of a federal court. And the ability of Alberto-Culver
to prosecute its claim would be eviscerated by lack of discovery. These are the policy
considerations which underlay Wilko and which apply to the instant case as well.
163) In addition to the clause providing for arbitration before the Japan Commercial
Arbitration Association, the Sales Agreement includes a choice-of-law clause which reads:
“This Agreement is made in, and will be governed by and construed in all respects
according to the laws of the Swiss Confederation as if entirely performed therein.” The
United States raises the possibility that the arbitral panel will read this provision not
simply to govern interpretation of the contract terms, but wholly to displace American
law even where it otherwise would apply. The International Chamber of Commerce opines
that it is “[c]onceivabl[e], although we believe it unlikely, [that] the ar;itrators could
consider Soler's affirmative claim of anticompetitive conduct by CISA and Mitsubishi to
fall within the purview of this choice-of-law provision, with the result that it would be
decided under Swiss law rather than the U.S. Sherman Act.” At oral argument, however,
counsel for Mitsubishi conceded that American law applied to the antitrust claims and
represented that the claims had been submitted to the arbitration panel in Japan on that
basis. The record confirms that before the decision of the Court of Appeals the arbitral
panel had taken these claims under submission.
We therefore have no occasion to speculate on this matter at this stage in proceedings,
when Mitsubishi seeks to enforce the agreement to arbitrate, not to enforce an award. Nor
need we consider now the effect of an arbitral tribunal's failure to take cognizance of the
statutory cause of action on the claimant's capacity to reinitiate suit in federal court. We
merely note that in the event the choice-of-forum and choice-of-law clauses operated in
tandem as a prospective waiver of a party's right to pursue statutory remedies for
antitrust violations, we would have little hesitation in condemning the agreement as
against public policy.
164) We note, for example that the rules of the Japan Commercial Arbitration Association
provide for the taking of a “summary” of each hearing, Rule 28.1; for the stenographic
recording of the proceedings where the tribunal so orders or a party requests one, Rule
28.2; and for a statement of reasons for the award unless the parties agree otherwise, Rule
36.1(4).
165) We do not quarrel with the Court of Appeals' conclusion that Article II(1) of the Convention,
which requires the recognition of agreements to arbitrate that involve “subject matter
capable of settlement by arbitration,” contemplates exceptions to arbitrability grounded
in domestic law. And it appears that before acceding to the Convention the Senate was
advised by a State Department memorandum that the Convention provided for such
exceptions.
In acceding to the Convention the Senate restricted its applicability to commercial
matters, in accord with Article I(3). Yet in implementing the Convention by amendments
to the Federal Arbitration Act, Congress did not specify any matters it intended to exclude
from its scope. In Scherk, this Court recited Article II(1), including the language relied
upon by the Court of Appeals, but paid heed to the Convention delegates' “frequent[ly
voiced] concern that courts of signatory countries in which an agreement to arbitrate is
sought to be enforced should not be permitted to decline enforcement of such
agreements on the basis of parochial views of their desirability or in a manner that would
diminish the mutually binding nature of the agreements.” There, moreover, the Court
dealt arguendo with an exception to arbitrability grounded in express congressional
language; here, in contrast, we face a judicially implied exception. The utility of the
Convention in promoting the process of international commercial arbitration depends
upon the willingness of national courts to let go of matters they normally would think of as
their own. Doubtless, Congress may specify categories of claims it wishes to reserve for
decision by our own courts without contravening this Nation's obligations under the
Convention. But we decline to subvert the spirit of the United States' accession to the
Convention by recognizing subject-matter exceptions where Congress has not expressly
directed the courts to do so.
166) McDonald v. City of West Branch, 466 U.S. 284 (1984).
167) Wilko v. Swan, 346 U.S. 427 (1953).
168) Barrentine v. Arkansas-Best Freight System, Inc., 450 U.S. 729 (1981).
169) Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974).
170) The arbitration procedure in this case does not provide any right to evidentiary discovery
or a written decision, and requires that all proceedings be closed to the public. Moreover,
Japanese arbitrators do not have the power of compulsory process to secure witnesses
and documents, nor do witnesses who are available testify under oath. Cf. 9 U.S.C. §7
(arbitrators may summon witnesses to attend proceedings and seek enforcement in a
district court).
171) The great risk, of course, is that the arbitrator will condemn business practices under the
antitrust laws that are efficient in a free competitive market. Cf. Northwest Wholesale
Stationers, Inc. v. Pacific Stationery & Printing Co., 472 U.S. 284 (1985), rev'g, 715 F.2d 1393
(9th Cir. 1983). In the absence of a reviewable record, a reviewing district court would not
be able to undo the damage wrought. Even a Government suit or an action by a private
party might not be available to set aside the award.
172) The Court notes that some courts which have held that agreements to arbitrate antitrust
claims generally are unenforceable have nevertheless enforced arbitration agreements to
settle an existing antitrust claim. These settlement agreements, made after the parties
have had every opportunity to evaluate the strength of their position, are obviously less
destructive of the private treble-damages remedy that Congress provided. Thus, it may
well be that arbitration as a means of settling disputes is permissible.
173) Indeed, it has been argued that a state may refuse to enforce an agreement to arbitrate
subject matter which is non-arbitrable in domestic law under Article II(3) as well as under
Article II(1). Since awards rendered under such agreements need not be enforced under
Article V(2) the agreement is “incapable of being performed.” Article II(3).
174) For example, the Cour de Cassation in Belgium has held that disputes arising under a
Belgian statute limiting the unilateral termination of exclusive distributorships are not
arbitrable under the Convention in that country, Audi-NSU Auto Union A.G. v. SA Adelin
Petit & Cie. (1979), in 5 Yearbook Commercial Arbitration 257, 259 (1980), and the Corte di
Cassazione in Italy has held that labor disputes are not arbitrable under the Convention
in that country, Compagnia Generale Construzioni v. Persanti, [1980] Foro Italiano I 190, in 6
Yearbook Commercial Arbitration 229, 230 (1981).
175) The same is true of federal securities law claims, RICO claims, and a variety of other
public law protections. See supra pp. 280-81.
176) See supra pp. 274-75.
177) See supra pp. 274-75.
178) See supra pp. 43-47, 95-117.
179) See supra pp. 262-63.
180) The analysis is no different for the arbitration clauses. Indeed, an arbitration clause is
merely a specialized type of forum selection clause. See Scherk, 417 U.S. at 519. We might
have referred to the [New York] Convention, for further support with respect to the
arbitration clauses; however, because we are not entirely persuaded that the
[Convention] applies in the securities context, we prefer to rest our decision on different
grounds. Because we understand the Roby Names to complain primarily that the United
States securities laws will not be applied and not that the arbitration forum is
particularly inappropriate in their case, we do not believe a detailed analysis of the
[Convention] is necessary.
181) Scherk, decided eleven years before Mitsubishi, is not to the contrary. Although the Scherk
Court enforced an arbitration clause which contained a choice of law provision (Illinois
law), the focus of the opinion is almost exclusively on the validity of the arbitration
provision. Nowhere in the opinion is it suggested that a choice of law clause invariably
trumps the public policies underlying the securities laws. In any event, Illinois law is
certainly adequate to protect the substantive rights of Alberto-Culver, the American
company that allegedly was defrauded in its purchase of Scherk, a German company.
Indeed, viewed practically, the complaint was essentially a breach of contract action
masquerading as a statutory misrepresentation claim. The Court could confidently rely on
Illinois law to protect any public policy of the United States implicated in that action.
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part One : Chapter 4.
Interpretation of
International Arbitration
Agreements', in Gary B. Born ,
International Commercial
Arbitration: Commentary and
Materials (Second Edition),
2nd edition (© Kluwer Law
International; Kluwer Law
International 2001) pp. 297 -
330
P "297"
P "298"
P "298" In resolving disputes over the scope of arbitration agreements, a number of national courts
P "299" apply rules of interpretation which are avowedly “pro-arbitration,” resolving doubts about
KluwerArbitration
Part One : Chapter 4. Interpretation of International
Arbitration Agreements
4 Interpretation of International Arbitration Agreements
The interpretation of arbitration agreements is of critical importance to the international
arbitral process. Questions of interpretation most frequently concern the scope of arbitration
clauses, but can also include other topics (such as the incorporation of institutional rules). This
Chapter examines the interpretation of international arbitration agreements.
A. Introduction
Under the New York Convention, other international arbitration instruments, and virtually all
developed national arbitration regimes, parties are guaranteed broad autonomy to draft
international arbitration agreements in the fashion they desire. The parties' autonomy in
drafting international arbitration agreements inevitably produces a wide range of different
arbitration agreements. (1) As described above, arbitration clauses can be very short (a few
words) or quite long; they may be drafted in various languages and with varying degrees of skill
and linguistic proficiency; they may incorporate model clauses, either in whole or part, or start
from scratch; they may provide for arbitration of no disputes, some contractual disputes, all
contractual disputes, or virtually all disputes (contractual, tort, or otherwise) connected to
their relationship; (2) they may provide for either ad hoc or institutional arbitration; they may
designate an arbitral situs or appointing authority; they may select the arbitrators or impose
limitations on the identities of the arbitrators; and they may otherwise structure the
arbitration process. (3)
The parties' autonomy with respect to drafting arbitration agreements frequently results in
disputes over the interpretation of such agreements. Some recurrent issues are summarized
below.
1. Exclusivity of Arbitral Procedure
A critical threshold issue in the interpretation of an arbitration agreement is whether
arbitration is the parties' mandatory and exclusive remedy, or whether it is only a permissive
remedy that leaves the parties free to resort to litigation in national courts or other forums.
Although this is a matter of interpreting the parties' agreement, national courts usually start
from an assumption that the parties' inclusion of an arbitration clause in a contract indicates
that arbitration is the exclusive, mandatory mechanism for resolution of substantive disputes.
(4) This is true even where the arbitration clause contains no express language regarding
exclusivity. (5)
2. Agreement to “Arbitrate”
Another threshold issue of interpretation is whether the parties have agreed to “arbitration,” as
distinguished from some other form of dispute resolution. For example, parties may agree to
“expert determination,” conciliation or mediation, or other forms of alternative dispute
resolution which do not necessarily constitute “arbitration.” (6) If so, then significant legal
consequences follow: neither the New York Convention nor (in most cases) national arbitration
legislation will apply to the agreement, and instead other legal regimes will. This can result in
material differences in the enforceability of the dispute resolution agreement, the possibility
of judicial interference in the dispute resolution proceedings, and the enforceability of the
proceedings' outcome.
Determining whether a particular agreement constitutes an arbitration agreement, or
something else, is largely a question of interpreting what it is that the parties have agreed. In
general, national courts have adopted relatively expansive conceptions of arbitration for these
purposes.
3. Scope of Arbitration Agreement
The most frequent, and important, issue that arises in the interpretation of international
arbitration agreements relates to the “scope” of the parties' agreement; that is, what category
of disputes or claims have the parties agreed to submit to arbitration? Disputes frequently
arise concerning the application of arbitration agreements to particular contract claims or,
even more commonly, non-contractual claims based upon tort or statutory protections. (7)
the scope of a clause in favor of encompassing borderline claims. (8) In interpreting
international arbitration agreements, for example, U.S. courts have generally applied a federal
common law rule of contract interpretation that is expressly and vigorously “pro-arbitration.”
(9) In the Supreme Court's words, “questions of arbitrability must be addressed with a healthy
regard for the federal policy favoring arbitration [and] any doubts concerning the scope of
 arbitrable issues should be resolved in favor of arbitration.” (10) In contrast, other national
courts apply either neutral, generally-applicable rules of contract construction or “anti-
arbitration” presumptions to the interpretation of arbitration agreements. (11)
4. Choice of Law Applicable to Interpretation of Arbitration Agreement
Questions concerning the interpretation of arbitration agreements also raise choice of law
issues. What national (or other) law governs the construction of the arbitration clause?
Assuming that the parties have not otherwise agreed, possible choices include the law
governing the underlying contract, the procedural law of the arbitration, and international
principles. These issues arise both in arbitral proceedings (when the scope of an arbitration
clause is disputed before the tribunal) and in national courts (when the scope of an arbitration
clause is litigated). (12)
5. Respective Roles of Courts and Arbitrators in Interpretation of Arbitration Agreement
The interpretation of international arbitration agreements raises questions regarding the
respective roles of arbitrators and national courts. Some national courts have held that the
interpretation of the scope of an arbitration agreement is, in the first instance, ordinarily a
matter for the arbitral tribunal, and only thereafter is judicial review appropriate. In contrast,
other courts have held that interpreting the scope of arbitration agreements is for judicial
resolution, not for decision by arbitrators. (13)

B. Interpretation of the Scope of International Arbitration Agreements

The following materials examine the issues which arise in connection with the interpretation of
P "299" international arbitration agreements, particularly with regard to their scope. In Apollo
P "300" Computer, Inc. v. Berg, the Court concludes that the parties' arbitration clause (and the ICC
Rules which it incorporated) vested the arbitrators – not the court – with power to interpret the
scope of the arbitration agreement. In contrast, in the other cases excerpted below, the courts
themselves interpret the scope of the parties' arbitration agreement.
The following materials also examine both the choice of law rules and the substantive
principles of contract construction which arise in disputes over the interpretation of
arbitration agreements. Mitsubishi Motors Corp. v. Soler Chrysler- Plymouth, Inc. and
Mediterranean Enterprise, Inc. v. Ssangyong Corp. raise both sets of issues. Finally, the opinion
of the Munich Oberlandesgerichtshof illustrates an alternative approach to the interpretation
of international arbitration agreements.
APOLLO COMPUTER, INC. v. BERG
886 F.2d 469 (1st Cir. 1989)
TORRUELLA, CIRCUIT JUDGE. The plaintiff appeals from a district court order refusing its request
for a permanent stay of arbitration proceedings.... Apollo Computer, Inc. (“Apollo”) and
Dicoscan Distributed Computing Scandinavia AB (“Dico”) entered into an agreement granting
Dico, a Swedish company having its principal place of business in Stockholm, the right to
distribute Apollo's computers in four Scandinavian countries. Helge Berg and Lars Arvid Skoog,
the defendants in this action, signed the agreement on Dico's behalf in their respective
capacities as its chairman and president. The agreement contained a clause stating that all
disputes arising out of or in connection with the agreement would be settled in accordance
with the [1998] Rules of Arbitration of the International Chamber of Commerce (“ICC”), and
another clause that stated that the agreement was to be governed by Massachusetts law. The
agreement also provided that it could not be assigned by Dico without the written consent of
Apollo.
In September 1984, after disputes relating to the financing of Dico's purchases, Apollo notified
Dico that it intended to terminate the agreement, effective immediately. Dico then filed for
protection from its creditors under Swedish bankruptcy law and subsequently entered into
liquidation, with its affairs being handled by its trustee in bankruptcy. The trustee assigned
Dico's right to bring claims for damages against Apollo to the defendants. In May 1988, the
defendants filed a complaint and a request for arbitration with the ICC.
On August 24, 1988, Apollo rejected arbitration, claiming that there was no agreement to
arbitrate between it and the defendants, and that assignment of Dico's contractual right to
arbitrate was precluded by the agreement's nonassignment clause. The ICC requested both
parties to submit briefs on the issue. On December 15, 1988, the ICC's Court of Arbitration
P "300" decided that pursuant to its rules, the arbitrator should resolve the issue of arbitrability,
P "301" and directed the parties to commence arbitration proceedings to resolve that issue and, if
necessary, the merits.
On January 11, 1989, Apollo filed the instant action in federal district court under diversity of
citizenship jurisdiction. It sought a permanent stay of the arbitration, pursuant to M.G.L. Ch.
251, § 2(b), on the grounds that there is not an arbitration agreement between the parties....
Apollo then moved for summary judgment. On May 11, 1989, the district court denied the
request to stay arbitration and the motion for summary judgment....
The district court first decided that the parties had explicitly agreed to have the issue of
arbitrability decided by the arbitrator. Notwithstanding this conclusion, the court then
proceeded to analyze the issue of arbitrability itself. It determined that Dico would have the
right to seek arbitration of the underlying claims if it had pursued them on its own behalf. The
only remaining issue, the court reasoned, was whether the agreement's nonassignment clause
prevented the defendants from asserting Dico's right to arbitrate. The court ruled that it did
 not because, under Massachusetts law, a general nonassignment clause will be construed as
barring only the delegation of duties, not the assignment of rights....
We ... find that the parties contracted to submit issues of arbitrability to the arbitrator. There is
no question that this contract falls under the aegis of the [FAA]. Both parties agree that under
the [FAA], the general rule is that the arbitrability of a dispute is to be determined by the
court. See Necchi v. Necchi Sewing Machine Sales Corp., 348 F.2d 693, 696 (2d Cir. 1965) (Marshall,
J.), cert. denied, 383 U.S. 909 (1966); see also AT&T Technologies, Inc. v. Communications Workers,
475 U.S. 643, 649 (1986) (reaffirming this general rule in the labor arbitration context). Parties
may, however, agree to allow the arbitrator to decide both whether a particular dispute is
arbitrable as well as the merits of the dispute. See Necchi, 348 F.2d at 696.
In this case, the parties agreed that all disputes arising out of or in connection with their
contract would be settled by binding arbitration “in accordance with the rules of arbitration of
the International Chamber of Commerce.” Article 8.3 of the ICC's [1988] Rules of Arbitration
states:
Should one of the parties raise one or more pleas concerning the existence or validity of the
agreement to arbitrate, and should the [International Court of Arbitration of the International
Chamber of Commerce] be satisfied of the prima facie existence of such an agreement, the
[Court of Arbitration of the International Chamber of Commerce] may, without prejudice to the
admissibility or merits of the plea or pleas, decide that the arbitration shall proceed. In such a
case, any decision as to the arbitrator's jurisdiction shall be taken by the arbitrator himself.
P "301"
P "302" Article 8.4 of the ICC's [1988] Rules of Arbitration states:
Unless otherwise provided, the arbitrator shall not cease to have jurisdiction by reason of any
claim that the contract is null and void or allegation that it is inexistent provided that he
upholds the validity of the agreement to arbitrate. He shall continue to have jurisdiction, even
though the contract itself may be inexistent or null and void, to determine the respective
rights of the parties and to adjudicate upon their claims and pleas.
The contract therefore delegates to the arbitrator decisions about the arbitrability of disputes
involving the existence and validity of a prima facie agreement to arbitrate. Both the ICC's
Court of Arbitration and the district court determined that a prima facie agreement to
arbitrate existed. Therefore, they reasoned, Article 8.3 requires the arbitrator to determine the
validity of the arbitration agreement in this specific instance – in other words, decide whether
the arbitration agreement applies to disputes between Apollo and the assignees of Dico.
Apollo did not discuss this issue in its brief. At oral argument, it averred that Article 8.3 is
inapplicable because no prima facie agreement to arbitrate exists between it and the
defendants. We are unpersuaded by this argument. The relevant agreement here is the one
between Apollo and Dico. The defendants claim that Dico's right to compel arbitration under
that agreement has been assigned to them. We find that they have made the prima facie
showing required by Article 8.3. Whether the right to compel arbitration survives the
termination of the agreement, and if so, whether that right was validly assigned to the
defendants and whether it can be enforced by them against Apollo are issues relating to the
continued existence and validity of the agreement.
Ordinarily, Apollo would be entitled to have these issues resolved by a court. See, e.g., I.S.
Joseph Co., Inc. v. Michigan Sugar Co., 803 F.2d 396, 399-400 (8th Cir. 1986). By contracting to
have all disputes resolved according to the Rules of the ICC, however, Apollo agreed to be
bound by Articles 8.3 and 8.4. These provisions clearly and unmistakably allow the arbitrator to
determine her own jurisdiction when, as here, there exists a prima facie agreement to arbitrate
whose continued existence and validity is being questioned. The arbitrator should decide
whether a valid arbitration agreement exists between Apollo and the defendants under the
terms of the contract between Apollo and Dico. (14) Consequently, without expressing any
opinion on the merits of the issues raised by Apollo, we affirm the district court's order denying
a permanent stay of the arbitration proceedings.
FIRST OPTIONS OF CHICAGO v. KAPLAN
514 U.S. 938 (1995)
[excerpted above at pp. 81-84]
P "302"
P "303"
MITSUBISHI MOTORS CORP. v. SOLER CHRYSLER-PLYMOUTH, INC.
473 U.S. 614 (1985)
JUSTICE BLACKMUN. [Mitsubishi Motors Corporation (“Mitsubishi”) is a Japanese corporation
that manufactures automobiles in Tokyo, Japan. Mitsubishi is a joint venture between Chrysler
International (“CISA”), a Swiss corporation owned by Chrysler Corporation, and Mitsubishi
Heavy Industries, a Japanese corporation. Soler Chrysler-Plymouth, Inc. (“Soler”), is a Puerto
Rico corporation. Soler entered into a distributor agreement with CISA that provided for the
sale by Soler of Mitsubishi manufactured vehicles within a designated area. At the same time,
CISA, Soler, and Mitsubishi entered into a sales procedure agreement (“sales agreement”) that
provided for the direct sale of Mitsubishi products to Soler and governed the terms and
conditions of such sales.
Paragraph VI of the Sales Agreement, labelled Arbitration of Certain Matters, provides:
All disputes, controversies or differences which may arise between [Mitsubishi] and [Soler] out
of or in relation to Articles I-B through V of this Agreement or for the breach thereof, shall be
 finally settled by arbitration in Japan in accordance with the rules and regulations of the Japan
Commercial Arbitration Association.
Soler failed to maintain the sales volume specified in its agreements and requested that
Mitsubishi delay or cancel shipment of several orders. Mitsubishi and CISA refused, and
Mitsubishi later brought an action against Soler in the District of Puerto Rico under the Federal
Arbitration Act and the Convention. Mitsubishi sought an order, pursuant to 9 U.S.C. §4 and 201,
to compel arbitration. Shortly after filing the complaint, Mitsubishi filed a request for
arbitration before the Japan Commercial Arbitration Association seeking damages from Soler
for breach of the parties' sales agreement. Soler denied the allegations and counterclaimed
against both Mitsubishi and CISA under the Sherman Act; the Puerto Rico competition statute;
common law defamation rules; and the Puerto Rico Dealers' Contract Act. In the counterclaim
premised on the Sherman Act, Soler alleged that Mitsubishi and CISA had conspired to divide
markets in restraint of trade.] (15)
P "303"
P "304"
At the outset, we address the contention raised in Soler's cross-petition that the arbitration
clause at issue may not be read to encompass the statutory counterclaims stated in its answer
to the complaint. In making this argument, Soler does not question the Court of Appeals'
application of Paragraph VI of the Sales Agreement to the disputes involved here as a matter of
standard contract interpretation. (16) Instead, it argues that as a matter of law a court may not
construe an arbitration agreement to encompass claims arising out of statutes designed to
protect a class to which the party resisting arbitration belongs “unless [that party] has
expressly agreed” to arbitrate those claims, by which Soler presumably means that the
arbitration clause must specifically mention the statute giving rise to the claims that a party to
the clause seeks to arbitrate....
We do not agree, for we find no warrant in the [FAA] for implying in every contract within its ken
a presumption against arbitration of statutory claims. The Act's centerpiece provision makes a
written agreement to arbitrate “in any maritime transaction or a contract evidencing a
transaction involving commerce ... valid, irrevocable, and enforceable, save upon such grounds
as exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. The “liberal federal
policy favoring arbitration agreements,”Moses H. Cone Memorial Hospital v. Mercury
Construction Corp., 460 U.S. 1, 24 (1983), manifested by this provision and the Act as a whole, is
at bottom a policy guaranteeing the enforcement of private contractual arrangements: the Act
simply “creates a body of federal substantive law establishing and regulating the duty to honor
an agreement to arbitrate.”...
Accordingly, the first task of a court asked to compel arbitration of a dispute is to determine
whether the parties agreed to arbitrate that dispute. The court is to make this determination
by applying the “federal substantive law of arbitrability, applicable to any arbitration
agreement within the coverage of the Act.” And that body of law counsels
that questions of arbitrability must be addressed with a healthy regard for the federal policy
favoring arbitration.... The Arbitration Act establishes that, as a matter of federal law, any
doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration,
whether the problem at hand is the construction of the contract language itself or an allegation
of waiver, delay, or a like defense to arbitrability.
P "304"
P "305"
Thus, as with any other contract, the parties' intentions control, but those intentions are
generously construed as to issues of arbitrability. There is no reason to depart from these
guidelines where a party bound by an arbitration agreement raises claims founded on
statutory rights, [Wilko v. Swan, 346 U.S. 427 (1953), and] the Act itself provides no basis for
disfavoring agreements to arbitrate statutory claims by skewing the otherwise hospitable
inquiry into arbitrability.
That is not to say that all controversies implicating statutory rights are suitable for arbitration.
There is no reason to distort the process of contract interpretation, however, in order to ferret
out the inappropriate. Just as it is the congressional policy manifested in the [FAA] that
requires courts liberally to construe the scope of arbitration agreements covered by that Act, it
is the congressional intention expressed in some other statute on which the courts must rely to
identify any category of claims as to which agreements to arbitrate will be held unenforceable.
For that reason, Soler's concern for statutorily protected classes provides no reason to color
the lens through which the arbitration clause is read. By agreeing to arbitrate a statutory claim,
a party does not forgo the substantive rights afforded by the statute; it only submits to their
resolution in an arbitral, rather than a judicial, forum. It trades the procedures and opportunity
for review of the courtroom for the simplicity, informality, and expedition of arbitration. We
must assume that if Congress intended the substantive protection afforded by a given statute
to include protection against waiver of the right to a judicial forum, that intention will be
deducible from text or legislative history....
JUSTICE STEVENS, DISSENTING.... [First,] as a matter of ordinary contract interpretation, there
are at least two reasons why that clause does not apply to Soler's antitrust claim against
Chrysler and Mitsubishi. First, the clause only applies to two-party disputes between Soler and
Mitsubishi. The antitrust violation alleged in Soler's counterclaim is a three-party dispute.
Soler has joined both Chrysler and its associated company, Mitsubishi, as counterdefendants....
Only by stretching the language of the arbitration clause far beyond its ordinary meaning could
one possibly conclude that it encompasses this three-party dispute.
Second, the clause only applies to disputes “which may arise between MMC and BUYER out of
 or in relation to Articles I-B through V of this Agreement or the breach thereof.... “ Thus,
disputes relating to only 5 out of a total of 15 Articles in the Sales Procedure Agreement are
arbitrable. Those five Articles cover: (1) the terms and conditions of direct sales (matter such as
the scheduling of orders, deliveries, and payment); (2) technical and engineering changes; (3)
compliance by Mitsubishi with customs laws and regulations, and Soler's obligation to inform
Mitsubishi of relevant local laws; (4) trademarks and patent rights; and (5) Mitsubishi's right to
cease production of any products. It is immediately obvious that Soler's antitrust claim did not
arise out of Articles I-B through V and it is not a claim “for the breach thereof.” The question is
whether it is a dispute “in relation to” those Articles....
P "305" The federal policy favoring arbitration cannot sustain the weight that the Court assigns to it. A
P "306" clause requiring arbitration of all claims “relating to” a contract surely could not encompass
a claim that the arbitration clause was itself part of a contract in restraint of trade. Nor in my
judgment should it be read to encompass a claim that relies, not on a failure to perform the
contract, but on an independent violation of federal law. The matters asserted by way of
defense do not control the character, or the source, of the claim that Soler has asserted. (17)
Accordingly, simply as a matter of ordinary contract interpretation, I would hold that Soler's
antitrust claim is not arbitrable....
[Second,] until today all of our cases enforcing agreements to arbitrate under the [FAA] have
involved contract claims. In one, the party claiming a breach of contractual warranties also
claimed that the breach amounted to fraud actionable under §10(b) of the Securities Exchange
Act of 1934. Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974). (18) But this is the first time the
Court has considered the question whether a standard arbitration clause referring to claims
arising out of or relating to a contract should be construed to cover statutory claims that have
only an indirect relationship to the contract. In my opinion, neither the Congress that enacted
the Arbitration Act in 1925, nor the many parties who have agreed to such standard clauses,
could have anticipated the Court's answer to that question.
On several occasions we have drawn a distinction between statutory rights and contractual
rights and refused to hold that an arbitration barred the assertion of a statutory right. Thus, in
Alexander v. Gardner Denver Co., 415 U.S. 36 (1974), we held that the arbitration of a claim of
employment discrimination would not bar an employee's statutory right to damages under
Title VII of the Civil Rights Act of 1964 ... notwithstanding the strong federal policy favoring the
arbitration of labor disputes. In that case the Court explained at some length why it would be
unreasonable to assume that Congress intended to give arbitrators the final authority to
implement the federal statutory policy:
“[W]e have long recognized that ‘the choice of forums inevitably affects the scope of the
substantive right to be vindicated.’ U.S. Bulk Carriers v. Arguelles, 400 U.S. 351, 359-360 (1971)
(Harlan, J., concurring)....”
In view of the Court's repeated recognition of the distinction between federal statutory rights
P "306" and contractual rights, together with the undisputed historical fact that arbitration has
P "307" functioned almost entirely in either the area of labor disputes or in “ordinary disputes
between merchants as to questions of fact,” it is reasonable to assume that most lawyers and
executives would not expect the language in the standard arbitration clause to cover federal
statutory claims. Thus, in my opinion, both a fair respect for the importance of the interests
that Congress has identified as worthy of federal statutory protection, and a fair appraisal of
the most likely understanding of the parties who sign agreements containing standard
arbitration clauses, support a presumption that such clauses do not apply to federal statutory
claims....
MEDITERRANEAN ENTERPRISES, INC. v. SSANGYONG CORP.
708 F.2d 1458 (9th Cir. 1983)
NELSON, CIRCUIT JUDGE. Defendant-appellant Ssangyong Construction Co. (“Ssangyong”)
appeals the district court's interlocutory order staying the action and sending to arbitration
certain issues raised in a complaint filed by plaintiff-appellee Mediterranean Enterprises, Inc.
(“MEI”). Ssangyong contends that the district court improperly interpreted the scope of the
arbitration clause in a contract between the parties.... MEI, a California corporation, provides
engineering services for modular housing projects in developing countries. In May, 1978, MEI
was invited by the Saudi Arabian Royal Commission to bid on certain construction projects in
Saudi Arabia. In connection with this invitation, MEI contacted Ssanygong, a Korean contractor.
On September 9, 1978, in Los Angeles, MEI and Ssangyong signed a “Preliminary Agreement for
Formation of a Joint Venture” (“the Agreement”). The arbitration clause in the Agreement
provides as follows:
“Any disputes arising hereunder or following the formation of joint venture [sic] shall be settled
through binding arbitration pursuant to the Korean U.S. Arbitration Agreement, with arbitration
to take place in Seoul, Korea.”
Subsequently, MEI and Ssangyong entered into an Agency Agreement dated October 21, 1978,
with Trac Enterprises, providing that Trac would serve as the agent of the joint venture in Saudi
Arabia.
The contemplated MEI-Ssangyong joint venture was never actually formed. In its complaint,
MEI alleges that Ssangyong used the Agreement merely to gain access to the Saudi projects,
and wrongfully commenced the projects in association with Trac (named as a defendant [by
MEI in its complaint] below) rather than with MEI. Ssangyong claims that no breach occurred,
and that its non-performance of the Agreement was due to its inability to obtain certain
Korean government approvals....
 MEI commenced this action in district court. The complaint contains six counts against
P "307" Ssangyong: breach of contract and breach of fiduciary duty (counts 1, 2 and 4), inducing and
P "308" conspiracy to induce breach of contract [the Trac Agency Agreement (count 7), quantum
meruit (count 8) and conversion (count 9).... [T]he district court rejected MEI's contention that
Ssangyong had fraudulently inserted the words “arising hereunder or” in the arbitration clause
... [Thereafter, following a hearing, the district court issued the following order concerning the
scope of the arbitration clause:]
“The issues raised by Counts 1, 2 and 4 of [MEI's] Complaint against [Ssangyong] are found to be
arbitrable and are ordered to arbitration between the said parties pursuant to paragraph 16 of
the [Agreement.] ...”
A determination of the arbitrability of a dispute, like the interpretation of any contractual
provision, is subject to de novo review.... The parties cite strong policies in support of their
respective positions.
Ssangyong argues that federal policy favors the enforcement of arbitration agreements,
especially in international business transactions. MEI does not dispute the existence of such a
federal policy, but counters by arguing that “arbitration is a matter of contract and a party
cannot be required to submit to arbitration any dispute which he has not agreed to submit,”
quoting United Steel Workers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582 (1960). Both
statements are sound and not at all irreconcilable. Ultimately, the issue of arbitrability “is to
be determined by the contract entered into by the parties.” The task before this court remains
one of contractual interpretation. Ssangyong argues that the arbitration clause “was designed
to cover ‘any’ disputes between the parties.” MEI argues that the phrase “arising hereunder”
means “arising under the contract itself” and was not intended to cover “matters or claims
independent of the contract or collateral thereto.” Neither side points to, and additional
research has not uncovered, cases in this circuit which define “arising hereunder” in the
context of an arbitration agreement. However, we are persuaded by a line of cases from the
Second Circuit that MEI's interpretation is the more reasonable one. (19)
We interpret “arising hereunder” as synonymous with “arising under the Agreement.” The
phrase “arising under” has been called “relatively narrow as arbitration clauses go.” Sinva, Inc.
P "308" v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 253 F.Supp. 359, 364 (S.D.N.Y. 1966). In In re
P "309" Kinoshita & Co., 287 F.2d 951, 953 (2d Cir. 1961), Judge Medina concluded that when an
arbitration clause “refers to disputes or controversies ‘under’ or ‘arising out of’ the contract,”
arbitration is restricted to “disputes and controversies relating to the interpretation of the
contract and matters of performance.” Judge Medina reasoned that the phrase “arising under”
is narrower in scope than the phrase “arising out of or relating to,” the standard language
recommended by the American Arbitration Association.
In a recent case, a district court amplified Judge Medina's reasoning. In Michele Amoruso e Figli
v. Fisheries Development Corp., 499 F.Supp. 1074, 1080 (S.D.N.Y. 1980), the court discussed the
Supreme Court's interpretation of an arbitration clause, noting that “arising out of or relating to
this agreement” had been labelled a “broad arbitration clause.” The court went on to say that
in the case before it, “the clause is limited to differences or disputes ‘arising out of this
Agreement’; notably, it omits reference to disputes ‘relating to’ the agreements. The omission
is significant in the Second Circuit.” The omission should be significant in this circuit as well.
The standard clause suggested in the U.S. Korean Commercial Arbitration Agreement contains
the phrase, “out of or in relation to or in connection with this contract, or for the breach
thereof.” We have no difficulty finding that “arising under” is intended to cover a much
narrower scope of disputes, i.e., only those relating to the interpretation and performance of
the contract itself.
In light of our interpretation of the arbitration clause in the Agreement, we must next decide
whether the district court properly sent “the issued raised by” counts 1, 2 and 4 to arbitration.
This entails examining MEI's complaint to determine the extent to which the counts against
Ssangyong refer to disputes or controversies relating to the interpretation and performance of
the contract itself. Counts 1, 2 and 4 alleging breach of the Agreement and breach of the
fiduciary duty created by the Agreement, clearly fall within the scope of the arbitration clause,
and are thus proper subjects for arbitration. However, counts 7, 8 and 9 appear to raise issues
that are either primarily or wholly outside the scope of the arbitration clause. Count 7 alleges
that Ssangyong induced and conspired to induce breach of the Trac Agency Agreement, a
separate and distinct contract. Ssangyong's alleged conduct appears to relate only
peripherally to the MEI-Ssangyong Agreement, and could have been accomplished even if the
Agreement did not exist. Count 7 therefore alleges activity and raises issues which are
predominantly unrelated to the central conflict over the interpretation and performance of the
Agreement.
Count 8 sets forth a claim in quantum meruit, which by its own terms rests on the theory that
services were performed and accepted pursuant to an implied contract or “quasi-contract.” An
action does not lie on an implied contract where there exists between the parties a valid
express contract which covers the identical subject matter.... Thus, by definition, count 8 does
not directly relate to the interpretation and performance of the Agreement itself.
Count 9 alleges that Ssangyong converted to its own use and benefit certain prequalification
P "309" documents delivered by MEI. The Agreement provides only that each of the parties would bear
P "310" his own costs at the prequalification stage. MEI's claim that Ssangyong misappropriated
these documents appears to raise issues largely distinct from the central conflict over the
interpretation and performance of the Agreement itself.
By sending the “issues raised by” counts 1, 2 and 4 to arbitration, the district court authorized
 the arbitrator, in accordance with the expressed intention of the parties, to decide those
issues relating to the interpretation and performance of the Agreement. Counts 1, 2 and 4
appear to be completely arbitrable. By deciding those issues necessary to resolve counts 1, 2
and 4, the arbitrator might well decide issues which bear in some way on the court's ultimate
disposition of counts 7, 8 and 9. Nothing in the district court's order, or in this opinion would
bar such a result. The arbitrator's award, if it clearly exceeds the scope of his authority by
deciding a matter not within the ambit of the arbitration clause, will not be given effect by the
court. After the district court receives the results of the arbitration, it should proceed to
adjudicate those issues which fall outside the scope of the arbitration clause.
JUDGMENT OF 8 FEBRUARY 1991
(Oberlandesgerichtshof Munich 1991)
The plaintiff seeks reimbursement of money paid pursuant to a guarantee. The action is based
on an assigned claim for unjust enrichment.
On January 20, 1986 the parties entered into a contract for the construction of a lift. The
contract contained an arbitration clause. The plaintiff also agreed to obtain a bank guarantee
to secure potential warranty claims. On December 9, 1986 a bank furnished the said guarantee.
On January 25, 1990 the defendant claimed DM 11.950, under the guarantee which the bank paid
on first demand subject to countermand. The bank then assigned its claim for payment under
that assigned claim. The defendant has raised the arbitration clause as a bar to the judicial
proceedings.]
1.The two parties entered irrefutably an arbitration agreement as part of the building contract
on 20/01/1986 ... The single decisive factor is if the said claim in a concrete case is included in
the arbitration agreement entered into between the two parties. This question depends on the
content and the scope of the concrete agreement. Its scope is to be established through
individual interpretation. It is to comply with the intentions of the parties, who may determine
which disputes are to be resolved by arbitration.
In order to ascertain the parties' intentions, all the circumstances of the case are to be taken
into consideration. In particular, the interests of the parties and their purposes. General
principles of contract construction under the German Civil Code apply. In general, an
arbitration clause is to be interpreted liberally ...
P "310" The wording of the arbitration agreement is in this case very liberally formulated. According to
P "311" Section 1 I, all disputes which result from the parties' agreement are covered. Accordingly,
the principle that arbitration agreements are to be interpreted liberally is particularly
significant. Through further wording the parties indicated that any disputes are to be
submitted to arbitration. If a party intends a restrictive interpretation, it should identify any
issues that are not subject to arbitration. This was not done ...
The claim in this case is clearly included in the wording of the agreement, in accordance with
the principle of liberal interpretation referred to above. The claim concerns a legal dispute
between the two parties of the arbitration agreement, who confront each other as plaintiff and
defendant. The dispute arises from the contract they entered into and its resolution depends
upon whether the alleged defects in construction work actually exist. The fact of assignment
recedes into the background in light of the substantive nature of the claim. The parties'
dispute is not about the validity of the assignment but solely whether there are any warranty
claims under the work contract.
This interpretation of the wording is consistent with the purpose of the arbitration agreement.
If the parties choose to resolve their disputes by arbitration as opposed to by the state courts,
they have certain motives and reasons for doing so. Such intentions are present to a certain
extent, if the matter concerns disputes that frequently arise under the contractual relationship
in question. In case of a work contract, this undoubtedly includes differences regarding
warranties. With regard to meaning and purpose, an arbitration agreement will surely include
disputes of every sort relating to the warranty. When the core of the dispute concerns warranty
rights, it is not conceivable that the parties, having seen the advantages of arbitration, do not
want the state court to interfere.
Due to the contract structure, the arbitration agreement is very closely connected with the
questions at issue from the related transaction of the warranty surety. Both the arbitration
agreement and the plaintiff's obligation to provide the warranty security (i.e., the bank
guarantee) are regulated in one and the same contract. The arbitration agreement can be
found as attachment 4 to the construction contract from 20/01/1986 and the bank guarantee
for the warranty as attachment 5 to the aforementioned contract. The obligation to provide a
bank guarantee for the warranty also appears to form a part of the work contract due to its
external structure. This emphasises once again the fact that disputes in connection with the
bank guarantee for the warranty are included in the wording of the arbitration agreement.
Notes on Interpretation of Scope of International Arbitration Agreements
1 Respective roles of courts and arbitrators in interpreting arbitration agreements in Apollo,
Mitsubishi, and Ssangyong.Compare the respective roles of the court and the arbitral tribunal
in interpreting the scope of the arbitration agreements in Mitsubishi Motors and Ssangyong, on
the one hand, and Apollo Computer, on the other. Is it the court or the arbitrator that decides
the scope of the parties' arbitration clause in each case? Are the first two decisions consistent
P "311" with the third one? Note that the Ssangyong court holds that certain claims are outside the
P "311" scope of the arbitration agreement and shall not be arbitrated. Would that result have been
possible under the analysis in Apollo? Are there material differences between the arbitration
agreements in the three cases which might explain the different approaches? between the
 types of claims or disputes that are at issue?
P "311"
P "312"
2 Allocations of authority to interpret scope of arbitration agreements under national
arbitration legislation. Different national arbitration statutes prescribe different allocations of
authority to interpret the scope of arbitration agreements. Compare the approach of Apollo
with that of the Munich Oberlandesgerichthof. Is it possible that differences in the parties'
arbitration agreements explain the divergent approaches? Of course, differences among
national approaches to this issue gives importance to choice of law and forum selection issues.
See supra pp. 84-93, 95-117 & infra pp. 312-15, 315-18.
3 Rationales for allocations of authority to interpret scope of arbitration agreements.Why
should courts require arbitration of a dispute about the scope of an arbitration agreement
where the parties' agreement clearly does not encompass the dispute? One court put the issue
as follows:
Imagine a contract for construction of a one room log cabin. The parties agreed that disputes
over the glass used in the windows would be subject to arbitration. If the owner were to sue the
builder on broad breach of contract and tort causes of action, alleging drafty walls, a leaky
roof, and a complete lack of wooden flooring, it would defy logic to force the owner to submit
the entire dispute to arbitration, when all he had agreed to arbitrate was disputes over window
glass. Mesquite Lake Associates v. Lurgi Corp., 754 F.Supp. 161 (N.D. Calif. 1991).
Is that right? Suppose that the parties' arbitration agreement specifically provides that the
arbitrators are to resolve disputes about its scope. Then what result?
Is not judicial interpretation of the scope of the parties' arbitration agreement inconsistent
with the basic purpose of international arbitration? If the parties have entered into a valid
arbitration agreement, where the arbitrators will decide some significant category of disputes,
is it not likely that they intended the arbitrators to decide where their competence ends?
Would this not be sensible?
4 Allocation of authority under the FAA to interpret scope of arbitration clause. Reread the First
Options and Apollo Computer decisions.
(a) First Options' presumption that questions of arbitrability are for judicial resolution. As
discussed above, the Supreme Court confirmed in First Options that disputes concerning
“arbitrability questions” can in principle be dispatched to the arbitrator for decision, but
that whether or not this will be ordered depends upon what the parties' arbitration
agreement was intended to mean and upon presumptions which apply to ascertaining
the parties' intent. First Options of Chicago v. Kaplan, 514 U.S. 938 (1995); supra pp. 89-93.
The Court also adopted a presumption in First Options that arbitration agreements do not
ordinarily submit questions of arbitrability to the arbitrators. According to the First
Options Court, only “clear and unmistakable” evidence will support a conclusion that
“arbitrability” questions must be arbitrated. First Options of Chicago v. Kaplan, 514 U.S.
938 (1995); supra pp. 89-93. Note that Apollo (a pre-First Options decision) expressly
adopted a similar presumption that disputes over the scope of an arbitration agreement
are to be resolved by courts, not arbitrators, but then held that the presumption had
been rebutted by virtue of the ICC Rules.
(b) Applicability of First Options' presumption for judicial resolution of arbitrability questions
to interpretation of scope of arbitration agreement. Should the First Options' presumption
in favor of judicial resolution of arbitrability questions apply to the interpretation of the
scope of a concededly existent and valid arbitration agreement? Consider the rationale
in First Options for the presumption. If the parties have agreed to arbitrate their disputes,
rather than litigate them, isn't it more likely that they assumed that arbitrators would
resolve questions about how far their arbitration clause reached? Note that, in
international transactions, parties often agree to arbitrate in order to avoid national
court proceedings in either party's home forum. Does this support a presumption that the
scope of international arbitration agreements should be resolved by the arbitrators?
Some U.S. judicial decisions have suggested that First Options' presumption that
“arbitrability questions” are for judicial resolution does not apply to questions concerning
the scope of a concededly valid arbitration clause. See Abram Landau Real Estate v.
Benova, 123 F.3d 69 (2d Cir. 1997); United States Fire Ins. Co. v. National Gypsum Co., 101
F.3d 813 (2d Cir. 1996).
P "312"
P "313"
Most lower courts have held the First Options does apply to disputes about the scope of
an arbitration clause, but have also frequently found that First Options' presumption in
favor of judicial resolution has been overcome. See Toledo Technologies, Inc. v. INA
Walzlager Schaeffer KG, 1999 WL 681557 (N.D. Ohio 1999) (scope and interpretation of
arbitration clause is arbitrable under First Options); Port Authority of New York and New
Jersey v. Office of the Contract Arbitrator, 660 N.Y.S.2d 408 (App. Div. 1997) (scope and
interpretation of arbitration clause held arbitrable under First Options); In re Ras
Securities Corp., 674 N.Y.S.2d 303 (App. Div. 1998) (scope of arbitration clause held
arbitrable).

5 Institutional arbitration rules granting arbitrators power to interpret scope of parties'

arbitration agreement.As discussed above, leading institutional arbitration rules grant arbitral
tribunals authority to determine challenges to their own jurisdiction, including disputes over
 the scope of an arbitration clause. See supra pp. 85-86; ICC Rules Article 6; LCIA Rules Article 23.
(a) ICC Rules. As Apollo indicates, Article 8(3) of the pre-1998 ICC Rules provided that the ICC
International Court of Arbitration would decide challenges to the “prima facie”
jurisdiction of an ICC arbitration tribunal and that “any decision as to the arbitrator's
jurisdiction shall be taken by the arbitrator himself”; Article 8(4) provided that the
arbitrator shall have jurisdiction notwithstanding claims that the parties' contract is void
or nonexistent. Article 6 of the 1998 ICC Rules contains substantially identical provisions.
Apollo interprets Articles 8(3) and 8(4) of the 1988 ICC Rules as expressly delegating to the
arbitrator the power to decide disputes over the scope of the arbitration agreement. For
similar U.S. judicial interpretations of the ICC Rules, see Societe Generale etc. v. Raytheon
European Mgt. and Systems Co., 643 F.2d 863, 869 (1st Cir. 1981); Daiei Inc. v. United States
Shoe Corp., 755 F.Supp. 299, 303 (D. Haw. 1991). Compare J.J. Ryan & Sons v. Rhone Poulenc
Textile SA, 863 F.2d 315, 318-19 (4th Cir. 1988) (directly considering scope of ICC arbitration
clause without reference to Article 8); Butler Products Co. v. Unistrut Corp., 367 F.2d 733
(7th Cir. 1966); Andrew Martin Marine Corp. v. Stork-Werkspoor Diesel BV, 480 F.Supp. 1270
(D. La. 1979) (interpreting ICC clause broadly, but without reference to Article 8).
Is Apollo Computer's interpretation of the 1988 ICC Rules Articles 8(3) and 8(4) a fair
reading of those provisions? Is any other interpretation plausible?

(b) Other institutional arbitration rules. Compare Articles 8(3) and 8(4) of the ICC Rules
provisions with other comparable sections of the LCIA and UNCITRAL Rules, excerpted
above supra pp. .... Do the latter provisions accomplish the same thing? Is this treatment
of the issue of arbitrability a reason for or against selecting such institutional rules?
6 Lower U.S. court decisions holding that “broad” arbitration clause grant arbitrators authority
to interpret scope of clause.Relying on a passing reference in Prima Paint to “broad” arbitration
clauses, 388 U.S. at 402, some lower U.S. court decisions have distinguished between “broad”
and “narrow” arbitration clauses. These courts have held that, under a “broad” clause, the
arbitrator is granted authority to decide the arbitrability of particular claims, while the latter
requires a judicial determination:
Simply stated, a court should compel arbitration, and permit the arbitrator to decide whether
the dispute falls within the clause, if the clause is “broad.” In contrast, if the clause is “narrow,”
arbitration should not be compelled unless the court determines that the dispute falls within
the clause. Specific words and phrases alone may not be determinative although words of
limitations would indicate a narrower clause. The tone of the clause as a whole must be
considered.
Prudential Lines, Inc. v. Exxon Corp., 704 F.2d 59, 64 (2d Cir. 1983). See Lebanon Chemical Corp. v.
United Farmers Plant Food, Inc., 179 F.3d 1095 (8th Cir. 1999) (“A court deciding arbitrability
under a broad agreement [to arbitrate] leaves for the arbitrator the issue of whether the
controversy in question relates to the agreement containing the arbitration clause, i.e., the
scope of the clause.”); Paine Webber, Inc. v. Bybyk, 81 F.3d 1193 (2d Cir. 1996) (“broad” arbitration
clause encompassing “any and all controversies” indicates that “parties intended to arbitrate
issues of arbitrability”); Hornbeck Offshore Corp. v. Coastal Carriers Corp., 981 F.2d 752 (5th Cir.
1993) (“if the clause is broad, the action [in state court] should be stayed and the arbitrators
permitted to decide whether the dispute falls within the clause”); Sedco, Inc. v. Petroleos
Mexicanos Mexican National Oil Co., 767 F.2d 1140, 1145 (5th Cir. 1985); Prudential Lines, Inc. v.
Exxon Corp., 704 F.2d 59, 64 (2d Cir. 1983) (“Simply stated, a court should compel arbitration,
P "313" and permit the arbitrator to decide whether the dispute falls within the clause, if the clause is
P "313" “broad.” In contrast, if the clause is “narrow,” arbitration should not be compelled unless the
court determines that the dispute falls within the clause.”); McAllister Bors., Inc. v. A & S Transp.
Co., 621 F.2d 519, 522 (2d Cir. 1980); Acevedo Maldonado v. PPG Indus., Inc., 514 F.2d 614, 616-17
(1st Cir. 1975) (under broad clause, “arbitrator must ultimately pass on the outer boundaries of
what is arbitrable”); Duane Street Assoc. v. Local 32B-32J, 2000 WL 802889 at *1 (S.D.N.Y. 2000)
(“broad arbitration clause” requires that arbitrators decide disputes over scope of clause);
Gestetner Holdings, plc v. Nashua Corp., 784 F.Supp. 78 (S.D.N.Y. 1992); CAE Indus. Ltd v.
Aerospace Holdings Co., 741 F.Supp. 388, 392 (S.D.N.Y. 1989); Pepsi-Cola Metropolitan Bottling Co.
v. Columbia-Oxford Beverages, Inc., 474 N.Y.S.2d 151 (App. Div. 1975), aff'd, 389 N.Y.S.2d 315 (1976);
Nationwide Gen. Ins. Co. v. Investors Ins. Co., 371 N.Y.S.2d 463, 467 (1975) (“[p]enetrating
definitive analysis of the scope of the agreement must be left to the arbitrators”); Matter of
Arbitration between Jefferson- Lewis-Hamilton-Herkimer-Oneida Boces, 668 N.Y.S.2d 834 (App.
Div. 1998) (“broad arbitration clause” requires that “issues concerning the scope of the
agreement ... are matters for the arbitrator to decide”); Board of Education of Plainedge v.
Plainedge Fed. of Teachers, 645 N.Y.S.2d 489, 490 (App. Div. 1990) (scope of broad arbitration
clause “is an issue to be resolved by arbitration and not by courts”).
Most of these decisions pre-date First Options of Chicago v. Kaplan. It is arguable that they do
not survive the Supreme Court's analysis in First Options. On the other hand, what if state law
holds that “arbitrability questions” may be arbitrated without overcoming a presumption of
judicial resolution. Is there any basis for concluding that the FAA preempts such a rule?
If First Optionswere applicable, does the parties' agreement on a “broad” arbitration clause
constitute “clear and unmistakable” evidence of an intention to arbitrate disputes about the
scope of their arbitration clause? Note that First Options' requirement of “clear and
unmistakable” evidence may not apply to disputes about the scope of an arbitration clause (as
distinct from dispute about the existence of validity of an arbitration agreement). See supra
pp. 312-13.
P "313"
P "313"
P "314"
7 Lower U.S. court decisions holding that need to interpret parties' underlying contract is
relevant to allocation of authority to interpret scope of arbitration agreement.Disputes about
the scope of an arbitration clause can require interpretation of the substantive provisions of
the parties' underlying contract. For example, in determining whether a particular claim or
dispute “arises from” or “relates to” a contract, it may be necessary to determine what
substantive obligations the underlying contract imposes. It is almost universally
acknowledged, however, that it is for the arbitrators to determine what substantive obligations
an underlying contract imposes. Judicial resolution of such issues, for purposes of deciding
disputes about the scope of an arbitration clause, threaten to encroach on the undisputed
domain of the arbitrators.
Some courts have relied on the foregoing analysis in remitting disputes over the scope of
arbitration agreements to the arbitrators. In re Praetorian Realty Corp., 373 N.Y.S.2d 151 (App.
Div. 1975), aff'd, 389 N.Y.S.2d 315 (1976); Nationwide Gen. Ins. Co. of America v. Investors Ins. Co.,
371 N.Y.S.2d 463, 466 (1975); Sharon Steel Corp. v. Jewell Coal & Coke Co., 735 F.2d 775 (3d Cir.
1984) (“[T]he Federal Arbitration Act gives the arbitrator the power to determine the scope of
the arbitration clause as well as the substantive merits of the claim.... [A] case in which the
scope of arbitrability affects the merits of the claim is a strong[] candidate for an arbitration.”);
National R.R. Passenger Corp. v. Chesapeake & Ohio Ry. Co., 551 F.2d 136, 140 (7th Cir. 1977)
(“‘When the judiciary undertakes to determine the merits of a grievance under the guise of
interpreting the.... (arbitration clause), it usurps a function which.... is entrusted to the
arbitration tribunal.’”) (quoting United Steelworkers v. American Mfg. Co., 363 U.S. 564, 569
(1960)); I. & F. Corp. v. International Ass'n of Heat & Frost Insulators, Local 8, 493 F.Supp. 147, 150
(S.D. Ohio 1980) (“There are three recognized exceptions.... to the general proposition that
arbitrability is for the court. The first such exception applies where the arbitrability issue
unavoidably implicates the merits of the underlying controversy.”).
8 Lower U.S. court decisions adopting distinction between “broad” and “narrow” arbitration
clauses in determining scope of arbitration clause.Although they appear to be aberrant, other
lower U.S. court decisions have held that “broad” arbitration clauses are to be interpreted
broadly by courts in favor of arbitration, while “narrow” arbitration clauses are not. See
Pennzoil Exploration and Production Co. v. Ramco Energy Ltd, 139 F.3d 1061 (5th Cir. 1998)
(“relating to” language in arbitration agreement is “broad”; clause not limited to claims under
contract, and also reaches claims that “‘touch’ matters covered by” the contract).
9 Choice of law governing interpretation of arbitration agreement.What law should be applied
P "314" to the interpretation of an arbitration agreement? Possible options include: (a) the law chosen
P "314" by the parties to apply to the arbitration agreement; (b) the law of the state where the
judicial enforcement proceedings are pending; (c) the procedural law of the arbitration; and
(d) the law governing the parties' underlying contract. What arguments can be made for each of
these alternatives? Are different issues raised by disputes about the scope of an arbitration
agreement than by other questions of interpretation?
What law did the courts in Apollo Computer, Mitsubishi, Ssangyong, and Judgment of 8 February
1991 apply to interpret the scope of the parties' arbitration agreement? For other national
court decisions applying the law of the enforcement forum, see
P "314"
P "315"
10 Choice of law governing interpretation of arbitration agreements in U.S. courts. What was the
source of law for the rules of interpretation – including the presumption in favor of arbitrability
– that the First Options, Mitsubishi and Ssangyong courts applied? U.S. state, U.S. federal, or
foreign law?
(a) Applicability of federal law to the interpretation of arbitration agreements by U.S. courts.
The Mitsubishi Court emphasized the existence of a body of “federal substantive law” and
used this body of law to interpret the parties' arbitration agreement. See also First
Options of Chicago v. Kaplan, 514 U.S. 938, 945 (1995); Dean Witter Reynolds v. Byrd, 470 U.S.
213 (1985); Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (1983); suprap.
116 & infra pp. 348-53. Note that Ssangyong also applied federal rules of construction to
determine the scope of the parties' arbitration agreement.
Other lower U.S. courts have uniformly followed this course (except for a few decisions,
discussed below, incorrectly applying Volt). See McPheeters v. McGinn, Smith & Co., 953
F.2d 771 (2d Cir. 1992); Nicaragua v. Standard Fruit Co., 937 F.2d 469 (9th Cir. 1991); Mayaja,
Inc. v. Bodkin, 803 F.2d 157, 161 (5th Cir. 1986); Zell v. Jacoby-Bender, Inc., 542 F.2d 34, 36-7
(7th Cir. 1976); Coenen v. R.W. Pressprich & Co., 453 F.2d 1209, 1212 (2d Cir. 1972); Greenwich
Marine v. S.S. Alexandra, 339 F.2d 901, 908 (2d Cir. 1965); Merrill Lynch, Pierce, Fenner &
Smith Inc. v. DeCaro, 577 F.Supp. 616 (W.D. Mo. 1983); First Citizens Municipal Corp. v.
Pershing Division etc., 546 F.Supp. 884 (N.D. Ga. 1982); Fuller Co. v. Compagnie des Bauxites
de Guinie, 421 F.Supp. 938, 947 (W.D. Pa. 1976); Griffin v. Semperit of America, Inc., 414
F.Supp. 1384 (S.D. Tex. 1976).
 (b) State court applications of federal law to interpretation of arbitration agreements. U.S.
state courts have also generally applied the FAA's federal “pro-arbitration” rules of
interpretation of arbitration agreements. See Lost Creek Municipal Utility District v. Travis
Indus. Painters, Inc., 837 S.W.2d 103 (Tex. Ct. App. 1992); Singer v. Jeffries & Co., Inc., 571
N.Y.S.2d 680 (Ct. App. 1991); Main v. Merrill Lynch, Pierce, Fenner & Smith, 136 Cal.Rptr. 378
(Cal. Ct. App. 1977); Pathman Constr. Co. v. Knox Cty Hosp. Ass'n, 326 N.E.2d 844, 851 (Ind.
App. 1975); Pinkis v. Network Cinema Corp., 512 P.2d 751, 755-56 (Wash. App. 1973); West
Point-Pepperell, Inc. v. Multi Line Indus., Inc., 201 S.E.2d 452, 453 (Ga. 1973); In re A/S J.
Ludwig Mowinckels Rederi, 307 N.Y.S.2d 660 (Ct. App. 1970); REA Express v. Missouri Pacific
RR Co., 447 S.W.2d 721, 726 (Tex. Civ. App. 1969).
(c) Possible applicability of foreign law to the interpretation of international arbitration
agreements in U.S. courts. In Mitsubishi, the parties' underlying agreement was subject to
Swiss law. Why isn't the interpretation of the scope of the parties' arbitration agreement
therefore a question of Swiss law?
It is, of course, possible that the parties' arbitration agreement would be subject to a
different law from that of their underlying contract. See supra pp. 43-46, 68, 107-08.
Consider the arbitration clause at issue in Mitsubishi: if it is not subject to Swiss law, what
law is it subject to? Note that the provision calls for arbitration in Japan under the rules of
a Japanese arbitration institution. Arguably, therefore, Japanese law might govern the
arbitration agreement, as well as the conduct of the arbitration proceedings. See supra p.
303.
The foregoing suggests that either Swiss or Japanese law governed the parties' arbitration
agreement in Mitsubishi. Should the Supreme Court in Mitsubishi have applied either
Swiss or Japanese law to interpret the scope of the parties' arbitration agreement? Is
there any conceivable argument that U.S. law governed the arbitration agreement? Why
exactly was U.S. law relevant to the interpretation of the arbitration agreement?
Consider the arbitration agreement in Ssangyong, providing for arbitration in Korea. As in
Mitsubishi, the court applied federal standards of interpretation without discussion of the
possible applicability of Korean law.

(d) Lower U.S. court applications of federal law to interpret scope of arbitration agreements,
notwithstanding foreign choice-of-law clause. U.S. courts have almost unanimously
applied federal U.S. law derived from the FAA to interpret the scope of arbitration
P "315" agreements in enforcement actions in U.S. courts. In addition to Mitsubishi, see Becker
P "316" Autoradio U.S.A., Inc. v. Becker Autoradiowerk GmbH, 585 F.2d 39. 43-44 & n.8 (3d Cir.
1978) (“[W]hether a particular dispute is within the class of those disputes governed by
the arbitration and choice of law clause is a matter of federal law”); Marchetto v. DeKalb
Genetics Corp., 711 F.Supp. 936 (N.D. Ill. 1989) (refusing to apply Italian law to interpret
agreement to arbitrate in Italy); Pioneer Properties, Inc. v. Martin, 557 F.Supp. 1354, 1365-66
& n.14 (D. Kan. 1983) (applying FAA to interpretation of arbitration clause after noting that
agreements were subject to Ontario law); Antco Shipping Co. v. Sidermar SpA, 417 F.Supp.
207 (S.D.N.Y. 1976). Similar approaches are taken to issues relating to the enforceability of
the parties' arbitration agreement. See suprapp. 114-17, 182-84, 275-76.
(e) Lower U.S. court applications of foreign law to interpretation of arbitration agreements.
There are a number of lower U.S. court decisions that appear to apply, or lean towards
applying, foreign law to the interpretation of the parties' arbitration agreement. In re Oil
Spill by Amoco Cadiz etc., 659 F.2d 789 (7th Cir. 1981) (apparently relying on English law to
interpret scope of arbitration clause, but also relying on FAA's presumption of
arbitrability); SMG Swedish Machine Group, Inc. v. Swedish Machine Group, Inc., 1991 WL
10662 (N.D. Ill. 1991) (applying Swedish law to determine whether an arbitration clause
was mandatory); Al-Salamah Arabian Agencies Co. v. Reese, 673 F.Supp. 748, 750 (M.D.N.C.
1987) (assuming Saudi Arabian law applied, but, in absence of proof, looking to FAA); G.B.
Michael v. SS Thanasis, 311 F.Supp. 170 (N.D. Calif. 1970) (leaning, in dicta, towards
application of foreign law selected in choice of-law clause to govern interpretation of
arbitration clause); Savannah Sugar Refining Corp. v. SS Hudson Deep, 288 F.Supp. 181
(S.D.N.Y. 1968) (applying “British” law to interpretation and enforceability of arbitration
agreement); Fox v. The Giuseppe Mazzini, 110 F.Supp. 212, 213-14 (E.D.N.Y. 1953) (“it would
seem that since the contract between the parties was executed in London, the
interpretation to be given to the arbitration clause is to be that of British law rather than
the law of this country”).
 (f) Pre-Volt lower U.S. court applications of federal law to interpret scope of arbitration
agreements notwithstanding state choice-of-law clause. Prior to the Supreme Court's
decision in Volt Information, federal courts uniformly applied federal rules of
interpretation of arbitration agreements notwithstanding choice-of-law clauses selecting
state law. See Mesa Operating Limited Partnership v. Louisiana Intrastate Gas Corp., 797
F.2d 238 (5th Cir. 1986); Huber, Hunt & Nichols v. Architectural Stone Co., 625 F.2d 22 (5th
Cir. 1980); Commonwealth Edison Co. v. Gulf Oil Corp., 541 F.2d 1263, 1268-70 (7th Cir. 1976);
Collins Radio Co. v. Ex Cell-O Corp., 467 F.2d 995, 997 (8th Cir. 1972); Merrill Lynch, Pierce,
Fenner & Smith, Inc. v. Lecopulos, 553 F.2d 842, 845 n.4 (2d Cir. 1977); Medical Development
Corp. v. Industrial Holding Corp., 479 F.2d 345, 348 (10th Cir. 1973); Bell Canada v. IT&T
Telecommunications Corp., 563 F.Supp. 636, 638 (S.D.N.Y. 1983); Michele Amoruso e Figli v.
Fisheries Dev. Corp., 499 F.Supp. 1074, 1080 (S.D.N.Y. 1980); Rothberg v. Loeb, Rhoades & Co.,
445 F.Supp. 1336, 1339 (S.D.N.Y. 1978); Romnes v. Bache & Co., 439 F.Supp. 833, 838 (W.D.
Wisc. 1977).
For similar state court decisions, see Mamlin v. Susan Thomas, Inc., 490 S.W.2d 634 (Tex.
Civ. App. 1973); Burke County Public Schools Bd of Ed. v. The Shaver Partnership, 279 S.E.2d
816 (N.C. 1981); Mamlin v. Susan Thomas, Inc., 490 S.W.2d 634 (Tex. Civ. App. 1973); Pinkis v.
Network Cinema Corp., 512 P.2d 751 (Wash. App. 1973); Episcopal Housing Corp. v. Federal
Ins. Co., 239 S.E.2d 647 (S.C. 1977).

(g) Effect ofVolt on applicability of federal law to interpret scope of arbitration agreement
notwithstanding state choice-of-law clause. It does not appear that the Supreme Court's
decision in Volt Information Sciences v. Board of Trustees, 489 U.S. 468 (1989), excerpted
below, affects this consensus that federal law governs the interpretation of arbitration
agreements. In Volt, the Supreme Court held that the FAA did not preclude reliance on a
choice-of-law clause selecting California law to incorporate a section of California's
arbitration statute concerning stays of arbitration. The Volt rationale would arguably
permit incorporation of state law rules concerning interpretation of arbitration
agreements.
The apparent view of lower courts, however, is that the FAA's “pro-arbitration” rules of
interpretation preempt inconsistent state rules of interpretation even where the parties'
choice-of-law clause selects state law. See Progressive Casualty Ins. Co. v. CA
Reaseguradora Nacional de Venezuela, 991 F.2d 42 (2d Cir. 1993); Saturn Distribution Corp. v.
Williams, 905 F.2d 719 (4th Cir. 1989); Securities Indus. Ass'n v. Connolly, 883 F.2d 1114 (1st
Cir. 1989), cert. denied, 496 U.S. 956 (1990); Remy Amerique, Inc. v. Touzet Distribution SARL,
816 F.Supp. 213 (S.D.N.Y. 1993) (“Voltdoes not represent a retreat by the Court from ‘the
settled federal rule that questions of arbitrability in contracts subject to the FAA must be
resolved with a healthy regard for the federal policy favoring arbitration”); Seymour v.
Gloria Jean's Coffee Bean Franchising Corp., 732 F.Supp. 988 (D. Minn. 1990); Ideal Unlimited
Services Corp. v. Swift-Eckrich, Inc., 727 F.Supp. 75 (D.P.R. 1989). Contra Armco Steel Co. v.
CSX Corp., 790 F.Supp. 311 (D.D.C. 1991).
P "316"
P "317"
The Supreme Court endorsed the majority view of lower courts in Mastrobuono v.
Shearson Lehman Hutton Inc., 514 U.S. 52 (1995) (excerpted infra pp. 368-73). As discussed
below, the Mastrobuono Court reasoned that the choice-of-law clauses did not ordinarily
incorporate rules relating to arbitral procedure, and instead were directed towards
substantive contract law rules. See infra pp. 373-80.

11 “Pro-arbitration” bias of interpretation of international arbitration agreements under leading

national arbitration legislation.Rules of construction play an important role in the arbitral
process: to a greater extent than many other contractual provisions, arbitration clauses are
relatively formulaic and deal with unforeseen and fluid events. As a consequence, contractual
language will seldom expressly resolve issues relating to the coverage of an arbitration clause.
Instead, general rules of interpretation and presumptions regarding the parties' intent play an
important role in ascertaining the meaning of such agreements.
In a number of developed jurisdictions, national law provides that international arbitration
agreements should be interpreted in light of a strong “pro-arbitration” presumption. In
addition to the United States, Switzerland and Germany also apply presumptions of this sort.
(a) Swiss law with respect to the interpretation of arbitration agreements. Swiss courts and
commentators have generally concluded that arbitration agreements are subject to the
same basic rules of contract interpretation as other types of agreements. W. Wenger,
Kommentar zum Schweizerischen Privatrecht, Internationales Privatrecht Art. 178 note 49
(1996); Decision of the Swiss Federal Tribunal, BGE 116 la 56, 58. Additionally, there is
authority under Swiss law for a “pro-arbitration” presumption in interpreting the scope of
arbitration agreements. W. Wenger, Kommentar zum Schweizerischen Privatrecht,
Internationales Privatrecht Art. 178 note 49; Decision of the Swiss Federal Tribunal, BGE 121
III 495, 500. See also Partial Award of 5 February 1988, XV Y.B. Comm. Arb. 30 (Ad hoc) (1990)
(“the tendency has been not only to a non-restrictive but even to an expansive view of
international arbitration[] [clauses]”).
 (b) German law with respect to the interpretation of arbitration agreements. German courts
and commentators have held that valid arbitration agreements should be liberally
interpreted under German law. The excerpted decision of the Munich
Oberlandesgerichthof is representative. See also BGH BB 1971, page 369; Judgment of 17
February 1989, XV Y.B. Comm. Arb. 455 (Hamburg Oberlandesgericht) (1990) (“in case of
doubt an arbitration clause is not to be interpreted restrictively, but rather extensively”).
The rationale is that a comprehensive settlement of the parties' dispute is preferable to
piecemeal, multiplicitous litigation.
12 “Pro-arbitration” bias in interpreting arbitration agreements under the FAA. The Ssangyong
court, like the Mitsubishi Court, held that “any doubts concerning the scope of arbitrable issues
should be resolved in favor of arbitration.” Or, as the Court put it even more expansively in
United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582-83 (1960),
arbitration must be compelled unless the court can say with “positive assurance that the
arbitration clause is not susceptible to an interpretation that covers the asserted dispute.”See
also First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945 (1995) (the FAA “insist[s] upon
clarity before concluding that the parties did not want to arbitrate a related matter”); Moses H.
Cone Mem. Hosp. v. Mercury Construction Corp., 460 U.S. 1, 24-25 (1983).
Lower U.S. courts have consistently followed this vigorously pro-arbitration rule of
interpretation of arbitration agreements. E.g., Simula, Inc. v. Autoliv, Inc., 1999 U.S. App. LEXIS
8273 (9th Cir. 1999); David L. Threlkeld & Co. v. Metallgesellschaft Ltd, 923 F.2d 245, 250-51 (2d Cir.
1991); Morrie Mages etc. v. Thrifty Corp., 916 F.2d 402, 406 (7th Cir. 1990); Peoples Sec. Life Ins. Co.
v. Monumental Life Ins. Co., 867 F.2d 809, 812 (4th Cir. 1989) (“heavy presumption of arbitrability
requires that when the scope of the arbitration clause is open to question a court must decide
the question in favor of arbitration”); Management & Technical Consultants SA v. Parsons-Jurden
International Corp., 820 F.2d 1531, 1534-35 (9th Cir. 1987) (“An agreement to arbitrate ‘any
dispute’ without strong limiting or excepting language immediately following it logically
includes not only the dispute, but the consequences naturally flowing from it – here, the
amount of additional compensation”); Phillips Petroleum Co. v. Marathon Oil Co., 794 F.2d 1080
(5th Cir. 1986); Sedco, Inc. v. Petroleos Mexicanos Mexican National Oil Co., 767 F.2d 1140, 1145
(5th Cir. 1985); SA Mineracao da Trindade-Samitri v. Utah International, Inc., 745 F.2d 190, 194 (2d
Cir. 1984); Sharon Steel Corp. v. Jewell Coal & Coke Co., 735 F.2d 775, 778 (3d Cir. 1984); Dickinson
v. Heinold Securities, Inc., 661 F.2d 638, 643 (7th Cir. 1981); Butler Prod. Co. v. Unistrut Corp., 367
F.2d 733 (7th Cir. 1966); Gestetner Holdings, plc v. Nashua Corp., 784 F.Supp. 78 (S.D.N.Y. 1992)
(“where claims may be understood to raise an arbitrable issue, arbitration must be compelled,
P "317" even if the claims can also be characterized another way”); Griffin v. Semperit of America, Inc.,
P "318" 414 F.Supp. 1384 (S.D. Tex. 1976). Compare McDonnell Douglas Finance Corp. v. Pennsylvania
Power & Light Co., 858 F.2d 825, 831 (2d Cir. 1988) (“federal policy alone cannot be enough to
extend the application of an arbitration clause far beyond its intended scope”).
The FAA's “pro-arbitration” rule of interpretation is applicable to “narrow,” as well as to
“broad,” arbitration clauses. Progressive Cas. Ins. Co. v. CA Reaseguradora Nacional de
Venezuela, 991 F.2d 42, 48 (2d cir. 1993); Chevron U.S.A. Inc. v. Consolidated Edison Co., 872 F.2d
534, 537-38 (2d Cir. 1989) (“even a narrow arbitration clause must be construed in light of the
presumption in favor of arbitration”); Philips v. Newell Co., 1997 WL 181191, at *3 (S.D.N.Y. Apr. 15,
1997) (“even a narrow arbitration clause must be construed in light of the presumption in favor
of arbitration....”); Advanstar Communs. Inc. v. Beckley-Cardy, Inc., 1994 WL 176981, at *3 (S.D.N.Y.
May 6, 1994) (“A narrow arbitration clause must be construed in favor of arbitration....”);
Gestetner Holdings plc v. Nashua Corp., 784 F.Supp. 78 (S.D.N.Y. 1992) (“narrow” arbitration
clause subject to FAA's pro-arbitration rules of interpretation: “even a narrow arbitration
clause must be construed in light of the presumption in favor of arbitration”).
13 “Pro-arbitration” bias in interpreting international arbitration agreements under the New
York Convention.U.S. judicial decisions under the New York Convention have generally adopted
an especially broad federal pro-arbitration approach to interpretation, see Mitsubishi Motors
Inc. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614 (1985); Simula, Inc. v. Autoliv, Inc., 1999 U.S. App.
LEXIS 8273 (9th Cir. 1999) (“strong federal policy favoring arbitral dispute resolution ... applie[s]
with special force in the field of international contracts”); Pennzoil Exploration and Production
Co. v. Ramco Energy Ltd, 139 F.3d 1061, 1065 (5th Cir. 1998) (“This [presumption of arbitrability]
applies with special force in the field of international commerce”); Progressive Casualty Ins. Co.
v. CA Reaseguradora Nacional de Venezuela, 991 F.2d 42 (2d Cir. 1993) (Inter-American
Convention); Riley v. Kingsley Underwriting Agencies, Ltd, 969 F.2d 953 (10th Cir. 1992); David L.
Threlkeld & Co. v. Metallgesellschaft Ltd, 923 F.2d 245, 248 (2d Cir. 1991) (“the policy in favor of
arbitration is even stronger in the context of international business transactions”); J.J. Ryan &
Sons v. Rhone Poulenc Textile, SA, 863 F.2d 315 (4th Cir. 1988); Management & Technical
Consultants SA v. Parsons-Jurden International Corp., 820 F.2d 1531, 1534-35 (9th Cir. 1987);
Genesco Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 847 (2d Cir. 1987); Societe Generale de
Surveillance, SA v. Raytheon European Mgt & Systems Co., 643 F.2d 863 (1st Cir. 1981); Prograph
Int'l Inc. v. Barhydt, 928 F.Supp. 983 (N.D. Calif. 1996) (referring to “broad construction of
arbitration clauses in international agreements”); Meadows Indemnity Co. v. Baccala & Shoop
Insurance, 760 F.Supp. 1036, 1041 (E.D.N.Y. 1991) (“the liberal federal arbitration policy applies
with special force in the field of international commerce”); Rogers, Burgun, Shahine, etc. v.
Dongsan Construction Co. Ltd, 598 F.Supp. 754 (S.D.N.Y. 1984); Andrew Martin Marine Corp. v.
Stork Werkspoor Diesel BV, 480 F.Supp. 1270 (E.D. La. 1979).
14 Rationale for “pro-arbitration” rules of interpretation.Do either national arbitration statutes
or the New York Convention contain provisions governing the interpretation of arbitration
agreements? If not, then what authorizes national courts to develop presumptions governing
the construction of international arbitration agreements? Does a presumption in favor of
 arbitrability accord with the likely intent of private parties?
Consider the rationale suggested by the Munich Oberlandesgerichthof. Is the court's analysis
persuasive? Compare the rationale in First Options.
15 Other approaches to interpretation of international arbitration agreements.Not all
authorities or national laws adopt a “pro-arbitration” approach to the interpretation of
arbitration agreements.
(a) Arbitral awards adopting restrictive interpretation of scope of arbitration agreement. Some
authorities have held that arbitration clauses must be interpreted restrictively, resolving
doubts about the coverage of particular disputes against coverage. Award in ICC Case No.
2138 of 1974, Clunet 1975, at page 934 (arbitral clause must be interpreted strictly); Award
in ICC Case No. 7920 of 1993, XXIII Y.B. Comm. Arb. 80 (1998) (concluding that scope of
arbitration clause is to be interpreted “strictly,” but validity of clause is governed by
“principle of effectiveness”).
(b) U.S. state law rules requiring restrictive interpretation of arbitration agreements. Under
some U.S. state court decisions, arbitration agreements are construed narrowly with
respect to scope. Flood v. Country Mutual Ins. Co., 41 Ill.2d 91, 94 (1968) (“clear language”
required; “arbitration agreements will not be extended by construction or implication”);
Terminex Int'l Co. v. Michaels, 668 So.2d 1013, 1015 (Fla. Ct. App. 1996) (Court held that
ambiguity as to whether personal injury claims were covered by an arbitration agreement
in a contract for termite extermination should be resolved against arbitrating the
dispute); Allstate Ins. Co. v. Cook, 21 Ariz.App. 313 (1974); A.F.C.O. Metals, Inc. v. Local Union
P "318" 580, 638 N.Y.S.2d 585 (1995); Shuffman v. Rudd Plastic Fabrics Corp., 407 N.Y.S.2d 565, 566
P "319" (App. Div. 1978) (“If equivocal, the scope of a commercial arbitration clause must be
read conservatively”); Gangel v. DeGroot, 393 N.Y.S.2d 698 (N.Y. 1977) (“The agreement to
arbitrate must be express, direct, and unequivocal as to the issues or disputes to be
submitted to arbitration”).
These state law rules are almost unanimously held to be preempted under the FAA. See
supra pp. 315-16 & infra pp. 348-51; Progressive Casualty Ins. Co. v. CA Reaseguradora
Nacional de Venezuela, 991 F.2d 42 (2d Cir. 1993).

(c) Neutral interpretation of scope of arbitration agreement. Other authorities have held that
arbitration agreements should be interpreted without resort to either a “pro-arbitration”
or “restrictive” presumption. Amco Asia et al. v. Indonesia, 23 I.L.M. 359 (ICSID 1984) (“a
convention to arbitrate is not to be construed restrictively, nor, as a matter of act, broadly
or liberally. It is to be construed in a way which leads to find out and to respect the
common will of the parties.”)
16 Relevance of generally-applicable rules of contract interpretation.Aside from the “pro-
arbitration” presumption of many developed national arbitration regimes, what rules of
construction apply to arbitration agreements? What other rules of construction did the Munich
Oberlandesgerichthof apply? Under the FAA, U.S. courts also apply generally-applicable rules
of contract interpretation. See First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995). Swiss
courts adopt the same approach. See suprap. 317.
17 “Submerged” forum selection issues in “pro-arbitration” presumptions for interpretation of
international arbitration agreement.When a national court applies a presumption of
arbitrability, is it in fact interpreting the substantive contract rights of the parties in view of
their intentions, or is it instead making a procedural decision about the appropriate forum to
decide those substantive rights? That is, are “pro-arbitration” rules of interpretation in a
national court actually a means of defining the respective roles of courts and arbitrators in
interpreting the scope of arbitration agreements? See Griffin v. Semperit of America, Inc., 414
F.Supp. 1384 (S.D. Tex. 1976), for a suggestion that they are. On the other hand, note that U.S.
and other national courts' interpretation of the scope of arbitration clauses will ordinarily be
binding decisions on the merits, with full preclusive effect. See infrapp. 849-59.
18 Standard formulae in arbitration clauses.There are a limited number of fairly standard
formulae used in arbitration clauses to describe the scope of such provisions. The most
common terms cover (a) “all” or “any”; (b) “disputes,” “differences,” “claims,” or “controversies”;
(c) “arising out of,” “in connection with,” or “relating to”; (d) the parties' agreement or relations.
(a) “Relating to” formula in arbitration agreement. A number of lower U.S. courts have
concluded that the phrase “relating to” extends an arbitration clause to a broad range of
disputes. Pennzoil Exploration and Production Co. v. Ramco Energy Ltd, 139 F.3d 1061 (5th
Cir. 1998)(“relating to” language in arbitration agreement is “broad”; clause not limited to
claims under contract, and also reaches claims that “‘touch’ matters covered by” the
contract); American Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 93
(4th Cir. 1996) (“arising out of or relating to” parties' agreement is “broad” clause, covering
“all disputes having a significant relationship to the consulting agreement regardless of
whether those claims implicated the terms of the consulting agreement”); Swensen's Ice
Cream Co. v. Corsair Corp., 942 F.2d 1307, 1309 (8th Cir. 1991); In re Kinoshita & Co., 287 F.2d
951, 953 (2d Cir. 1961); McDonnell Douglas Corp. v. Kingdom of Denmark, 607 F.Supp. 1016,
1019 (E.D. Mo. 1985) (“‘relating to’ is generally regarded as broad rather than narrow
language”). See also PPG Indus., Inc. v. Pilkington plc, 825 F.Supp. 1465 (D.Ariz. 1993) (“The
word ‘involving’ is ... expansive” and “carries the same meaning here as ‘relating to’”).
 (b) “In connection with” formula in arbitration agreement. Various U.S. courts have
commented on the “in connection with” formula, usually in ways that suggest it is broad.
See Simula, Inc. v. Autoliv, Inc., 1999 U.S. App. LEXIS 8273 (9th Cir. 1999) (“in connection”
formula must be interpreted liberally”); J.J. Ryan & Sons v. Rhone Poulenc Textile, SA, 863
F.2d 315, 321-22 (4th Cir. 1988) (clause covering “‘all disputes arising in connection with the
present contract’ must be construed to encompass a broad scope of arbitrable issues ... It
embraces every dispute between the parties having a significant relationship to the
contract regardless of the label attached to the dispute”); Prograph Int'l, Inc. v. Barhydt,
928 F.Supp. 983, 989 (N.D. Calif. 1996); Good(e) Business Systems, Inc. v. Raytheon Co., 614
F.Supp. 428 (W.D. Wisc. 1985) (“the plain meaning of the phrase ‘arising in connection with’
suggests a broader scope for the arbitration clause than a phrase such as ‘arising out of’
or ‘arising under’, which seem to limit the clause to disputes concerning the contract
itself”). Compare Acquaire v. Canada Dry Bottling, 906 F.Supp. 819, 835 (E.D.N.Y. 1995)
(holding that arbitration clause covering disputes “concerning the interpretation or
application” of an agreement is “broad”).
(c) “Arising under” formula in arbitration clause. The Ssangyong court holds that arbitration
P "319" clauses using the formulation “arising under” are “narrow” and do not encompass various
P "320" tort claims that do not directly involve application of the parties' contractual
commitments. Other courts have adopted similar positions. See Belke v. Merrill Lynch,
Pierce, Fenner & Smith, 693 F.2d 1023, 1028 (11th Cir. 1982) (“An arbitration clause covering
disputes arising out of the contract or business between the parties evinces a clear intent
to cover more than just those matters set forth in the contract.”); In re Kinoshita & Co., 287
F.2d 951, 953 (2d Cir. 1961) (holding that “arising under” or “arising out of” does not
encompass a claim of fraud in the inducement of the underlying contract); Good(e)
Business Systems, Inc. v. Raytheon Co., 614 F.Supp. 428 (W.D. Wisc. 1985) (“arising under”
and “arising out of” are narrower than “in connection with”); Michele Amoruso e Figli v.
Fisheries Dev. Corp., 499 F.Supp. 1074, 1080-81 (S.D.N.Y. 1980); Sinva, Inc. v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 253 F.Supp. 359, 364 (S.D.N.Y. 1966). See also Northern Cal.
Newspaper Guild Local 52 v. Sacramento Union, 856 F.2d 1381, 1383 (9th Cir. 1998) (clause
“limit[ing] arbitrable disputes to those involving ‘application of’ the agreement” limited
scope to disputes “involving construction of the substantive provisions of the contract”);
Ashville Inv. Ltd v. Elmer Contractors Ltd, 2 Lloyd's Rep. 73, 74 (1988) (misrepresentation
claims not caught by “arising under” language, but were covered by the words “in
connection therewith”); Fillite (Runcorn) Ltd v. Acqua Lift, English Court of Appeal,
unreported decision of Feb. 17, 1989 (“arising under” implies only contractual claims).
(d) “Arising out of” formula in arbitration clause. U.S. courts are divided in their
interpretations of “arising out of” clauses. Some courts have concluded that this formula
is narrow, equating it with “arising under” provisions. Tracer Research Corp. v. Nat'l
Environmental Services Co., 42 F.3d 1292 (9th Cir. 1994) (“The ‘arising out of’ language is of
the same limited scope as the ‘arising under’ language” and does not reach
misappropriation of trade secrets claim); Texaco, Inc. v. American Trading Transp. Co., 644
F.2d 1152, 1154 (5th Cir. 1981) (“arising out of” clause evidences “restrictive language”). See
also Britton v. Co-op Banking Group, 4 F.3d 742, 749 (9th Cir. 1993) (Brunetti, J., dissenting)
(discussing “arising under” and “arising out of” clauses); Ethiopian Oilseeds & Pulses Corp.
v. Rio Del Mar Foods Inc., [1990] 1 Q.B. 86.
Other courts have suggested that “arising out of” is a broader formulation than “arising
under.” American Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88, 93 (4th
Cir. 1996).

(e) Exceptions to general scope of arbitration clause. Most U.S. courts have correctly reasoned
that the existence of exceptions to an arbitration clause does not imply that the general
affirmative scope of the clause is intended to be narrow. Acquaire v. Canada Dry Bottling,
906 F.Supp. 819, 836 (E.D.N.Y. 1995) (rejecting argument that existence of two contractual
exceptions to arbitration agreement implies that agreement's scope was intended to be
narrow); Risi-Lino Beverage Distrib., Inc. v. Coca-Cola Bottling Co., 749 F.2d 124, 126 (2d Cir.
1984) (same).
(f) Distinction between scope of arbitration clause and scope of related choice-of-law clause.
As discussed above, it is common (and advisable) for international commercial contracts
to contain both an arbitration clause and a choice-of-law clause. See suprap. 5. The two
provisions are closely-related and must frequently be applied to the same issues.
Nonetheless, as a practical matter, arbitration clauses and choice-of-law clauses are
often drafted in differing terms. For example, choice-of-law clauses sometimes provide
that the parties' “agreement shall be governed by the law of State X,” while arbitration
clauses often apply to “all disputes relating to” the parties' agreement.
It is generally well-settled that choice-of-law clauses and arbitration clauses may, if the
parties so agree, have different scopes. S+L+H SpA v. Miller-St. Nazianz, Inc., 988 F.2d 1518
(7th Cir. 1993) (disputes excluded from contracts' choice-of-law clause nonetheless
subject to contract's arbitration clause). Why would parties agree to such an
arrangement? Should an agreement's choice-of-law clause and its arbitration clause be
presumed to have identical scopes, absent clear contrary evidence? Why?
 (g) Lower court decisions refusing to parse arbitration clauses' language finely. Some courts
have questioned efforts to distinguish between different linguistic formulations used in
arbitration provisions. See Peoples Security Life Ins. Co. v. Monumental Life Ins. Co., 867
F.2d 809 (4th Cir. 1989); J.J. Ryan & Sons v. Rhone Poulenc Textile, SA, 863 F.2d 315, 321 (4th
Cir. 1988) (differences are “largely semantic”); Genesco, Inc. v. T. Kakiuchi & Co., 815 F.2d
840, 848 & 854 (2d Cir. 1987).
Is it sensible to distinguish between formulations such as “arising under” and “in
connection with” or “relating to”? Do you think that, in general, parties really intend
different meanings to attach to these different terms? As a general rule, what
presumption about the intended scope of an arbitration clause makes sense? that the
parties wanted all disputes having some connection to their contractual relations and
dealings to be arbitrated? Isn't this consistent with arbitration's promise of a single,
efficient dispute resolution mechanism?
P "320"
P "321"
19. Application of arbitration agreements to statutory claims.Parties to international arbitration
agreements frequently assert claims based on statutory protections under national law. As
Mitsubishiillustrates, these claims often raise questions concerning the scope of the parties'
arbitration agreement.
(a) Ability of parties to arbitrate statutory claims. As Mitsubishi illustrates, there is no absolute
prohibition in most developed jurisdictions against the arbitration of non-contractual
statutory claims. However, national courts have also long held that some types of
statutory claims are “non-arbitrable” – that is, that particular statutory rights cannot be
the subject of a binding arbitration agreement. That was historically the case, for
example, with U.S. federal antitrust and securities law claims, although recent decisions
have held such claims arbitrable. For a discussion of the non-arbitrability doctrine, see
supra pp. 243-95.
(b) “Pro-arbitration” presumptions applicable to statutory claims. The Mitsubishi Court held
that the parties had clearly intended to arbitrate the antitrust claims asserted by Soler.
The Mitsubishi Court also rejected any presumption that an arbitration clause would not
extend to statutory claims. On the contrary, Mitsubishi held that the FAA's “pro-
arbitration” rule of interpretation is fully applicable to statutory and other non-
contractual claims. Mitsubishi Motors, 473 U.S. at 626 (“There is no reason to depart from
these [pro-arbitration] guidelines where a party bound by an arbitration agreement
raises claims founded on statutory rights”). See also Rodriguez de Quijas v.
Shearson/American Express, Inc., 490 U.S. 477 (1989); Southland Corp., 465 U.S. at 15; Roby,
996 F.2d 1353; Fleck v. E.F. Hutton Group, Inc., 891 F.2d 1047 (2d Cir. 1989); Genesco Inc., 815
F.2d 840; Good(e) Business Systems, Inc. v. Raytheon Co., 614 F.Supp. 428 (W.D. Wisc. 1985)
(“there is no presumption against arbitration of statutory claims”); Singer v. Jefferies & Co.,
571 N.Y.S.2d 680 (Ct. App. 1991) (“A court's obligation under the [FAA] to liberally interpret
and enforce arbitration agreements is not diminished when the underlying controversy
involves a violation of a federal statute”).
Are the foregoing decisions persuasive? Do you believe that parties ordinarily consider
the existence and arbitrability of statutory claims – not based on the contract itself –
when they include an arbitration provision in their agreement? Should “pro-arbitration”
biases also apply to statutory claims?

(c) Statutory claims subject to arbitration agreement. National courts have frequently
concluded that particular statutory claims are within the scope of the parties' arbitration
agreement. Roby v. Lloyds Corporation, 996 F.2d 1353 (2d Cir. 1993) (federal securities and
RICO claims); S+L+H SpA v. Miller-St. Nazianz, Inc., 988 F.2d 1518 (7th Cir. 1993) (disputes
under Wisconsin Fair Dealership Law arbitrable); J.J. Ryan & Sons v. Rhone Poulenc Textile,
SA, 863 F.2d 315, 319-20 (4th Cir. 1988) (state unfair competition act claims); Valero
Refining, Inc. v. M/T Lauberhorn, 813 F.2d 60, 62-63 (5th Cir. 1987) (RICO); Mayaja, Inc. v.
Bodkin, 803 F.2d 157 (5th Cir. 1986) (federal securities and RICO); Commerce Park at DFW
Freeport v. Mardian Const. Co., 729 F.2d 334, 339 n.4 (5th Cir. 1984) (state statutes); PPG
Industries, Inc. v. Pilkington plc, 825 F.Supp. 1465 (D. Ariz. 1993) (antitrust); Cook Chocolate
Co. v. Salomon Inc., 684 F.Supp. 1177 (S.D.N.Y. 1988) (Commodities Exchange Act, RICO, and
fraud claims); Sharp Elec. Corp. v. Branded Products, Inc., 604 F.Supp. 239, 243 (S.D.N.Y.
1984) (Texas state antitrust claim); Lawson Fabrics, Inc. v. Akzona Inc., 355 F.Supp. 1146
(S.D.N.Y. 1973) (Lanham Act).
(d) Statutory claims held not subject to arbitration agreement. On specific facts, some courts
have held that particular statutory claims were not within the parties' arbitration
agreement. Washburn v. Societe Commerciale de Reassurance, 831 F.2d 149, 151 (7th Cir.
1987) (RICO claims not within arbitration agreement); Hoffman v. Aaron Kamhi, Inc., 927
F.Supp. 640 (S.D.N.Y. 1996) (statutory claims not within scope of poorly-drafted arbitration
clause); Church v. Gruntal & Co., 698 F.Supp. 465, 469 (S.D.N.Y. 1988) (federal securities
claims not within arbitration agreement); In re Barney's Inc., 206 B.R. 336 (S.D.N.Y. Bankr.
1997) (interpreting arbitration agreement as not extending to claims in bankruptcy
proceeding).
20 Arbitrability of common law tort claims.It is common for disputes to arise in international
arbitration over the arbitrability of common law tort claims. In a footnote, the MitsubishiCourt
 observed that the district court had held that the parties' arbitration clause did not cover
common law defamation claims asserted against Mitsubishi and CISA by Soler. As a result, the
parties' arbitration clause failed to achieve the objective of consolidating all litigation in a
single forum. How could the language of the parties' arbitration agreement in Mitsubishi have
been improved, so as to cover defamation claims?
(a) Parties' ability to arbitrate common law tort claims. There is no general bar under the laws
of most developed jurisdictions to inclusion of tort claims within the scope of an
arbitration clause. Fleck v. E.F. Hutton Group, Inc., 891 F.2d 1047, 1049-52 (2d Cir. 1989);
Pierson v. Dean Witter, Reynolds, Inc., 742 F.2d 334, 338 (7th Cir. 1984); In re Oil Spill by
P "321" Amoco Cadiz, 659 F.2d 789, 794 (7th Cir. 1981); Legg, Mason & Co. v. Mackall & Coe, Inc., 351
P "322" F.Supp. 1367 (D.D.C. 1972).
In addition, it is frequently said that a party may not defeat an arbitration clause by
casting its claims in tort, rather than contract. Ford v. Nylcare Health Plans of the Gulf
Coast, Inc., 141 F.3d 243, 250-51 (5th Cir. 1998) (“Basing the arbitrability of an action merely
on the legal label attached to it would allow artful pleading to dodge arbitration of a
dispute otherwise ‘arising out of or relating to’ (or legally dependent on) the underlying
contract. To avoid this contrivance, courts look at the facts giving rise to the action and to
whether the action ‘could be maintained without reference to the contract’....”); Collins &
Aikman Prods. Co. v. Building Sys., Inc., 58 F.3d 16, 22 (2d Cir. 1995) (plaintiff cannot “‘avoid
the broad language of [an] arbitration clause by the casting of its complaint in tort’”);
Sweet Dreams Unlimited, Inc. v. Dial-A-Mattress Int'l, Ltd, 1 F.3d 639, 643 (7th Cir. 1993) (“We
have routinely held that a party may not avoid a contractual arbitration clause merely by
‘casting its complaint in tort.’”); Acevedo Maldonado v. PPG Indus., Inc., 514 F.2d 614 (1st
Cir. 1975) (“it is immaterial whether claims are in contract or in tort”); McBro Planning and
Dev. Co. v. Triangle Elec. Construction Co., 741 F.2d 342, 344 (11th Cir. 1984); Polar
Communications Corp. v. Oncor Communications, Inc., 927 F.Supp. 894 (D. Md. 1996)
(parties may not “dress what is essentially a contract case in the garb of tort or other
theories in order to avoid the effect of a compulsory arbitration clause”); Tac Travel
America Corp. v. World Airways, Inc., 443 F.Supp. 825 (S.D.N.Y. 1978).
Similarly, a number of courts have also said that the scope of an arbitration clause is
determined by reference to the factual allegations underlying the parties' claims,
regardless of the “legal labels” attached to the claims. Ford v. Nylcare Health Plans of the
Gulf Coast, Inc., 141 F.3d 243, 250-51 (5th Cir. 1998); J.J. Ryan & Sons v. Rhone Poulenc
Textile, 863 F.2d 315, 319 (4th Cir. 1988); Hinson v. Jusco Co., 868 F.Supp. 145 (D.S.C. 1994);
Beeson v. Erickson, 917 P.2d 901 (Kan. App. 1996) (under Kansas state law, where tort claims
are not arbitrable, contract claim could not be relabelled as tort claim).

(b) “Pro-arbitration” presumptions applicable to common law tort claims. As

Mitsubishiindicates, the FAA's “pro-arbitration” presumption is fully applicable to
common law tort claims. Ford v. Nylcare Health Plans of the Gulf Coast, Inc., 141 F.3d 243,
250-51 (5th Cir. 1998); Collins & Aikman Prods. Co. v. Building Sys., Inc., 58 F.3d 16, 22 (2d Cir.
1995).
(c) Common law tort claims held subject to arbitration agreement. Lower U.S. courts have
struggled with cases, similar to Mitsubishi, where termination of a contract, or other
conduct relating to the parties' basic contractual relationship, leads to common law tort
claims (such as fraud, defamation, or unfair competition). For decisions finding that such
claims were within the scope of particular arbitration agreements, see Peoples Security
Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809 (4th Cir. 1989) (arbitration agreement
covering disputes “believed to constitute a breach or violation of” the parties'
agreement, held to cover fraudulent inducement claim); Genesco, Inc. v. T. Kakiuchi & Co.,
815 F.2d 840, 847 (2d Cir. 1987); Mar-Len of La., Inc. v. Parsons-Gilbane, 773 F.2d 633, 637 (5th
Cir. 1985) (arbitration agreement covering “any dispute arising under” the agreement or
“with respect to the interpretation or performance of” the agreement held to cover duress
claims); SA Mineracao da Trinidade-Samitri v. Utah Int'l Inc., 745 F.2d 190, 194 (2d Cir. 1984);
In re Oil Spill by Amoco Cadiz, 659 F.2d 789, 794 (7th Cir. 1981); Altshul Stern & Co. v. Mitsui
Bussan Kaisha, Ltd, 385 F.2d 158 (2d Cir. 1967) (fraud and conspiracy claims arbitrable);
Almacenes Fernandez, SA v. Golodetz, 148 F.2d 625, 628-29 (2d Cir. 1945); Stone v.
Pennsylvania Merchant Group, Ltd, 949 F.Supp. 316 (E.D. Pa. 1996) (defamation claim
subject to arbitration); Meadows Indemnity Co. v. Baccala & Shoop Ins. Services, Inc., 760
F.Supp. 1036, 1044-45 (E.D.N.Y. 1991) (fraud claims arbitrable); Eastern Europe, Inc. v.
Transportmaschinen, Export-Import, Inc., 658 F.Supp. 612 (S.D.N.Y. 1987) (indemnity action
“arises from” parties' agreement); Baselski v. Paine Webber, Jackson & Curtis Inc., 514
F.Supp. 535, 539 (N.D. Ill. 1981) (breach of fiduciary duty claim); Legg, Mason & Co. v.
Mackall & Coe, Inc., 351 F.Supp. 1367 (D.D.C. 1972) (disparagement, defamation, theft of
business secrets).
For non-U.S. authorities, see Partial Award in ICC Case No. 7319 of 1992, XXIV Y.B. Comm.
Arb. 141 (1999) (unfair competition claim encompassed within arbitration clause);
Judgment No. 8375 of 16 November 1987, XVI Y.B. Comm. Arb. 585 (Italian Corte di
Cassazione) (1991) (arbitration clause encompassed tort, unjust enrichment, and
restitution claims); Judgment of District Court of Yokohama of 3 May 1980, VIII Y.B. Comm.
Arb. 394 (1983) (arbitration clause encompassed tort claims).
 (d) Common law tort claims held not subject to arbitration agreement. For cases in which
common law tort claims were held to fall outside the scope of the parties' arbitration
agreement, see Northern Cal. Newspaper Guild Local 52 v. Sacramento Union, 856 F.2d 1381,
1383 (9th Cir. 1998) (clause “limit[ing] arbitrable disputes to those involving ‘application
P "322" of’ the agreement” limited scope to disputes “involving construction of the substantive
P "323" provisions of the contract”); Armada Coal Export, Inc. v. Interbulk, Ltd, 726 F.2d 1566,
1568 (11th Cir. 1984) (tort claims based on foreign attachment held nonarbitrable where
agreement covered “any dispute arising during the execution of the Charter Party”);
Texaco, Inc. v. American Trading Transp. Co., 644 F.2d 1152 (5th Cir. 1981) (tort claims
outside broad arbitration clause); Fuller v. Guthrie, 565 F.2d 259, 261 (2d Cir. 1977) (“wholly
unexpected tortious behavior” found nonarbitrable); Necchi SpA v. Necchi Sewing Machine
Sales Corp., 348 F.2d 693, 698 (2d Cir. 1965); Popper v. Monroe, 673 F.Supp. 1228, 1230-31
(S.D.N.Y. 1987) (defamation claim not arbitrable because it had “no material relationship
to the contractual relation with the parties”); McMahon v. RMS Electronics Inc., 618
F.Supp. 189, 190-91 (S.D.N.Y. 1985) (defamation claim not arbitrable); Michele Amoruso e
Figli v. Fisheries Dev. Corp., 499 F.Supp. 1074 (S.D.N.Y. 1980) (holding that parties'
arbitration clause did not reach claims of fraudulent inducement or illegality of
underlying contract); Discount Foods, Inc. v. Supervalu, 211 So.2d 992 (Ala. 1998)
(“intentional tort of interference with business relations stemmed not from the parties'
contractual dealings, but from an alleged separate and distinct act”; “The parties'
arbitration provision, although broad, cannot be construed to encompass intentional
torts of the parties that are separate and distinct from the dealings that gave rise to the
signing of the document containing the arbitration provision in the first place.”). Compare
Award in Case No. 41/92 of 1993, XXII Y.B. Comm. Arb. 178 (Italian Arbitration Ass'n) (1997)
(only claims under parties' contract held arbitrable).
(e) What approach should be taken to the arbitrability of tort claims? What is the sensible
approach to determining whether tort claims are arbitrable? If parties' arbitration
clauses are generally silent, or if one questions the wisdom of fine distinctions between
formulae such as “arising under” and “relating to,” what criteria can be used to decide
whether the parties agreed to arbitrate a particular tort claim? For some efforts to
articulate general presumptions, see Kroll v. Doctor's Associates, Inc., 3 F.3d 1167, 1170 (7th
Cir. 1993) (“The touchstone of arbitrability in such situations is the relationship of the tort
alleged to the subject matter of the arbitration clause”); Summer Rain v. Donning
Co./Publishers, 964 F.2d 1455 (4th Cir. 1992) (various contractual and noncontractual
claims subject to arbitration agreement, based on court's determination of “the heart of
the dispute”); Morgan v. Smith Barney, Harris Upham & Co., 729 F.2d 1163 (8th Cir. 1984)
(considering whether tort claims involved “significant aspects of [parties' contractual]
relationship”); Aspero v. Shearson American Express, Inc., 768 F.2d 106, 109 (6th Cir. 1985)
(considering whether claim “goes to core” of parties' contractual relations); Becker
Autoradio (U.S.A.), Inc. v. Becker Autoradiowerk GmbH, 585 F.2d 39, 47 (3d Cir. 1978)
(considering whether claim “derive[s] from the [contractual] relationship”); McMahon v.
RMS Elec., Inc., 618 F.Supp. 189, 192 (S.D.N.Y. 1985). See Note, Arbitrability of Disputes Under
the Federal Arbitration Act, 71 Iowa L. Rev. 1137, 1156-60 (1986).
21. Disputes arising after contract terminated.The mere fact that a dispute does not arise, and a
party does not assert claims, until after the parties' contract has terminated does not
necessarily prevent the dispute from being arbitrated pursuant to an arbitration clause in the
underlying (and expired) contract. A leading U.S. Supreme Court decision on the issue is Nolde
Bros., Inc. v. Bakery & Confectionary Workers Union, 430 U.S. 243, 250 (1977), where the Court
held that “the parties' obligations under their arbitration clause survived contract termination
when the dispute was over an obligation arguably created by the expired agreement.”See also
Litton Fin. Printing Div. v. National Labor Relations Board, 501 U.S. 190, 206 (1991) (limiting Nolde
to cases where dispute “involves facts and occurrences that arose before expiration, where an
action taken after expiration infringes a right that accrued or vested under the agreement, or
where, under normal principles of contract interpretation, the disputed contractual right
survives expiration of the remainder of the agreement”); John Wiley & Sons v. Livingstone, 376
U.S. 543 (1964).
For lower U.S. court decisions considering whether particular arbitration agreements were
applicable, notwithstanding termination of parties' underlying agreement, see Aspero v.
Shearson American Express, Inc., 768 F.2d 106, 108 (6th Cir. 1985) (“duty to arbitrate does not
necessarily end when the contract is terminated”); Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
Hovey, 726 F.2d 1286, 1290 (8th Cir. 1984); Downing v. Merrill Lynch, Pierce, Fenner & Smith, 725
F.2d 192, 195 (2d Cir. 1984); Coudert v. Paine Webber, Jackson & Curtis, 705 F.2d 78 (2d Cir. 1983);
Federated Metals Corp. v. United Steelworkers of America, 648 F.2d 856 (3d Cir.), cert. denied, 454
U.S. 1031 (1981); Necchi v. Necchi Sewing Machine Sales Corp., 348 F.2d 693 (2d Cir. 1965), cert.
denied, 383 U.S. 909 (1966); Organizing Committee for the 1998 Goodwill Games, Inc. v. Goodwill
Games, Inc., 919 F.Supp. 21 (D.D.C. 1995) (rejecting argument that arbitration agreement ceased
to have effect upon termination of underlying contract); Merrill, Lynch, Pierce, Fenner & Smith,
Inc. v. Thomson, 574 F.Supp. 1472 (E.D. Mo. 1983) (claims regarding breach of obligations
P "323" surviving termination of contract held arbitrable); Zenol, Inc. v. Carblox, Ltd, 334 F.Supp. 866
P "324" (W.D. Pa. 1971); Batson Yarn and Fabrics Machinery Group, Inc. v. Saurer-Allma GmbH-Allgauer
Maschinenbau, 311 F.Supp. 68 (D.S.C. 1970); Ex parte Shamrock Food Services, Inc., 514 So.2d 921
(Ala. 1987). Compare Virginia Carolina Tools, Inc. v. Int'l Tool Supply, Inc., 793 F.Supp. 664
(W.D.N.C. 1992), aff'd, 984 F.2d 113 (court holds that arbitration clause was no longer effective
because underlying option contract had expired).
As discussed above, supra p. 68, the foregoing is a consequence of the doctrine of separability,
 permitting the arbitration agreement to survive the underlying contract. The decisions cited
above involve arbitrations commenced after expiry or termination of the parties' main
contract, under a surviving arbitration clause, concerning actions and events that occurred
when the main contract was still in effect.
Arbitration clauses in agreements will generally not be held applicable to conduct and events
occurring after the agreement expires (except where specific substantive obligations survive
termination of the main contract). Local 703 etc. v. Kennicott Bros. Co., 771 F.2d 300 (7th Cir.
1985) (arbitration clause not applicable to dispute arising from events occurring six months
after contract expired); Local 807 v. Brink's Inc., 744 F.2d 283, 286 (2d Cir. 1984); Coudert v. Paine
Webber, Jackson & Curtis, 705 F.2d 78 (2d Cir. 1983); Milwaukee Type Union etc. v. Madison
Newspapers, Inc., 444 F.Supp. 1223, 1226-27 (W.D. Wisc. 1978); Boston Printing Pressman's Union v.
Potter Press, 141 F.Supp. 553 (D. Mass.), aff'd, 241 F.2d 787 (1st Cir.), cert. denied, 355 U.S. 817
(1956). See generallyAnnotation, Enforcement of Contractual Arbitration Clause As Affected by
Expiration of Contract Prior to Demand for Arbitration, 5 A.L.R.3d 1008.
22. Disputes arising before the arbitration agreement is made.It is, of course, possible to make
an arbitration agreement which applies to an existing dispute. Indeed, in earlier eras, so-
called “submission agreements” were the only form of arbitration agreement which were
enforceable. See supra p. 5.
Parties sometimes enter into commercial contracts, containing ordinary arbitration clauses,
which are later invoked with respect to disputes arising before the contract was made. This
gives rise to interpretative questions, as to whether the arbitration clause was intended to
have retroactive application. In the United States, “[C]ourts routinely enforce retroactive
arbitration agreements when ... this is consistent with the parties' intentions.”Dean Witter
Reynolds, Inc. v. Prouse, 831 F.Supp. 328, 331 (S.D.N.Y. 1993). See Zink v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 13 F.3d 330 (10th Cir. 1993) (rejecting “contention that an agreement to
arbitrate a dispute must pre-date the actions giving rise to the dispute”); Whisler v. H.J. Meyers
& Co., 948 F.Supp. 798 (N.D. Ill. 1996) (arbitration clause covers disputes arising before clause
was entered into); Clark v. Kidder, Peabody & Co., 636 F.Supp. 195, 197 (S.D.N.Y. 1986); Prestera v.
Shearson Lehman Bros., Inc., 1996 WL 10095 (D. Mass. 1986); Hamilton v. Dean Witter Reynolds,
Inc., 1989 WL 89434 (W.D. Pa. 1989).
For a decision declining to order arbitration of disputes arising before the contract containing
the arbitration clause was entered into, see Church v. Gruntal & Co., 698 F.Supp. 465 (S.D.N.Y.
1988).
23. Disputes involving successive contracts.Not infrequently, parties will enter into successive
contracts, and disputes may arise as to the continued existence and applicability of an
arbitration clause contained in an early agreement to conduct relating to a subsequent
agreement. Hinson v. Jusco Co., 868 F.Supp. 145 (D.S.C. 1994) (holding that arbitration clause in
one agreement survived subsequent agreements and applied to disputes under all
agreements); G.D. Searle & Co. v. Metric Constructors, Inc., 572 F.Supp. 836 (N.D. Ga. 1983)
(invoking FAA's “pro-arbitration” policy to hold that parties' subsequent agreement to submit
two specific disputes to arbitration did not supersede prior, broad agreement to arbitrate).
24 Disputes involving multiple agreements.As Ssangyong and the Munich Oberlandesgerichthof
decision illustrate, disputes frequently arise in which the parties have entered in a number of
different agreements, each with (or without) a separate dispute resolution mechanism. This can
create procedural quagmires, with parallel or overlapping arbitrations under different rules
involving different sets of parties. Counsel drafting international agreements should ordinarily
endeavor to ensure that a single, unitary dispute resolution mechanism governs all of the
parties' various relations.
Many national courts have in principle been willing to conclude that disputes under one
agreement are arbitrable, if the parties have so agreed, under an arbitration provision of a
different agreement. See Collins & Aikman Products Co. v. Building Systems, Inc., 58 F.3d 16 (2d
Cir. 1995) (disputes under one agreement are arbitrable, at least in part, under arbitration
clause in second agreement; arbitrators to consider issue more fully); ARW Exploration Corp. v.
Aquirre, 45 F.3d 1455 (10th Cir. 1995) (where 5 of 6 related agreements included arbitration
clauses, disputes under sixth agreement could be arbitrated); Associated Brick Mason
Contractors v. Harringon, 820 F.2d 31 (2d Cir. 1987) (arbitration clause in collective bargaining
agreement encompassed disputes under related agreement); Becker Autoradio U.S.A., Inc. v.
Becker Autoradiowerk GmbH, 585 F.2d 39 (3d Cir. 1978) (dispute over subsequent oral agreement
P "324" subject to arbitration provision in prior written agreement); United Engineering and Foundry
P "325" Employees Association v. United Engineering and Foundry Co., 389 F.2d 479, 481 (3d Cir. 1967)
(same); Hart Enterprises International, Inc. v. Anhui Provincial Import & Export Corp., 888 F.Supp.
587 (S.D.N.Y. 1995) (bolding that arbitration clause in sales agreement applied to claims arising
from subsequent settlement agreement (which did not contain an arbitration clause) dealing
with disputes under sales agreement); B.F. Goodrich Co. v. McCorkle, 865 S.W.2d 618 (Tex. Ct.
App. 1993) (dispute under one contract subject to arbitration under arbitration clause in
separate contract).
On the other hand, the existence of a separate arbitration provision in a related agreement is
presumably fairly strong evidence that disputes under that agreement were meant to be
arbitrated under its dispute resolution provisions – not those of some other contract. Nordin v.
Nutri/System, Inc., 897 F.2d 339, 345 (8th Cir. 1990); Netherlands Curacao Co., NV v. Kenton Corp.,
366 F.Supp. 744 (S.D.N.Y. 1973).
25. Arbitrability of preclusive effect of arbitral award.Many lower U.S. courts have held that
disputes with respect to the preclusive effect of an arbitral award are ordinarily to be resolved
 by reference to arbitration. United States Fire Insurance Co. v. National Gypsum Co., 101 F.3d 813,
816 (2d Cir. 1996) (“[Defendant] argues that issue preclusion, like other defenses to arbitrability,
is arbitrable, and, because issue preclusion can be arbitrated, it must be arbitrated. We
agree.”); National Union Fire Ins. Co. v. Belco Petroleum Corp., 88 F.3d 129, 135-36 (2d Cir. 1996)
(“Belco's claim of preclusion is a legal defense to National Union's claim. As such, it is itself a
component of the dispute on the merits” and therefore, like other disputes on the merits, must
be referred to an arbitrator; North River Ins. Co. v. Allstate Ins. Co., 866 F.Supp. 123 (S.D.N.Y.
1994) (preclusive effect of earlier arbitral award was for determination by arbitrators pursuant
to broad arbitration clause in existing agreement); Philadelphia Electric Co. v. Nuclear Electric
Insurance Ltd., 845 F.Supp. 1026, 1030 (S.D.N.Y. 1994) (“Nor can there be any dispute that
[Defendant's] insurance policy's broad arbitration clause ... afforded the [arbitral] Panel the
authority to decide a dispute as to the collateral estoppel effect of a previous arbitration
award.”) Compare Kelly v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 985 F.2d 1067 (11th Cir. 1993)
(question whether party's claims in arbitration are barred by res judicata is for judicial, not
arbitral, decision); Miller Brewing Co. v. Fort Worth Distr. Co., 781 F.2d 494 (5th Cir. 1986); New
York Stats Ass'n for Retarded Children v. Carey, 456 F.Supp. 85, 96 (E.D.N.Y. 1978).

C. Interpretation of Procedural and Related Issues in International Arbitration

Agreements
As discussed above, several issues recurrently arise in interpreting international arbitration
agreements other than those relating to the scope of such agreements. In particular, disputes
not infrequently arise as to whether an arbitration agreement is mandatory or optional and as
to whether an agreement provides for arbitration or a related form of dispute resolution.
Excerpted below is the trial court opinion in Hoogovens Ijmuiden Verkoopkantoor BV v. MV “Sea
Cattleya,” (20) which illustrates some of these issues.
HOOGOVENS IJMUIDEN VERKOOPKANTOOR BV v. MV “SEA CATTLEYA”
852 F.Supp. 6 (S.D.N.Y. 1994)
P "325" WHITMAN KNAPP, SENIOR DISTRICT JUDGE. This is an admiralty action relating to damage
P "326" caused to steel coils during their carriage from the Netherlands to the United States.
Defendant V Ommeren Bulk Shipping B.V. (“Van Ommeren”), one of the parties which shipped
the coil, moves pursuant to the [New York] Convention to stay proceedings against it pending
arbitration in the Netherlands. Defendant San Steamship Co. Ltd (“Sanko”) moves to amend its
answer to state a cross-claim for indemnity and contribution against Van Ommeren.
Van Ommeren asserts that according to the terms of the charter party which and plaintiff
entered into on January 12, 1989, in Ijmuiden, Netherlands, for the purpose of shipping
plaintiff's steel coils to Bridgeport, Connecticut, plaintiff must arbitrate its cargo damage
claim in the Netherlands. Clause 2 of that charter states: “General Average and arbitration to
be settled in the Netherlands.” Van Ommeren interprets this clause to require the parties to
submit all disputes arising in connection with the charter to arbitration in the Netherlands. In
support of this interpretation, it cites Judge Leisure's decision in Oriental Commercial &
Shipping Co. v. Rosseel NV, 609 F.Supp. 75, 77 (S.D.N.Y. 1985).
In Rosseel, defendant moved to compel arbitration under the [New York] Convention, based on
the clause in a sales contract, “Arbitration: If required in New York City.” Applying federal law to
determine whether or not the parties to a foreign contract have agreed to arbitrate, the court
ruled that the clause bound the parties to arbitration of all claims arising with respect to the
contract. It reasoned that “[a]rbitration clauses must be interpreted broadly, and all doubts as
to whether a dispute is encompassed by a particular clause must be resolved in favor of
arbitration, even where the problem is the construction of the contract language itself.”
Plaintiff, on the other hand, asserts that the clause merely states the parties' choice of situs for
any arbitration relating to the charter, if the parties were to voluntarily decide to arbitrate
claims, or if such arbitration were otherwise required. Alternatively, plaintiff suggests that the
clause only requires the parties to arbitrate general average claims in the Netherlands, no such
claims being asserted in this suit.
Regretfully, we must disagree with Judge Leisure's interpretation of a very similar clause in
Rosseel. In so doing, we note that the contractual clause actually involved in Moses Cone, unlike
the clauses at issue here and in Rosseel unambiguously imposed compulsory arbitration. The
Moses Coneclause provided:
[a]ll claims, disputes and other matters in question arising out of, or relating to, this Contract or
the breach thereof, ... shall be decided by arbitration... unless the parties mutually agree
otherwise. (Emphasis added)
The first inquiry in a case governed by the [New York] Convention is whether or not the parties
have made “any agreement in writing arbitrate the subject in dispute.”Filanto, SPA v. Chilewich
Intern. Corp., 789 F.Supp. 1229, 1236 (S.D.N.Y. 1992), quoting Ledee v. Ceramiche Ragno, 684 F.2d
184, 186-87 (1st Cir. 1982). Where no such agreement exists, the court has no jurisdiction under
P "326" the [New York] Convention and its implementing legislation to stay a federal action or to
P "327" compel arbitration. We find that clause 24 of the January 1989 charter party is no more than
an agreement that, if arbitration were to be conducted whether voluntarily agreed upon or
required by some other contractual clause, it would proceed in the Netherlands. Therefore, we
have no authority under the [New York] Convention to stay proceedings against Van Ommeren
pending arbitration.
REPUBLIC OF NICARAGUA v. STANDARD FRUIT CO.
 937 F.2d 469 (9th Cir. 1991) (excerpted above at pp. 168-72)
Notes on Interpretation of International Arbitration Agreements
1. Agreement to “arbitrate” distinguished from other forms of dispute resolution. Of course, an
arbitration agreement must contain an agreement to arbitrate – rather than an agreement to
do something else. Not infrequently, parties agree to do things like – but not the same as –
arbitration. The leading examples of such forms of alternative dispute resolution are expert
determination, conciliation, and mediation. See suprap. 296. In many countries, agreements to
engage in these types of dispute resolution are not arbitration agreements and the “decisions”
resulting from them are not arbitral awards. In both instances, the “pro-arbitration” regimes of
the New York Convention and national arbitration legislation do not necessarily apply.
U.S. courts have only infrequently considered the distinctions between arbitration agreements
and other dispute resolution arrangements, and have usually regarded a wide variety of
alternative dispute resolution mechanisms as constituting “arbitration.” See Powderly v.
Metrabyte Corp., 866 F.Supp. 39 (D. Mass. 1994) (“The use of the term arbitrate is not a vital
ingredient of an agreement to do so;” finding arbitration agreement where clause provided for
accounting firm to calculate “Net Operating Profit.”); AMF Inc. v. Burswick Corp., 621 F.Supp. 456
(E.D.N.Y. 1985)(agreement to seek non-binding advisory opinion subject to FAA); Cheng- Canindin
v. Renaissance Hotel Assoc., 50 Cal.App.4th 676 (Calif. Ct. App. 1996) (“a true arbitration
agreement [requires]: (1) a third party decision maker; (2) mechanisms for ensuring neutrality
with respect to the rendering of the decision; (3) a decision-maker who is chosen by the parties;
(4) an opportunity for both parties to be heard; and (5) a binding decision”); Schaefer v. Allstate
Ins. Co. 590 N.E.2d 1242 (Ohio 1992); Stradinger v. Whitewater, 277 N.W.2d 827 (Wis. 1979); Gary
Excavating, Inc. v. Town of New Haven, 318 A.2d 84, 85 (Conn. 1972); Franklin Needle Co. v.
American Federation, 105 A.2d 382 (N.H. 1954); Stockwell v. Equitable Fire & Marine Ins. Co., 75
P.2d 873 (Calif. Ct. App. 1933).
2. Optional “agreement” to arbitrate.Parties sometimes agree only to consider arbitration as an
alternative or optional means of dispute resolution, but not to require mandatory submission
of future disputes to arbitration. Such agreements are almost always ill-advised, because they
serve virtually no meaningful purpose and give rise to procedural confusion.
A number of national courts have considered whether arbitration can be compelled, where the
parties' arbitration agreement provides only that, in the event of disputes, arbitration “may”
be requested. Courts have generally concluded that such provisions do constitute compulsory
arbitration agreements, albeit sometimes over vigorous dissents. McKee v. Home Buyers
Warranty Corp. II, 45 F.3d 981, 983 (5th Cir. 1995) (arbitration clause incorporating AAA Rules is
presumptively mandatory arbitration agreement, although parties may “expressly agree
otherwise”); Rainwater v. National Home Ins. Co., 944 F.2d 190 (4th Cir. 1991) (interpreting
provision as mandatory, rather than optional, arbitration clause; relying on incorporation of
AAA Rules); American Italian Pasta Co. v. Austin Co., 914 F.2d 1103 (8th Cir. 1990); Bonnot v.
Congress of Independent Unions Local # 14, 331 F.2d 355 (8th Cir. 1964) (“may” gives either party
the option of requiring arbitration); Deaton Truck Line, Inc. v. Local Union 612, 314 F.2d 418, 421
(5th Cir. 1962) (same); St. Lawrence Explosives Corp. v. Worthy Brothers Pipeline Corp., 916 F.Supp.
187 (N.D.N.Y. 1996) (arbitration clause incorporating AAA Rules is presumptively “mandatory”);
P "327" Eastern Europe, Inc. v. Transportmaschinen, Export-Import, Inc., 658 F.Supp. 612, 614 (S.D.N.Y.
P "328" 1987); Rogers, Burgun, Shahine, etc. v. Dongsan Construction Co., 598 F.Supp. 754 (S.D.N.Y.
1984); Credit Alliance Corp. v. Crook, 567 F.Supp. 1462 (S.D.N.Y. 1983); Judgment of District Court of
Yokohama of 3 May 1980, VIII Y.B. Comm. Arb. 394 (1983) (rejecting claim that arbitration clause
was not mandatory); Judgment of 30 May 1994, XX Y.B. Comm. Arb. 745 (Tokyo High Court) (1995)
(“the extent to which an arbitration agreement bars litigation shall be determined in principle
by the law governing the arbitration agreement”; holding arbitration agreement mandatory
and exclusive).
In most cases, only if arbitration clauses are clearly optional will arbitration be deemed non-
mandatory. See Mignocchi v. Merrill Lynch, Pierce, Fenner & Smith, 707 F.Supp. 140 (S.D.N.Y.
1989). Compare Hoogovens Ijmuiden Verkoopkantoor BV v. MV “Sea Cattleya,”852 F.Supp. 6
(S.D.N.Y. 1994) (clause providing “arbitration to be settled in the Netherlands” held not
compulsory: “no more than an agreement that, if arbitration were to be conducted whether
voluntarily agreed upon or required by some other contractual clause, it would proceed in the
Netherlands”); Howard Fields & Assoc. v. Grand Wailea Co., 848 F.Supp. 890 (D. Haw. 1993)
(apparently interpreting arbitration clause as non-exclusive, but then staying litigation
because of FAA's strong pro-arbitration policies); Beckham v. William Bayley Co., 655 F.Supp.
288, 291 (N.D. Tex. 1987) (no mandatory arbitration agreement).
Consider the Court's opinion in Hoogovens. Is the court's analysis persuasive? Why should
arbitration agreements be regarded as presumptively mandatory? Was the parties' agreement
in Hoogovensclearly non-mandatory?
3. Non-exclusive agreement to arbitrate.At least in theory, an arbitration agreement might be
“non-exclusive.” That is, like a forum selection clause, an arbitration agreement might permit
either party to commence binding arbitration, but not forbid other forms of dispute resolution
(such as litigation in national courts). Is it likely that this is what parties might intend in
entering into an arbitration agreement? Why not? For a decision rejecting such a contention,
see Judgment of 30 May 1994, XX Y.B. Comm. Arb. 745 (Tokyo High Court) (1995).
4. Contrast between exclusive character of forum selection and arbitration agreements.In the
United States, forum selection clauses are presumptively permissive. That is, an agreement to
submit disputes to the courts of State X will allow litigation in State X, but will not exclude
litigation in other states that possess jurisdiction under applicable law. See G. Born,
 International Civil Litigation in United States Courts 454-55 (3d ed. 1996).
Contrast the U.S. approach to interpretation of forum selection agreements to the
interpretation of arbitration agreements. Are arbitration clauses presumptively exclusive or
presumptively permissive? As we have seen, the answer is clearly the former; indeed, the
contrary is virtually never even argued. Why?
5. Interpretation of procedural requirements of arbitration agreement.Arbitration agreements
not infrequently contain various procedural steps that are to be followed prior to or
contemporaneous with commencement of the arbitration. For example, arbitration
agreements often require that, prior to commencing arbitration, the parties attempt to resolve
their disputes in good faith negotiations or to mediate their differences. Other arbitration
agreements may impose contractual time-limits on the commencement of arbitral
proceedings (e.g., arbitration must be commenced within 3 or 6 months of a dispute arising).
Consider, for example, the following:
“The Parties agree to make all reasonable efforts to settle any dispute arising out of or relating
to this Agreement by referring such dispute to their respective senior managers for a period of
not less than 30 days following receipt of written notice describing such dispute from any other
Party. In the event that the dispute is not resolved during such 30 day period, the Parties agree
to submit such dispute to arbitration under [the ICC Rules].”
“All disputes arising out of or relating to this Agreement may be submitted to arbitration under
[the ICC Rules] within 12 months of the date on which such dispute arises.”
These types of procedural requirements can give rise to questions of interpretation of the
arbitration agreement.
6. Allocation of competence to interpret procedural requirements of arbitration clause.Suppose
that one party claims that an arbitration agreement bars commencement of arbitral
P "328" proceedings, because the agreement's procedural requirements have not been satisfied. Are
P "329" such objections for a national court, or an arbitral tribunal, to resolve? Do such objections
involve questions of interpretation of the arbitration agreement or substantive defenses? or
both?
7. Allocation of competence to interpret procedural requirements of arbitration clause under
the FAA. U.S. courts, particularly in labor cases, have generally refused to consider claims that
procedural requirement imposed by an arbitration clause were satisfied, reasoning that this
issue is one for the arbitrators. John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964); Paine
Webber v. Elahi, 87 F.3d 589 (1st Cir. 1996) (timeliness of arbitration under institutional
arbitration rules is issue for arbitral tribunal); International Ass'n of Machinists etc. v. General
Elec. Co., 865 F.2d 902, 904 (7th Cir. 1989) (“The arbitrator is not the judge of his own authority –
though ... there is an exception: the arbitrator, like any other adjudicator, is empowered to
decide whether the parties have taken whatever procedural steps are required to preserve
their right to arbitrate a particular dispute”); Del E. Webb Const. v. Richardson Hosp. Authority,
823 F.2d 145, 149 (5th Cir. 1987) (“question of compliance with procedural prerequisites to
arbitration under a bargaining agreement is for the arbitrator”); Belke v. Merrill Lynch, Pierce,
Fenner & Smith, 693 F.2d 1023, 1027-28 (11th Cir. 1982); Miller and Co. v. China Nat'l Minerals
Import & Export Corp., 1991 WL 171268 (N.D. Ill. 1991) (determination whether pre-arbitration
conciliation steps were complied with is issue for arbitrators).
8. Allocation of competence to decide statute of limitations and other time bar defenses under
the FAA. A number of lower U.S. courts have held that statute of limitations, laches, and similar
defenses are for resolution by the arbitrators, not the courts. Glass v. Kidder Peabody & Co., 114
F.3d 446 (4th Cir. 1997) (“questions of mere delay, laches, statute of limitations, and
untimeliness raised to defeat the compelled arbitration are issues of procedural arbitrability
exclusively reserved for resolution by the arbitrator”); Shearson Lehman Hatton, Inc. v.
Wagoner, 944 F.2d 114, 121 (2d Cir. 1991) (“any limitations defense ... whether stemming from the
arbitration agreement, arbitration association rule, or state statute ... is an issue to be
addressed by the arbitrators”); Trafalgar Shipping Co. v. International Milling Co., 401 F.2d 568
(2d Cir. 1968);Louis Dreyfus Corp. v. Cook Indus., Inc., 505 F.Supp. 4 (S.D.N.Y. 1980).
Other U.S. courts, often relying on state law (e.g., New York), have concluded that statute of
limitations and laches issues are for courts to decide. See N.Y. C.P.L.R. §§ 7502(b) & 7503; Smith
Barney v. Luckie, 85 N.Y.2d 193 (1995).
9. Allocation of competence to resolve disputes over selection of arbitral institution in
arbitration agreement.As we have seen, arbitration agreements are sometimes ambiguous or
contradictory as to the arbitral situs or institution. Most lower U.S. courts have expressly or
implicitly rejected claims that such ambiguity or inconsistency can be resolved by the
arbitrators. Bauhinia Corp. v. China Nat'l Machinery & Equip. Export & Import, 819 F.2d 247 (9th
Cir. 1987); Bear Stearns & Co. v. N.H. Karol & Assoc., Ltd, 728 F.Supp. 499, 501 (N.D. Ill. 1989) (“The
issues of whether a grievance is before a proper arbitration forum is appropriate for judicial
resolution.”). We consider this issue in greater detail below. See infrapp. 596-609.
10. Allocation of competence to resolve disputes over selection of arbitrator in arbitration
agreement. Arbitration agreements are also sometimes ambiguous or contradictory as to the
designation of an arbitrator. Most U.S. courts have held that such ambiguity or inconsistency
can be resolved by the arbitrators themselves. We discuss this issue in greater detail below.
See infra pp. 635-38.
11. Arbitration agreements incorporating institutional arbitration rules.As discussed elsewhere,
arbitration agreements frequently incorporate (or attempt to incorporate) institutional
arbitration rules. It is settled law in most jurisdictions that such an incorporation may be
 effective. For U.S. authorities, see St. Lawrence Explosives Corp. v. Worthy Bros. Pipeline Corp.,
1997 WL 187332, at *1 (2d Cir. 1997) (“It is well settled that ‘a clause [in an arbitration agreement]
providing for the settlement of controversies by arbitration pursuant to the rules of the
American Arbitration Association’ ... is ‘sufficient to incorporate th[ose] rules into the
agreement.’”); Koch Oil, SA v. Transocean Gulf Oil Co., 751 F.2d 551, 554 (2d Cir. 1985) (parties
bound by their agreement to AAA Rules); I/S Stavborg v. National Metal Converters, Inc., 500
F.2d 424 (2d Cir. 1974); Varley v. Tarrytown Associates, Inc., 477 F.2d 208, 210 (2d Cir. 1973); Reed &
Martin, Inc. v. Westinghouse Electric Corp., 439 F.2d 1268 (2d Cir. 1971) (parties selecting
institutional arbitration rules are bound by those rules); Paley Assocs., Inc. v. Universal Woolens,
Inc., 446 F.Supp. 212, 214 (S.D.N.Y. 1978) (“‘[I]t is settled doctrine that a reference in a contract
to another writing, sufficiently described, incorporates that writing.’ This doctrine is applied
generally to AAA rules incorporated by reference....”); Compagnie des Bauxites de Guinee v.
Hammermills, Inc., 1992 WL 122712, at *1-6 (D.D.C. 1992) (ICC Rules incorporated into arbitration
agreement).
P "329"
P "330"
12. Relationship between parties' arbitration agreement and institutional arbitration rules.
When parties agree to arbitrate under institutional arbitration rules, they are deemed to have
incorporated those rules into their agreement. Koch Oil, SA v. Transocean Gulf Oil Co., 751 F.2d
551, 554 (2d Cir. 1985) (parties bound by their agreement to AAA Rules); Reed & Martin, Inc. v.
Westinghouse Electric Corp., 439 F.2d 1268 (2d Cir. 1971) (parties selecting institutional
arbitration rules are bound by those rules); Diemaco v. Colt's Mfg Co., 11 F.Supp.2d 228, 232 (D.
Conn. 1998) (“When parties agree to arbitrate before the AAA and incorporate the Commercial
Arbitration Rules into their agreement, they are bound by those rules and by the AAA's
interpretation.”); Silvester Tafuro Design, Inc. v. Sachs, 1996 WL 257668 at 4 (S.D.N.Y. 1996) (court
held that by incorporating the AAA rules into the contract, the parties agreed to all provisions
of the AAA rules).
If there is a conflict between the parties' arbitration agreement, and the rules that they
incorporate, the former has generally been held to prevail. Szuts v. Dean Witter Reynolds, Inc.,
931 F.2d 830, 831-32 (11th Cir. 1991).
On the other hand, courts have generally afforded arbitration institutions reasonable
discretion in interpreting institutional rules. Koch Oil, SA v. Transocean Gulf Oil Co., 751 F.2d 551
(2d Cir. 1985) (AAA Rules give AAA reasonable discretion to interpret time limits in Rules);
Reeves Bros., Inc. v. Capital-Mercury Shirt Corp., 962 F.Supp. 408 (S.D.N.Y. 1997) (“Where ... the
parties have adopted [particular institutional arbitration] rules, the parties are also obligated
to abide by the [relevant arbitral institution's] determinations under those rules”).
13. Novation or elimination of arbitration clause.Parties to an arbitration clause – like other
contracts – may subsequently cancel, replace, amend, or eliminate that provision. U.S. courts
have generally held that claims of novation or termination, when directed specifically at the
arbitration provision, are for judicial resolution. See Matterhorn, Inc. v. NCR Corp., 763 F.2d 866,
869 (7th Cir. 1985); Great American Trading Corp v. I.C.P. Cocoa, Inc., 629 F.2d 1282, 1284-85 (7th
Cir. 1980). Is this result correct? Why? Compare China Resource Products (U.S.A.) Ltd v. Fayda
Int'l, Inc., 747 F.Supp. 1101 (D. Del. 1990) (rejecting novation claim).
P "330"

References
1) See generally G. Born, International Arbitration and Forum Selection Agreements (1999).
2) See infra pp. 319-25. As discussed above, there are some disputes that are regarded as
“nonarbitrable,” and arbitration clauses will generally not be enforced with respect to
these disputes.See supra pp. 243-95.
3) See supra p. 7 & infra pp. 409-26, 443-44, 471-72, 573-80, 615-29.
4) See infra pp. 325-28.
5) See infra pp. 327-28.
6) See supra pp. 2-4 & infra pp. 325-27.
7) See infrapp. 299-325.
8) See infra pp. 317-19.
9) See infra pp. 318-19.
10) Moses H. Cone Mem. Hosp. v. Mercury Construction Corp., 460 U.S. 1, 24-25 (1983).
11) See infra pp. 318-19.
12) See infra pp. 311-14.
13) See supra pp. 84-93. & infra pp. 311-14.
14) The fact that the arbitrability determination turns on complicated legal issues does not
alter our conclusion, because contracting parties are at liberty to entrust an arbitration
with the resolution of such issues. See Local City Workers Union v. Boston Edison Co., 752
F.2d 1,3 (1st Cir. 1984); George Day Constr. Co., Inc. v. United Brotherhood of Carpenters, 722
F.2d 1471, 1475 (9th Cir. 1984).
15) The District Court found that the arbitration clause did not cover the fourth and six
counterclaims, which sought damages for defamation, or the allegations in the seventh
counterclaim concerning discriminatory treatment and the establishment of minimum-
sales volumes. Accordingly, it retained jurisdiction over those portions of the litigation. In
addition, because no arbitration agreement between Soler and CISA existed, the court
retained jurisdiction, insofar as they sought relief from CISA, over the first, second, third
and ninth counterclaims, which raised claims under the Puerto Rico Dealers' Contracts Act,
the federal Automobile Dealers' Day in Court Act, the Sherman Act, and the Puerto Rico
competition statute, respectively. These aspects of the District Court's ruling were not
appealed and are not before this Court.
16) ... Soler does suggest that, because the title of the clause referred only to “certain matters,”
and the clause itself specifically referred only to “Articles I-B through V,” it should be read
narrowly to exclude the statutory claims. Soler ignores the inclusion within those “certain
matters” of “[a]ll disputes, controversies or differences which may arise between
[Mitsubishi] and [Soler] out of or in relation to [the specified provisions] or for the breach
thereof.” Contrary to Soler's suggestion, the exclusion of some areas of possible dispute
from the scope of an arbitration clause does not serve to restrict the reach of an otherwise
broad clause in the areas in which it was intended to operate. Thus, insofar as the
allegations underlying the statutory claims touch matters covered by the enumerated
articles, the Court of Appeals properly resolved any doubts in favor of arbitrability.”
17) Even if Mitsubishi can prove that it did not violate any provision of the contract, such proof
would not necessarily constitute a defense to the antitrust claim. In contrast, in Prima Paint
Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967), Prima Paint's claim of fraud in the
inducement was asserted to rescind the contract, not as an independent basis of recovery.
18) “The dispute between these parties over the alleged shortage in defendant's inventory of
European trademarks, a matter covered by contract warranties and subject to pre-closing
verification, is the kind of commercial dispute for which arbitration is entirely appropriate.
In my opinion, the fact that the ‘fraud’ language of Rule 10(b)(5) has been included in the
complaint is far less significant than the desirability of having the Court of Arbitration of
the International Chamber of Commerce in Paris, France, decide the various questions of
foreign law which should determine the rights of these parties.”Alberto-Culver Co. v. Scherk,
484 F.2d 611, 619-620 (7th Cir. 1973) (Stevens, J., dissenting), rev'd, 417 U.S. 506 (1974).
19) The cases cited by Ssangyong in support of its broad interpretation are unpersuasive. Most
cited cases involved arbitration clauses which were drafted in broader terms and intended
to cover a broader spectrum of disputes than the clause involved here. See, e.g., Griffin v.
Semperit of America, Inc., 414 F.Supp. 1384, 1387 (S.D. Tex. 1978) (clause read “[a]ny
controversy or claim arising out of or relating to this agreement”); Acevedo Maldonado v.
PPG Indus., Inc., 514 F.2d 614, 616 (1st Cir. 1975) (same); Altshul Stern & Co., v. Mitsui Bussan
Kaisha, Ltd, 385 F.2d 158, 159 (2d Cir. 1967) (clause read “any dispute ... arising out of or
relating to this contract or the breach thereof”). Most of the cases cited by Ssangyong also
involve disputes more clearly arising under the contract than those involved here. See, e.g.,
Haig Berberian, Inc. v. Cannery Warehousemen, 535 F.2d 496, 499 (9th Cir. 1976) (holding
arbitrable a claim which itself purported to be based on an interpretation of the contract);
Georgia Power Co. v. Cimarron Coal Corp., 526 F.2d 101, 106 (6th Cir. 1975), cert. denied, 425
U.S. 952 (1976) (holding that under an arbitration clause which read “any controversy ...
arising under this Agreement,” no “provisions of the contract [was] wholly outside of the
arbitration provision”).
20) 852 F.Supp. 6 (S.D.N.Y. 1994).
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Jurisdiction
United States of America
Bibliographic reference
'Part One : Chapter 5.
Enforcement of International
Arbitration Agreements in
U.S. Courts', in Gary B. Born ,
International Commercial
Arbitration: Commentary and
Materials (Second Edition),
2nd edition (© Kluwer Law
International; Kluwer Law
International 2001) pp. 331 -
408
KluwerArbitration
Part One : Chapter 5. Enforcement of International
Arbitration Agreements in U.S. Courts
5 Enforcement of International Arbitration Agreements in U.S. Courts
The enforcement and interpretation of international arbitration agreements in U.S. courts is
affected by a variety of domestic U.S. substantive and procedural rules. This Chapter explores
these rules.
First, the Chapter considers in greater detail the respective roles of U.S. federal and state law
in enforcing arbitration agreements in U.S. courts. Second, the Chapter considers the choice of
law complexities that have arisen from the Supreme Court's opinion in Volt Information. Third,
the Chapter examines the procedural avenues that are available in U.S. courts for enforcing
international arbitration agreements. Finally, we consider various forum selection issues which
arise in U.S. litigation to enforce international arbitration agreements.
A. Enforceability of Arbitration Agreements Under the FAA
P "331" As described above, U.S. law recognizes the validity of arbitration agreements and generally
P "332" seeks to permit effective enforcement of such agreements. (1) Thus, §2 of the domestic FAA
provides that arbitration agreements falling within the FAA's jurisdictional ambit are “valid,
irrevocable, and enforceable.” (2)
Unfortunately, the FAA's goal of making arbitration agreements readily enforceable in U.S.
courts is complicated in international transactions by jurisdictional and choice of law
uncertainties. Overlapping provisions of the New York and Inter-American Conventions, the
second and third chapters of the FAA, the first (“domestic”) chapter of the FAA, and state law
can all bear upon the enforceability of an international arbitration agreement in U.S. courts.
Likewise, important issues of interpretation and procedure under the FAA remain unresolved,
often leaving U.S. practitioners and courts without clear guidance. (3)
1. Unenforceability of Arbitration Agreements at Common Law
As described previously, U.S. courts historically refused to grant specific enforcement of
arbitration agreements. (4) The 19th century common law view was that arbitration agreements
“ousted” courts of jurisdiction, and that such arrangements would not be judicially enforced. (5)
This position prevailed into the early decades of the 20th century. (6)
2. Overview of Enforceability of Arbitration Agreements Under the FAA
Early in the 20th century, widespread dissatisfaction in the U.S. business community with the
quality, pace, and expense of litigation led to concerted efforts in the United States to reform
common law attitudes towards arbitration. In 1920, New York enacted an arbitration statute
which for the first time in the United States made arbitration agreements generally
enforceable. (7) Congress followed suit and, in 1925, enacted what was then known as the
“United States Arbitration Act.” (8) That statute subsequently came to be referred to as the
Federal Arbitration Act (“FAA”).
The central features of the FAA were: (a) §2, which rendered arbitration agreements affecting
interstate or foreign commerce enforceable, subject to specified exceptions; (b) §§3 and 4,
which provided enforcement procedures for arbitration agreements; (c) §§9 and 10, which
P "332" provided for enforcing arbitral awards, subject to specified, narrow exceptions; and (d)
P "333" miscellaneous ancillary provisions relating to discovery in aid of arbitration, selection of
arbitrators, service, and procedural matters. Although brief, the domestic FAA plays a central
role in the arbitration process – domestic and international – in the United States.
Unfortunately, the domestic FAA is not a model of drafting clarity. Its sixteen sections are
couched in rambling prose and contain a disorganized mix of substantive, jurisdictional,
procedural, and remedial provisions whose reach and meaning is poorly articulated. As a
consequence, U.S. courts have struggled with the FAA, particularly in cases involving the
enforcement of arbitration agreements.
a. Section 2's Basic Federal Rule of Enforceability of Arbitration Agreements (9)
In the United States, most contracts are interpreted according to, and are enforceable under,
the laws of the several States. (10) There is no general federal legislation, and no federal
common law, dealing either comprehensively or in substantial part with commercial contracts.
(11) That is generally as true in the case of international business transactions as it is in
interstate and local transactions.
Arbitration agreements are a significant exception to this general rule that state law governs
the interpretation and enforcement of commercial contracts. At the heart of the FAA is §2's
provision that a written arbitration provision in a contract involving interstate or foreign
commerce shall be “valid, irrevocable, and enforceable,” subject only to a savings clause
permitting non-enforcement on “such grounds as exist at law or in equity for the revocation of
any contract.” (12) The section's avowed purpose was to “‘revers[e] centuries of judicial hostility
 to arbitration agreements ... by plac[ing] arbitration agreements ‘upon the same footing as
other contracts.’” (13)
P "333" The Supreme Court has repeatedly held that §2 creates substantive federal law. That federal
P "334" law is binding in both federal and state courts, and it preempts inconsistent state law. (14)
Section 2 requires, as a matter of federal law, “courts to enforce privately negotiated
agreements to arbitrate, like other contracts, in accordance with their terms.” (15) As the
Supreme Court has remarked:
Section 2 is a congressional declaration of a liberal federal policy favoring arbitration
agreements, notwithstanding any state substantive or procedural policies to the contrary. The
effect of the section is to create a body of federal substantive law of arbitrability, applicable
to any arbitration agreement within the coverage of the Act. (16)
Other U.S. decisions have repeatedly reaffirmed this basic principle that federal law imposes
substantive rules regarding the enforceability of arbitration agreements. (17)
b. Exceptions to Enforceability Under §2's “Savings Clause”
Notwithstanding §2's basic rule of enforceability, the domestic FAA recognizes that, like other
contracts, arbitration agreements will be invalid or unenforceable in some circumstances. As
noted above, §2 contains a “savings clause” which permits non-enforcement of arbitration
agreements on “such grounds as exist at law or in equity for the revocation of any contract.” (18)
Relying on §2, U.S. courts have refused to enforce arbitration agreements on a number of
separate contract and quasi-contract grounds. These exceptions to §2's general rule of
enforceability include defects in formation, fraudulent inducement and fraud, illegality,
unconscionability, lack of capacity, and waiver, all of which we examine in detail elsewhere.
(19)
c. Choice of Law Applicable to Domestic and International Arbitration Agreement under §2
Although §2 of the FAA establishes a basic federal rule that arbitration agreements are
enforceable, federal law does not govern all issues of formation, validity, and interpretation of
P "334" domestic arbitration agreements. (20) Rather, §2's savings clause has been interpreted, where
P "335" domestic U.S. arbitration agreements are concerned, to incorporate or preserve generally
applicable state contract law dealing with issues of contract formation, validity, and
enforceability. These general state law rules are subject, however, to a federal prohibition
against state laws that single out arbitration agreements for special disfavor. (21)
As discussed elsewhere, it is likely that international arbitration agreements are subject to a
broader federal common law regime governing issues of formation, validity, and
interpretation. (22) There are substantial arguments favoring such a result where international
arbitration agreements are concerned, based on the New York and Inter-American
Conventions, the Conventions' implementing legislation, and considerations of policy. (23)
Moreover, a substantial number of U.S. authorities have adopted such a conclusion,
particularly in recent years. (24)
d. The Supreme Court's Decision in Volt Information
One further point complicates choice of law analysis with respect to arbitration agreements in
U.S. courts. The Supreme Court's decision in Volt Information Sciences, Inc. v. Board of Trustees,
(25) has been interpreted by some courts as requiring application of state law rules governing
arbitration agreements where the parties have agreed to a choice-of-law clause selecting state
law. (26) As explained below, the potential breadth of the Volt decision was limited by the
Supreme Court in Mastrobuono v. Shearson Lehman Hutton, Inc., (27) and Doctor's Associates
Inc. v. Cassarotto. (28) Nonetheless, as also discussed below, the effects of state choice-of-law
clauses remain unclear under the domestic FAA.
e. The Separability Doctrine Under Federal Law
As discussed above, national arbitration statutes, institutional arbitration rules, and other
authorities recognize the basic principle that arbitration agreements are “separable” from the
underlying commercial contracts to which they relate. (29) As we have seen, the FAA, and U.S.
decisions interpreting it, also recognize the separability doctrine. (30) We examine these
decisions in greater detail below. (31)
P "335"
P "336"
f. Section 2's “Writing” Requirement
The domestic FAA does not apply to arbitration agreements unless they are in “writing.” Section
2 is applicable only to a “written provision in ... a contract evidencing a transaction involving
commerce to settle by arbitration a controversy thereafter arising out of such contract or
transaction.” (32) Lower courts have struggled with this language.
It appears fairly clear that §2 does not require a single, integrated written contract. (33) Some
courts have said that the FAA “contains no built-in statute of frauds provision but merely
requires that the arbitration provision itself be in writing.” (34) Nor is there any requirement
under §2 that an arbitration agreement be either formally executed or signed; rather,
“[o]rdinary contract principles determine who is bound by such written provisions and of
course parties can become contractually bound absent their signatures.” (35)
Applying these principles, some courts have found §2's “writing” requirement satisfied by
“tacit” acceptance of a written set of terms and conditions which included an arbitration
 clause. (36) Other lower courts have also found §2 satisfied where there were exchanges of
writings – typically, order forms and invoices – only some of which contained arbitration
provisions. (37) Several lower courts have held that the FAA's “writing” requirement is less
stringent than the New York Convention's analogous requirement. (38)
3. Historical Overview of U.S. Judicial Decisions Under the FAA
P "336" When §2 of the domestic FAA was enacted in 1925, Swift v. Tyson (39) remained good law. Under
P "337" Swift v. Tyson, federal courts freely applied rules of “general” federal common law in
diversity and other cases. (40) As a consequence, the interpretation and enforceability of
arbitration agreements in federal court was a matter of federal law (on the theory that these
were procedural issues, governed by the law of the forum). (41) In 1938, however, the Supreme
Court held in Erie R.R. v. Tompkins that there is no “general federal common law.” (42) Erie held
that, except where Congress has validly enacted substantive rules of federal law, the rules of
decision in federal court are provided by state law.
After Erie, three basic characterizations of §2 of the FAA were possible: (a) based on Congress's
powers to regulate interstate and foreign commerce and maritime matters, §2 established
substantive rules of federal law applicable in, and binding on, both federal and state courts; or
(b) based on Congress's Article III powers, §2 provided substantive rules of federal law
applicable only in federal courts; or (c) based on Congress's Article III powers, §2 provided
procedures applicable only in federal courts.
For several decades, characterization of the FAA was left to the lower courts. On the one hand,
the Second Circuit held in a series of landmark decisions that the FAA established a
substantive federal law governing the formation, interpretation, and enforcement of
arbitration agreements. (43) In the words of one early opinion:
We think it is reasonably clear that the Congress intended by the [FAA] to create a new body of
federal substantive law affecting the validity and interpretation of arbitration agreements....
At the same time, other lower courts reached different conclusions, holding that the FAA was
procedural in character and that the enforceability of arbitration agreements as a substantive
matter continued to be governed by state law. (44)
The Supreme Court first considered the meaning of §§2 and 3 of the FAA in Bernhardt v.
Polygraphic Co. (45) The action arose in federal court, with jurisdiction based on diversity,
where a stay of litigation was sought under §3 of the FAA. Citing Erie and applying Vermont state
law, the district court held that the parties had the right under state law to revoke their
arbitration agreement at any time prior to award. The Court of Appeals reversed, reasoning
that §3 was applicable in federal court because it was merely procedural and thus not subject
to Erie's requirement that state law be applied. (46)
P "337"
P "338" The Supreme Court reversed in turn. The Court first held that the disputed arbitration
agreement was not subject to §2 of the FAA, because it did not involve a transaction in
“commerce” or within federal maritime jurisdiction. (47) The Court also held that §3's stay
provisions were applicable only to arbitration agreements that fell within §2. (48) Finally, the
Court went on to disclaim any power to enforce arbitration agreements under general federal
common law. Citing Erie, and holding that the enforcement of arbitration agreements was
“outcome determinative” and substantive, the Court refused to apply the FAA as a federal
procedural rule applicable in federal courts; rather, where the FAA did not apply, the Court
held that state law governed. (49)
Eleven years later, the Supreme Court revisited the status of the FAA in Prima Paint Corp. v.
Flood & Conklin Mfg. Co., (50) excerpted above. (51) Relying on §§2, 3, and 4 of the FAA, the
Court held that an allegation of fraudulent inducement of a contract containing within it an
arbitration clause was arbitrable under the FAA. The Court's opinion made it clear that the FAA
established binding substantive rules of federal law that did “not permit the federal court to
consider claims of fraud in the inducement of the contract generally.” (52)
The Court in Prima Paint did not clearly articulate either the scope of federal law created by
the FAA or of the separability doctrine. Nonetheless, many lower courts interpreted Prima Paint
broadly, concluding that §2 of the FAA established a rule of substantive federal law requiring
enforcement of arbitration agreements that was applicable in both state and federal courts.
(53) Subsequently, during the 1980s, the Supreme Court rendered a series of decisions that
expressly adopted expansive federal substantive rules requiring the enforcement of
arbitration agreements. (54)
The watershed decision was Moses H. Cone Memorial Hospital v. Mercury Construction
Corporation. (55) There, the Court considered whether the FAA permitted a stay of a federal
court action under §4 seeking to compel arbitration pending resolution of the same issues in a
state court action. Holding that the FAA did not permit such a stay, the Court broadly
interpreted the Act:
Section 2 [of the FAA] is a congressional declaration of a liberal federal policy favoring
P "338" arbitration agreements, notwithstanding any state substantive or procedural policies to the
P "339" contrary. The effect of the section is to create a body of substantive law of arbitrability,
applicable to any arbitration agreements within the coverage of the Act. (56)
The Court also went out of its way in Moses H. Cone to hold that the interpretation of arbitration
agreements was governed by federal law. (57) Specifically, the Court declared that federal law
imposed a pro-arbitration rule of interpretation, requiring that doubts about the scope of an
arbitration clause be resolved in favor of arbitration.
 One year later, in Southland Corp. v. Keating, (58) excerpted below, (59) the Court again
considered the preemptive effect of the FAA. Southland presented the question whether a
California state court was obliged by the FAA to permit the arbitration of a dispute,
notwithstanding a California statute specifically rendering such disputes non-arbitrable. The
Court held that the FAA preempted the California law and was applicable in state (as well as
federal) court: “In creating a substantive rule applicable in state as well as federal courts,
Congress intended to foreclose state legislative attempts to undercut the enforceability of
arbitration agreements.” (60)
The Supreme Court reaffirmed the pro-arbitration federal rule of interpretation of arbitration
agreements in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc. (61) The Court applied
federal law to expansively interpret an arbitration clause as encompassing statutory antitrust
claims. Among other things, the Mitsubishi Motors Court expressly held that federal law
required a “pro-arbitration” interpretation of arbitration agreements. (62)
In Perry v. Thomas, decided in 1987, the Court reaffirmed Southland, holding that the FAA
preempted a state law forbidding arbitration of certain “wage” claims. (63) At the same time,
however, the Court also indicated that issues relating to the formation and validity of
arbitration agreements were subject to generally-applicable state contract law – rather than to
substantive federal law. (64) According to the Court, the domestic FAA applied only to preempt
state law rules which singled out arbitration agreements for unfavorable treatment, but that in
other respects general state contract law governed. (65)
P "339" Perry v. Thomas' treatment of the preemptive effect of the FAA in domestic matters was
P "340" confirmed in several decisions rendered during the 1990s. In First Options of Chicago, Inc. v.
Kaplan, (66) the Court reiterated that the formation and validity of domestic arbitration
agreements is governed by generally-applicable state contract law rules: “[w]hen deciding
whether the parties agreed to arbitrate ... courts generally ... should apply ordinary state-law
principles that govern the formation of contracts.” (67) Only where state law discriminated
against arbitration agreements would the FAA's federal rule of enforceability have preemptive
effect.
More recently, in Allied-Bruce Terminix Co. v. Dobson (68) and the Doctor's Associates Inc. v.
Casarotto, (69) the Court reaffirmed this analysis. In Allied-Bruce, the Court held that the FAA
preempted a state statute invalidating prospective arbitration agreements. The Court
reiterated that the FAA preempts a state “policy [that] would place arbitration clauses on an
unequal ‘footing.’” (70) Similarly, in Doctor's Associates, the Court held that the FAA preempted
a state law requirement that arbitration agreements be printed in capital letters (of a
prescribed size) on the front page of any contract. (71)
4. Volt Information: Choice-of-Law Confusion
Notwithstanding the Court's resolution of other issues relating to the FAA's preemptive effect in
domestic matters, in Volt Information Sciences, Inc. v. Board of Trustees, (72) the Court issued a
cryptic and unfortunate opinion that created substantial uncertainty as to the respective roles
of federal and state law under the domestic FAA. In Volt, the parties' underlying contract
contained a choice-of-law clause selecting California law; interpreting that clause as
incorporating California's arbitration statute, the California courts held that, under California
law, an arbitration could be stayed pending a related litigation. (73)
The Supreme Court affirmed the California courts' decisions, rejecting the argument that the
FAA preempted the California statute. The Court did so notwithstanding the fact that the FAA
provided for no equivalent stay of arbitration. Accepting the California courts' interpretation of
the parties' choice-of-law clause, the Court held that the FAA merely required enforcing the
parties' arbitration agreement in accordance with its terms, including the incorporated
provisions of California's arbitration statute. (74)
In the wake of Volt, lower courts reached widely divergent decisions concerning the effect of
P "340" state choice-of-law clauses under the FAA. (75) Some of these decisions interpreted Volt
P "341" expansively, applying state choice-of-law clauses to incorporate (and avoid federal
preemption of) a wide range of state law rules which were less favorable to the arbitral process
than the FAA. Fortunately, in two subsequent decisions, the Supreme Court significantly limited
Volt's potentially broad scope.
First, in Mastrobuono v. Shearson Lehman Hutton, Inc., (76) the Court considered the question
whether a standard New York choice-of-law clause incorporated a New York rule forbidding
arbitrators from awarding punitive damages. Interpreting the choice-of-law clause under New
York law, the Court concluded that the provision was not intended to incorporate New York
rules of arbitration law, and was instead limited to issues of substantive law. Accordingly, the
FAA was applicable and New York's limitations on the power of arbitrators to award punitive
damages was preempted.
Mastrobuono provided a persuasive means for limiting the reach of the Court's Volt decision. It
did so by restricting the circumstances in which state choice-of-law clauses will be interpreted
to incorporate state law arbitration rules: in particular, the Court concluded that a standard
choice-of-law clause did not extend to state law rules governing arbitration issues.
Nonetheless, Mastrobuono was merely the interpretation, under one state's law, of one
contractual choice-of-law clause. The extent to which lower courts will similarly interpret state
law, and choice-of-law clauses in other contracts, is unclear, although most courts appear to be
following the Mastrobuono analysis. (77)
More recently, in Doctor's Associates Inc. v. Casarotto, (78) the Supreme Court rejected an
argument that Volt's analysis barred preemption of a Montana state statute requiring
 arbitration clauses to appear in capital letters on the first page of any contract. The Court
emphasized that Volt had involved a state law rule which (in the Court's view) supported the
arbitral process, rather than one (like the Montana statute) which singled arbitration
agreements out for special requirements and disfavor. The Court held that the latter type of
provision was preempted by §2 of the FAA, thereby placing a potentially significant limit on the
scope of Volt's reasoning. (79)
5. Judicial Decisions Applying §2 of the FAA: Basic Principles of Federal Preemption Under the
FAA
Consider the analyses of §2 referred to below, including the U.S. Supreme Court's decision in
Prima Paint, (80) the Supreme Court's decision in Southland Corp. v. Keating, (81) and the
P "341" Supreme Court's decision in First Options. (82) Also consider again the decisions in Rhone
P "342" Mediterranee Compagnia Francese Di Assicurazioni e Riassicurazioni v. Achille Lauro, (83) and
Kahn Lucas Lancaster, Inc. v. Lark Int'l Ltd, (84) which illustrate the special preemption issues
which arise under the New York Convention and its implementing legislation.
PRIMA PAINT CORP. v. FLOOD & CONKLIN MANUFACTURING CO.
388 U.S. 395 (1967)
[excerpted above at pp. 63-67]
SOUTHLAND CORPORATION v. KEATING
465 U.S. 1 (U.S. Supreme Court 1984)
CHIEF JUSTICE BURGER.... [Southland Corporation franchises 7-Eleven convenience stores. Its
standard franchise contract contains an arbitration provision, requiring AAA arbitration of “any
controversy or claim arising out of or relating to the Agreement or the breach thereof.” A
dispute arose between Southland and several of its franchisees, who filed suit against
Southland in California Superior Court. Among other things, the plaintiffs charged Southland
with violations of the California Franchise Investment Law, Cal. Corp. Code §31000 et seq. (West
1977). Southland sought to compel arbitration. On appeal, the California Supreme Court held
that claims under the California Franchise Investment Law were non-arbitrable.] ...
In enacting §2 of the [FAA], Congress declared a national policy favoring arbitration and
withdrew the power of the states to require a judicial forum for the resolution of claims which
the contracting parties agreed to resolve by arbitration. [In §2 of the FAA,] Congress has ...
mandated the enforcement of arbitration agreements.
We discern only two limitations on the enforceability of arbitration provisions governed by the
FAA: they must be part of a written maritime contract or a contract “evidencing a transaction
involving commerce” and such clauses may be revoked upon “grounds as exist at law or in
equity for the revocation of any contract.” We see nothing in the Act indicating that the broad
principle of enforceability is subject to any additional limitations under State law.
The FAA rests on the authority of Congress to enact substantive rules under the Commerce
Clause.... [In Prima Paint, the Court] held that notwithstanding a contrary state rule,
consideration of a claim of fraud in the inducement of a contract “is for the arbitrators and not
P "342" for the courts.” ... In Moses H. Cone... we reaffirmed our view that the Arbitration Act “creates a
P "343" body of federal substantive law” and expressly stated what was implicit in Prima Paint, i.e.,
the substantive law the Act created was applicable in state and federal court....
Although the legislative history is not without ambiguities, there are strong indications that
Congress had in mind something more than making arbitration agreements enforceable only in
the federal courts.... This broader purpose can also be inferred from the reality that Congress
would be less likely to address a problem whose impact was confined to federal courts than a
problem of large significance in the field of commerce.... [The legislative history of the Act]
makes clear that [Congress] contemplated a broad reach of the FAA, unencumbered by state
law constraints....
The problems Congress faced were therefore twofold: the old common law hostility towards
arbitration, and the failure of state arbitration statutes to mandate enforcement of arbitration
agreements. To confine the scope of the Act to arbitrations sought to be enforced in federal
courts would frustrate what we believe Congress intended to be a broad enactment
appropriate in scope to meet the large problems Congress was addressing.
[In dissent,] Justice O'Connor argues that Congress viewed the [FAA] “as a procedural statute,
applicable only in federal courts.” If it is correct that Congress sought only to create a
procedural remedy in federal courts, there can be no explanation for the express limitation in
the [FAA] to contracts “involving commerce.” 9 U.S.C. §2.... Under the interpretation of the [FAA]
urged by Justice O'Connor, claims brought under the California Franchise Investment Law are
not arbitrable when they are raised in state court. Yet it is clear beyond question that if this
suit had been brought as a diversity action in a federal district court, the arbitration clause
would have been enforceable. The interpretation given to the [FAA] by the California Supreme
Court would therefore encourage and reward forum shopping. We are unwilling to attribute to
Congress the intent, in drawing on the comprehensive powers of the Commerce Clause, to
create a right to enforce an arbitration contract and yet make the right dependent for its
enforcement on the particular forum in which it is asserted. And since the overwhelming
proportion of all civil litigation in this country is in state courts, we cannot believe Congress
intended to limit the [FAA] to disputes subject only to federal court jurisdiction. (85) Such an
interpretation would frustrate Congressional intent to place “[a]n arbitration agreement ...
upon the same footing as other contracts, where it belongs.” H.R. Rep. No. 96 at 1.
P "343" In creating a substantive rule applicable in state as well as federal courts, (86) Congress
P "344" intended to foreclose state legislative attempts to undercut the enforceability of arbitration
ageements. (87) We hold that §31512 of the California Franchise Investment Law violates the
Supremacy Clause....
JUSTICE STEVENS, concurring in part and dissenting in part....Although Justice O'Connor's review
of the legislative history of the FAA demonstrates that the 1925 Congress that enacted the
statute viewed the statute as essentially procedural in nature, I am persuaded that the
intervening developments in the law compel the conclusion that the Court has reached....
For me [however] it is not “clear beyond question that if this suit had been brought as a
diversity action in a Federal District Court the arbitration clause would have been
enforceable.” The general rule prescribed by §2 of the FAA is that arbitration clauses in
contracts involving interstate transactions are enforceable as a matter of federal law. That
general rule, however, is subject to an exception based on “such ground as exist at law or in
equity for the revocation of any contract.” I believe that exception leaves room for the
implementation of certain substantive state policies that would be undermined by enforcing
certain categories of arbitration clauses....
The limited objective of the FAA was to abrogate the general common law rule against specific
enforcement of arbitration agreements,....and a state statute which merely codified the
general common law rule – either directly by employing the prior doctrine of revocability or
indirectly by declaring all such agreements void – would be preempted by the Act. However,
beyond this conclusion, which seems compelled by the language of §2 and case law concerning
the Act, it is by no means clear that Congress intended entirely to displace State authority in
this field....[W]e must first recognize that as the “‘saving clause’ in §2 indicates, the purpose of
Congress in 1925 was to make arbitration agreements as enforceable as other contracts, but not
P "344"
P "345"
more so.”Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 404 n.12 (1967). The
existence of a federal statute enunciating a substantive federal policy does not necessarily
require the inexorable application of a uniform federal rule of decision notwithstanding the
differing conditions which may exist in the several States....
JUSTICE O'CONNOR, DISSENTING.... Today, the Court takes the facial silence of §2 as a license to
declare that state as well as federal courts must apply §2. In addition, though this is not
spelled out in the opinion, the Court holds that in enforcing this newly-discovered federal right
state courts must follow procedures specified in §3. The Court's decision is impelled by an
understandable desire to encourage the use of arbitration, but it utterly fails to recognize the
clear congressional intent underlying the FAA. Congress intended to require federal, not state,
courts to respect arbitration agreements.
The FAA ... was enacted in 1925.... Congress thought it was exercising its power to dictate either
procedure or “general federal law” in federal courts. The issue presented here is the result of
three subsequent decisions of this Court. In 1938 this Court decided Erie Railroad... [which]
denied the federal government the power to create substantive law solely by virtue of the
Article III power to control federal court jurisdiction. Eighteen years later the Court decided
Bernhardt v. Polygraphic Co.... [which] held that the duty to arbitrate a contract dispute is
outcome determinative – i.e., substantive – and therefore a matter normally governed by state
law in federal diversity cases.
Bernhardt gave rise to concern that the FAA could thereafter constitutionally be applied only in
federal court cases arising under federal law, not in diversity cases. In Prima Paint... we
addressed that concern, and held that the FAA may constitutionally be applied to proceedings
in a federal diversity court. The FAA covers only contracts involving interstate commerce or
maritime affairs, and Congress “plainly has the power to legislate” in that area.
Nevertheless, the Prima Paint decision “carefully avoided any explicit endorsement of the view
that the Arbitration Act embodied substantive policies that were to be applied to all contracts
within its scope, whether sued on in state or federal courts.” P. Bator, P. Mishkin, D. Shapiro &
H. Wechsler, Hart and Wechsler's The Federal Courts and the Federal System 731-2 (2d ed. 1973).
Today's case is the first in which this Court has had occasion to determine whether the FAA
applies to state court proceedings. One statement on this subject did appear in Moses H.
Cone... but that case involved a federal, not a state, court proceedings; its dictum concerning
the law applicable in state courts was wholly unnecessary to its holding.
The majority opinion decides three issues. First, it holds that §2 creates federal substantive
rights that must be enforced by the state courts. Second, though the issue is not raised in this
case, the Court states that §2 substantive rights may not be the basis for invoking federal court
jurisdiction under 28 U.S.C. 1331. Third, the Court reads §2 to require state courts to enforce §2
P "345" rights using procedures that mimic those specified for federal courts by FAA §§3 and 4. The first
P "346" of these conclusions is unquestionably wrong as a matter of statutory construction; the
second appears to be an attempt to limit the damage done by the first; the third is
unnecessary and unwise.
One rarely finds a legislative history as unambiguous as the FAA's. That history establishes
conclusively that the 1925 Congress viewed the FAA as a procedural statute, applicable only in
federal courts, derived, Congress believed, largely from the federal power to control the
jurisdiction of the federal courts.... A month after the Act was signed into law the American Bar
Association Committee that had drafted and pressed for passage of the federal legislation
wrote:
The statute establishes a procedure in the Federal courts for the enforcement of arbitration
agreements.... A Federal statute providing for the enforcement of arbitration agreements does
relate solely to procedure in the Federal courts.... [W]hether or not an arbitration agreement is
 to be enforced is a question of the law of procedure and is determined by the law of the
jurisdiction wherein the remedy is sought. That the enforcement of arbitration contracts is
within the law of procedure as distinguished from substantive law is well settled by the
decisions of our courts....
In characterizing the FAA as procedural was not enough, the draftsmen of the Act, the House
Report and the early commentators all flatly stated that the Act was intended to affect only
federal court proceedings....
The structure of the FAA itself runs directly contrary to the reading the Court today gives to §2.
Sections 3 and 4 are the implementing provisions of the Act, and they expressly apply only to
federal courts. Section 4 refers to the “United States district court[s],” and provides that it can
be invoked only in a court that has jurisdiction under Title 28 of the United States Code. As
originally enacted, §3 referred, in the same terms as §4, to “courts [or court] of the United
States.” (88) There has since been a minor amendment in §4's phrasing, but no substantive
change in either section's limitation to federal courts. (89)
None of this Court's prior decisions has authoritatively construed the Act otherwise. It bears
repeating that both Prima Paint and Moses H. Cone involved federal court litigation. The
P "346" applicability of the FAA to state court proceedings was simply not before the Court in either
P "347" case. Justice Black would surely be surprised to find either the majority opinion or his
dissent in Prima Paint cited by the Court today, as both are. His dissent took pains to point out:
The Court here does not hold ... that the body of federal substantive law created by federal
judges under the Arbitration Act is required to be applied by state courts. A holding to that
effect – which the Court seems to leave up in the air – would flout the intention of the framers
of the Act.
Nothing in the Prima Paint majority opinion contradicts this statement.
The Prima Paint majority gave full but precise effect to the original congressional intent – it
recognized that notwithstanding the intervention of Erie the FAA's restrictive focus on maritime
and interstate contracts permits its application in federal diversity courts. Today's decision, in
contrast, glosses over both the careful crafting of Prima Paint and the historical reasons that
made Prima Paint necessary, and gives the FAA a reach far broader than Congress intended.
(90)
Section 2, like the rest of the FAA, should have no application whatsoever in state courts.
Assuming, to the contrary, that §2 does create a federal right that the state courts must
enforce, state courts should nonetheless be allowed, at least in the first instance, to fashion
their own procedures for enforcing the right. Ultimately, the Court seems to direct that the
arbitration clause at issue here must be specifically enforced; apparently no other means of
enforcement is permissible. (91) ...
Before we undertake to read a set of complex and mandatory procedures into §2's brief and
general language, we should at a minimum allow state courts and legislatures a chance to
develop their own methods for enforcing the new federal rights. Some might choose to award
compensatory or punitive damages for the violation of an arbitration agreement; some might
award litigation costs to the party who remained willing to arbitrate; some might affirm the
“validity and enforceability” of arbitration agreements in other ways....
FIRST OPTIONS OF CHICAGO v. KAPLAN
514 U.S. 938 (1995)
[excerpted above at pp. 81-84]
P "347"
P "348"
RHONE MEDITERRANEE COMPAGNIA FRANCESE DI ASSICURAZIONI E RIASSICURAZIONI v. ACHILLE
LAURO
712 F.2d 50 (3d Cir. 1983)
[excerpted above at pp. 100-103]
KAHN LUCAS LANCASTER, INC. v. LARK INTERNATIONAL LTD
956 F.Supp. 1131 (S.D.N.Y. 1997)
[excerpted above at pp. 129-33]
Notes on Enforceability of Arbitration Agreements Under the FAA
1. Lower U.S. court decisions holding that the separability doctrine is a rule of substantive
federal law. A number of early lower U.S. court decisions squarely held that the domestic FAA
established the separability doctrine as a substantive rule of federal law. Representative of
this approach was Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir. 1959).
There, the Second Circuit held:
We think it is reasonably clear that the Congress intended by the [FAA] to create a new body of
federal substantive law affecting the validity and interpretation of arbitration agreements....
[Section 2's declaration] that arbitration agreements affecting commerce or maritime affairs
are “valid, irrevocable, and enforceable” ... must mean that arbitration agreements of this
character, previously held by state law to be invalid, revocable, or unenforceable are now
made “valid, irrevocable, and enforceable.” This is a declaration of national law equally
applicable in state or federal courts. This conclusion flows directly from the realization by the
Congress that nothing of significance would have been accomplished without tapping these
 substantive sources of power. It is these that put teeth into the statute and make it accomplish
the salutary and beneficial ends the Congress had in mind....
We hold that the body of law thus created is substantive not procedural in character and that
it encompasses questions of interpretation and construction as well as questions of validity,
revocability, and enforceability of arbitration agreements affecting interstate commerce or
maritime affairs, since these two types of legal questions are inextricably intertwined....
That the [FAA] envisages a distinction between the entire contract between the parties on the
one hand and the arbitration clause of the contract on the other is plain on the face of the
statute. Section 2 does not purport to affect the contract as a whole. On the contrary, it makes
“valid, irrevocable, and enforceable” only a “written provision in any maritime transaction or a
contract evidencing a transaction involving commerce to settle by arbitration a controversy
thereafter arising out of such contract or transaction”; and §3 provides for the granting of a stay
in any suit or proceeding in the federal courts “upon an issue referable to arbitration under an
agreement in writing for such arbitration.
Consider the Second Circuit's reasoning in Robert Lawrence. Is it persuasive? What provisions of
the FAA are relied upon for the separability doctrine? Section 2? Section 3? Section 4? Is the
parties' intent relevant to the separability doctrine? If so, does the parties' intent provide a
basis for creating federal law? How?
2. Prima Paint's holding on the separability doctrine as a rule of federal law. As noted above,
Prima Paint is inevitably cited as support for the proposition that the separability doctrine is a
rule of federal law. See supra p. 71-72. Is that a correct reading of Prima Paint?
In fact, the Prima Paint Court did not itself expressly adopt the separability doctrine. The
P "348" Supreme Court's most explicit treatment of the separability doctrine in Prima Paint was merely
P "349" a description of the Second Circuit's holding in Robert Lawrence:“except where the parties
otherwise intend... arbitration clauses as a matter of federal law are ‘separable’ from the
contracts in which they are embedded, and ... where no claim is made that fraud was directed
to the arbitration clause itself, a broad arbitration clause will be held to encompass
arbitration of the claim that the contract itself was induced by fraud.” 388 U.S. at 402
(emphasis in original), quoting Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d
Cir. 1959), cert. denied, 362 U.S. 909 (1960).
On the other hand, Prima Paint also specifically held that state law rejecting separability is
irrelevant and that federal law requires arbitrating claims that the underlying contract was
fraudulently induced. See supra p. 338-39. Moreover, the Court's apparent interpretation of §§3
and 4 regards those provisions as incorporating the separability doctrine. The Court held “that
in passing upon a §3 application for a stay while the parties arbitrate, a federal court may
consider only issues relating to the making and performance of the agreement to arbitrate.”
Similarly, the Court relied on §4 of the FAA, which requires the district court to compel
arbitration if “the making of the agreement for arbitration... is not the issue.” (Emphasis added.)
Is the Court's treatment of the separability doctrine in Prima Paint persuasive? Note the
dissent's comment that the language of §4 “far from providing an ‘explicit answer’ merely
poses the further question of what kind of allegations put the making of the arbitration
agreement in issue.” Why does not the validity of the underlying agreement which contains the
parties' arbitration agreement “relat[e] to the making and performance of the agreement to
arbitrate” under §3 and §4? Where in the FAA is there a basis for a federal rule separating the
arbitration agreement from the underlying contract?
3. Current status of the separability doctrine as a rule of federal law. Whatever Prima Paint
actually meant to hold, it is now almost uniformly interpreted as embracing the separability
doctrine as a matter of federal law under the domestic FAA. See Republic of Nicaragua v.
Standard Fruit Co., 937 F.2d 469 (9th Cir. 1991); Teledyne, Inc. v. Kone Corp., 892 F.2d 1404, 1410
(9th Cir. 1989); Peoples Security Life Ins. Co. v. Monumental Life Ins. Co., 867 F.2d 809 (4th Cir.
1989); Union Mutual Stock Life Ins. Co. v. Beneficial Life Insurance Co., 774 F.2d 524, 529 (1st Cir.
1985); Sauer-Getriebe KG v. White Hydraulics, Inc., 715 F.2d 348, 350 (7th Cir. 1983); Republic of the
Philippines v. Westinghouse Elec. Corp., 714 F.Supp. 1362 (D.N.J. 1989); Dougherty v. Mieczkowski,
661 F.Supp. 267, 273 (D. Del. 1987) (“Under the FAA, the arbitration clause is severable from the
contract ...”).
4. Federal substantive law under §2 of the FAA – historical development. A vital issue, raised in
Prima Paint, Southland, and First Options, is the scope of federal substantive law created by §2
of the FAA.
 (a) Robert Lawrence's holding that §2 establishes a rule of federal substantive law regarding
the enforceability of arbitration agreements. As noted above, Robert Lawrence and similar
decisions held that §2 of the FAA establishes, as a matter of federal law, a substantive
rule that arbitration agreements are enforceable. Consider the language of §2: certain
agreements to arbitrate “shall be valid, irrevocable and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any contract.” Is Robert Lawrence
correct in concluding that this provision creates substantive rules of federal contract law?
What does the “savings clause” at the end of §2 mean? Section 2, particularly given the
savings clause, could be read as merely referring to the otherwise applicable substantive
rules of contract law. Why shouldn't such a reading be adopted? If Congress meant to
establish substantive rules of federal contract law, applicable to arbitration agreements,
would it have done so by adopting a short, general provision like §2? Note that §2
addresses virtually none of the issues that arise in most contractual disputes – capacity,
offer and acceptance, formalities, consideration, interpretation, legality, and the like.

(b) Did Prima Paint adopt Robert Lawrence's view of substantive federal law under §2?
Consider the Supreme Court's remark in Prima Paint, quoted above, that it agrees with
Robert Lawrence “albeit for somewhat different reasons,” 388 U.S. at 400, and Justice
Harlan's concurrence that he would “also” affirm “on the basis of Robert Lawrence.” Does
Prima Paint rely on §2 – or §4 – for the separability rule? Compare Justice Black's dissent,
accusing the Court of having adopted Robert Lawrence. Is that true?
(c) Scope of substantive federal law under Prima Paint. Under Prima Paint, what law – state or
federal – governs the formation, validity, legality, interpretation, and enforceability of an
arbitration agreement? Does Prima Paint adopt the conclusion in Robert Lawrence that:
the body of law thus created is substantive not procedural in character and ... it
encompasses questions of interpretation and construction as well as questions of validity,
revocability and enforceability of arbitration agreements affecting interstate commerce
or maritime affairs, since these two types of legal questions are inextricably intertwined.
P "349"
P "350"
Was the Supreme Court's unwillingness wholeheartedly to embrace Robert Lawrence, see
supra p.349, based on the Second Circuit's views about the scope of federal law, rather
than its treatment of the separability doctrine?

(d) Did Southland adopt Robert Lawrence's view of federal substantive law under §2? Consider
the role of federal law in Southland. The Supreme Court clearly holds that §2 creates
substantive federal law that preempts state laws forbidding the arbitration of particular
types of claims. What precisely is the scope of federal substantive law recognized in
Southland?
(e) Law applicable under §2's savings clause. Section 2 of the FAA does not, of course, provide
that all arbitration agreements are always enforceable. Section 2 also provides that an
arbitration agreement is revocable upon “such grounds as exist at law or in equity for the
revocation of any contract.” What law governs the question whether “any” contract is
revocable “at law or in equity”? Federal common law or state law? How does Prima Paint
answer this question? What interpretation does Southland give to §2? Consider note 87
supra in the Southland opinion. What does it suggest about the meaning of §2's savings
clause? For a more detailed discussion, see infra pp. 350-53.
(f) Untangling the FAA's intended preemptive effect. It is, in truth, very hard to figure out what
Congress thought it was doing when it enacted the FAA in 1925. On the one hand, as Justice
O'Connor's Southland dissent observes, the legislative history makes it fairly clear that
the principal objective of the Act's framers was to provide an enforcement mechanism in
federal courts. On the other hand, in enacting the FAA, Congress clearly relied in part on
its powers to regulate commerce, and §2 fairly clearly appears to establish a substantive
federal rule of enforceability of arbitration agreements, at least in some circumstances. If
such a rule exists, however, it is at best only very awkwardly confined to federal courts. In
the words of one observer, “[t]he broad command of §2 of the Arbitration Act stands in
sharp contrast to Congress's arguably narrow goal in enacting the legislation, and for this
reason determination of the Act's preemptive effect is problematic.” Atwood, Issues in
Federal-State Relations Under the Federal Arbitration Act, 37 U. Fla. L. Rev. 61, 83-84 (1985).
And finally, when the FAA was enacted, it was widely held that the validity and
interpretation of arbitration agreements were procedural matters governed by the law of
the forum. See supra pp. 108-09.
At the end of the day, it may be futile to attempt to reconstruct from the Act's terse language
and contradictory legislative history what the 68th Congress – in days before either Erie or the
New Deal expansion of the Commerce Clause power – thought about the preemptive effect of
the FAA. That is particularly true as applied to the comparatively exotic landscape of
arbitration agreements. The more productive avenue is to consider the fundamental concerns
that motivated the FAA.
Those concerns were the unacceptable expense and unreliability of the judicial system in
resolving complex national and international commercial disputes, and the perceived
procedural advantages of arbitration. See supra pp. 35-39, 157-61. The FAA was meant to
overcome hostility towards arbitration agreements and to provide an efficient judicial regime
that would facilitate the use and enforcement of arbitration. In today's national and global
 economy, those objectives require a broad reading of the FAA, and in particular, a conclusion
that §2 contains substantive rules of federal law binding on both state and federal courts.
Moreover, as discussed below, those objectives argue, particularly in the international context,
for a uniform set of federal rules governing the enforcement, formation, and interpretation of
arbitration agreements. See infra pp. 353-56.
5. Differing views regarding respective roles of state and federal law in determining existence
and validity of arbitration agreements in the United States. As Southland and Prima Paint
illustrate, and as discussed in detail below, the formation and enforceability of arbitration
agreements that are subject to the FAA is governed in important respects by federal law. See
infra pp. 351-57. In particular, as Southland illustrates, §2 of the FAA establishes a basic federal
rule that arbitration agreements are enforceable, notwithstanding at least some state law
prohibitions. Nevertheless, there is still substantial debate about the respective roles of state
and federal law in determining the existence and validity of domestic arbitration agreements
in the United States.
(a) Federal substantive law preempts discriminatory state law rules. At a minimum, the federal
rule derived from §2 of the FAA preempts state laws that single out arbitration
agreements, either to render them unenforceable or to subject them to special
requirements not otherwise applicable to other contracts. See infra pp. 351-52; Allied-
Bruce Terminix Co. v. Dobson, 513 U.S. 265 (1995); Perry v. Thomas, 482 U.S. 483 (1987);
P "350" Southland Corp. v. Keating, 465 U.S. 1 (1984) (“In creating a substantive rule applicable in
P "351" state as well as federal courts, Congress intended to foreclose state legislative
attempts to undercut the enforceability of arbitration agreements.”).
(b) Early U.S. lower court decisions applying state law to formation and validity of arbitration
agreements. Historically, some lower U.S. courts applied state law to issues of contract
formation and validity, subject to the FAA-imposed requirement that state law not single
out arbitration agreements for disfavor. See Progressive Casualty Ins. Co. v. CA
Reasequradora Nacional de Venezuela, 991 F.2d 42 (2d Cir. 1993); Supak & Sons Mfg. Co. v.
Pervel Indus., 593 F.2d 135, 137 (4th Cir. 1979) (FAA “does not displace state law on the
general principles governing [contract] formation”); Medical Dev. Corp. v. Industrial
Molding Corp., 479 F.2d 345, 348 (10th Cir. 1973); Southeastern Enameling Corp. v. General
Bronze Corp., 434 F.2d 330 (5th Cir. 1970); Ziegler v. Whale Securities Co., 786 F.Supp. 739,
741-42 (N.D. Ind. 1992) (“to determine whether a valid arbitration agreement exists, this
Court must turn to state contract law”); Astor Chocolate Corp. v. Mikroverk Ltd, 704 F.Supp.
30 (E.D.N.Y. 1989) (“state law governs the issue of whether or not the arbitration clause is a
part of the contract”); Cook Chocolate Co. v. Salomon Inc., 684 F.Supp. 1177 (S.D.N.Y. 1988)
(Ҥ2 of the Act preserves general principles of state contract law as rules of decision on
whether the parties have entered into an agreement to arbitrate. Once an agreement to
arbitrate is found to exist, federal substantive law ... governs the scope and
interpretation of the agreement.”).
As discussed below, however, most lower courts held that federal common law rules are
broader in cases involving international arbitration agreements under the Convention
than under the domestic FAA. See infra pp. 353-57. Only in the event that this view were
rejected would the foregoing domestic decisions arguably provide for the application of
state law to the formation and validity of international arbitration agreements.

(c) Early U.S. lower court decisions holding that federal substantive law provides the sole
standards governing formation, validity and interpretation of arbitration agreements.
Although most lower court authority applied state law to the formation and validity of
arbitration agreements, other lower courts went further and held that federal law
provided the sole standards under the domestic FAA governing the formation, validity,
legality, and interpretation of arbitration agreements. Cohen v. Wedbush, Noble, Cooke,
Inc., 841 F.2d 282, 285 (9th Cir. 1988) (“the availability and validity of defenses against
arbitration are therefore to be governed by application of federal standards”); Genesco,
Inc. v. T. Kakiuchi & Co., 815 F.2d 840, 845 (2d Cir. 1987); Johnson Controls, Inc. v. City of
Cedar Rapids, 713 F.2d 370, 376 (8th Cir. 1983) (“federal substantive law preempts state law
governing the enforceability of arbitration agreements in interstate contracts”); Church v.
Gruntal & Co., 698 F.Supp. 465, 467 (S.D.N.Y. 1988); Hall v. Prudential-Bache Securities, Inc.,
662 F.Supp. 468 (C.D. Calif. 1987) (“whether an agreement to arbitrate is valid is
determined by federal law”); Avila Group, Inc. v. Norma J. of Calif., 426 F.Supp. 537, 540
(S.D.N.Y. 1977) (“federal law applies to all questions of interpretation, construction,
validity, revocability and enforceability”). See generally Annotation, Conflict of Laws as to
Validity and Effect of Arbitration Provision, 95 A.L.R. 3d 1145.
6. Contemporary application of the preemption doctrine under Perry, First Options, and Allied-
Bruce – the domestic FAA preempts only discriminatory state laws, and not generally-applicable
state contract law. The historic uncertainty among lower U.S. courts over the respective roles of
federal and state law in the formation of arbitration agreements under the domestic FAA
appears to have been resolved by the Supreme Court. This resolution came in the Court's
decisions in Perry v. Thomas, First Options, Allied-Bruce, and Doctor's Associates.
 (a) Dicta in Perry v. Thomas. In Perry v. Thomas, 482 U.S. 483, 492 n.9 (1987), the Court
reasoned, albeit in dicta, that:
We ... decline to address Thomas' claim that the arbitration agreement in this case
constitutes an unconscionable, unenforceable contract of adhesion. This issue was not
decided below.... We note, however, the choice-of-law issue that arises when defenses
such as Thomas' so-called “standing” and unconscionability arguments are asserted. In
instances such as these, the text of §2 provides the touchstone for choosing between state
law principles and the principles of federal common law envisioned by the passage of
that statute: “An agreement to arbitrate is valid, irrevocable, and enforceable, as a
matter of federal law,”see Moses H. Cone Memorial Hospital v. Mercury Construction Corp.,
460 U.S. 1, 24 (1983), “save upon such grounds as exist at law or in equity for the
P "351" revocation of any contract.” 9 U.S.C. §2 (emphasis added). Thus, state law, whether of
P "352" legislative or judicial origin, is applicable if that law arose to govern issues concerning
the validity, revocability, and enforceability of contracts generally. A state law principle
that takes its meaning precisely from the fact that a contract to arbitrate is at issue does
not comport with this requirement of §2. See Prima Paint, 388 U.S. at 404; Southland Corp.
v. Keating, 465 U.S. at 16-17 n.11. A court may not, then, in assessing the rights of litigants
to enforce an arbitration agreement, construe that agreement in a manner different from
that in which it otherwise construes nonarbitration agreements under state law. Nor may
a court rely on the uniqueness of an agreement to arbitrate as a basis for a state-law
holding that enforcement would be unconscionable, for this would enable the court to
effect what we hold today the state legislature cannot....
Note that the Perry dicta indicates only what state law rules are not preempted by §2's
express terms; the Perry dicta arguably does not preclude the development of federal
common law rules to govern the formation of arbitration agreements. Nevertheless, as
discussed below, subsequent Supreme Court decisions have interpreted Perry as leaving
issues of formation and validity of domestic arbitration agreements to generally-
applicable state law.

(b) The preemption analysis of First Options – generally-applicable state law governs
formation and validity of arbitration agreements under the domestic FAA. Following Perry v.
Thomas, the Supreme Court expressly confirmed that generally-applicable state contract
law, not federal contract law, governs the formation and validity of arbitration
agreements which are subject to the domestic FAA. As we have seen, the Court said in First
Options that, “[w]hen deciding whether the parties agreed to arbitrate ... courts generally
... should apply ordinary state-law principles that govern the formation of contracts.” Of
course, the Court did nothing to question the FAA's preemptive effect with respect to
state law rules which singled out arbitration agreements for disfavored treatment.
(c) Allied-Bruce – generally-applicable state law governs formation and validity of arbitration
agreements under the domestic FAA. Likewise, the Supreme Court held in Allied-Bruce
Terminix Co. v. Dobson, 513 U.S. 265 (1995), that:
States may regulate contracts, including arbitration under general contract law
principles and they may invalidate an arbitration clause “upon such grounds as exist at
law or in equity for the revocation of any contract.” 9 U.S.C. §2 (emphasis added). What
States may not do is to decide that a contract is fair enough to enforce all its basic terms
(price, service, credit), but not fair enough to enforce its arbitration clause. The Act makes
any such state policy unlawful, for that kind of policy would place arbitration clauses on
an unequal “footing,” directly contrary to the Act's language and to Congress's intent.
Applying this rationale, the Court held that the FAA preempted an Alabama statute
invalidating predispute arbitration agreements.
 (d) The preemption analysis of Doctor's Associates. In Doctor's Associates, Inc. v. Casarotto, 517
U.S. 681 (1996), the Supreme Court held that the FAA preempted a Montana statute
requiring that any arbitration agreement be printed in capital letters (and underlined) on
the first page of the contract. The Court reasoned that the Montana statute did not
constitute “grounds as exist at law or in equity for the revocation of any contract,” 9 U.S.C.
§2, because the statute “governs not ‘any contract,’ but specifically and solely contracts
‘subject to arbitration.’” 517 U.S. at 682. The Court observed that “generally-applicable
contract defenses, such as fraud, duress or unconscionability, may be applied to
invalidate arbitration agreements without contravening §2,” but “[c]ourts may not ...
invalidate arbitration agreements under state laws applicable only to arbitration
provisions.”
For lower court decisions reaching similar conclusions, see David L. Threlkeld & Co. v.
Metallgesellschaft Ltd, 923 F.2d 245 (2d Cir. 1991); Saturn Distribution Corp. v. Williams, 905
F.2d 719 (4th Cir. 1990) (refusing to apply state law forbidding formation of arbitration
agreements in certain form contracts); Securities Indus. Ass'n v. Connolly, 883 F.2d 1114,
1123-24 (1st Cir. 1989) (refusing to apply state law requiring particular disclosure of
arbitration agreements); Commerce Park at DFW Freeport v. Mardian Const. Co., 729 F.2d
334 (5th Cir. 1984); Collins Radio Co. v. Ex-Cell-O Corp., 467 F.2d 995, 999 (8th Cir. 1972)
(distinguishing between “special state laws or decisions governing the validity of
arbitration agreements” and “the validity of an arbitration agreement under general
P "352" contract law”); Medical Development Corp. v. Industrial Molding Corp., 479 F.2d 345 (10th
P "353" Cir. 1973); China Resources Products (U.S.A.) Ltd v. Fayda Int'l Inc., 747 F.Supp. 1101, 1108
n.11 (D. Del. 1990); Cook Chocolate Co. v. Salomon Inc., 684 F.Supp. 1177, 1182 (S.D.N.Y. 1988)
(refusing to apply New York state law decisions imposing particularly high obstacles to
incorporation of arbitration agreements); Wydel Associates v. Thermasol, Ltd, 452 F.Supp.
739, 742 (W.D. Tex. 1978).

(e) Correctness of Southland. In enacting the FAA, did Congress in fact intend to “foreclose
state legislative attempts to undercut the enforceability of arbitration agreements”?
Putting aside Justice O'Connor's view that the FAA applies only in federal courts, consider
Justice Stevens' argument that §2 “leaves room for the implementation of certain
substantive state policies that would be undermined by enforcing certain categories of
arbitration clauses.” Consider also the following:
A more legitimate interpretation of the Act would require states to recognize
enforceability of arbitration agreements as a general matter, but allow states to ensure
judicial resolution of particular claims favored under state law. Such an approach
squares with the statutory language of §2 in two ways. First, an ‘agreement to arbitrate’
within the meaning of §2 arguably must exist under state law before the federal mandate
of enforceability comes into play. If state law prohibits agreements to arbitrate
particular claims, not because of generalized hostility toward arbitration but because of
a substantive policy favoring the claims in question, a valid ‘agreement’ required to
trigger §2 does not exist.... Alternatively, the savings clause of §2 could have provided a
vehicle for recognizing state substantive policies.... Because the state statute in Keating
effectively nullified the arbitration clause in the franchise agreement, arguably the
clause, like any other contract nullified by state law, was unenforceable.
Atwood, Issues in Federal-State Relations Under the Federal Arbitration Act, 37 U. Fla. L.
Rev. 61, 86-7 (1985). Is this persuasive?
7. Interpretation of scope of arbitration agreements generally subject to federal law under
domestic FAA. As discussed in detail above, Prima Paint has uniformly been read to hold that
the interpretation of arbitration agreements – as distinguished from the formation, validity,
and legality of arbitration agreements – that are subject to the FAA is a matter of federal law
(not state law). The Supreme Court has repeatedly reaffirmed this rule. See supra pp. 315-18;
First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (1995); Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth Inc., 473 U.S. 614, 625-27 (1985). See also Coenen v. R.W. Pressprich & Co., 453
F.2d 1209, 1211 (2d Cir.), cert. denied, 406 U.S. 949 (1972); Oriental Commercial and Shipping Co. v.
Rosseel, NV, 609 F.Supp. 75, 77-78 (S.D.N.Y. 1985); SA Mineracao Da Trindade-Samitri v. Utah
International, Inc., 576 F.Supp. 566 (S.D.N.Y. 1988), aff'd, 745 F.2d 190 (2d Cir. 1984); Ferrara SpA v.
United Grain Growers, Ltd, 441 F.Supp. 778, 780 & n.2 (S.D.N.Y. 1977), aff'd, 580 F.2d 1044 (2d Cir.
1978).
8. Enforceability and interpretation of arbitration agreements generally subject in U.S. courts to
U.S. law, not foreign law. As we have seen, international arbitration agreements can generally
be subjected by the parties to whatever substantive law they wish. See supra pp. 109-10.
Alternatively, in the absence of any choice-of-law clause, application of ordinary conflict of law
rules will provide a particular governing law for the arbitration agreement. See supra pp. 108-
17; Restatement (Second) Conflict of Laws §218 (1971).
As discussed above, U.S. courts have not frequently considered whether foreign law governs the
interpretation, existence, or enforceability of an international arbitration agreement. For the
most part, U.S. courts have simply applied the FAA and federal common law to international
arbitration agreements, notwithstanding a foreign choice-of-law clause, apparently on the
theory that these issues are procedural or remedial and subject to the law of the forum. See
supra pp. 113-17 & infra pp. 353-56.
9. What U.S. law – federal or state – applies to determine the formation, validity, and legality of
arbitration agreements under Article II(3) of the New York Convention? Reread the decisions in
Rhone and Lark International, which involved arbitration agreements subject to the New York
 Convention (and not ust the domestic FAA). Assume, as Rhone, Lark International and most
other U.S. courts have held, that J.S. law is applicable to determine whether an arbitration
agreement is “null and void” under Article II(3). s it U.S. federal or U.S. state law that governs
this issue?
(a) Federal common law applicable to formation and validity of international arbitration
agreements subject to New York Convention. As Rhone and Lark International illustrate,
lower U.S. courts have almost uniformly concluded that federal law governs the formation
and validity of arbitration agreements under the Convention. See McDermott Int'l Inc. v.
P "353" Lloyds Underwriters of London, 944 F.2d 1199 (5th Cir. 1991) The FAA “is the approximate
P "354" domestic equivalent of the Convention; it guarantees enforcement of domestic arbitral
contracts and awards, but with slightly different rules of applicability.”); David L.
Threlkeld & Co. v. Metallgesellschaft Ltd, 923 F.2d 245 (2d Cir. 1991); Riley v. Kingsley
Underwriting Agencies, Ltd, 969 F.2d 953, 960 (10th Cir. 1992); Rhone Mediterranee etc. v.
Achille Lauro, 712 F.2d 50 (3d Cir. 1983) (“The forum law implicitly referenced by Article
II(3) is the law of the United States, not the local law of the Virgin Islands or of a state”);
Ledee v. Ceramiche Ragno, 684 F.2d 184 (1st Cir. 1982); Becker Autoradio U.S.A., Inc. v.
Becker Autoradiowerke GmbH, 585 F.2d 39, 43 & n.15 (3d Cir. 1978) (whether “there is an
agreement to arbitrate” and “questions of interpretation ... of such agreement” are
“clearly a matter of substantive federal law”); Filantro SpA v. Chilewich Int'l Corp., 789
F.Supp. 1229, 1236 (S.D.N.Y. 1992) (“the question whether these parties agreed to arbitrate
their disputes is governed by the Arbitration Convention and its implementing
legislation”); In re Midland Bright Drawn Steel Ltd, 1989 WL 125788 (S.D.N.Y. 1989); National
Dev. Co. v. Khashoggi, 781 F.Supp. 959, 963 (S.D.N.Y. 1992); McCain Foods Ltd v. Puer to Rico
Supplies, Inc., 766 F.Supp. 58 (D.P.R. 1991); Meadows Indemnity Co. v. Baccala & Shoop Ins.
Services, Inc., 1991 U.S. Dist. Lexis 4144, at 18-21 (E.D.N.Y. 1991) (federal law governs
whether agreement is null and void and interpretation); Marchetto v. DeKalb Genetics
Corp., 711 F.Supp. 936 (E.D. Ill. 1989); Onyx Development Corp. v. Ministry of Finance, 1989
U.S. Dist. Lexis 11995 (S.D.N.Y. 1988); Beromun AG v. Societa Industriale Agricola “Tresse,”
etc., 471 F.Supp. 1163, 1169 (S.D.N.Y. 1979) (“Since jurisdiction is alleged under Chapter 2 of
the [FAA], the issue of the enforceability and validity of the parties arbitration clause is
governed by federal law.”); Ferrara SpA v. United Grain Growers, Ltd, 441 F.Supp. 778, 780-
81 & n.2 (S.D.N.Y. 1977) (“it would seem that the enforceability of the arbitration clause at
issues must be determined in accordance with federal law, ie., generally accepted
principles of contract law”; suggesting that there “is no reason why a different rule should
apply [to enforceability of arbitration agreement] in proceedings brought under Chapter
2” than Chapter 1); Antco Shipping Co. v. Sidermar SpA, 417 F.Supp. 207 (S.D.N.Y. 1976)
(applying federal law, without analysis, to claim that agreement was “null and void”
under Article II(3)).
(b) Applicability to international arbitration agreements of general state contract law defenses
under first chapter of FAA. Despite the weight of U.S. lower court authority, the
relationship between federal and state law in determining the validity of an international
arbitration agreement may be more complex. As discussed in detail above, §2 of the
domestic FAA establishes a basic federal rule that arbitration agreements are
enforceable, “save upon such grounds as exist at law or in equity for the revocation of any
contract.”See supra pp. 331-35, 348-51. As we have seen, it is now clear that state (not
federal) law defines the grounds for “revocation of any contract” under §2's so-called
“savings clause” where domestic arbitration agreements are concerned. See supra pp.
349-53.
When a U.S. court applying Article II(3) of the Convention looks to the forum law, why is it
not these principles of enforceability under the domestic FAA that are presumptively
applicable? If this analysis were accepted, state (or foreign) contract law defenses would
be applicable under Article II(3). As detailed above, most U.S. courts have not adopted
this approach. See supra pp. 353-54.

10. Federal policies justifying federal common law rules governing international arbitration
agreements. Few authorities have sought to articulate why the scope of federal common law
under Article II(3) should be broader than that under §2. Nonetheless, the Convention may
provide a basis for federalizing the contract law defenses to the enforceability of international
arbitration agreements which does not exist in domestic cases.
In general, federal common law rules are not lightly fashioned. In order to do so, it is necessary
to demonstrate that an issue arises in a “uniquely federal field” and that either a specific state
law rule, or the possibility of divergent state law rules, creates a “significant conflict” with
federal policies. See Boyle v. United Technologies Corp., 487 U.S. 500 (1988); G. Born,
International Civil Litigation in United States Courts 15-16 (3d ed. 1996).
 (a) Absence from Prima Paint of reliance on federal policy encouraging arbitration. Note that
Prima Paint does not expressly rely on the existence of any “pro-arbitration” policy under
the FAA. As Southland demonstrates, that is not true of subsequent Supreme Court
decisions. In Moses H. Cone Memorial Hospital, Southland, and Mitsubishi Motors, the
Supreme Court specifically reasoned that the FAA was meant to encourage arbitration, in
order to relieve congested federal courts and to promote more efficient dispute
resolution. See supra pp. 34-41, 156-61, 336-40 & infra pp. 354-56. If there is no general
federal policy of encouraging arbitration, does this have consequences for the existence
and scope of federal substantive rules governing the interpretation and enforcement of
P "354" arbitration agreements? Conversely, if there is such a policy, what are the consequences
P "355" for a federal common law analysis?
(b) Federal pro-arbitration policy and rules of formation. The Supreme Court has repeatedly
affirmed the FAA's pro-arbitration policy, albeit without defining the policy with any real
precision. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 625-29
(1985); Southland Corp. v. Keating, 465 U.S. 1, 14-16 (1984) (“national policy favoring
arbitration”); Moses H. Cone Memorial Hosp. v. Mercury Construction Corp., 460 U.S. 1
(1983). A pro-arbitration policy is reflected in the concerns about the costs, delays, and
quality of judicial dispute resolution which gave rise to the FAA. See supra pp. 34-41, 156-
61, 336-40. This policy of encouraging arbitration of private disputes provides direct
support for federal rules of contract formation and interpretation in the context of
arbitration agreements.
Some commentators (and on occasion, some Supreme Court opinions) have questioned
whether in fact any broad pro-arbitration policy exists. Atwood, Issues in Federal-State
Relations Under the Federal Arbitration Act, 37 U. Fla. L. Rev. 61 (1985); Note, Incorporation
of State Law Under the Federal Arbitration act, 78 Mich. L. Rev. 1391, 1403 (1980); Volt
Information Sciences, Inc. v. Board of Trustees, 489 U.S. 468, 478 (1989) (FAA “simply
requires courts to enforce privately negotiated agreements to arbitrate, like other
contracts, in accordance with their terms”).
If, however, Congress indeed saw arbitration as a desirable means of dispute resolution,
which freed the judiciary for other tasks and produced more efficient and acceptable
results for the business community, then federal policy ought also to disfavor artificial or
unduly rigorous rules governing the formation and validity of arbitration agreements. This
argument goes beyond Southland, Perry v. Thomas, and Allied Bruce – which apparently
allow generally-applicable state law to govern issues of formation and validity, save
where it discriminates against arbitration agreements. It urges a uniform federal law that
presents low entry barriers to the arbitral process and that resolves doubts in favor of
arbitration.

(c) Is domestic arbitration a “uniquely federal field”? Can it fairly be said that domestic
arbitration is a “uniquely federal field”? Note that state arbitration statutes and law
existed before the FAA was enacted, and that almost every state now has such a statute.
See supra pp. 39-41. On the other hand, does §2 of the FAA suffice to establish that
arbitration is a uniquely federal field? Note that, in Perry v. Thomas, 482 U.S. 483 (1986),
the Court referred to “principles of federal common law envisioned by the passage of” the
FAA. Although historically misleading, the observation is sound in result.
(d) Is there a need for a single, uniform federal law governing interpretation, formation, and
enforcement of domestic arbitration agreements? As discussed above, most issues of
contract formation and interpretation are governed by state law. Why should a different
rule apply to the formation and interpretation of arbitration agreements?
Note that the Supreme Court has apparently concluded that federal policy encourages
arbitration. See supra pp. 336-40, 354-55. This policy arguably provides a basis for a
uniform federal law governing the formation and interpretation of arbitration
agreements. Without such a uniform, pro-arbitration law, parties may be left uncertain
about the meaning and enforceability of their arbitration agreements. That uncertainty
will arguably dissuade businesses from entering into arbitration agreements (particularly
in light of the hostility displayed towards such agreements at common law and in
parochial quarters). In addition, indirect hostility towards arbitration agreements will be
a more serious threat if individual state laws are applicable, relatively safe from
thorough federal judicial review. Moreover, arbitration is frequently entered into in
interstate transactions to avoid uncertainties created by conflict of laws, jurisdictional
debates, and parochial bias.
 (e) Is international arbitration a “uniquely federal field”? Even if the FAA does not convert
arbitration into a uniquely federal field in domestic matters, what about international
arbitration? Do the New York Convention, Inter-American Convention, ICSID, and various
bilateral treaties indicate that the field of international arbitration is uniquely federal?
As we have seen, the Supreme Court has long drawn a distinction between arbitration of
international and domestic disputes. See Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth Inc., 473 U.S. 614 (1985) and Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974), both
rejecting claims that federal statutory claims were non-arbitrable in international
disputes, even though, at the time, they would have been in domestic disputes. See supra
pp. 277-78.
The arguments in favor of a uniform federal law governing the interpretation, formation,
and enforcement of arbitration agreements are significantly stronger in the international
context. In that field, there is a well-established national interest in “speaking with one
voice.” Japan Line v. County of Los Angeles, 441 U.S. 434 (1979); Hines v. Davidowitz, 312 U.S.
52 (1941). As discussed elsewhere, most lower courts appear to have concluded that
broader rules of federal common law exist under the New York Convention than under the
domestic FAA. See supra pp. 113-17, 349-55.
P "355"
P "356"
(f) Federal pro-arbitration policy and rules of construction. It is well-settled that the federal
pro-arbitration policy described above provides the basis for federal rules of contract
interpretation of arbitration agreements. As we have seen, the Court emphasized in
Mitsubishi Motors and elsewhere that “as a matter of federal law, any doubts concerning
the scope of arbitrable issues should be resolved in favor of arbitration, whether the
problem at hand is the construction of the contract language itself or an allegation of
waiver, delay, or a like defense to arbitrability.” 473 U.S. at 626 (quoting Moses H. Cone
Memorial Hospital, 460 U.S. at 24-25).
11. Applicability of §2 of the FAA in state courts. One of the significant conclusions in Southland
was that the FAA's substantive federal rules of enforceability of arbitration agreements, set
forth in §2, apply in state courts. Compare the different approaches to this issue adopted by
the Court and Justice O'Connor's dissent. Which is more persuasive? Where do Justice Stevens'
sympathies lie?
Consider the legislative history offered by the Court and Justice O'Connor. Note that some
commentators share Justice O'Connor's conclusion that the FAA probably was intended to be
“procedural” – that is, the Act was intended by Congress primarily to supply a mechanism for
federal (and not state) courts to provide a remedy for breaches of arbitration agreements.
Atwood, Issues in Federal-State Relations Under the Federal Arbitration Act, 37 U. Fla. L. Rev. 61,
76-79 (1985); Note, 73 Harv. L. Rev. 1382 (1960); Note, Erie, Bernhardt, and §2 of the United States
Arbitration Act: A Farrago of Rights, Remedies, and a Right to a Remedy, 69 Yale L.J. 847 (1960);
Note, Scope of the United States Arbitration Act in Commercial Arbitration: Problems in
Federalism, 58 Nw. U. L. Rev. 468, 492 (1963). See Joint Hearings on S. 1005 and H.R. 646 Before
the Subcommittees of the Committees on the Judiciary, 68th Cong., 1st Sess. 17, 37 (1923) (“The
statute as drawn establishes a procedure in the Federal courts for the enforcement of
arbitration agreements”); H.R. Rep. No. 96, 68th Cong., 1st Sess. 1 (1924) (treating FAA as
applicable in “Federal court”); S. Rep. No. 536, 68th Cong., 1st Sess. 1-2 (1924). Query, however,
what “procedural” was understood at the time to connote, particularly where the enforceability
of arbitration agreements was concerned.
12. Obligation of state courts to stay litigation of claims that are arbitrable under the FAA. Are
state courts obliged by the FAA to stay state court litigation of claims that are subject to a valid
arbitration agreement governed by §2 of the FAA? Although the answer should clearly be yes,
there is surprising uncertainty on the issue.
(a) Applicability of §3's stay provisions in state court. Consider the language of §§3 and 4. Is §3
applicable in, and binding on, state courts? Compare the language of §3 to that of §4.
Note that §3 refers to “any of the courts of the United States,” while §4 refers to “any
United States district court.” Are different meanings intended?
The Supreme Court has not clarified whether or not §3 is applicable in state courts. In
Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24 n.34 (1983),
the Court in dicta said that §3's reference to “any of the courts of the United States” is
ambiguous, and might include state courts. In Southland Corp. v. Keating, 465 U.S. 1, 29-31
(1984), Justice O'Connor criticized that conclusion, on the grounds that §4 originally
contained the same formulation as §3, and that Congress's substitution of the phrase
“United States district courts” in 1954 was intended to have no substantive effect. Act of
September 3, 1954, ch. 1263, 19, 68 Stat. 1233 (1954); H.R. Rep. No. 1981, 83d Cong., 2d Sess.
8 (1954). And, in Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. 468, 477 n.6
(1989), the Court remarked that while “the FAA's ‘substantive’ provisions – §§1 and 2 – are
applicable in state as well as federal court, we have never held that §§3 and 4, which by
their terms appear to apply only to proceedings in federal court ... are nonetheless
applicable in state court.”
 (b) Possible state court obligation to stay litigation based on federal common law. What does
the Court in Southland indicate about the obligation of a state court to stay litigation on
arbitrable claims? Putting aside the debate over §3's “applicability” in state court, note
Justice O'Connor's dissent interpreting the Court's opinion in Southland as holding that
state courts are required to “mimic” §3. Is that a fair reading of the Court's opinion? Why
else would the California Supreme Court's judgment have been reversed?
Consider the language and structure of the FAA. As the Court has observed, there is little
textual support for an argument that §3's provisions concerning a stay of litigation are
literally applicable in state court. Rather than focusing specifically on whether §3
“applies” in state courts, it is more productive to consider whether the FAA obliges state
courts to stay their proceedings when the parties' dispute is arbitrable. As to this
question, Southland strongly suggests that a state court must stay the litigation of claims
subject to a valid arbitration agreement under the FAA.
P "356"
P "357"
What would be the basis for such a holding? Is a federally-mandated stay necessary to
further the fundamental purposes of the FAA? Is it enough, as Justice O'Connor suggests,
for state courts to offer compensatory or other damages? Note that there is considerable
evidence that the 68th Congress, in enacting the FAA, was aware that specific
enforcement of arbitration agreements was necessary in order for such agreements to be
effective. S.R. Rep. No. 536, 68th Cong., 1st Sess. 2 (1924); Hearings on S. 4213 and S. 4214
Before the Subcommittee of the Senate Committee on the Judiciary, 67th Cong., 4th Sess.
6 (1923) (remarks of Sen. Walsh); Joint Hearings on S. 1005 and H.R. 646 Before the
Subcommittee of the Committees on the Judiciary, 68th Cong., 1st Sess. 14-15, 38 (1924)
(statement of J. Cohen). Why isn't §2's command that arbitration agreements are
enforceable sufficient to oblige state courts to grant meaningful enforcement
mechanisms?
Like Southland, lower courts have generally held either that §3 applies in state court, or
that the FAA requires state courts to grant comparable stays. See In re Costa and Head
(Atrium), Ltd, 486 So.2d 1272 (Ala. 1986); Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
McCollum, 469 U.S. 1127 (1985) (White, J., dissenting from denial of certiorari) (“no
substantial disagreement among the state courts over §3's applicability”); Merrill Lynch,
Pierce, Fenner & Smith, Inc. v. Melamed, 405 So.2d 790 (Fla. App. 1981). But see McDermott
Int'l, Inc. v. Lloyds Underwriters of London, 944 F.2d 1199 (5th Cir. 1991) (dicta that “state
courts do not necessarily have to grant stays of conflicting litigation or compel arbitration
in compliance with the FAA's sections 3 and 4”).

(c) Obligations to stay state court proceedings imposed by the New York and Inter-American
Conventions and chapter 2 and 3 of the FAA. As discussed above, supra pp. 157-58, Article
II(3) of the New York Convention requires all courts of signatory states to “refer” the
parties to a valid arbitration agreement to arbitration. The Inter-American Convention is
similar. See supra pp. 157-58. The Conventions are the “Supreme Law of the Land,” binding
on state courts by virtue of the Supremacy Clause. Consequently, in actions falling under
the Conventions, stays of litigation involving arbitrable claims should be mandatory.
Cooper v. Ateliers de la Motobecane SA, 456 N.Y.S.2d 728 (Ct. App. 1982); Faberge Int'l Inc. v.
Di Pino, 491 N.Y.S.2d 345 (App. Div. 1985).
Note that, while §206 of the FAA arguably applies only to federal courts, the Convention
must be deemed self-executing as to state courts. See G. Born, International Civil
Litigation in United States Courts 17-20 (3d ed. 1996), for an overview of when a treaty will
be self-executing.

13. Identical standards of arbitrability under §3 and §4. Note that §§3 and 4 arguably contain
language setting different standards for the issuance of orders to arbitrate and stays of
litigation. Section 3 provides for a stay when an issue is “referable to arbitration,” while §4
provides for an order compelling arbitration if the court finds that the “making” and
performance of the arbitration agreement are not “in issue.” Although these formulae are not
identical, in Prima Paint the Supreme Court held that it was “inconceivable that Congress
intended the rule to differ depending upon which party to the arbitration agreement first
invokes the assistance of a federal court”: thus, “in passing upon a §3 application for a stay
while the parties arbitrate, a federal court may consider only issues relating to the making and
performance of the agreement to arbitrate.” 388 U.S. at 404. Query whether it would be
sensible for §4 to impose a higher standard for obtaining an affirmative order compelling
arbitration than under §3 for a stay of litigation.
14. Section 4's guarantee of preliminary judicial determination of disputes over the validity of
arbitration agreements. Sections 3 and 4 of the FAA provide for stays of litigation or orders
compelling arbitration where “the making of the agreement for arbitration ... is not in issue.”
Where the “making of the agreement for arbitration”is “in issue,” then §4 requires a trial on that
question (unless there is “clear and unmistakable” evidence of an agreement to arbitrate the
question).
 (a) Section 4 requires trial of credible claims that no arbitration agreement exists. Most U.S.
courts have concluded that §4's language requires immediate judicial resolution of
reasonably-supported claims that no valid arbitration agreement exists. Canconon v.
Smith Barney, Harris, Upham & Co., 805 F.2d 998 (11th Cir. 1986) (ordering §4 trial);
Interbras Cayman Co. v. Orient Victory Shipping Co., 663 F.2d 4, 7 (2d Cir. 1981) (ordering
trial under §4 because of “genuine issue of fact” as to existence of arbitration agreement);
Parknit-Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51 (3d Cir. 1980); Donato v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 663 F.Supp. 669 (N.D. Ill. 1987) (§4 trial on claim that
signature on contract containing arbitration clause was forged); Aberle Hosiery Co. v.
American Arbitration Association, 337 F.Supp. 90, 93 (E.D. Pa.), appeal dismissed, 461 F.2d
1005 (3d Cir. 1972).
(b) Section 4 requires triable issue of fact. Lower U.S. courts have been reluctant to permit §4
P "357" to be used to delay the arbitral process. They have required that parties challenging an
P "358" asserted arbitration agreement demonstrate the existence of triable issues of fact,
before a §4 trial will be ordered. Doctor's Associate, Inc. v. Stuart, 85 F.3d 975, 980 (2d Cir.
1996) (suggesting that §4 trial requires proof of facts sufficient to obtain summary
judgment); Oppenheimer & Co. v. Neidhardt, 56 F.3d 352, 358 (2d Cir. 1995) (same); Dillard v.
Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1154 (5th Cir. 1992), cert. denied,
506 U.S. 1079 (1993) (same); Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d
1191, 1196 (7th Cir. 1987) (party can obtain §4 trial only if “there is a triable issue
concerning the existence ... of the agreement”); Par-Knit Mills, Inc. v. Stockbridge Fabrics
Co., 636 F.2d 51, 54 n.9 (3d Cir. 1980) (same standard applies to §4 trial as to grant
summary judgment); Interocean Shipping Co. v. National Shipping & Trading Corp., 462 F.2d
673 (2d Cir. 1972), cert. denied, 423 U.S. 1054 (1976) (to warrant §4 trial a party must proffer
“an unequivocal denial that the agreement has been made, and some evidence to
substantiate the denial”); Topf v. Warnaco, Inc., 942 F.Supp. 762 (D. Conn. 1996) (“plaintiff
must show genuine factual issues regarding his allegations concerning the making of the
arbitration agreement, such that a jury could find no agreement”); Marion Coal Co. v. Marc
Rich & Co. Int'l, Ltd, 539 F.Supp. 903 (S.D.N.Y. 1982) (§4 trial required to determine whether
exchanges of drafts resulted in binding agreement containing arbitration clause). Berger
Farms v. First Interstate Bank of Oregon, 939 P.2d 64 (Ore. 1997) (“‘only where there exists
no genuine issue of fact concerning the formation of the agreement should the courts
decide, as a matter of law, whether the parties entered such an agreement’” under §4).
(c) Effect of §4 trial on arbitral process. Consider the impact of First Options and §4 on the
international arbitral process. Under the FAA, a party who challenges the formation or
validity of an arbitration agreement itself (as distinguished from the underlying contract),
and who has not “clearly and unmistakably” agreed to arbitrate “arbitrability questions,”
can ordinarily obtain an immediate interlocutory judicial decision on the challenge.
Compare this basic procedural approach to that under the UNCITRAL Model Law and
Swiss Law on Private International Law. See supra pp. 88-89. Which is wiser?
(d) Section 4 trials under §208 and the FAA's second chapter. Section 208 has been held to
incorporate §4's provisions for summary trials concerning the existence, validity, and
scope of an arbitration agreement. Cargill Int'l SA v. M/T Pavel Dybenko, 991 F.2d 1012,
1019 (2d Cir. 1993); Interocean Shipping Co. v. National Shipping & Trading Corp., 462 F.2d
673, 676-78 (2d Cir. 1972), cert. denied, 423 U.S. 1054 (1976); Progressive Cas. Ins. Co. v. CA
Reaseguradora Nacional de Venezuela, 802 F.Supp. 1069, 1072 (S.D.N.Y. 1992); Maritime
Ventures Int'l Inc. v. Caribbean Trading & Fidelity Ltd, 722 F.Supp. 1032 (S.D.N.Y. 1989).

B. Choice of Law Confusion – Volt Information Sciences and Mastrobuono

As we have seen, a number of preemption-related issues under the domestic FAA have been
clarified by judicial decision: (1) §2 has been understood to create substantive federal law, (92)
(2) that is binding on federal and state courts, (93) (3) preempting state laws dealing with the
interpretation of arbitration agreements or specifically targeting arbitration agreements for
treatment different from that afforded other contracts, (94) but (4) not preempting the
application to domestic arbitration agreements of generally-applicable, non-discriminatory
state law rules regarding the formation, validity, and enforceability of contracts, and (5)
apparently requiring state courts to grant stays, similar or identical to those called for under
P "358" §3 of the FAA. (95) Nevertheless, important uncertainties remain, including the extent to which
P "359" §§4, 9, 10 and 11 are applicable in state courts or, alternatively, provide exclusive
enforcement avenues. (96) But these uncertainties are, it can be said, at the edges of a
reasonably stable understanding of the relationship between the FAA and state law.
This emerging stability was challenged in Volt Information, excerpted below. In Volt, the
Supreme Court affirmed a California state court decision holding that a routine California
choice-of-law clause was a selection of California's arbitration statute; that procedural
mechanisms applicable under the California arbitration statute were therefore available; and
that the FAA did not necessarily preempt this result. In particular, the Court held that the FAA
permitted a court-ordered stay of arbitration – provided for under California law, but not
under the FAA – pending the outcome of related judicial proceedings on the merits of the
parties' dispute. The Court's decision raised significant questions, at least in the domestic
arbitration context, as to the effect of choice-of-law provisions on preemption analysis under
the FAA.
Some of the uncertainties created by Volt were clarified by the Court's decision in
Mastrobuono v. Shearson Lehman Hutton, Inc., (97) also excerpted below. Mastrobuono arose
from an arbitration clause which was coupled with a standard New York choice-of-law clause.
 Under settled New York state law, arbitrators are forbidden, as a matter of state public policy,
from awarding punitive damages. (98) Citing this rule of New York law, the respondents in an
ensuing arbitration argued that the arbitrators were not authorized to award punitive
damages. The arbitrators nonetheless awarded punitive damages, and the respondents sought
to vacate their award in federal court. The Supreme Court rejected the respondents' challenge,
interpreting both Volt and the parties' choice-of-law clause narrowly. Ultimately, however, the
Court's holding in Mastrobuono rested on a state law interpretation of a particular choice-of-
law clause – thereby limiting the effect of the Court's analysis on Volt.
VOLT INFORMATION SCIENCES, INC. v. BOARD OF TRUSTEES OF LELAND STANFORD JUNIOR
UNIVERSITY
489 U.S. 468 (U.S. Supreme Court 1989)
CHIEF JUSTICE REHNQUIST. Unlike its federal counterpart, the California Arbitration Act, Cal.
Civ. Proc. Code Ann. §1280 et seq. (West 1982), contains a provision allowing a court to stay
P "359" arbitration pending resolution of related litigation. We hold that application of the California
P "360" statute is not pre-empted by the [FAA], in a case where the parties have agreed that their
arbitration agreement will be governed by the law of California.
Appellant Volt Information Sciences, Inc. (“Volt”), and appellee the Board of Trustees of Leland
Stanford Junior University (“Stanford”) entered into a construction contract under which Volt
was to install a system of electrical conduits on the Stanford Campus. The contract contained
an agreement to arbitrate all disputes between the parties “arising out of or relating to this
contract or the breach thereof.” (99) The contract also contained a choice-of-law clause
providing that “[t]he Contract shall be governed by the law of the place where the Project is
located.” During the course of the project, a dispute developed regarding compensation for
extra work, and Volt made a formal demand for arbitration. Stanford responded by filing an
action against Volt in California Superior Court, alleging fraud and breach of contract; in the
same action, Stanford also sought indemnity from two other companies involved in the
construction project, with whom it did not have arbitration agreements. Volt petitioned the
Superior Court to compel arbitration to the dispute. (100) Stanford in turn moved to stay
arbitration pursuant to Cal. Civ. Proc. Code Ann. §1281.2(c) (West 1982), which permits a court to
stay arbitration pending resolution of related litigation between a party to the arbitration
agreement and third parties not bound by it, where “there is a possibility of conflicting rulings
on a common issue of law or fact.” (101) The Superior Court denied Volt's motion to compel
arbitration and stayed the arbitration proceedings pending the outcome of the litigation on
the authority of Cal. Civ. Proc. Code Ann., §1281.2(c).
P "360"
P "361" The California Court of Appeal affirmed. The court ... held that by specifying that their
contract would be governed by “the law of the place where the project is located,” the parties
had incorporated the California rules of arbitration, including §1281.2(c), into their arbitration
agreement. Finally, the court rejected Volt's contention that, even if the parties had agreed to
arbitrate under the California rules, application of the §1281.2(c) here was nonetheless pre-
empted by the FAA because the contract involved interstate commerce. The court reasoned
that the purpose of the FAA was “‘not [to] mandate the arbitration of all claims, but merely the
enforcement ... of privately negotiated arbitration agreements.’” While the FAA therefore pre-
empts application of state laws which render arbitration agreements unenforceable, “[i]t does
not follow, however, that the federal law has preclusive effect in a case where the parties have
chosen in their [arbitration] agreement to abide by state rules.” To the contrary, because “[t]he
thrust of the federal law is that arbitration is strictly a matter of contract,” the parties to an
arbitration agreement should be “at liberty to choose the terms under which they will
arbitrate.” ...
Appellant devotes the bulk of its argument to convincing us that the Court of Appeal erred in
interpreting the choice-of-law clause to mean that the parties had incorporated the California
rules of arbitration into their arbitration agreement. Appellant acknowledges, as it must, that
the interpretation of private contracts is ordinarily a question of state law, which this Court
does not sit to review....
[Nonetheless, appellant] first suggests that the Court of Appeal's construction of the choice-of-
law clause was in effect a finding that appellant had “waived” its “federally guaranteed right to
compel arbitration of the parties' dispute,” a waiver whose validity must be judged by
reference to federal rather than state law. This argument fundamentally misconceives the
nature of the rights created by the FAA. The Act was designed “to overrule the judiciary's
longstanding refusal to enforce agreements to arbitrate,”Byrd, 470 U.S. at 219-220, and place
such agreements “‘upon the same footing as other contracts.’”Scherk v. Alberto-Culver Co., 417
U.S. at 511 (1974) (quoting H.R.Rep. No. 96, 68th Cong., 1st Sess., 1, 2 (1924)). Section 2 of the Act
therefore declares that a written agreement to arbitrate in any contract involving interstate
commerce or a maritime transaction “shall be valid, irrevocable, and enforceable, save upon
such grounds as exist at law or in equity for the revocation of any contract,” 9 U.S.C. §2, and §4
allows a party to such an arbitration agreement to “petition any United States district court ...
for an order directing that such arbitration proceed in the manner provided for in such
agreement.”
But §4 of the FAA does not confer a right to compel arbitration of any dispute at any time; it
confers only the right to obtain an order directing that “arbitration proceed in the manner
provided for in [the parties'] agreement.” 9 U.S.C. §4 (emphasis added). Here the Court of Appeal
found that, by incorporating the California rules of arbitration into their agreement, the parties
had agreed that arbitration would not proceed in situations which fell within the scope of
§1281.2(c). This was not a finding that appellant had “waived” an FAA-guaranteed right to
compel arbitration of this dispute, but a finding that it had no such right in the first place,
P "361" because the parties' agreement did not require arbitration to proceed in this situation.
P "362" Accordingly, appellant's contention that the contract interpretation issue presented here
involves the “waiver” of a federal right is without merit.
Second, appellant argues that we should set aside the Court of Appeal's construction of the
choice-of-law clause because it violates the settled federal rule that questions of arbitrability
in contracts subject to the FAA must be resolved with a healthy regard for the federal policy
favoring arbitration. [Moses H. Cone and Mitsubishi] of course establish that, in applying general
state-law principles of contract interpretation to the interpretation of an arbitration
agreement within the scope of the Act, see Perry v. Thomas, 482 U.S. 483, 493 n.9 (1987), due
regard must be given to the federal policy favoring arbitration, and ambiguities as to the scope
of the arbitration clause itself resolved in favor of arbitration.
But we do not think the Court of Appeal offended the Moses Cone principle by interpreting the
choice-of-law provision to mean that the parties intended the California rules of arbitration,
including the §1281.2(c) stay provision, to apply to their arbitration agreement. There is no
federal policy favoring arbitration under a certain set of procedural rules; the federal policy is
simply to ensure the enforceability, according to their terms, of private agreements to
arbitrate. Interpreting a choice-of-law clause to make applicable state rules governing the
conduct of arbitration – rules which are manifestly designed to encourage resort to the arbitral
process – simply does not offend the rule of liberal construction set forth in Moses Cone, nor
does it offend any other policy embodied in the FAA. (102)
The question remains whether, assuming the choice-of-law clause meant what the Court of
Appeal found it to mean, application of §1281.2(c) is nonetheless preempted by the FAA to the
extent it is used to stay arbitration under this contract involving interstate commerce. It is
undisputed that this contract falls within the coverage of the FAA, since it involves interstate
commerce, and that the FAA contains no provision authorizing a stay of arbitration in this
situation. Appellee contends, however, that §§3 and 4 of the FAA, which are the specific
sections claimed to conflict with the California statute at issue here, are not applicable in this
state court proceeding and thus cannot pre-empt application of the California statute. While
P "362" the argument is not without some merit, (103) we need not resolve it to decide this case, for we
P "363" conclude that even if §§3 and 4 of the FAA are fully applicable in state court proceedings,
they do not prevent application of §1281.2(c) to stay arbitration where, as here, the parties
have agreed to arbitrate in accordance with California law.
The FAA contains no express pre-emptive provision, nor does it reflect a congressional intent to
occupy the entire field of arbitration. See Bernhardt v. Polygraphic Co., 350 U.S. 198 (1956)
(upholding application of state arbitration law to arbitration provision in contract not covered
by the FAA). But even when Congress has not completely displaced state regulation in an area,
state law may nonetheless be pre-empted to the extent that it actually conflicts with federal
law – that is, to the extent that it “stands as an obstacle to the accomplishment and execution
of the full purposes and objectives of Congress.”Hines v. Davidowitz, 312 U.S. 52, 67 (1941). The
question before us, therefore, is whether application of §1281.2(c) to stay arbitration under this
contract in interstate commerce, in accordance with the terms of the arbitration agreement
itself, would undermine the goals and policies of the FAA. We conclude that it would not. The
FAA was designed “to overrule the judiciary's long-standing refusal to enforce agreements to
arbitrate,”Dean Witter Reynolds Inc. v. Byrd, 470 U.S. at 219-220, and to place such agreements
“‘upon the same footing as other contracts.’”Scherk v. Alberto-Culver Co., 417 U.S. at 511 (quoting
H.R.Rep. No. 96, 68th Cong., 1st Sess., 1, 2 (1924)). While Congress was no doubt aware that the
Act would encourage the expeditious resolution of disputes, its passage “was motivated, first
and foremost, by a congressional desire to enforce agreements into which parties had
entered.”Byrd, 470 U.S. at 220. Accordingly, we have recognized that the FAA does not require
parties to arbitrate when they have not agreed to do so, see id. at 219 (the Act “does not
mandate the arbitration of all claims”), nor does it prevent parties who do agree to arbitrate
from excluding certain claims from the scope of their arbitration agreement, see Mitsubishi
Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. at 628. It simply requires courts to enforce
privately negotiated agreements to arbitrate, like other contracts, in accordance with their
terms. See Prima Paint, 388 U.S. at 404, n.12 (the Act was designed “to make arbitration
agreements as enforceable as other contracts, but not more so”).
In recognition of Congress' principal purpose of ensuring that private arbitration agreements
are enforced according to their terms, we have held that the FAA preempts state laws which
“require a judicial forum for the resolution of claims which the contracting parties agreed to
resolve by arbitration.”Southland Corp. v. Keating, 465 U.S. 1, 10 (1984). See, e.g., Perry v.
Thomas, 482 U.S. at 490 (finding FAA pre-empted a state statute which rendered unenforceable
private agreements to arbitrate certain wage collection claims). But it does not follow that the
FAA prevents the enforcement of agreements to arbitrate under different rules than those set
forth in the Act itself. Indeed, such a result would be quite inimical to the FAA's primary
P "363" purpose of ensuring that private agreements to arbitrate are enforced according to their
P "364" terms. Arbitration under the Act is a matter of consent, not coercion, and parties are generally
free to structure their arbitration agreements as they see fit. Just as they may limit by contract
the issues which they will arbitrate, see Mitsubishi, 473 U.S. at 628, so too may they specify by
contract the rules under which that arbitration will be conducted. Where, as here, the parties
have agreed to abide by state rules of arbitration, enforcing those rules according to the terms
of the agreement is fully consistent with the goals of the FAA, even if the result is that
arbitration is stayed where the Act would otherwise permit it to go forward. By permitting the
courts to “rigorously enforce” such agreements according to their terms, see Byrd, 470 U.S. at
221, we give effect to the contractual rights and expectations of the parties, without doing
violence to the policies behind by FAA.
 JUSTICE BRENNAN, DISSENTING. The litigants in this case were parties to a construction
contract which contained a clause obligating them to arbitrate disputes and making that
obligation specifically enforceable. The contract also incorporated provisions of a standard
form contract prepared by the American Institute of Architects and endorsed by the Associated
General Contractors of America; among these general provisions was §7.1.1: “The Contract shall
be governed by the law of the place where the Project is located.” When a dispute arose
between the parties, Volt invoked the arbitration clause, while Stanford attempted to avoid it
...
The FAA requires courts to enforce arbitration agreements in contracts involving interstate
commerce. The California courts nonetheless rejected Volt's petition to compel arbitration in
reliance on a provision of state law that, in the circumstances presented, permitted a court to
stay arbitration pending the conclusion of related litigation. Volt, not surprisingly, suggested
that the Supremacy Clause compelled a different result. The California Court of Appeal found,
however, that the parties had agreed that their contract would be governed solely by the law of
P "364" the State of California, to the exclusion of the federal law. (104) In reaching this conclusion the
P "365" court relied on no extrinsic evidence of the parties' intent, but solely on the language of the
form contract that the “law of the place where the Project is located” would govern. (105)
The Court now declines to review that holding, which denies effect to an important federal
statute, apparently because it finds no question of federal law involved. I can accept neither
the state court's unusual interpretation of the parties' contract, nor this Court's unwillingness
to review it. I would reverse the judgment of the California Court of Appeal. (106)
Arbitration is, of course, “a matter of contract and a party cannot be required to submit to
arbitration any dispute which he has not agreed so to submit.”Steelworkers v. Warrior & Gulf
Co., 363 U.S. 574, 582 (1960). I agree with the Court that “the FAA does not require parties to
arbitrate when they have not agreed to do so.” Since the FAA merely requires enforcement of
what the parties have agreed to, moreover, they are free if they wish to write an agreement to
arbitrate outside the coverage of the FAA. Such an agreement would permit a state rule,
otherwise pre-empted by the FAA, to govern their arbitration. The substantive question in this
case is whether or not they have done so. And the question, we have made clear in the past, is a
matter of federal law.
Not only does the FAA require the enforcement of arbitration agreements, but we have held
that it also establishes substantive federal law that must be consulted in determining whether
(or to what extent) a given contract provides for arbitration. We have stated this most clearly in
Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24-25 (1983):
“Section 2 [of the FAA] is a congressional declaration of a liberal federal policy favoring
arbitration agreements, notwithstanding any state substantive or procedural policies to the
contrary. The effect of the section is to create a body of federal substantive law of
arbitrability....”
The Court recognizes the relevance of the Moses Cone principle but finds it unoffended by the
Court of Appeal's decision, which, the Court suggests, merely determines what set of procedural
P "365" rules will apply. (107) I agree fully with the Court that “the federal policy is simply to ensure the
P "366" enforceability, according to their terms, of private agreements to arbitrate,” but I disagree
emphatically with its conclusion that the policy is not frustrated here. Applying the California
procedural rule, which stays arbitration while litigation of the same issue goes forward, means
simply that the parties' dispute will be litigated rather than arbitrated. Thus, interpreting the
parties' agreement to say that the California procedural rules apply rather than the FAA, where
the parties arguably had no such intent, implicates the Moses Cone principle no less than
would an interpretation of the parties' contract that erroneously denied the existence of an
agreement to arbitrate. (108)
While appearing to recognize that the state court's interpretation of the contract does raise a
question of federal law, the Court nonetheless refuses to determine whether the state court
misconstrued that agreement. There is no warrant for failing to do so. The FAA requires that a
court determining a question of arbitrability not stop with application of state-law rules for
construing the parties' intentions, but that it also take account of the command of federal law
that “those intentions [be] generously construed as to issues of arbitrability.”Mitsubishi Motors,
473 U.S. at 626. Thus, the decision below is based on both state and federal law, which are
thoroughly intertwined....
Construed with deference to the opinion of the California Court of Appeal, yet “with a healthy
regard for the federal policy favoring arbitration,”Moses Cone, 460 U.S. at 24, it is clear that the
choice-of-law clause cannot bear the interpretation the California court assigned to it.
Construction of a contractual provision is, of course, a matter of discerning the parties' intent.
It is important to recall, in the first place, that in this case there is no extrinsic evidence of
their intent. We must therefore rely on the contract itself. But the provision of the contract at
issue here was not one that these parties drafted themselves. Rather, they incorporated
portions of a standard form contract commonly used in the construction industry. That makes it
most unlikely that their intent was in any way at variance with the purposes for which choice-
of-law clauses are commonly written and the manner in which they are generally interpreted.
It seems to me beyond dispute that the normal purpose of such choice-of law clauses is to
determine that the law of one State rather than that of another State will be applicable; they
simply do not speak to any interaction between state and federal law. A cursory glance at
standard conflicts texts confirms this observation: they contain no reference at all to the
relation between federal and state law in their discussions of contractual choice-of-law
P "366" clauses. See, e.g., R. Weintraub, Commentary on the Conflict of Laws §7.3C (2d ed. 1980); E.
P "367"
P "367" Scoles & P. Hay, Conflict of Laws 632-652 (1982); R. Leflar, L. McDougal, & R. Felix, American
Conflicts Law §147 (4th ed. 1986). The same is true of standard codifications. See Uniform
Commercial Code §1-105(1) (1978); Restatement (Second) of Conflict of Laws §187 (1971). Indeed
the Restatement of Conflicts notes expressly that it does not deal with “the ever-present
problem of determining the respective spheres of authority of the law and courts of the nation
and of the member States.”Id. §2, Comment c. Decisions of this Court fully bear out the
impression that choice-of-law clauses do not speak to any state-federal issue. On at least two
occasions we have been called upon to determine the applicability vel non of the FAA to
contracts containing choice-of-law clauses similar to that at issue here. Despite adverting to
the choice-of-law clauses in other contexts in our opinions, we ascribed no significance
whatever to them in connection with the applicability of the FAA. Scherk v. Alberto-Culver Co.,
417 U.S. 506 (1974); Bernhardt v. Polygraphic Co., 350 U.S. 198 (1956). (109) The great weight of
lower court authority similarly rejects the notion that a choice-of-law clause renders the FAA
inapplicable. Choice-of-law clauses simply have never been used for the purpose of dealing
with the relationship between state and federal law. There is no basis whatever for believing
that the parties in this case intended their choice-of-law clause to do so.
Moreover, the literal language of the contract – “the law of the place” – gives no indication of
any intention to apply only state law and exclude other law that would normally be applicable
to something taking place at that location. By settled principles of federal supremacy, the law
of any place in the United States includes federal law.... In the absence of any evidence to the
contrary it must be assumed that this is what the parties meant by the “law of the place where
the Project is located.”...
Most commercial contracts written in this country contain choice-of-law clauses, similar to the
one in the Stanford-Volt contract, specifying which State's law is to govern the interpretation of
the contract. See Scoles & Hay, Conflict of Laws 632-633 (“Party autonomy means that the
parties are free to select the law governing their contract, subject to certain limitations. They
will usually do so by means of an express choice-of-law clause in their written contract.”). Were
every state court to construe such clauses as an expression of the parties' intent to exclude the
application of federal law, as has the California Court of Appeal in this case, the result would
be to render the [FAA] a virtual nullity as to presently existing contracts. I cannot believe that
the parties to contracts intend such consequences to flow from their insertion of a standard
choice-of-law clause. Even less can I agree that we are powerless to review decisions of state
courts that effectively nullify a vital piece of federal legislation.
P "367"
P "368"
MASTROBUONO v. SHEARSON LEHMAN HUTTON, INC.
514 U.S. 52 (U.S. Supreme Court 1995)
JUSTICE STEVENS. New York law allows courts, but not arbitrators, to award punitive damages.
In a dispute arising out of a standard-form contract that expressly provides that it “shall be
governed by the laws of the State of New York,” a panel of arbitrators awarded punitive
damages. The District Court and Court of Appeal disallowed that award. The question
presented is whether the arbitrators' award is consistent with the central purpose of the
Federal Arbitration Act to ensure “that private agreements to arbitrate are enforced according
to their terms.”Volt Information Sciences, Inc. v. Board of Trustees of Leland Stanford Junior
Univ., 489 U.S. 468, 479 (1989).
In 1985, petitioners, Antonio Mastrobuono, then an assistant professor of medieval literature,
and his wife Diana Mastrobuono, an artist, opened a securities trading account with
respondent Shearson Lehman Hutton, Inc. (“Shearson”), by executing Shearson's standard form
Client's Agreement. Respondent Nick DiMinico, a vice president of Shearson, managed the
Mastrobuonos' account until they closed it in 1987. In 1989, petitioners filed this action in the
United States District Court for the Northern District of Illinois, alleging that respondents had
mishandled their account and claiming damages on a variety of state and federal law theories.
Paragraph 13 of the parties' agreement contains an arbitration provision and a choice-of-law
provision. Relying on the arbitration provision and on §§3 and 4 of the [FAA], respondents filed
a motion to stay the court proceedings and to compel arbitration pursuant to the rules of the
National Association of Securities Dealers. The District Court granted that motion, and a panel
of three arbitrators was convened. After conducting hearings in Illinois, the panel ruled in favor
of petitioners.
In the arbitration proceedings, respondents argued that the arbitrators had no authority to
award punitive damages. Nevertheless, the panel's award included punitive damages of
$400,000, in addition to compensatory damages of $159,327. Respondents paid the
compensatory portion of the award but filed a motion in the District Court to vacate the award
of punitive damages. The District Court granted the motion, and the Court of Appeals for the
Seventh Circuit affirmed. Both courts relied on the choice-of-law provision in Paragraph 13 of
the parties' agreement, which specifies that the contract shall be governed by New York law.
Because the New York Court of Appeals has decided that in New York the power to award
punitive damages is limited to judicial tribunals and may not be exercised by arbitrators,
Garrity v. Lyle Stuart, Inc., 40 N.Y.2d 354 (1976), the District Court and the Seventh Circuit held
that the panel of arbitrators had no power to award punitive damages in this case. We granted
certiorari, because the Courts of Appeals have expressed differing views on whether a
contractual choice-of-law provision may preclude an arbitral award of punitive damages that
otherwise would be proper.
P "368"
P "369"
 Earlier this term, we upheld the enforceability of a predispute arbitration agreement governed
by Alabama law, even though an Alabama statute provided that arbitration agreements are
unenforceable. Allied-Bruce Terminix Cos. v. Dobson, 513 U.S. 266 (1995). Writing for the Court,
Justice Breyer observed that Congress passed the FAA “to overcome courts' refusals to enforce
agreements to arbitrate.” After determining that the FAA applied to the parties' arbitration
agreement, we readily concluded that the federal statute pre-empted Alabama's statutory
prohibition. Allied-Bruce, 513 U.S. at 281.
Petitioners seek a similar disposition of the case before us today. Here, the Seventh Circuit
interpreted the contract to incorporate New York law, including the Garrity rule that arbitrators
may not award punitive damages. Petitioners ask us to hold that FAA pre-empts New York's
prohibition against arbitral awards of punitive damages because this state law is a vestige of
the “‘ancient’” judicial hostility to arbitration. See Allied-Bruce, 513 U.S. at 270, quoting
Bernhardt v. Polygraphic Co. of America, Inc., 350 U.S. 198, 211 n.5 (1956) (Frankfurter, J.,
concurring). Petitioners rely on Southland Corp. v. Keating, and Perry v. Thomas, in which we
held that the FAA preempted two California statutes that purported to require judicial
resolution of certain disputes. In Southland, we explained that the FAA not only “declared a
national policy favoring arbitration,” but actually “withdrew the power of the states to require
a judicial forum for the resolution of claims which the contracting parties agreed to resolve by
arbitration.”
Respondents answer that the choice-of-law provision in their contract evidences the parties'
express agreement that punitive damages should not be awarded in the arbitration of any
dispute arising under their contract. Thus, they claim, this case is distinguishable from
Southland and Perry, in which the parties presumably desired unlimited arbitration but state
law stood in their way. Regardless of whether the FAA pre-empts the Garrity decision in
contracts not expressly incorporating New York law, respondents argue that the parties may
themselves agree to be bound by Garrity, just as they may agree to forgo arbitration altogether.
In other words, if the contract says “no punitive damages,” that is the end of the matter, for
courts are bound to interpret contracts in accordance with the expressed intentions of the
parties – even if the effect of those intentions is to limit arbitration.
We have previously held that the FAA's pro-arbitration policy does not operate without regard
to the wishes of the contracting parties. In Volt Information, the California Court of Appeal had
construed a contractual provision to mean that the parties intended the California rules of
arbitration, rather than the FAA's rules, to govern the resolution of their dispute. Noting that
the California rules were “manifestly designed to encourage resort to the arbitral process,” and
that they “generally foster[ed] the federal policy favoring arbitration,” we concluded that such
an interpretation was entirely consistent with the federal policy “to ensure the enforceability,
according to their terms, of private agreements to arbitrate.” After referring to the holdings in
P "369" Southland and Perry, which struck down state laws limiting agreed-upon arbitrability, we
P "370" added:
But it does not follow that the FAA prevents the enforcement of agreements to arbitrate under
different rules than those set forth in the Act itself. Indeed, such a result would be quite
inimical to the FFA's primary purpose of ensuring that private agreements to arbitrate are
enforced according to their terms. Arbitration under the Act is matter of consent, not coercion,
and parties are generally free to structure their arbitration agreements as they see fit. Just as
they may limit by contract the issues which they will arbitrate, see Mitsubishi, so too may they
specify by contract the rules under which that arbitration will be conducted.
Relying on our reasoning in Volt, respondents thus argue that the parties to a contract may
lawfully agree to limit the issues to be arbitrated by waiving any claim for punitive damages.
On the other hand, we think our decisions in Allied-Bruce, Southland, and Perry make clear that
if contracting parties agree to include claims for punitive damages within the issue to be
arbitrated, the FAA ensures that their agreement will be enforced according to its terms even if
a rule of state law would otherwise exclude such claims from arbitration. Thus, the case before
us comes down to what the contract has to say about the arbitrability of petitioners' claim for
punitive damages.
Shearson's standard-form “Client Agreement,” which petitioners executed, contains 18
paragraphs. The two relevant provisions of the agreement are found in Paragraph 13. (110) The
first sentence of that paragraph provides, in part, that the entire agreement “shall be governed
by the laws of the State of New York.” The second sentence provides that “any controversy”
P "370" arising out of the transactions between the parties “shall be settled by arbitration” in
P "371" accordance with rules of the National Association of Securities Dealers (“NASD”), or the
Board of Directors of the New York Stock Exchange and/or the American Stock Exchange. The
agreement contains no express reference to claims for punitive damages. To ascertain whether
Paragraph 13 expresses an intent to include or exclude such claims, we first address the impact
of each of the two relevant provisions, considered separately. We then move on to the more
important inquiry: the meaning of the two provisions taken together. See Restatement (Second)
of Contracts §202(2) (1979) (“A writing is interpreted as a whole”).
The choice-of-law provision, when viewed in isolation, may reasonably be read as merely a
substitute for the conflict-of-laws analysis that otherwise would determine what law to apply
to disputes arising out of the contractual relationship. Thus, if a similar contract, without a
choice-of-law provision, had been signed in New York, presumably “the laws of the State of
New York” would apply, even though the contract did not expressly so state. In such event,
there would be nothing in the contract that could possibly constitute evidence of an intent to
exclude punitive damages claims. Accordingly, punitive damages would be allowed because,
in the absence of contractual intent to the contrary, the FAA would pre-empt the Garrity rule.
 Even if the reference to “the laws of the State of New York” is more than a substitute for
ordinary conflict-of-laws analysis and, as respondents urge, includes the caveat, “detached
from otherwise-applicable federal law,” the provision might not preclude the award of punitive
damages because New York allows its courts, though not its arbitrators, to enter such awards.
See Garrity, 40 N.Y.2d at 358. In other words, the provision might include only New York's
substantive rights and obligations, and not the State's allocation of power between alternative
tribunals. (111) Respondent's argument is persuasive only if “New York law” means “New York
decisional law, including that State's allocation of power between courts and arbitrators,
notwithstanding otherwise-applicable federal law.” But, as we have demonstrated, the
provision need not be read so broadly. It is not, in itself, an unequivocal exclusion of punitive
damages claims. (112)
The arbitration provision (the second sentence of Paragraph 13) does not improve respondent's
argument. On the contrary, when read separately this clause strongly implies that an arbitral
award of punitive damages is appropriate. It explicitly authorizes arbitration in accordance
P "371" with NASD rules; the panel of arbitrators in fact proceeded under that set of rules. The NASD's
P "372" Code of Arbitration Procedure indicates that arbitrators may award “damages and other
relief.” NASD Code of Arbitration Procedure 3741(e) (1993). While not a clear authorization of
punitive damages, this provision appears broad enough at least to contemplate such a
remedy. Moreover, as the Seventh Circuit noted, a manual provided to NASD arbitrators
contains this provision:
B. Punitive Damages. The issue of punitive damages may arise with great frequency in
arbitrations. Parties to arbitration are informed that arbitrators can consider punitive
damages as a remedy.
Thus the text of the arbitration clause itself surely does not support – indeed, it contradicts –
the conclusion that the parties agreed to foreclose claims for punitive damages. (113)
Although neither the choice-of-law clause nor the arbitration clause, separately considered,
expresses an intent to preclude an award of punitive damages, respondents argue that a fair
reading of the entire Paragraph 13 leads to that conclusion. On this theory, even if “New York
law” is ambiguous, and even if “arbitration in accordance with NASD rules” indicates that
punitive damages are permissible, the juxtaposition of the two clauses suggests that the
contract incorporates “New York law relating to arbitration.” We disagree. At most, the choice-
of-law clause introduces an ambiguity into an arbitration agreement that would otherwise
allow punitive damages awards. As we pointed out in Volt, when a court interprets such
provisions in an agreement covered by the FAA, “due regard must be given to the federal policy
favoring arbitration, and ambiguities as to the scope of the arbitration clause itself resolved in
favor of arbitration.”
Moreover, respondents cannot overcome the common-law rule of contract interpretation that a
court should construe ambiguous language against the interest of the party that drafted it. See,
e.g., United States Fire Ins. Co. v. Schnackenberg, 88 Ill.2d 1, 4 (1984); Graff v. Billet, 64 N.Y.2d
899, 902 (1984); (114) Restatement (Second) of Contracts §206 (1979); United States v. Seckinger,
P "372" 397 U.S. 203, 210 (1970). Respondents drafted an ambiguous document, and they cannot now
P "373" claim the benefit of the doubt. The reason for this rule is to protect the party who did not
choose the language from an unintended or unfair result. (115) That rationale is well-suited to
the facts of this case. As a practical matter, it seems unlikely that petitioners were actually
aware of New York's bifurcated approach to punitive damages, or that they had any idea that
by signing a standard-form agreement to arbitrate disputes they might be giving up an
important substantive right. In the face of such doubt, we are unwilling to impute this intent to
petitioner.
Finally, the respondents' reading of the two clauses violates another cardinal principle of
contract construction: that a document should be read to give effect to all its provisions to
render them consistent with each other. See, e.g., In re Halas, 104 Ill.2d 83, 92 (1984); Crimmins
Contracting Co. v. City of New York, 74 N.Y.2d 166, 172-173 (1989); Trump-Equitable Fifth Avenue
Co. v. H.R.H. Constr. Corp., 106 App.Div.2d 242, 244 (1985); Restatement (Second) of Contracts
§203(a) and Comment b (1979); id. §202(5). We think the best way to harmonize the choice-of-
law provision with the arbitration provision is to read “the laws of the State of New York” to
encompass substantive principles that New York courts would apply, but not include special
rules limiting the authority of arbitrators. Thus, the choice-of-law provision covers the rights
and duties of the parties, while the arbitration clause covers arbitration; neither sentence
intrudes upon the other. In contrast, respondents' reading sets up the two clauses in conflict
with one another: one foreclosing punitive damages, the other allowing them. This
interpretation is untenable.
We hold that the Court of Appeals misinterpreted the parties' agreement. The arbitral award
should have been enforced as within the scope of the contract. The judgment of the Court of
Appeals is, therefore, reversed.
Notes on Preemption and Choice-of-Law Clauses
1. Volt's choice of law analysis. The Supreme Court held in Volt that the FAA does not preempt
application of a California state law providing for stays of arbitration (not available under the
FAA), where the parties have agreed to the application of California arbitration rules. The Court
relied in significant part on the California courts' conclusion, as a matter of California law, that
the parties' choice-of-law clause selected the California arbitration statute. The Supreme Court
refused to review the correctness of this choice-of-law decision, because it was a
determination of state – not federal – law, not subject to Supreme Court review.
Two aspects of the underlying choice of law analysis in Volt are noteworthy. First, there is no
 reflection in the various Supreme Court opinions of the important distinctions between: (a) the
law governing the parties' underlying contract and dispute, (b) the law governing their
arbitration agreement, and (c) the law governing the arbitral proceedings. See supra pp. 41-45.
Consider the parties' choice-of-law clause in Volt. To what does it appear to apply – the
P "373" parties' agreement, their arbitration agreement, or the arbitration proceedings? Into which
P "374" category did the California statutory provision regarding related litigation fall? Was the
California courts' interpretation of the parties' choice-of-law clause correct? For cases reaching
a contrary result, see Doctor's Associates, Inc. v. Distajo, 107 F.3d 126 (2d Cir. 1997) (“inclusion in
the contract of a general choice-of-law clause does not require application of state law to
arbitrability issues, unless it is clear that the parties intend state arbitration law to apply on a
particular issue”); Booth v. Hume Publishing Inc., 902 F.2d 925, 928-29 (11th Cir. 1990) (“when [the
parties] agreed that their employment contract would be subject to Georgia law, they probably
intended that federal arbitration law would apply rather than Georgia common law”);
Ackerberg v. Johnson, 829 F.2d 1328, 1333-34 (8th Cir. 1989) (choice-of-law clause does not
incorporate state law nonarbitrability statute); Acquaire v. Canada Dry Bottling, 906 F.Supp.
819, 824 n.4 (E.D.N.Y. 1995) (distinguishing Volt, and applying FAA to interpretation and validity
of arbitration agreement, on grounds that choice-of-law clause only specified substantive and
procedural laws to be applied by arbitrator); Merrill Lynch, Pierce, Fenner & Smith Inc. v.
Shaddock, 822 F.Supp. 125 (S.D.N.Y. 1993) (“Volt does not stand for the proposition that any time
an arbitration agreement contains a choice-of law provision which does not expressly
encompass state arbitration rules, such a provision, by operation of law, obliges a Court to
apply state rather than federal arbitration law”). Compare also the Supreme Court's
independent interpretation of the New York choice-of-law clause in Mastrobuono.
Second, is it reasonable to think that the parties' choice-of-law clause in Volt was intended to
select California arbitration law to the exclusion of federal arbitration law? Is Justice Brennan's
dissent persuasive when it addresses the content of the law chosen by the parties' choice-of-
law clause? Note that, prior to Volt, state choice-of-law clauses had never been accorded this
result.
2. Conflict of laws analysis under the domestic FAA after Volt and Mastrobuono – respective
roles of federal and state law. The Court holds in Volt that the interpretation and enforcement
of a choice-of-law clause selecting California law is a matter of state law. The Volt Court also
rejects various arguments that the FAA should govern conflict of laws analysis with respect to
arbitration agreements. Likewise, the Court in Mastrobuono referred solely to state law
authorities in interpreting the parties' choice-of-law clause. At least in domestic matters,
therefore, it would appear that state conflict of laws rules govern the choice-of-law questions
in arbitration subject to the FAA. See Progressive Casualty Ins. Co. v. CA Reaseguradora Nacional
de Venezuela, 991 F.2d 42 (2d Cir. 1993).
3. Applicability of Volt under New York Convention. Suppose Volt had involved a dispute
between a U.S. and a foreign company, and that the parties' arbitration agreement was subject
to the New York Convention. Would the result in Volt have been any different?
Consider the effect of Article II(3), which requires courts to “refer the parties to arbitration,”
unless their arbitration agreement is “null and void.” See supra pp. 157-61. Does Article II(3)
preempt the provisions of California law permitting a stay of arbitration? Compare McCreary
Tire & Rubber Co. v. CEAT, 501 F.2d 1032 (3d Cir. 1974), discussed infra pp. 935-60, holding that
Article II(3) bars court-ordered provisional relief. See American Physicians Service Group, Inc. v.
Port Lavaca Clinic Assoc., 843 S.W.2d 675 (Tex. App. 1992) (suggesting Volt not applicable under
Convention).
Why is the Court's rationale in Volt not equally applicable to Article II(3) – that is, the parties
agreed to arbitrate according to rules of California law that permit stays of arbitration, and
there is no requirement under the FAA or the Convention that parties be forced into
arbitrations that they did not agree to?
Do the needs of uniformity and the enhanced pro-enforcement policies under the Convention
sustain a different approach to state choice-of-law agreements than that in Volt? See supra pp.
113-17, 352-55 for a discussion of possible bases for federal common law under the Convention.
4. Volt's real and stated rationales – significance of the choice-of-law clause. The Court
reasoned in Volt that the FAA's pro-arbitration objectives are not compromised by a state
statute permitting a judicially-ordered stay of arbitration pending related litigation, because
the parties had agreed to that state procedure. The Court goes on to argue at length that the
FAA's “pro-arbitration” policy is only directed at enforcing parties' arbitration agreements, not
at requiring non-consensual arbitration. At least at first blush, therefore, the Volt rationale
would appear to rest almost entirely on the parties' choice-of-law agreement.
But note that the Volt Court goes out of its way to emphasize its view that the California
arbitration statute prescribed “rules which are manifestly designed to encourage resort to the
arbitral process.” Rightly or wrongly, the Volt Court seemed not to regard a judicially-ordered
stay of arbitration pending resolution of related litigation as particularly inimical to the
arbitral process.
P "374" Suppose that there had been no choice-of-law clause in Volt, but that the California courts had
P "375" nonetheless looked to the California arbitration statute and stayed arbitral proceedings.
Given the Supreme Court's reliance on the parties' purported agreement to be bound by
California law, would the outcome of the FAA preemption issue have been different? See infra
pp. 377-79.
5. Mastrobuono's conflict of laws analysis. In Mastrobuono, the Court interpreted the parties'
 choice-of-law clause itself. In contrast to the California courts' interpretation in Volt, the
Mastrobuono Court concluded that the parties' New York choice-of-law agreement did not
incorporate New York “arbitration law.” (Preliminarily, if the Court's opinions in Volt and
Mastrobuono appear confusing, consider Lanier v. Old Republic Ins. Co., 936 F.Supp. 839 (M.D.
Ala. 1996) (“The court must admit the difference between the two cases [Volt and Mastrobuono],
while there, is difficult to grasp.”).)
(a) Interpretation of choice-of-law clause. Consider Justice Stevens' interpretation of the
parties' choice-of-law clause in Mastrobuono. Is it persuasive? Note that the choice-of-
law clause was contained within the parties' arbitration clause (Paragraph 13). What
exactly does Justice Stevens conclude the choice-of-law clause means? Note that the
Court says (a) the clause “may reasonably be read as merely a substitute for the conflict-
of-laws analysis that otherwise would determine what law to apply to disputes arising out
of the contractual relationship,” (b) the clause “might include only New York's substantive
rights and obligations and not the State's allocation of power between alternative
tribunals,” (c) “[a]t most, the choice-of-law clause introduces an ambiguity into an
arbitration agreement that would otherwise allow punitive damages awards,” and (d) the
clause must be interpreted both against its drafter and consistently with the remainder
of the parties' contract. These various observations do not provide much guidance to
either litigants or lower courts. Suppose that only some, or one, of these factors were
applicable. Then what result?
Suppose that the parties' arbitration and choice-of-law clauses had been carefully
negotiated and jointly drafted. Would they then have been interpreted as incorporating
New York's allocation of authority with respect to punitive damages? Note that Justice
Stevens' opinion appears never to say expressly what the parties' New York choice-of-law
clause, standing alone, would mean; the Court merely says that it “may” or “might” not
incorporate New York's rules regarding the non-arbitrability of punitive damages. In the
face of this ambiguity, the Court then relied on both the pro-arbitration federal rule of
interpretation and the canon that contractual provisions should be interpreted
consistently with one another.

(b) Character of rule of New York arbitration law. What role did the character of the relevant
rule of New York arbitration law – that is, that punitive damage claims are non-arbitrable
– play in Mastrobuono? Note that this rule collided directly with both the pro-arbitration
rule of interpreting arbitration clauses expansively and the broad scope of the parties'
arbitration agreement. Suppose that the issue in Mastrobuono had instead been the
applicability of a New York state law rule requiring stays of arbitration pending related
litigation (as in Volt). Would Mastrobuono have been decided differently? If such a rule of
New York law had been involved, wouldn't Justice Stevens have been required
definitively to interpret the parties' choice-of-law clause, rather than merely saying what
it “may” or “might” mean? In these circumstances, how should the choice-of-law clause be
interpreted? Should it refer merely to New York substantive law, or should it also
encompass New York's arbitration statute?
(c) Potentially broader holding in Mastrobuono. Despite the Court's fairly narrow analysis, the
Mastrobuono opinion concludes with language that arguably applies broadly to most
choice-of-law and arbitration clauses:
We think the best way to harmonize the choice-of-law provision with the arbitration
provision is to read the laws of the State of New York to encompass substantive principles
that New York courts would apply, but not to include special rules limiting the authority
of arbitrators. Thus, the choice-of-law provision covers the rights and duties of the
parties, while the arbitration clause covers arbitration; neither sentence intrudes upon
the other.
Does this passage apply broadly to choice-of-law and arbitration clauses? Does it suggest,
at least presumptively, that ordinary choice-of-law clauses deal with substantive rights
and arbitration clauses with arbitral procedures and laws? Would that be sensible? Note
that this appears to be the conclusion of most lower courts considering the issue. See
infra pp. 376-77.
(d) Importance of state law. Despite the detail of Justice Stevens' analysis of the parties'
choice-of-law clause, that interpretation ultimately appears to be a question of state –
P "375" not federal – law. What if a New York court were to interpret an identical choice-of-law
P "376" clause as incorporating New York's prohibition against arbitrating punitive damages
claims? Would Mastrobuono permit this interpretation to render punitive damage claims
non-arbitrable? In ordinary cases, the Supreme Court's interpretation of state law (and
contracts governed by state law) have no binding precedential weight on state courts. Is
there an argument that the parties' arbitration clause (interpreted under federal law)
would override an inconsistent choice-of-law clause (interpreted under state law)?
If Mastrobuono does rest only on a state law interpretation of a choice-of-law clause,
does it do much to limit the uncertainties created by Volt?

6. Types of choice-of-law “agreements” covered by Volt's rationale. In Volt, the Supreme Court
did not itself hold that the parties' choice-of-law clause was intended to incorporate state
arbitration rules; the Court instead merely refused to disturb the California court's conclusion
of the subject. See Mastrobuono, 514 U.S. at 60 n.4. When should the parties' choice-of-law
agreement be read to incorporate state arbitration rules, and what rules should be deemed
incorporated?
 (a) Interpreting choice-of-law clauses. Apparently applying state law, and usually without
analysis, post-Volt lower courts have reached divergent conclusions in deciding whether a
choice-of-law clause was meant to incorporate state arbitration rules. A few patterns
seem to be emerging from the post-Volt confusion.
First, clauses expressly selecting the procedural law of the arbitration (i.e., arbitration “in
accordance with the Arbitration Act of X”) will generally be held to incorporate state
arbitration rules. See Carabetta Builders, Inc. v. Hotz Corp., 619 A.2d 13 (Conn. App. 1993)
(choice-of-law clause providing that “the arbitration proceeding shall be in accordance
with Connecticut law” incorporated state arbitration statute); Ford v. Nylcare Health Plans
of the Gulf Coast, Inc., 141 F.3d 243 (5th Cir. 1998) (agreement to arbitrate “in accordance
with the Texas General Arbitration Act” incorporates Texas procedural rules and Texas law
governing scope of arbitration agreement); American Physicians Service Group, Inc. v. Port
Lavaca Clinic Assoc., 843 S.W.2d 675 (Tex. App. 1992) (under Volt, parties' agreement that
arbitration be held “pursuant to the laws of the State of Texas” incorporated Texas
General Arbitration Act); St. Lukes's Hospital v. SMS Computer Systems, Inc., 785 F.Supp.
1243 (E.D. Mich. 1991) (under Volt, agreement that arbitration be “determined in
accordance with” state arbitration statute held to incorporate Michigan standards for
vacating award; court observes Michigan standards are similar to FAA).
Second, although authority is still divided, lower courts are increasingly holding that
general choice-of-law clauses contained in the parties' underlying contract do not
incorporate state arbitration statutes. The Supreme Court's analysis in Mastrobuono
supports this conclusion. Ferro Corp. v. Garrison Indus., Inc., 142 F.3d. 926 (6th Cir. 1998)
(refusing to interpret choice-of-law clause as incorporating state arbitration statute);
National Union Fire Ins. Co. v. Belco Petroleum, 88 F.3d 129 (2d Cir. 1996) (New York “choice-
of-law clause is not an unequivocal inclusion of a New York rule that requires the
preclusive effect of a prior arbitration to be decided by the court.”); Booth v. Hume
Publishing, Inc., 902 F.2d 925, 928-29 (11th Cir. 1990) (holding that choice-of-law clause
probably did not incorporate state arbitration statute); Howard Fields & Assoc. v. Grand
Wailea Co., 848 F.Supp. 890 (D. Haw. 1993) (Volt does not require reading ordinary choice-
of-law clause as incorporating state arbitration statute; court refuses to interpret clause
as incorporating state arbitration rules); Transcontinental Gas Pipeline v. Dakota
Gasification Co., 782 F.Supp. 336 (S.D. Tex. 1991) (reasoning that choice-of-law clause did
not mean “that the parties intended for the Illinois Uniform Arbitration Act to apply to
their agreement”; relying on fact agreement also provided for AAA Rules); Barbier v.
Shearson Lehman Hutton, Inc., 752 F.Supp. 151 (S.D.N.Y. 1990) (Volt“does not stand for the
proposition that any time a choice-of-law provision is included in an arbitration
agreement, such a provision necessarily requires the application of state, rather than
federal, arbitration law”), modified, 948 F.2d 117 (2d Cir. 1991); Osteen v. T.E. Cuttino
Construction Co., 434 S.E.2d 281 (S.C. 1993) (holding that choice-of-law clause should not
be interpreted as incorporating state, rather than federal, arbitration law); Smith Barney
Shearson, Inc. v. Sacharow, 91 N.Y.S.2d 39 (Ct. App. 1997) (“While a choice-of-law clause
incorporates substantive New York principles, it does not also pull in conflicting
restrictions on the scope of arbitrators and the competence of parties to contract for
plenary alternative dispute resolution”).
Nonetheless, some lower courts (particularly pre-Mastrobuono) have interpreted general
choice-of-law clauses as incorporating state arbitration rules. Bank v. International
Business Machines Corp., 915 F.Supp. 491 (D. Mass. 1996) (applying Massachusetts choice-
of-law clause to incorporate state arbitration statute); Melum Indus., Inc. v. S&C Holding
Co., 1992 U.S. Dist. Lexis 191 (S.D.N.Y. 1992) (choice-of-law clause in underlying contract
held to “unambiguously” apply to arbitration agreement and encompass New York
arbitration statute); Armco Steel Co. v. CSX Corp., 790 F.Supp. 311 (D.D.C. 1991) (general
P "376" choice-of-law clause held to incorporate state arbitrability rules); International Insurance
P "377" Co. v. Certain Underwriters at Lloyd's London, 1991 U.S. Dist. Lexis 19605 (N.D. Ill. 1991)
(holding, without analysis, that choice-of-law clause in underlying contract applied to
arbitration agreement and encompassed state arbitration statute; applying state law
that referred disputes over arbitrability to arbitrators); Albright v. Edward D. Jones & Co.,
571 N.E.2d 1329 (Ind. App. 1991) (under Volt, choice-of-law clause held to select state
arbitration law requiring conspicuous display of arbitration clause; FAA held not to
preempt state requirement).
Consider the impact of Mastrobuono on this latter line of decisions.
 (b) Application of generally-applicable conflicts rules. Suppose that under standard conflict of
laws rules, California law governed the parties' underlying dispute in Volt. Would Volt's
rationale apply? Suppose that generally-applicable conflicts rules provided for the
application of California law to the parties' arbitration agreement? To the arbitral
proceedings themselves, as the curial law? Lee v. Smith Barney, Harry's Upham & Co., 1993
Fla. App. Lexis. 9844 (Fla. Ct. Ap. 1993) (applying Volt in absence of choice-of-law clause).
Contra McClendon, State International Arbitration Laws: Are They Needed or Desirable?, 1
Am. Rev. Int'l Arb. 245, 248 (1990).
Note the Court's discussion in Mastrobuono of the consequences of interpreting the
parties' choice-of-law clause as merely equivalent to the application of conflict of laws
rules: “In such event, there would be nothing in the contract that could possibly
constitute evidence of an intent to exclude punitive damages claims.” Does this make it
clear that Volt's analysis does not apply where state arbitration rules are applicable by
virtue of generally-applicable conflict of laws rules?

(c) Selection of arbitral situs. Suppose that the parties in Volt had not selected California law,
but that they had agreed that California would be the arbitral forum. As discussed below,
there is substantial authority for the position that the law governing the parties'
arbitration proceeding is prima facie the law of the place where the proceeding is
conducted. See infra pp. 428-29. Would an agreement to arbitrate in California establish
an agreement to arbitrate under California law which would come within Volt's rationale?
There is apparently no reported precedent.
(d) Renvoi. If none of the foregoing is sufficiently obtuse, what if the state law incorporated
by a state choice-of-law clause says that the FAA does preempt state arbitration law or
that state arbitration law does not displace the FAA's rules? See Sierra Telcom Services,
Inc. v. Ericsson Business Communications, Inc., 1993 U.S. Dist. Lexis 11548 (S.D.N.Y. 1993)
(choice-of-law clause selecting New York law, which was held not to “displace the FAA”);
Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. at 59 (questioning whether parties'
New York choice-of-law clauses “includes the caveat, ‘detached from otherwise-
applicable federal law’”).
7. Doctor's Associates' treatment of Volt. In Doctor's Associates, Inc. v. Casarotto, 517 U.S. 681
(1996), the Supreme Court held that §2 of the FAA preempted a Montana state statute requiring
that arbitration agreements appear in all capitals, underlined, and on the first page of the
parties' contract. The Court rejected the argument that Volt saved the Montana statutory
requirement from preemption, reasoning that:
Volt involved an arbitration agreement that incorporated state procedural rules, one of which,
on the facts of that case, called for arbitration to be stayed pending the resolution of a related
judicial proceeding. The state rule examined in Volt determined only the efficient order of
proceedings; it did not affect the enforceability of the arbitration agreement itself. We held [in
Volt] that applying the state rule would not undermine the goals and policies of the FAA,
because the very purpose of the Act was to ensur[e] that private agreements to arbitrate are
enforced according to their terms.
The Doctor's Associates case apparently did not, as described by the Supreme Court, involve a
state choice-of-law clause, as Volt had. However, the Court's opinion indicates that it would
have refused to apply Volt's analysis to a state law provision rendering arbitration agreements
unenforceable: Montana's statute “would not enforce the arbitration clause ...; instead,
Montana's first-page notice requirement would invalidate the clause.... Montana's law places
arbitration agreements in a class apart from ‘any contract’ [9 U.S.C. §2], and singularly limits
their validity.” Thus, the Court concluded Volt's analysis did not apply and that the Montana
statute was preempted. The Court's analysis in Doctor's Associates arguably limits Volt – even
where a choice-of-law clause incorporates state arbitration rules – to state law rules which are
fairly clearly supportive of the arbitral process.
8. Types of state arbitration rules covered by Volt's rationale.Volt involved a California statute
P "377" permitting a court-ordered stay of arbitration pending litigation of related claims. What other
P "378" types of state “arbitration rules” does Volt's rationale extend to? What about state law rules
governing interpretation of the arbitration agreement? enforceability and formation?
provisional measures? discovery? The thrust of the Court's analysis in Volt is that the FAA
merely provides for enforcement of whatever the parties agree to, which would at least in
principle appear to permit agreement to significant restrictions on the ordinary arbitral
process under the FAA. How, for example, would the analysis in Volt treat state law limits on
arbitration of tort claims or state law requirements (like that in Doctor's Associates) that
arbitration agreements be “prominently” displayed or separately signed?
Note again that Volt asserts, albeit in passing, that the California arbitration statute contained
“rules which are manifestly designed to encourage resort to the arbitral process,” and that
“generally foster the federal policy favoring arbitration.” Is the Court talking about the entire
California arbitration statute? Is the Court's characterization accurate when applied to the
California rule permitting stays of arbitration pending related litigation?
Consider the Court's opinion in Mastrobuono, and the relevance of the character of the New
York arbitration rule. What does Mastrobuono suggest about the types of state law rules which
are subject to Volt's analysis?
Note also the discussion above of the Supreme Court's decision in Doctor's Associates, holding
that Volt's analysis did not apply to a Montana statute requiring that arbitration clauses
appear in capital letters on the first page of any contract. See supra p. 377. The Court's analysis
 very likely limited Volt to state laws which are supportive of the arbitral process, and not to
rules which limit the enforceability or scope of arbitration agreements. For lower courts
adopting this view, see Ferro Corp. v. Garrison Indus., Inc., 142 F.3d 926 (6th Cir. 1998) (confining
Volt to cases where state law does not conflict with FAA, and refusing to apply Volt to
incorporate state law that would have precluded arbitration of fraudulent inducement claim);
PaineWebber Inc. v. Bybyk, 81 F.3d 1193 (2d Cir. 1996) (refusing to apply Volt to New York state
law rules regarding arbitrator's power to decide issues of arbitrability).
9. Lower court applications of Volt. In general, but with some exceptions, lower courts have
successfully struggled to avoid applications of Volt that restrict or undercut the arbitration
process. Despite their own uncertainties, Mastrobuono and Doctor's Associates limit the
adverse effects of Volt on arbitration in the United States. Nevertheless, as the following
discussion illustrates, Volt has thus far proved to be a profoundly unsatisfactory decision,
which has sowed uncertainty and delay across a wide range of the domestic arbitral process.
(a) Supreme Court clarifies lower court uncertainty whether FAA preempts state law
requirements that arbitration clauses be “conspicuous.” State laws in a number of
jurisdictions impose various requirements for conspicuous display of arbitration clauses.
E.g., Missouri Rev. Sta. §435.460 (“ten point capital letters” adjacent to signature line);
Mont. Code Ann. §27-5 114(4) (“typed in underlined capital letter on the first page of the
contract”); S.C. Code Ann. §15-48-10a (“underlined capital letters” on “first page of the
contract”); Texas Gen. & Spec. Laws 1708, Art. 224-1 (“underlined capital letters” or
“rubber-stamped prominently” on first page), repealed, 1987 Tex. Gen. & Spec. Laws 2828.
A number of lower courts held that Volt did not prevent preemption by the FAA of state
law requirements that arbitration provisions be “conspicuously” displayed, even where
parties have agreed to the application of state law. See David L. Threlkeld & Co. v.
Metallgesellschaft Ltd, 923 F.2d 245 (2d Cir. 1991); Securities Indus. Ass'n v. Connolly, 883
F.2d 1114 (1st Cir. 1989), cert. denied, 110 S.Ct. 2559 (1990); Webb v. R. Rowland & Co., 800
F.2d 803, 806-07 (8th Cir. 1986) (state law requirement for 10-point type in arbitration
clause held preempted); Osteen v. T.E. Cuttino Construction Co., 434 S.E.2d 281 (S.C. 1993)
(holding that if parties' choice of South Carolina law were deemed to incorporate South
Carolina's requirement that arbitration clauses be conspicuously displayed, the FAA
would preempt requirement notwithstanding Volt).
In contrast, other lower courts had relied on Volt to hold that state conspicuous display
rules are not preempted. American Physicians Service Group, Inc. v. Port Lavaca Clinic
Assoc., 843 S.W.2d 675 (Tex. App. 1992) (under Volt, Texas requirement for conspicuous
display not preempted); Albright v. Edward D. Jones & Co., 571 N.E.2d 1329 (Ind. App. 1991)
(under Volt, Indiana requirement for conspicuous display not preempted). See also
Dreyer, Arbitration Agreements After Volt and Browning-Ferris, 38 U. Kan. L. Rev. 667 (1990).
As discussed above, the Supreme Court's opinion in Doctor's Associates, Inc. v. Casarotto,
517 U.S. 681 (1996), rejected an argument that Volt saved Montana's “conspicuous notice”
statute from preemption. See supra p. 377. The Doctor's Associates analysis strongly
suggested that Volt applies only to state law rules which support the arbitral process, and
not the state laws which limit the enforceability of arbitration agreements.
P "378"
P "379"
(b) Lower court uncertainty whether FAA preempts state law prohibitions against arbitration of
particular claims. Most lower courts have held that Volt does not permit application of
state laws seeking to preclude the enforceability of arbitration agreements as to
particular claims. See Saturn Distribution Corp. v. Williams, 905 F.2d 719 (4th Cir. 1989);
Securities Indus. Ass'n v. Connolly, 883 F.2d 1114 (1st Cir. 1989), cert. denied, 110 S.Ct. 2559
(1990); Seymour v. Gloria Jean's Coffee Bean Franchising Corp., 723 F.Supp. 988 (D. Minn.
1990) (“the state regulations did more than regulate the manner in which arbitration was
to be conducted, but rather limited the extent to which parties could agree to submit
their claims to arbitration. The Court finds ... enforcement of the ‘choice of law’ provision
of the franchise agreement is barred”); Jones v. Merrill, Lynch, Pierce, Fenner & Smith, Inc.,
604 So.2d 332 (Ala. 1991) (dicta that, under Volt, a choice-of-law clause does not permit
application of state law to issue of separability).
Mastrobuono's interpretation of a general choice-of-law clause supports these refusals to
incorporate state law limitations on arbitrability through a choice-of-law provision.
Nonetheless, a few lower courts have relied on Volt to interpret choice-of-law clauses as
evidencing the parties' agreement on state non-arbitrability rules. See Armco Steel Co. v.
CSX Corp., 790 F.Supp. 311 (D.D.C. 1991) (under Volt, “[b]y including the Ohio choice-of-law
provision, the parties indicated their intention to arbitrate to the extent allowed by Ohio
law”; Ohio rule that challenge to legality of underlying contract is not arbitrable is not
preempted).
 (c) FAA preempts state laws relating to enforceability of arbitration agreements. Suppose that
the parties' arbitration agreement (and underlying contract) are subject to a choice-of-
law clause selecting the laws of state A. After Volt, may a party resist enforcement of an
arbitration agreement on the grounds that, under the laws of state A, the agreement is
invalid?
The lower courts that have addressed the issue thusfar have generally concluded that
Volt is not applicable to the basic issue of arbitrability or to the enforceability of
arbitration agreements. PaineWebber Inc. v. Bybyk, 81 F.3d 1193 (2d Cir. 1996) (refusing to
apply Volt to New York state law rules regarding arbitrator's power to decide issues of
arbitrability); Remy Amerique, Inc. v. Touzet Distribution SARL, 816 F.Supp. 213 (S.D.N.Y.
1993) (“Volt deals with the procedural rules to be followed in arbitration.... Volt does not
represent a retreat by the Court from ‘the settled federal rule that questions of
arbitrability in contracts subject to the FAA must be resolved with a healthy regard for the
federal policy favoring arbitration.’”); Seymour v. Gloria Jean's Coffee Bean Franchising
Corp., 732 F.Supp. 988 (D. Minn. 1990); Ideal Unlimited Services Corp. v. Swift Eckrich, Inc.,
727 F.Supp. 75 (D.P.R. 1989); Weatherly Cellaphonics Partners v. Hueber, 726 F.Supp. 319, 322
n.5 (D.D.C. 1989) (“if a state statute were to fall short of the FAA's solicitude towards
arbitration, federal law would govern even when the parties' choice-of-law clause
designated that state's law”). See also Transcontinental Gas Pipeline v. Dakota Gasification
Co., 782 F.Supp. 336 (S.D. Tex. 1991) (Volt does not permit application of state law rules
regarding appropriate forum for action to compel arbitration).

(d) FAA preempts state laws relating to interpretation of arbitration agreements. Lower courts
have also continued to hold that the FAA preempts state law rules of interpretation of
arbitration agreements. See supra p. 353. Compare Shearson Lehman Bros., Inc. v. Brady,
783 F.Supp. 1490 (D. Mass. 1991) (apparently concluding, under Volt, that state law
governed interpretation of arbitration agreement).
(e) FAA does not preempt state law limits on awards of attorneys' fees. Florida courts have
relied on Volt to hold that the FAA does not preempt a Florida statute denying arbitrators
the power to award attorneys' fees. Lee v. Smith Barney, Harris Upham & Co., 1993 Fla. App.
Lexis. 9844 (Fla. Ct. Ap. 1993). It is very doubtful that this result survives Mastrobuono.
10. Volt's limited view of the scope of the FAA's “pro-arbitration” policies.Volt reasoned that the
FAA only required the enforcement of private agreements to arbitrate; in doing so, the Court
limited the breadth and intensity of the pro-arbitration policies reflected in decisions like
Moses H. Cone and Mitsubishi Motors. Those decisions not only identified FAA policies of
enforcing arbitration agreements, but also affirmatively encouraged the formation and
recognition of such agreements, for example by broadly interpreting arbitration clauses and
narrowly interpreting defenses such as waiver. See supra pp. 34-41, 156-61, 336-40.
Consider the Volt Court's rejection of the argument that no “waiver” of an “FAA-guaranteed
right” had occurred, on the grounds that “the parties' agreement did not require arbitration to
proceed in this situation.” That argument rests, of course, entirely on the California courts'
determination under California law of what the parties “agreement” meant. The Court's
apparent willingness to allow state law to exclusively govern such issues is in considerable
P "379" tension with the federal rules of arbitrability recognized in Moses H. Cone and Mitsubishi. As
P "380" we have seen, Mastrobuono did not alter this basic approach, apparently concluding that the
parties' choice-of-law clause was to be interpreted as a matter of state law.
11. Applicability of state arbitration statutes in federal court. After Volt, parties may well seek to
remove arbitration cases in California to federal court, in an effort to avoid the application of
California arbitration rules (like the stay provision at issue in Volt). Would this succeed?
Suppose that, in a diversity action in federal court to enforce an arbitration agreement, the
party resisting arbitration relies on California's Civil Procedure Code §1281(2)(c) to argue for a
stay of the arbitration. As the Volt Court observes, it is plain that no such stay of arbitration
would be available under the FAA. But, if the FAA does not preempt the state law, why is the
state law not then binding in federal court? Recall that in Bernhardt, the availability of
arbitration was held outcome determinative; a federal court sitting in diversity must apply
such law unless it is preempted by federal law. Bernhardt v. Polygraphic Co., 350 U.S. 198 (1956).

C. Procedural Avenues for Enforcing International Arbitration Agreements in U.S.

Courts
A variety of procedural mechanisms are available for enforcing international arbitration
agreements in U.S. courts. These include: (a) actions to compel arbitration under §4 of the
domestic FAA; (b) actions to compel arbitration under §206 of the FAA (implementing the New
York Convention); (c) actions to compel arbitration under §303 of the FAA (implementing the
Inter-American Convention); (d) actions for a stay of litigation under §3 of the domestic FAA or
under the court's inherent powers; (e) actions to compel arbitration under the Foreign
Sovereign Immunities Act; (f) actions either to compel arbitration or stay litigation under state
law in state court; and (g) actions for injunctions against arbitration or related foreign
litigation.
Initially, although these various avenues for judicial relief are available, there is generally no
requirement that disputes over the interpretation and enforceability of the parties' arbitration
agreement be resolved judicially in the first instance. The parties can, as discussed above, first
present their differences over jurisdiction to the arbitrators, subject to eventual judicial
review. (116)
 As discussed in detail above, a variety of significant choice of law and substantive issues arise
in disputes over the enforceability and interpretation of arbitration agreements – including
interpretation of the arbitration clause and questions of waiver, invalidity, illegality,
unconscionability, and fraudulent inducement. In addition to these substantive issues,
however, actions to compel arbitration or stay litigation under these provisions raise a variety
of significant jurisdictional and procedural issues in national courts. (117) The treatment of
these issues in U.S. courts is examined below.
P "380"
P "381"
1. Orders Compelling Performance of An Agreement to Arbitrate Under §206 of the FAA
The most effective avenue for enforcing an international arbitration agreement in many U.S.
cases is §206 of the FAA, which implements Article II of the New York Convention. As we have
seen, Article II(3) of the Convention requires courts to “refer” the parties to a valid written
arbitration agreement, falling within the Convention, to arbitration in accordance with the
terms of their agreement. (118)
Section 206 of the FAA authorizes U.S. courts to “direct that arbitration be held in accordance
with” the parties' arbitration agreement. (119) Applying §206, U.S. courts have frequently
compelled parties to honor preexisting international arbitration agreements. (120) Before a
federal court may order parties to arbitration under §206, however, the following procedural
and jurisdictional requirements must be satisfied: (a) the court must possess personal
jurisdiction over the defendant; (b) the court must possess subject matter jurisdiction; and (c)
venue in the court compelling arbitration must be proper under the FAA (or otherwise). (121)
P "381"
P "382"
a. Personal Jurisdiction Under §206
A U.S. court cannot compel a party to arbitrate under §206 unless the party is subject to the
court's personal jurisdiction. (122) The statutory basis for assertions of personal jurisdiction by
district courts under §206 is not clear. Chapter 2 of the FAA does not appear to contain a
federal grant of personal jurisdiction (equivalent, for example, to the federal long-arm
provisions of the antitrust and securities laws). (123) If that is correct, (124) a district court's
personal jurisdiction under §206 would presumably be defined in the first instance by Rules 4
and 81 of the Federal Rules of Civil Procedure. (125) Those Rules would incorporate any
applicable federal long-arm provision or the state law of the state in which the district court is
located. (126) Apparently following this approach (albeit without analysis) several lower courts
have upheld personal jurisdiction based on §§1605(a)(1) and 1605(a)(6) of the Foreign Sovereign
Immunities Act. (127) At least arguably, §208 of the FAA also incorporates any available basis
for personal jurisdiction under §4 of the FAA.
Without specifying a statutory basis for jurisdiction, several lower courts have held that by
agreeing to arbitrate within a particular forum, a party impliedly consents to the personal
jurisdiction of the forum's courts for purposes of actions to compel arbitration. (128) Other
bases of personal jurisdiction – such as the defendant's presence within or contacts with the
forum – should also be available in actions to compel arbitration. (129)
P "382"
P "383"
b. Federal Subject Matter Jurisdiction Under §203
In contrast to the domestic FAA, (130) §203 of the FAA establishes an independent basis for
federal subject matter jurisdiction in actions to compel arbitration pursuant to agreements
subject to the Convention. Section 203 provides that U.S. district courts shall have original
jurisdiction over actions or proceedings “falling under the Convention.” (131) This formulation
clearly encompasses actions to compel arbitration and to stay litigation. (132) Lower courts
have held, however, that §203 does not extend to actions seeking provisional measures in aid
of arbitration, (133) or to actions seeking to vacate an arbitral award. (134)
Section 203 does not appear to provide the exclusive basis for subject matter jurisdiction in
§206 actions to compel arbitration. Several lower courts have held that, under §206, actions
can be based on independent grants of federal subject matter jurisdiction in other federal
statutes, including under the Foreign Sovereign Immunities Act. (135)
c. Removal Under §205
Section 205 authorizes removal of any action that “relates to an arbitration agreement falling
under the Convention” from state to federal court. (136) It appears settled that federal court
jurisdiction to enforce §206 is not exclusive, but merely concurrent with the jurisdiction of
state courts. (137) Lower courts have generally interpreted §§203 and 205 broadly, holding
among other things that an action in state court challenging the appointment of an arbitrator
P "383" “relates to” an arbitration agreement falling under the Convention. (138) Although §205's
P "384" language (“relates to”) is broader than §203's (“falling under the Convention”) the two
provisions probably were intended to have an identical meaning. Lower courts have concluded
that this right to remove can be waived. (139)
d. Venue Under §§206 and 204
Venue requirements under the FAA's second chapter are defined, at least in part, by §204.
Section 204 provides that an action to compel arbitration
may be brought in any such [district] court in which save for the arbitration agreement an
 action or proceeding with respect to the controversy between the parties could be brought, or
in such court for the district and division which embraces the place designated in the
agreement as the place of arbitration if such place is within the United States. (140)
Lower courts have not frequently discussed this standard: it would appear fairly clear, however,
that §204 permits venue either where personal jurisdiction and venue requirements would
have been satisfied had no arbitration clause existed or in the arbitral situs.
It is not clear whether §204's venue requirements are exclusive, or whether other venue
statutes (such as the Alien Venue Act or Foreign Sovereign Immunities Act) can also be relied
on. (141) The better view would appear to be that §204's venue requirements are not exclusive.
The Supreme Court has held that specialized venue provisions are presumptively non-
exclusive, (142) and lower courts have apparently followed such an approach with respect to
§204. (143) This result would also be consistent with the pro-enforcement bias of the
Convention and the FAA.
P "384" It is also not clear whether a U.S. court may dismiss an action to compel arbitration under §206
P "385" on the grounds that the court is forum non conveniens for enforcement purposes. As
discussed below, some lower courts have held that discretion to dismiss on forum non
conveniens grounds exists under §206. (144) Other courts, applying §4 of the domestic FAA, have
concluded that there is no such discretion. (145) Lower courts have generally enforced forum
selection clauses, contained in the parties' arbitration agreement, specifying a judicial forum
for purposes of enforcement of the arbitration agreement (or award). (146)
e. Where Can Arbitration Be Ordered Under §206?
As discussed in detail below, under §206 a court may order arbitration of the parties' dispute
even if the agreed-upon arbitral forum is outside the United States. (147) (In contrast, §4 of the
domestic FAA has generally been held to permit a court to order arbitration only within the
judicial district in which it is located.) (148) Nevertheless, §206 has been held inapplicable
where the parties have not agreed upon a specific foreign arbitral situs, (149) or where they
have chosen an arbitral situs in a state that is not a signatory to the New York Convention. (150)
f. Sua Sponte §206 Orders
In some cases, the defendant in a U.S. action on the merits will seek dismissal of the action on
the grounds of the parties' arbitration agreement, but will not seek an order compelling
arbitration. In those circumstances, several lower courts have sua sponte compelled
arbitration “in the interests of justice.” (151) The better course, however, is for a court simply to
stay litigation (under §3, incorporated by §208), rather than ordering an arbitration that
neither party has requested (or, possibly, desires). (152)
P "385"
P "386"
2. Orders Compelling Performance of Agreement to Arbitrate Under §4 of the FAA
International arbitration agreements can also be enforced in actions under §4 of the FAA. As we
have seen, §2 of the FAA provides that a written arbitration (153) provision in any contract
evidencing a transaction involving U.S. interstate or foreign commerce shall be “valid,
irrevocable and enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.” (154)
The principal enforcement mechanism for §2 is §4 of the FAA, which provides a statutory basis
for orders compelling arbitration (and which is independent of §206). (155) (Section 2 is also
enforced by §3 of the FAA, providing for stays of U.S. judicial proceedings on claims subject to
valid arbitration agreements.) (156) Section 4 empowers a court to grant what amounts to an
injunction requiring a party to arbitrate pursuant to its arbitration agreement. (157) In the
words of one lower court, a motion under §4 “is simply a request for an order compelling
specific performance of part of a contract.” (158)
As described above, §4 of the FAA is applicable, among other things, to international
arbitration agreements (i.e., agreements in transactions affecting U.S. foreign commerce) that
are not subject to the New York or Inter-American Conventions. (159) Section 4 is also
potentially applicable, by virtue of §208 and §307, to actions to enforce arbitration
agreements that are subject to the New York Convention and Inter-American Convention. (160)
Section 4 provides:
A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a
written agreement for arbitration may petition any United States district court which, save for
such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the
P "386" subject matter of a suit arising out of the controversy between the parties, for an order
P "387" directing that such arbitration proceed in the manner provided for in such agreement. Five
days' notice in writing of such application shall be served upon the party in default. Service
thereof shall be made in the manner provided by the Federal Rules of Civil Procedure. The
court shall hear the parties, and upon being satisfied that the making of the agreement for
arbitration or the failure to comply therewith is not in issue, the court shall make an order
directing the parties to proceed to arbitration in accordance with the terms of the agreement.
The hearing and proceedings, under such agreement, shall be within the district in which the
petition for the order directing such arbitration is filed. (161)
Section 4 has been relied on repeatedly by U.S. courts in compelling parties to arbitrate in
accordance with their international arbitration agreements. (162) A §4 order compelling
arbitration can be made even if no §3 stay is available. (163)
 a. No Independent Basis for Federal Subject Matter Jurisdiction Under §4
Section 4 provides that a party seeking to compel arbitration “may petition any United States
district court which, save for such agreement, would have jurisdiction ... of the subject matter of
a suit arising out of the controversy between the parties.” (164) Notwithstanding this language,
and the substantive federal rights created by §2, §4 has been held not to provide an
independent basis for federal question jurisdiction under 28 U.S.C. §1331. The Supreme Court
has affirmed that conclusion, albeit with the observation that it is “anomalous” for a federal
statute, creating substantive federal rules, not to provide a basis for federal question
jurisdiction. (165)
Thus, in contrast to §206, (166) federal courts may entertain actions to enforce an arbitration
agreement under the domestic FAA only if there is some independent basis for federal subject
P "387" matter jurisdiction (such as diversity, alienage, or the Foreign Sovereign Immunities Act). (167)
P "388" At least some lower courts have held that federal subject matter jurisdiction does not exist
in an action to compel arbitration merely because the underlying dispute between the parties
involves federal securities or other statutory claims that would, if brought in a judicial action,
be within federal question jurisdiction. (168)
b. Limitation of §4 to Transactions Involving Interstate or Foreign Commerce
In addition to requiring an independent basis for federal subject matter jurisdiction, actions
under §4 also must satisfy a separate legislative jurisdiction requirement. Section 4 of the FAA
is only applicable to those arbitration agreements that fall within the jurisdictional scope of
§1. (169)
Under §1 of the FAA, §2 and the other provisions of the FAA are applicable to arbitration
agreements in “any maritime transaction” or “a contract evidencing a transaction involving
commerce.” Section 1 defines both of these terms. Among other things:
‘commerce’ as herein defined, means commerce among the several States or with foreign
nations, or in any Territory of the United States or in the District of Columbia, or between any
such Territory and another, or between any such Territory and any State or foreign nation, or
between the District of Columbia and any State or Territory or foreign nation ...” (170)
Both “interstate” and “foreign” commerce, as used in §1, are construed broadly, particularly by
federal courts. (171) Most business transactions of any significance in the United States will fall
P "388" within §1's jurisdictional ambit. (172) International arbitration agreements generally come
P "389" within §1's definition of foreign “commerce,” and therefore will usually benefit from §2's
federal rule of enforceability even where neither the New York nor Inter-American Convention
is applicable. (173)
The jurisdictional provisions of §1 include the foreign commerce of the United States –
“commerce among the several States or with foreign nations.” Section 1 apparently does not
reach commerce only among “foreign nations” that does not affect U.S. commerce – i.e., local
sales from India to Nepal or Indonesia – but instead would appear to require commerce
between one of the several States and a foreign nation or otherwise affecting U.S. foreign
commerce. (174)
c. Personal Jurisdiction Under §4
In order for a district court to order arbitration under §4, it must have personal jurisdiction
over the party against whom the order is sought. (175) As with §206, the domestic FAA does not
appear to contain a federal statutory grant of personal jurisdiction. (176) If that is correct, then
the personal jurisdiction of federal court would presumably be defined any applicable federal
long-arm provision or by the local state long-arm statute (incorporated through Rules 81 and 4
of the Federal Rules of Civil Procedure). (177)
Lower courts have routinely held that, by agreeing to arbitrate in a particular forum, a party
impliedly consents to personal jurisdiction in that forum for actions under §4 to enforce the
arbitration agreement. (178) In some cases, the parties' arbitration agreement will select a
court for purposes of enforcing the agreement. These sorts of specialized forum selection
clauses are usually enforceable and a sufficient basis for personal jurisdiction in the
P "389" designated court. (179) Presumably, other bases for personal jurisdiction – such as existence of
P "390" an office within the jurisdiction or minimum contacts with the forum relating to the dispute –
would also provide a sufficient basis for an action to compel arbitration under §4. In practice,
because §4 is generally interpreted as limiting a court's enforcement power to ordering
arbitration within its district, (180) personal jurisdiction has rarely been based on factors other
than an agreement to arbitrate within the forum.
d. Venue Under §4
Section 4 has also been held to deal with venue. It is clear under §4 that the district court for
the district where the parties agreed to arbitrate is a proper venue for §4 actions to enforce
the arbitration agreement. (181) Nevertheless, there are three significant uncertainties
surrounding issues of venue and enforcement power under §4.
First, some lower federal courts have held that an action to compel arbitration under §4 can
only be brought in the judicial district in which the parties have agreed to arbitrate. (182) Other
lower courts have permitted §4 actions provided that other generally-applicable personal
jurisdiction and venue requirements are satisfied. (183)
Second, it is not clear whether a district court has discretion in ordering arbitration under §4
(or §206) of the FAA if there is a valid arbitration agreement. According to some courts, the FAA
 leaves no room for the exercise of discretion by a district court. (184) Nevertheless, several
decisions have held that a district court has the power to dismiss an action to compel
arbitration under §4 on forum non conveniens grounds. (185) Other lower courts have reached
the opposite conclusion. (186)
Third, it is not clear whether §4 applies in state courts, granting state judges the power (and
P "390" imposing the obligation) to compel arbitration. (187) The section refers specifically to “United
P "391" States district courts,” presumably not including state courts. Several state courts appear to
have relied on the section in compelling arbitration, (188) while other state courts appear to
have reached the contrary conclusion. (189)
3. Orders Compelling Performance of Agreement to Arbitrate Under §303 of the FAA
A third avenue for enforcing international arbitration agreements in the United States is §303
of the FAA. Much like Article II of the New York Convention, Article 1 of the Inter-American
Convention provides for the general enforceability of arbitration agreements subject to the
Convention. Article 1 of the Inter-American Convention is implemented by §303 of the FAA,
which provides that
“[a] court having jurisdiction under this chapter may direct that arbitration be held in
accordance with the agreement at any place therein provided for, whether that place is within
or without the United States. The court may also appoint arbitrators in accordance with the
provisions of the agreement.” (190)
To date, there have been few U.S. judicial interpretations of §303. Given the similarities in
language, interpretations of §206 will be influential in construing §303.
a. Federal Subject Matter Jurisdiction, Personal Jurisdiction, and Venue Under §302
Section 302 of the FAA, which implements the Inter-American Convention, incorporates a
number of the provisions of chapter two of the FAA. (191) Among other things, §302 incorporates
§§203, 204, and 205, dealing respectively with subject matter jurisdiction, venue, and removal.
Decisions under these sections of chapter two should be applicable as well to actions to
compel arbitration under §303. Where chapter two is not applicable, §307 incorporates
chapter one of the FAA (just as §208 incorporates chapter one for actions under the New York
Convention).
b. Where Can Arbitration Be Ordered Under §303?
One significant difference between the New York Convention and the Inter American
Convention relates to the role of the Inter-American Commercial Arbitration Commission
P "391" (“IACAC”). Article 3 of the Convention provides that, “[i]n the absence of an express agreement
P "392" between the parties, the arbitration shall be conducted in accordance with the rules of
procedure of the Inter-American Arbitration Commission.” As discussed above, those rules are
based on the UNCITRAL Rules, with the IACAC designated as the appointing authority. (192)
Section 303(b) implements Article 3, providing that “[i]n the event the agreement does not
make provision for the place of arbitration or the appointment of arbitrators, the court shall
direct that the arbitration shall be held and the arbitrators be appointed in accordance with
Article 3 of the Inter-American Convention.” (193) Under the rules of procedure of the IACAC,
arbitrators are appointed (absent contrary agreement) by the Commission (194) and the
arbitral situs is selected (absent contrary agreement) by the arbitral tribunal. (195) Section
303(b) presumably authorizes federal courts to compel arbitration in this arbitral situs.
4. Actions to Compel Arbitration By Foreign States Under the Foreign Sovereign Immunities Act
(196)
Actions to compel arbitration by foreign states (and their agencies and instrumentalities) are
subject to the Foreign Sovereign Immunities Act. The FSIA provides foreign states with a
presumptive grant of sovereign immunity, (197) subject to a number of statutory exceptions.
(198) Where an exception to immunity applies, §1330 of the FSIA simultaneously provides
federal courts with an affirmative grant of both subject matter and personal jurisdiction. (199)
P "392" Two of the FSIA's exceptions are particularly relevant in actions to enforce international
P "393" arbitration agreements – §1605(a)(6) and §1605(a)(1). Section 1605(a)(6) deals specifically
with actions to enforce arbitration agreements and awards, while §1605(a)(1) is a more
generally applicable waiver provision.
Section 1605(a)(6) was added to the FSIA in 1988, specifically to deny foreign states immunity
for actions to enforce certain arbitration agreements or confirm certain arbitral awards.
Section 1605(a)(6) creates an exception to foreign sovereign immunity in cases:
(6) in which the action is brought either to enforce an agreement made by the foreign State
with or for the benefit of a private party to submit to arbitration all or any differences which
have arisen or which may arise between the parties with respect to a defined legal
relationship, whether contractual or not, concerning a subject matter capable of settlement by
arbitration under the laws of the United States, or to confirm an award made pursuant to such
an agreement to arbitrate, if (A) the arbitration takes place or is intended to take place in the
United States, (B) the agreement or award is or may be governed by a treaty or other
international agreement in force for the United States calling for the recognition and
enforcement of arbitral awards, (C) the underlying claim, save for the agreement to arbitrate,
could have been brought in a United States court under this section or section 1607, or (D)
paragraph (1) of this subsection is otherwise applicable.
 Relatively few decisions have interpreted §1605(a)(6). (200)
Section 1605(a)(6) provides for a waiver of immunity and grant of jurisdiction for actions to
enforce certain arbitration agreements in any of the following cases: (1) the arbitration takes
place, or “is intended to take place,” in the United States; (2) the agreement is, “or may be,”
governed by a treaty “calling for the recognition and enforcement of arbitral awards;” (201) (3)
paralleling §204, the underlying “claim, save for the agreement to arbitrate, could have been
brought in a United States court” under §1605 or §1607; or (4) §1605(a)(1)'s waiver provision
applies.
P "393" Lower courts have correctly observed that §1605(a)(6) “evinces a strong legislative intent to
P "394" provide enforcement for [arbitration] agreements.” (202) In one of the few decisions applying
§1605(a)(6), the Second Circuit held that, although §1605(a)(1) was inapplicable, §1605(a)(6) was
broader and provided a potential basis for jurisdiction to compel arbitration, outside the
United States, by a party that had not itself signed the agreement. (203) Section 1605(a)(6)
applies to arbitration agreements “with or for the benefit of a private party,” and has been
argued to be inapplicable in cases between two foreign states. (204)
Section 1605(a)(6) expressly preserves the fairly extensive body of case law which developed
under §1605(a)(1)'s waiver provisions with respect to arbitration clauses. Under these
decisions, it is clear that a foreign state's agreement to arbitrate in the United States
constitutes a waiver of immunity from actions in U.S. courts to compel arbitration. (205)
Moreover, several lower court decisions have suggested that an open-ended agreement to
arbitrate, without designation of a particular situs, constitutes a waiver of immunity in U.S.
courts for actions to compel arbitration or confirm arbitral awards. (206) It is also possible that
an agreement to arbitrate at either an unspecified situs or a foreign situs would fall within
§1605(a)(1) if the parties had agreed to the application of U.S. law as the substantive or curial
law. (207)
Section 1605(a)(1)'s waiver provisions do not, however, automatically apply whenever a foreign
state has agreed to arbitrate. A number of lower courts have held that an agreement to
arbitrate outside the United States does not necessarily constitute a waiver of immunity in an
action to compel arbitration in U.S. courts. (208) These decisions have reasoned that
submission to arbitrate outside the United States does not, without more, indicate any
intention to waive immunity in U.S. courts. They reject the view that “whenever a foreign
P "394" sovereign [has] contracted with a private party anywhere in the world, and chose to be
P "395" governed by the laws or answer in the forum of any country other than its own, it ... expose[s]
itself to personal liability in the courts of the United States.” (209)
5. Orders Compelling Performance of Agreement to Arbitrate Pursuant to State or Common
Law
It is possible, although not common, for state courts to consider the appropriateness of an
order compelling arbitration pursuant to an international arbitration agreement. Whether or
not such an order can or will be granted is, at least in the first instance, a matter of state law,
and varies from state to state. (210)
Under many state arbitration statutes, a state court order compelling arbitration abroad can
in principle be obtained. Sections 2(a) and 18 of the Uniform Arbitration Act authorize the
issuance of orders to compel arbitration, without imposing any express territorial limitations.
(211) Article 8 of the UNCITRAL Model Law is similar. (212) Likewise, in New York, §7503 of the
New York Civil Practice Law authorizes the issuance of orders compelling arbitration, without
any geographical limitations. (213)
It may also be possible, although again not common, for either state or federal courts to issue
orders compelling arbitration under common law authority. The existence of such authority is
uncertain, (214) given the historic common law refusal to specifically enforce arbitration
agreements. (215)
6. Court Order Staying U.S. Judicial Proceedings Pending Arbitration
The procedural avenues described above involved orders affirmatively compelling arbitration.
Arbitration agreements can also be enforced through stays of judicial proceedings. Indeed, in
many nations, affirmative injunctive relief compelling arbitration is unavailable and the sole
means of enforcing an arbitration agreement is a stay of litigation. (216)
P "395" Obtaining a stay of litigation is a defensive action, brought in response to judicial proceedings
P "396" initiated by an adverse party. “The concept [of §3] seems to be that a power to grant a stay is
enough without the power to order that the arbitration proceed, for, if a stay can be granted
the plaintiff can never get relief unless he proceeds to arbitration.” (217)
a. Stays of Judicial Proceedings Under §3 of the FAA
In the United States, there are several types of stays that may be obtained in aid of
arbitration. The domesoic FAA specifically requires U.S. courts to stay their own proceedings
where those proceedings involve claims that are subject to a valid written arbitration
agreement. Section 3 of the domestic FAA provides that
If any suit or proceeding be brought in any of the courts of the United States upon any issue
referable to arbitration under an agreement in writing for such arbitration, the court in which
such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is
referable to arbitration under such agreement, shall on application of one of the parties stay
the trial of the action until such arbitration has been had in accordance with the terms of the
agreement, providing the applicant for the stay is not in default proceeding with such
 arbitration. (218)
It is well-settled that a stay of litigation may be granted under §3 even if no order compelling
arbitration may be made under §4. (219) A §3 stay has been held to apply to the entire action,
and not merely the “trial.” (220) Nevertheless, a stay of litigation under §3 can only bind
P "396" persons that are party to an arbitration agreement (221) (although, as discussed below,
P "397" inherent judicial power to stay actions can extend to non-parties). (222) Section 3 stays can
also be granted, in the court's discretion, as to non-arbitrable claims, (223) although courts not
infrequently deny such stays. (224)
Section 3 of the FAA does not specifically grant the power to stay proceedings in favor of an
arbitration to be held outside the United States. A plausible argument might be made that no
such power should be implied, perhaps given the apparent limitation in §4 on ordering
arbitration abroad. Nonetheless, lower federal courts have frequently relied on §3 of the FAA to
stay proceedings pending arbitrations that are to be conducted abroad. (225)
It is not clear whether §3 of the FAA was intended to apply in state courts. The provision's
language refers only to “courts of the United States,” which suggests that only U.S. district
courts (and other federal courts) are covered by the section's stay provision. (226)
Nevertheless, as discussed above, the Supreme Court has held that state courts must stay their
proceedings if they involve claims subject to arbitration under the FAA. (227) State courts have
generally done so. (228)
b. Stays Under Chapters 2 and 3 of the FAA
P "397" The implementing legislation for the New York Convention and the Inter-American Convention
P "398" do not contain any provisions equivalent to §3 of the domestic FAA. Nevertheless, U.S. courts
have found no difficulty in staying proceedings before them where disputes arbitrable under
the Conventions are involved. (229) It is not clear whether such stays are based upon §3
(incorporated by §208), the court's inherent power over its docket, or Articles II(3) and 2 of the
New York and Inter-American Conventions.
c. Inherent Power to Stay Litigation
A number of lower federal courts have held that they possess inherent power to stay litigation,
even where §3 and other statutory provisions do not apply. (230) That power extends to claims
by persons not party to an arbitration agreement. (231)
d. Stays of Litigation Under State Law
When litigation in derogation of an alleged arbitration agreement is commenced in state court,
and not removed, state courts may be requested to stay the action. As noted above, the
Supreme Court has apparently held that, in actions where the FAA is applicable, state courts
must issue stays analogous to those under §3 of the FAA. (232) The same result almost certainly
obtains where the New York and Inter-American Conventions are applicable (although here
removal will generally be readily available). In the rare international cases where neither the
FAA nor the Conventions are applicable, state law will govern the availability of a stay. In
general, such relief should be available, assuming that the parties' arbitration agreement is
enforceable under applicable law. (233)
P "398"
P "399"
7. Court Order Enjoining Arbitration
A number of lower U.S. courts have granted injunctive relief barring arbitration proceedings
where the parties' agreement did not cover the claims asserted before the arbitrators. (234)
These courts have relied on traditional equitable powers to support such relief. (235) They have
also rejected the argument that the FAA prohibits injunctions barring arbitration. (236)
8. Motions Practice Under the FAA
Actions under most sections of the FAA are procedural anomalies. Although disputes under the
FAA can involve issues of fact and law that are indistinguishable from ordinary civil actions, the
FAA prescribes a unique procedural regime. Section 6 of the FAA provides:
Any application to the court hereunder shall be made and heard in the manner provided by
law for the making and hearing of motions, except as otherwise herein expressly provided.
Section 6 thus prescribes an expedited procedural regime, modelled on federal court motions
practice, for actions to enforce arbitration agreements (and awards).
Motions, of course, are often decided without evidentiary oral hearings, based instead upon
affidavits and documentary evidence. According to most lower federal courts, “motions may be
decided wholly on the papers, and usually are, rather than after oral examination and cross-
examination of witnesses.” (237) The policy of §6 “is to expedite judicial treatment of matters
pertaining to arbitration.” (238)
P "399"
P "400"
Section 4 of the FAA is an exception to this general procedural regime. It provides for a trial by
jury if disputes exist as to the making of an arbitration agreement. In §4's words, “[i]f the
making of the arbitration agreement or the failure, neglect or refusal to perform the same be in
issue, the court shall proceed summarily to the trial thereof.” Lower courts have developed
common law standards defining the degree of factual dispute that is required before a §4 trial
is appropriate. It is settled that there must be a “genuine issue” as to the existence of an
 arbitration agreement or its continuing validity. (239) If such issues exist, then a §4 trial is
required; if they do not, it is forbidden. Nonetheless, motivated by the FAA's goals of
expedition and informality, courts have sometimes dispensed with trial-type evidentiary
hearings, in favor of written submissions and evidence, even where genuine factual disputes
existed. (240)

D. Forum Selection Issues in U.S. Litigation Concerning International Arbitration

Agreements
International arbitration agreements can usually be enforced in several different possible
forums, including different national courts. Given the differences between arbitration statutes
in different countries, different national courts will often produce different conclusions
concerning the enforceability and interpretation of arbitration agreements. As a result,
disputes inevitably arise as to the available or appropriate judicial forum for enforcement of
international arbitration agreements.
Several lower U.S. courts have considered issues of forum selection in the enforcement of
arbitration agreements. This has most frequently occurred when parties have resisted motions
to compel arbitration in a U.S. court on forum non conveniens grounds, (241) or when injunctions
against arbitration proceedings or judicial enforcement proceedings in other fora have been
sought. (242) Three themes stand out in these decisions.
P "400" First, the Supreme Court and various lower courts have said generally that §4 does not permit
P "401" discretionary or prudential denials of relief: the FAA's provisions “leave no place for the
exercise of discretion by a district court, but instead mandate that district courts shall direct
the parties to proceed to arbitration on issues as to which an arbitration agreement has been
signed.” (243)
Second, international arbitration agreements frequently can have no significant connection to
the United States – and very substantial contacts with some other foreign nation. In these
circumstances, U.S. courts may not provide a particularly convenient or well-informed forum
for resolving disputes concerning the agreement, and their orders may conflict with those of
more appropriate foreign courts.
Third, arbitral proceedings can sometimes go forward notwithstanding the manifest absence of
any contractual or other basis for such proceedings. Alternatively, foreign judicial proceedings
can be commenced in a manifestly inconvenient or otherwise inappropriate forum. In both
cases, U.S. courts can be called upon to issue injunctions prohibiting further prosecution of
either the arbitration or the enforcement action.
With these themes in the background, lower U.S. courts have reached divergent results in cases
raising forum selection defenses to the enforcement of international arbitration clauses. As
noted above, some U.S. courts have concluded that neither the forum non conveniens doctrine
nor other prudential considerations are available under §4. (244) In contrast, the Oil Basins Ltd
v. Broken Hill Proprietary Co. decision, excerpted below, illustrates the willingness of other U.S.
courts to apply prudential rules, like the forum non conveniens doctrine in actions to compel
arbitration.
Conversely, U.S. courts have sometimes issues orders to enjoin both foreign arbitration
proceedings and foreign litigation, albeit only in exceptional circumstances. The decision in
Faberge International Inc. v. Di Pino illustrates such action.
OIL BASINS LTD v. BROKEN HILL PROPRIETARY CO.
613 F.Supp. 483 (S.D.N.Y. 1985)
CANNELL, DISTRICT JUDGE.... This action arises out of a contract (“Royalty Agreement”) between
plaintiff and defendant Broken Hill Proprietary Company (“BHP”), pursuant to which
defendants are required to pay plaintiff royalties on hydrocarbons produced by BHP
Petroleum Proprietary Ltd (“BHP Petroleum”) in the offshore waters of Australia. Plaintiff
[originally] brought this action in New York State Supreme Court. Plaintiff claims that an
Australian excise tax and certain costs of production should not be deducted from the gross
value of the hydrocarbons on which the royalty is calculated and requests a declaration as to
computation, an accounting and damages of over $350 million. Defendants subsequently
P "401" removed the action to this Court pursuant to 9 U.S.C. §205, which permits removal to federal
P "402" court of cases involving arbitration agreements covered by the [New York] Convention.
Jurisdiction is based upon 28 U.S.C. §1331 and 9 U.S.C. §203.
Plaintiff is a Bermudian corporation, the sole function of which is to act as trustee for the
royalty payments specified in the Royalty Agreement. Defendants are Australian corporations.
BHP is a large multinational corporation with an agent in New York City. The Royalty Agreement
expressly provides that all disputes arising as to “the construction meaning or effect of any
clause ... or as to the rights obligations or liabilities of the parties under any clause ... shall be
determined by arbitration.” Both parties acknowledge that the issue before the Court is
governed by this arbitration clause. The only dispute concerns the location in which arbitration
should take place. After this action was filed, defendant BHP Petroleum sent plaintiff a letter
that purports to commence arbitration proceedings. The next day, BHP Petroleum also
commenced action against plaintiff in the Supreme Court of Victoria at Melbourne to enforce
arbitration....
Both parties previously moved for an order compelling arbitration. Plaintiff requested that the
venue of arbitration be in New York; defendants preferred that it be held in Australia. In its
March Memorandum and Order the Court ordered that arbitration be held in New York,
 because under Chapter 2 of the [FAA] the Court had no power to order arbitration in Australia.
See id.; 9 U.S.C. §201 et seq. [See also infra pp. 584-88.] Defendants had not at that time moved
for dismissal on forum non conveniens grounds, and the Court declined to “order such a drastic
remedy sua sponte, particularly in light of the ongoing dispute concerning the Australian
court's jurisdiction over plaintiff.” Since the date of the Court's prior decision, defendants have
moved for dismissal on grounds of forum non conveniens and the Australian Supreme Court has
affirmed the Australian trial court's finding that it has personal jurisdiction over plaintiff. See
BHP Petroleum Pty. Limited v. Oil Basins Limited, No. 3949 (Austr. S. Ct. June 20, 1985).
The Second Circuit has recently held “squarely that district courts have the power to dismiss a
petition to compel arbitration on the ground of forum non conveniens.”Maria Naviera, SA v.
Cementos del Valle, 759 F.2d 1027, 1031 (2d Cir. 1985). The only restriction on this power is
created by a contract expressly designating the forum for arbitration. This Court has already
held in its March Memorandum and Order that no such designation was made in the “Royalty
Agreement.”
Under the doctrine of forum non conveniens, the moving party bears the burden of showing that
the alternative forum is clearly more convenient and appropriate. See, e.g., Piper Aircraft Co. v.
Reyno, 454 U.S. 235, 255 (1979). In deciding whether to dismiss a case, the court may look to “the
convenience of the parties, convenience of material witnesses, place where events occurred,
access to sources of proof, and plaintiff's choice of forum.”Lovebright Diamond Co. v. Spragins,
574 F.Supp. 76, 80 (S.D.N.Y. 1983). An additional factor is whether the law governing the
substantive issues is that of the instant forum or the alternate forum. Generally, the choice of
forum will not be disturbed pursuant to this doctrine unless the interests of justice weigh
strongly in favor of the defendant.
P "402"
P "403"
All the factors point to Australia being the proper forum for litigation in this case. The contract
at issue was to be performed in Australia. The hydrocarbons are produced there and the
royalty payments are calculated and paid to the defendant in Australia. Plaintiff has been able
to suggest only one witness in America – Paul Temple, who resides in Virginia and was, at best,
only tangentially involved in the drafting of the Royalty Agreement. The documentary evidence
is also in Australia. Moreover, neither party is domiciled in New York. Plaintiff is a corporation
organized under the laws of Bermuda, with its principal place of business in Bermuda. The sole
function of plaintiff corporation is to act as trustee for the royalty payments, and its majority
shareholder is Weeks Petroleum Limited, a subsidiary of the Australian Bell Group, which
operates out of Melbourne. Thus, the majority of the royalties never leave Australia. Both
defendants are Australian corporations and have maintained no office in New York since
December 1984.
The only factor that presents any problem results from the choice of law clause in the Royalty
Agreement. That clause provides: “Except as otherwise required by the law of the place where
the said hydrocarbons are produced or as otherwise herein provided this Agreement shall be
interpreted and applied in accordance with the law of the State of New York.” Thus, New York
law applies unless Australian law must be applied by virtue of Australia's own laws. If New York
law governs the issues in this case, the Court must weigh that factor in determining the
appropriate forum. The wording of the choice of law clause makes it necessary for the Court to
determine the central issue in the underlying substantive dispute in order to decide which law
will apply. See Overseas Programming Cos. v. Cinematographische Commerzanstalt, 684 F.2d
232, 235 (2d Cir. 1982).... [T]he Court finds that Australian law will necessarily play a major part
in the resolution of the dispute. To the extent that New York law will govern certain issues,
those issues will only require the implementation of general principles of contract
interpretation, which should not be difficult to prove in a foreign forum. Plaintiff has pointed to
no specific areas of New York law that will be at issue. Accordingly, the Court finds that the
balance of interests weigh overwhelmingly on the side of dismissal in favor of the Australian
forum....
FABERGE INTERNATIONAL INC. v. DI PINO
91 N.Y.S.2d 345 (App. Div. 1985)
ASCH, JUSTICE. The defendant is an Italian-born American citizen who in 1971 returned to Italy
to work for plaintiff Faberge International, Inc. as an international sales executive. The
defendant held this position until 1973, when he was appointed by Faberge as the General
Manager of its newly formed Italian branch. For the first time, in March 1979, Faberge and the
defendant entered into a written employment agreement. The defendant's salary was divided
into two parts, the larger portion being payable in the United States, in dollars, for work done
P "403" by the defendant as Faberge's Executive Vice President for International Sales. A smaller
P "404" portion of his salary was paid in Italy for his work as head of the Italian branch. The
defendant lived on his Italian salary and arranged for an attorney on Faberge's staff to deposit
his American salary directly into his account with a bank in the United States.
The agreement provided that it was to be governed by New York law and for arbitration in New
York City of all “controversies of any kind relating to [the] agreement.” The agreement also
contained a clause whereby the defendant, as “Executive,” “expressly agrees that the COMPANY
shall be entitled to injunctive and other equitable relief to prevent a breach of this agreement
by the EXECUTIVE” (emphasis added). [Disputes arose and Faberge terminated the defendant's
employment. He responded by threatening legal action, in Italy before an “Italian Labor Court
and/or arbitration tribunal” to enforce his rights under Italian Statutes, and in New York before
the contractually-designated arbitral tribunal, to enforce his contract rights. Faberge
commenced an action in New York courts for injunctive relief against the defendant for
 revealing trade secrets and from pursuing an action in Italy. The defendant sought to stay the
suit pending arbitration.] ...
Special Term erred when it granted an injunction against “defendant's resort to foreign
arbitration [and courts].” The Court recognized that if defendant's claims were analogous to
social security benefits, then it could not prevent him from seeking to recover on those claims
in Italy. However, it then decided to require him to bring what it recognized as Italian statutory
claims before the New York arbitrators.
Faberge, as the movant, had the burden of proof and failed to sustain this burden by showing
that defendant should be enjoined from proceeding pursuant to Italian law to obtain certain
Italian statutory severance benefits. The Court of Appeals has stated: “The use of the injunctive
power to prohibit a person from resorting to a foreign court is a power rarely and sparingly
employed, for its exercise represents a challenge, albeit an indirect one, to the dignity and
authority of that tribunal. Accordingly, an injunction will be granted only if there is danger of
fraud or gross wrong being perpetrated on the foreign court.”Arpels v. Arpels, 207 N.Y.S.2d 663.
The record herein is devoid of any proof whatsoever, as urged by plaintiff, that the arbitration
clause was intended to encompass defendant's Italian statutory rights. Even assuming a finding
that the arbitration clause had been intended as a waiver of defendant's Italian statutory
rights, Special Term, acting pursuant to the principles of comity, should have then weighed the
Italian public policy objectives of the affected statutes against New York's policy in favor or
arbitration to determine whether any waiver should be enforced. Thus, the Court should have
been provided with information as to whether a waiver of the Italian statutory rights would be
enforceable in Italy. No such material appears in the record. Therefore, Special Term's
conclusions that defendant's statutory benefits were not analogous to social security and that
an injunction would not violate Italian public policy were unsupported by any authority.
Since there is nothing in the record to indicate that the defendant's Italian statutory claims
P "404" arose out of the Agreement or were subsumed or precluded by the Agreement, these claims
P "405" had a validity that did not arise or depend upon the Agreement. Therefore, these issues
were, upon the proof presented, clearly directed to the competent Italian tribunals and it was
an abuse of discretion to enjoin defendant from enforcing those rights in these tribunals.
Notes on Forum Selection in U.S. Litigation Concerning International Arbitration Agreements
1. Lower U.S. court refusals to compel arbitration on grounds that court is forum non
conveniens. As Broken Hill illustrates, a few lower U.S. courts have held that they have the
power to decline to entertain motions to compel arbitration under §4 and §206 because they
are inconvenient forums to resolve issues of arbitrability. E.g., Maria Victoria Naviera, SA v.
Cementos del Valle, 759 F.2d 1027, 1031 (2d Cir. 1985) (“district courts have the power to dismiss a
petition to compel arbitration on the ground of forum non conveniens”); McCain Foods Ltd v.
Puerto Rico Supplies, Inc., 766 F.Supp. 58 (D.P.R. 1991) (same; rejecting dismissal). See also
Borden, Inc. v. Meiji Milk Products Co., 918 F.2d 822 (2d Cir. 1990) (excerpted at infra pp. 966-69)
(rejecting application for provisional measures in aid of arbitration on forum non conveniens
grounds). Compare G.B. Michael v. SS Thanasis, 311 F.Supp. 170 (N.D. Calif. 1970) (apparently
concluding that forum non conveniens could be invoked, but refusing to do so).
2. Lower court decisions holding that forum non conveniens is not available in actions to
compel arbitration under the FAA. In contrast to the authorities cited in the preceding note,
other lower U.S. courts have held that no forum non conveniens defense is available in actions
to compel arbitration under §4 or §206 of the FAA. E.g., I.T.A.D. Associates, Inc. v. Podar Bros.,
636 F.2d 75, 75 (4th Cir. 1981) (“The discretion vested by §206 relates only to the designation of a
place for arbitration and the appointment of arbitrators.”); E.C. Ernst, Inc. v. Potlatch Corp., 462
F.Supp. 694, 697-99 (S.D.N.Y. 1978).
3. Rationale for application of forum non conveniens doctrine in §4 actions. Should a forum non
conveniens defense be available in defense to an action to compel arbitration? Does the
language of §4 preclude application of the forum non conveniens doctrine?
Note that Article II(3) of the Convention, providing that national courts “shall refer” arbitrable
disputes to arbitration, has been interpreted as mandatory by some U.S. courts in the context
of provisional measures. See infra pp. 945-48. On the other hand, most courts and
commentators reject the view that the Convention requires signatories to provide orders
compelling arbitration (as opposed to stays of litigation). Is the international arbitration
process supported or hindered if potentially multiplicitous actions to compel arbitration are
brought in inconvenient forums?
4. Effect of forum selection clauses specifying court to enforce arbitration agreement. Parties'
arbitration agreements sometimes designate a national court system to resolve disputes over
the arbitration agreement.
Consider the following clause, taken from Lea Tai Textile Co. v. Manning Fabrics, Inc., 411 F.Supp.
1404 (S.D.N.Y. 1975) (excerpted above): “The parties consent to the jurisdiction of the Supreme
Court of the State of New York and the United States District Court for the Southern District of
New York for all purposes in connection with said arbitration.” Consider also the following: “The
parties hereby agree that any dispute relating to or arising out of the arbitration, including but
not limited to the jurisdiction, powers and conduct of the arbitral tribunal, shall be
determined by the Courts of the Province of Ontario, and the parties hereby agree that neither
of them shall apply to the Courts of any other jurisdiction related to the subject matter or
conduct of the arbitration.”McCain Foods Ltd v. Puerto Rico Supplies, Inc., 766 F.Supp. 58 (D.P.R.
1991).
What is the effect of such clauses? First, what implications do such clauses have for the
 arbitrators' power to consider issues of arbitrability? Do the clauses have the consequence of
removing from the arbitral tribunal initial responsibility for decisions concerning its
jurisdiction?
Second, will U.S. (or other) courts enforce such clauses and rely on them to dismiss §4 actions
otherwise satisfying jurisdiction and venue requirements? In McCain Foods, notwithstanding the
clause, the U.S. court examined the parties' arbitration agreement, held that it was
enforceable, and ordered arbitration. Although there is little reported precedent, U.S. courts
P "405" should usually give effect to such forum selection clauses. Cf. Patten Securities Corp., Inc. v.
P "406" Diamond Greyhound & Genetics, Inc., 819 F.2d 400 (3d Cir. 1987) (holding that references to
courts in parties' agreement were for purpose of specifying forum for judicial enforcement of
arbitration agreement and award). See G. Born, International Civil Litigation in United States
Courts 371-457 (3d ed. 1996) (discussing enforcement of forum selection clauses in U.S. courts).
5. Effect of foreign litigation on merits of parties' dispute on willingness of U.S. court to compel
arbitration. Suppose that, rather than suing in the United States, one party (Party A) to an
arbitration agreement files suit in a foreign court against the other party (Party B) on the merits
of the parties' dispute. Will a U.S. court nonetheless compel arbitration, at the request of Party
B, under the FAA? Although there is little precedent, the answer appears to be yes, in an
appropriate case. Sumitomo Corp. v. Parakopi Compania Maritima, 477 F.Supp. 737, 741 (S.D.N.Y.
1979) (nothing, however, that Greek litigation was not far advanced). On the other hand, as
Broken Hill illustrates, litigation abroad on issues of arbitrability will bear on the forum non
conveniens analysis.
6. State door-closing statutes do not bar actions under FAA. Various states have enacted “door-
closing” statutes, some directed against “foreign” litigation. Section 1312 of New York's Business
Corporation is illustrative: it bars any action by a foreign corporation doing business in New
York without authority. Such statutes have been held preempted by the FAA. In re Grand
Bahama Petroleum Co. v. Asiatic Petroleum Corp., 550 F.2d 1320 (2d Cir. 1977).
7. Injunctions against arbitration. As Faberge illustrates, most U.S. courts are in principle willing
to issue injunctions against arbitration of claims that are not properly subject to arbitration.
Nordin v. Nutri/System, Inc., 897 F.2d 339 (8th Cir. 1990); Societe Generale etc. v. Raytheon
European Mgt & Systems Co., 643 F.2d 863 (1st Cir. 1981); Leesona Corp. v. Cotwool Mfg. Corp., 315
F.2d 538 (4th Cir. 1963); A.B.C., Inc. v. American Federation of Television & Radio Artists, 412
F.Supp. 1077 (S.D.N.Y. 1976); Netherlands Curacao Co., NV v. Kenton Corp., 366 F.Supp. 744, 748
(S.D.N.Y. 1973). See also Hoffman Constr. Co. v. Active Erectors and Installers, Inc., 969 F.2d 796
(9th Cir. 1992) (affirming grant of permanent injunction against arbitration of claim barred by
res judicata); Shinto Shipping Co. v. Fibrex Shipping Co., 572 F.2d 1328 (9th Cir. 1978); Griffin v.
Semperit of America, Inc., 414 F.Supp. 1384 (S.D. Tex. 1976).
A number of lower U.S. courts have also issued injunctions to halt arbitration of claims which
are barred by res judicata. In re Y & A Group Sec. Litig., 38 F.3d 380 (8th Cir. 1994) (affirming
injunction against arbitration of dispute settled by prior judgment); Kelly v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 985 F.2d 1067 (11th Cir. 1993) (district court has power under All-
Writs Act to enjoin arbitration to prevent litigation of disputes already subject to final
judgment); Tai Ping Ins. Co. v. M/V Warschau, 731 F.2d 1141, 1144 (5th Cir. 1984); Miller Brewing Co.
v. Fort Worth Distributing Co., 781 F.2d 494 (5th Cir. 1986). The FAA has not been interpreted as
precluding such relief. This power extends to arbitrations to be conducted outside the United
States.
8. Standard under U.S. law for obtaining injunction against arbitration. Rigorous standards must
be satisfied to obtain an injunction under U.S. law against an arbitration. In Faberge, the court
required a showing of “danger of fraud or gross wrong.” Other courts have indicated that
injunctions against arbitration can be obtained by a showing that the arbitration agreement is
invalid or inapplicable to the parties' dispute. E.g., Societe Generale etc. v. Raytheon European
Mgt. & Systems Co., 643 F.2d 863, 868 n.5 (1st Cir. 1981). Which standard is more appropriate?
9. Availability under U.S. law of injunctions against foreign litigation.Faberge also suggests that
U.S. law permits antisuit injunctions against foreign litigation of arbitrable disputes. That is
consistent with the long established equitable power of U.S. courts to issue anti-suit
injunctions against the prosecution of foreign proceedings. See G. Born, International Civil
Litigation in United States Courts 475-90 (3d ed. 1996). There are virtually no reported instances
where such injunctions were issued. See XL Insurance Ltd v. Owens Corning, 2 Lloyd's Law Rep.
500 (2000) (antisuit enjoining litigation in Delaware on merits of dispute subject to arbitration
in London).
10. Standards under U.S. law for obtaining antisuit injunctions against foreign litigation. As
Faberge illustrates, the standards for obtaining antisuit injunctions under U.S. law are difficult
to satisfy. See G. Born, International Civil Litigation in United States Courts 475-90 (3d ed. 1996).
In general, a plaintiff must demonstrate that the foreign litigation: (a) duplicates U.S.
proceedings and is “vexatious”; or (b) evades an important U.S. public policy; or (c) threatens
the legitimate jurisdiction of the U.S. court. Antisuit injunctive relief may be more readily
obtained where a forum selection or arbitration agreement exists. Id.; Hartley, Comity and the
Use of Antisuit Injunctions in International Litigation, 35 Am. J. Comp. L. 487 (1987).
P "406"
P "407"
Suppose a foreign court proceeded to hear the merits of a dispute that was plainly arbitrable.
Should a U.S. court enjoin the parties from proceeding with the foreign litigation? Does it
matter whether the arbitration had commenced? Whether the arbitral situs was in the United
States? Whether one or both parties were American?
 11. Availability under U.S. law of injunctions against state court litigation. For lower federal
court decisions staying state court proceedings involving claims arbitrable under the FAA, see
McMahon v. Shearson/American Express, Inc., 709 F.Supp. 369, 374-5 (S.D.N.Y. 1989); Americana
Fabrics, Inc. v. L & L Textiles, Inc., 83 Civ. 5286 (S.D.N.Y. July 18, 1983 and August 24, 1983) (issuing
antisuit injunction against California state court action to stay arbitration; but refusing to
compel arbitration in California on grounds §4 did not allow order compelling arbitration in
another district); Network Cinema Corp. v. Glassburn, 357 F.Supp. 169 (S.D.N.Y. 1973); Necchi
Sewing Machine Sales Corp. v. Carl, 260 F.Supp. 665 (S.D.N.Y. 1966). See also Americana Fabrics,
Inc. v. L & L Textiles, Inc., 754 F.2d 1524 (9th Cir. 1985) (compelling parties to arbitrate in
California after concluding that Southern District of New York antisuit injunction against
California state court action to stay injunction was proper and should be recognized); H.M.
Hamilton & Co. v. American Home Assurance Co., 251 N.Y.S.2d 215 (App. Div. 1964) (issuing
antisuit injunction against Georgia litigation of arbitrable claims).
Some courts have declined to exercise their discretion to enjoin state court proceedings,
typically relying on the Anti-Injunction Act, see Commonwealth Edison Co. v. Gulf Oil Corp., 541
F.2d 1263, 1273-4 (7th Cir. 1976); Ultracashmere House, Ltd v. Meyer, 664 F.2d 1176 (11th Cir. 1981).
See also Empire Blue Cross and Blue Shield v. Janet Greeson's A Place For Us Inc., 985 F.2d 459
(9th Cir. 1993).
For a decision of a federal district court enjoining further judicial proceedings on arbitrable
claims in another federal district court, see CAE Industries Ltd v. Aerospace Holdings Co., 741
F.Supp. 388, 393 (S.D.N.Y. 1989).
12. No requirement under U.S. law of court order compelling arbitration in order to pursue
arbitration. If a party seeks to commence arbitration, and its adversary refuses to participate,
there is no requirement under the FAA that the first party obtain a court order compelling
arbitration. Instead, it is free to proceed with the arbitration (assuming that the parties'
agreement and applicable institutional arbitration rules permit) and obtain a default award.
U.S. courts have made clear that, where the parties have agreed to such rules, there is no
public policy bar to ex parte arbitration proceeding going forward to an award. Standard
Magnesium Corp. v. Fuchs, 251 F.2d 455, 458 (10th Cir. 1957) (“If the agreement provides that
where one party refuses or fails to submit to arbitration, that an arbitrator may be appointed
and that the arbitration may proceed ex parte, and further provides for the procedure to be
followed in such an ex parte proceeding, there is no occasion to invoke the remedy of §4. Such
a remedy is necessary only in those cases where one party refuses to participate in the
arbitration and a court order is necessary in order for the arbitration to proceed ex parte.”);
Kentucky River Mills v. Jackson, 206 F.2d 111 (6th Cir. 1953).
P "407"

References
1) The first chapter of the FAA plays a vital role in the enforcement and interpretation of
international arbitration agreements in U.S. courts. This is in part because §1 of the FAA
broadly applies the Act's first chapter to arbitration agreements arising out of
transactions involving both interstate and “foreign” commerce, 9 U.S.C. §1; supra pp. 37-38
& infra pp. 388-89, and because §208 specifically provides that the first chapter of the
FAA is applicable under the New York Convention's implementing legislation, except
where there is a conflict between the two, 9 U.S.C. §208. Thus, where the Convention does
not apply to an international arbitration agreement, the FAA's first chapter often will
apply; even where the Convention is applicable, §208 will often provide for the
application of “domestic” precedents to the validity and enforceability of arbitration
agreements subject to the Convention.
2) 9 U.S.C. §2. This basic rule of enforceability is subject to §2's “savings clause,” which
permits non-enforcement of an arbitration agreement on “such grounds as exist at law or
in equity for the revocation of any contract.”Id.
3) See supra pp. 36-41 & infra pp. 358-80.
4) See supra pp. 156-57.
5) See supra pp. 156-57; Home Ins. Co. v. Morse, 87 U.S. 445, 457-58 (1874).
6) See supra pp. 36-41, 157-61.
7) Act of April 19, 1929, ch. 275, 1920 N.Y. Laws 803 (currently codified, as amended, at N.Y.
C.P.L.R. §§7501-14 (McKinney 1980)).
8) 43 Stat. 883 (1925), codified 61 Stat. 669 (1947). See supra pp. 36-41, 157-61.
9) For commentary, see Atwood, Issues in Federal-State Relations Under the Federal
Arbitration Act, 37 U. Fla. L. Rev. 61 (1985); Furnish, Commercial Arbitration Agreements and
the Uniform Commercial Code, 67 Cal. L. Rev. 317 (1979); Garvey & Heffelfinger, Towards
Federalizing U.S. International Commercial Arbitration Law, 25 Int'l Law. 209 (1991);
Hirshman, The Second Arbitration Trilogy: The Federalization of Arbitration Law, 71 Va. L.
Rev. 1305 (1985); Aksen, Prima Paint v. Flood & Conklin – What Does It Mean?, 43 St. John's L.
Rev. 1, 22-23 (1968); Sturges & Murphy, Some Confusing Matters Relating to Arbitration
Under the United States Arbitration Act, 17 L. & Cont. Probs. 580 (1952); Note, Federal
Arbitration Act and Application of the “Separability Doctrine” in Federal Courts, 1968 Duke
L.J. 588; Note, Scope of the United States Arbitration Act in Commercial Arbitration:
Problems in Federalism, 58 Nw. U.L. Rev. 468 (1963); Note, Commercial Arbitration in Federal
Courts, 20 Vand. L. Rev. 607 (1967); Note, Erie, Bernhardt, and §2 of the United States
Arbitration Act: A Farrago of Rights, Remedies and a Right to a Remedy, 69 Yale L.J. 847
(1960); Note, The Federal Arbitration Act in State Courts: Converse Erie Problems, 55 Cornell
L. Rev. 623 (1970); Annotation, Conflict of Laws as to Validity and Effect of Arbitration
Provision, 95 A.L.R.3d 1145.
10) United States v. Little Lake Misere Land Co., 412 U.S. 580 (1973); Clearfield Trust Co. v. United
States, 318 U.S. 363 (1943); Anderson National Bank v. Luckett, 321 U.S. 233 (1944).
11) See G. Born, International Civil Litigation in United States Courts 13-16 (3d ed. 1996).
12) 9 U.S.C. §2.
13) Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226 (1987) (quoting Scherk v.
Alberto-Culver Co., 417 U.S. 506, 510-11 (1974)).
14) Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. 468, 478 (1989); Southland
Corp. v. Keating, 465 U.S. 1, 11, 15-16 n.9 (1984); Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth Inc., 473 U.S. 614 (1985); Moses H. Cone Memorial Hospital v. Mercury
Construction Corp., 160 U.S. 1, 24 (1983).
15) Prima Paint Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 404 n.12 (1967)
(Congress intended to “make arbitration agreements as enforceable as other contracts,
but not more so.”).
16) Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24 (1983)
(emphasis added).
17) For a discussion of the respective roles of state and federal law in enforcing and
interpreting arbitration agreements, see infra pp. 336-58.
18) 9 U.S.C. §2.
19) See supra pp. 155-295.
20) See infra pp. 349-53.
21) See supra pp. 113-17 & infra pp. 349-52.
22) See supra pp. 113-17 & infra pp. 353-56.
23) See infra pp. 353-56.
24) See supra pp. 113-17 & infra pp. 353-56.
25) 489 U.S. 468 (1989).
26) See infra pp. 358-80.
27) 514 U.S. 52 (1995).
28) 517 U.S. 681 (1996).
29) See supra pp. 55-74.
30) See supra pp. 71-72.
31) See infra pp. 336-51.
32) 9 U.S.C. §2.
33) See Medical Dev. Corp. v. Industrial Molding Corp., 479 F.2d 345 (10th Cir. 1973); Fisser v.
International Bank, 282 F.2d 231, 233 (2d Cir. 1960); Joseph Muller Corp. v. Commonwealth
Petrochemicals, Inc., 334 F.Supp. 1013, 1019-20 (S.D.N.Y. 1971); Tepper Realty Co. v. Mosaic
Tile Co., 259 F.Supp. 688, 691 (S.D.N.Y. 1966).
34) First Citizens Municipal Corp. v. Pershing Division, 546 F.Supp. 884, 887 (N.D. Cal. 1982)
(quoting Fisser v. International Bank, 282 F.2d 231, 233 (2d Cir. 1960)).
35) First Citizens Municipal Corp. v. Pershing Division, 546 F.Supp. 884, 887 (N.D. Cal. 1982); Fox
v. Merrill Lynch & Co., 453 F.Supp. 561 (S.D.N.Y. 1978) (“A valid arbitration provision must
be in writing, but a party may be bound by that provision without having signed an
exemplar”).
36) Al-Salamah Arabian Agencies Co. v. Reese, 673 F.Supp. 748, 750 (M.D.N.C. 1987); Great
Northern Nekoosa Corp. v. ASEA AB, 657 F.Supp. 1253 (W.D. Ark. 1987); First Citizens Municipal
Corp. v. Pershing Division etc., 546 F.Supp. 884 (N.D. Cal. 1982) (“arbitration provision may
be binding on the parties based upon their course of conduct”). But see C. Itoh & Co.
(America) Inc. v. Jordan Int'l Co., 552 F.2d 1228, 1238 (7th Cir. 1977) (§2's “writing”
requirement does not permit creation of arbitration clause “by implication from custom
and usage”).
37) Medical Dev. Corp. v. Industrial Molding Corp., 479 F.2d 345 (10th Cir. 1973); Garner Lumber
Co. v. Randolph E. Valensi, Lange, Inc., 393 F.Supp. 161 (W.D.N.C. 1974); Joseph Muller Corp. v.
Commonwealth Petrochemicals, Inc., 334 F.Supp. 1013 (S.D.N.Y. 1971); Universal Oil Products
Co. v. S.C.M. Corp., 313 F.Supp. 905 (D. Conn. 1970).
38) See supra pp. 126-40.
39) 41 U.S. 1 (1842).
40) See generally Westen & Lehman, Is There Life for Erie After the Death of Diversity?, 78 Mich.
L. Rev. 311 (1980).
41) See generally I. MacNeil, American Arbitration Law Chapter 3 (1992).
42) 304 U.S. 64, 78 (1938).
43) See Robert Lawrence Co. v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir. 1959), cert.
dismissed, 364 U.S. 801 (1960).
44) E.g., Bernhardt v. Polygraphic Co. of America, Inc., 122 F.Supp. 733 (D. Vt. 1954).
45) 350 U.S. 198 (1956).
46) 218 F.2d 948, 951 (2d Cir. 1955) (FAA is “not ‘substantive’ within the meaning of” Erie).
47) 350 U.S. at 200-02.
48) 350 U.S. at 202.
49) 350 U.S. at 203-04 (“If the federal court allows arbitration where the state court would
disallow it, the outcome of litigation might depend on the courthouse where suit is
brought.”).
50) 388 U.S. 395 (1967).
51) See supra pp. 63-67.
52) 388 U.S. at 404. See also Id. at 406 (“Federal courts are bound to apply rules enacted by
Congress with respect to matters – here, a contract involving commerce – over which it
has legislative power.”). The Court also upheld the FAA's constitutionality, citing Congress'
commerce and admiralty powers. 388 U.S. at 404-05.
53) See cases cited infra pp. 348-50.
54) Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983);
Southland Corp. v. Keating, 465 U.S. 1 (1984); Mitsubishi Motors Corp. v. Soler Chrysler-
Plymouth Inc., 473 U.S. 614 (1985); Perry v. Thomas, 482 U.S. 483 (1987).
55) 460 U.S. 1 (1983).
56) 460 U.S. at 24.
57) 460 U.S. at 24-25.
58) 465 U.S. 1 (1984).
59) See infra pp. 342-47.
60) 465 U.S. at 16. The Court's decision provoked a vigorous, closely-reasoned dissent from
Justice O'Connor. Id. at 21.
61) 473 U.S. 614 (1985).
62) 473 U.S. at 636.
63) 482 U.S. 483 (1987).
64) 482 U.S. at 492 n.9.
65) 482 U.S. at 492 n.9 (“Thus, state law, whether of legislative or judicial origin, is applicable
if that law arose to govern issues concerning the validity, revocability, and enforceability
of contracts generally. A state law principle that takes its meaning precisely from the fact
that a contract to arbitrate is at issue does not comport with this requirement of §2”).
66) 514 U.S. 938 (1995).
67) 514 U.S. at 944.
68) 513 U.S. 265 (1995).
69) 517 U.S. 681 (1996).
70) 513 U.S. at 281.
71) 517 U.S. at 685-86.
72) 489 U.S. 468 (1989).
73) 240 Cal. Rptr. 558 (1987).
74) 489 U.S. at 475-79.
75) See infra pp. 358-80.
76) 514 U.S. 52 (1995).
77) See infra pp. 375-79.
78) 517 U.S. 681 (1996). See infra pp. 377-78.
79) It was not clear from the Supreme Court's opinion in Doctor's Associates whether the case
involved a state choice-of-law clause. The breadth of the Court's reasoning appears,
however, to apply where a state choice-of-law clause exists. See infra pp. 377-78.
80) Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (1967).
81) 465 U.S. 1 (1984).
82) 514 U.S. 938 (1995).
83) 712 F.2d 50 (3d Cir. 1983).
84) 956 F.Supp. 1131 (S.D.N.Y. 1997), rev'd, 186 F.3d 210 (2d Cir. 1999).
85) While the FAA creates federal substantive law requiring the parties to honor arbitration
agreements, it does not create any independent federal-question jurisdiction under 28
U.S.C. §1331 (1976) or otherwise. Moses H. Cone, 460 U.S. at 25 n.32. This seems implicit in
the provisions in §3 for a stay by a “court in which such suit is pending” and in §4 that
enforcement may be ordered by “any United States district court which, save for such
agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the
subject matter of a suit arising out of the controversy between the parties.”
86) The contention is made [by the dissent] that the Court's interpretation of §2 of the Act
renders §§3 and 4 “largely superfluous.” This misreads our holding and the Act. In holding
that the [FAA] preempts a state law that withdraws the power to enforce arbitration
agreements, we do not hold that §§3 and 4 of the [FAA] apply to proceedings in state
courts. Section 4, for example, provides that the Federal Rules of Civil Procedure apply in
proceedings to compel arbitration. The Federal Rules do not apply in such state court
proceedings.
87) The California Supreme Court justified its holding by reference to our conclusion in Wilko
v. Swan, 346 U.S. 427 (1953), that arbitration agreements are nonbinding as to claims
arising under the federal Securities Act of 1933. The analogy is unpersuasive. The question
in Wilko was not whether a state legislature could create an exception to §2 of the [FAA]
but rather whether Congress, in subsequently enacting the Securities act, had in fact
created such an exception.
Justice Stevens dissents in part on the ground that §2 of the [FAA] permits a party to
nullify an agreement to arbitrate on “such grounds as exist at law or in equity for the
revocation of any contract.” We agree, of course, that a party may assert general contract
defenses such as fraud to avoid enforcement of an arbitration agreement. We conclude,
however, that the defense to arbitration found in the California Franchise Investment Law
is not a ground that exists at law or in equity “for the revocation of any contract” but
merely a ground that exists for the revocation of arbitration provisions subject to the
California Franchise Investment Law. Moreover, under this dissenting view, “a state policy
of providing special protection for franchisees...can be recognized without impapiring the
basic purposes of the federal statute.” If we accepted this analysis, states could wholly
eviscerate Congressional intent to place arbitration agreements “upon the same footing
as other contracts,” H.R. Rep. No. 96 at 1, simply by passing statutes such as the Franchise
Investment Law. We have rejected this analysis because it is in conflict with the [FAA] and
would permit states to overrid the declared policy requiring enforcement of arbitration
agreements.

88) The use of identical language in both sections was natural: §3 applies when the party
resisting arbitration initiates the federal court action; §4 applies to actions initiated by
the party seeking to enforce an arbitration provision. Phrasing the two sections differently
would have made no sense.
89) In 1954, as a purely clerical change, Congress inserted “United States district court” in §4
as a substitute for “court of the United States.” Both the House and Senate Reports
explained: “‘United States district court’ was substituted for ‘court of the United States’
because, among Federal courts, such a proceeding would be brought only in a district
court.” H.R. Rep. No. 1961, 83d Cong., 2d Sess., 8 (1954); S. Rep. No. 2496, 83d Cong., 2d Sess.
9 (1954).
Even without this history, §3's “courts of the United States” is a term of art whose meaning
is unmistakable. State courts are “in” but not “of” the United States....
90) The Court suggests that it is unlikely that Congress would have created a federal
substantive right that the state courts were not required to enforce. But it is equally rare
to find a federal substantive right that cannot be enforced in federal court under the
jurisdictional grant of 28 U.S.C. 1331. Yet the Court states that the FAA must be so
construed. The simple answer to this puzzle is that in 1925 Congress did not believe it was
creating a substantive right at all.
91) If my understanding of the Court's opinion is correct, the Court has made §3 of the FAA
binding on the state courts. But as we have noted, §3 by its own terms governs only
federal court proceedings. Moreover, if §2, standing alone, creates a federal right to
specific enforcement of arbitration agreements §§3 and 4 are, of course, largely
superfluous. And if §2 implicitly incorporates §§3 and 4 procedures for making arbitration
agreements enforceable before arbitration begins, why not also §9 procedures concerning
venue, personal jurisdiction, and notice for enforcing an arbitrator's award after
arbitration ends? One set of procedures is of little use without the other.
92) Moses H. Cone Memorial Hospital v. Mercury Constr. Co., 460 U.S. 1 (1983).
93) Southland Corp. v. Keating, 465 U.S. 1 (1984).
94) Id.; Perry v. Thomas, 482 U.S. 483 (1987).
95) Southland Corp. v. Keating, 465 U.S. 1 (1984).
96) See infra pp. 392-98.
97) 514 U.S. 52 (1995).
98) Garrity v. Lyle Stuart, Inc., 40 N.Y.2d 354 (1976); infra pp. 858-59.
99) The arbitration clause reads in full as follows:
All claims, disputes and other matters in question between the parties to this contract,
arising out of or relating to this contract or the breach thereof, shall be decided by
arbitration in accordance with the Construction Industry Arbitration Rules of the
American Arbitration Association then prevailing unless the parties mutually agreed [sic]
otherwise.... This agreement to arbitrate ... shall be specifically enforceable under the
prevailing arbitration law.
100) Volt's motion to compel was apparently brought pursuant to §4 of the FAA, 9 U.S.C. §4, and
the parallel provision of the California Arbitration Act, Cal. Civ. Proc. Code Ann. §1218.2;
the motion cited both Acts as authority, but did not specify the particular sections upon
which reliance was placed. Volt also asked the court to stay the Superior Court Litigation
until the arbitration was completed, presumably pursuant to §3 of the FAA, 9 U.S.C. §3,
and the parallel provision of the California Arbitration Act, Cal. Civ. Proc. Code Ann.
§1281.2(c)(3) (West 1982).
101) Cal. Civ. Proc. Code Ann. §1281.2(c) provides, in pertinent part, that when a court
determines that “[a] party to the arbitration agreement is also a party to a pending court
action or special proceeding with a third party, arising out of the same transaction or
series of related transactions and there is a possibility of conflicting rulings on a common
issue of law or fact[,] ... the court (1) may refuse to enforce the arbitration agreement and
may order intervention or joinder of all parties in a single action or special proceeding;
(2) may order intervention or joinder as to all or only certain issues; (3) may order
arbitration among the parties who have agreed to arbitration and stay the pending court
action or special proceeding pending the outcome of the arbitration proceeding; or (4)
may stay arbitration pending the outcome of the court action or special proceeding.”
102) Unlike the dissent, we think the California arbitration rules which the parties have
incorporated into their contract generally foster the federal policy favoring arbitration. As
indicated, the FAA itself contains no provision designed to deal with the special practical
problems that arise in multiparty contractual disputes when some or all of the contracts
at issue include agreements to arbitrate. California has taken the lead in fashioning a
legislative response to this problem by giving courts authority to consolidate or stay
arbitration proceedings in these situations in order to minimize the potential for
contradictory judgments. See Calif. Civ. Proc. Code Ann. §1281.2(c).
103) While we have held that the FAA “substantive” provisions – §§1 and 2 – are applicable in
state as well as federal court, see Southland Corp. v. Keating, 465 U.S. 1, 12 (1984), we have
never held that §§3 and 4, which by their terms appear to apply only to proceedings in
federal court, see 9 U.S.C. §3 (referring to proceedings “brought in any of the courts of the
United States”); §4 (referring to “any United States district court”), are nonetheless
applicable in state court. See Southland Corp. v. Keating, supra, at 16, n.10 (expressly
reserving the question whether “§§3 and 4 of the Arbitration Act apply to proceedings in
state courts”); see also id., at 29 (O'Connor, J., dissenting) (§§3 and 4 of the FAA apply only
in federal court).
104) The California Court of Appeal correctly assumed that the FAA, were it applicable, would
preempt the provisions of Cal. Civ. Proc. Code Ann. §1281.2(c) (West 1982): “it is apparent
that were the federal rules to apply, Volt's petition to compel arbitration would have to
be granted.” 240 Cal. Rptr. 558, 559 (1987).
Stanford nonetheless attempts to cast doubt on this conclusion by arguing that §§3 and 4
of the FAA, which provide for court orders to stay litigation and to compel arbitration, are
not applicable in state court. Brief for Appellee 43-50. While we have stated that “state
courts, as much as federal courts, are obliged to grant stays of litigation under §3 of the
Arbitration Act,”Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1,
26 (1983); see also id., at 26, nn.34-35, it is immaterial to the resolution of this case
whether §§3 and 4 actually “apply.” The parties here not only agreed to arbitrate, but
they also agreed that agreement would be specifically enforceable. See ante, at 1251, n.1.
FAA §2 – which indisputably does apply in state court, Southland Corp. v. Keating, 465 U.S.
1 (1984) – requires the court to enforce the parties' agreement. (Indeed, Southland Corp.
can be read to stand for the proposition that §2 makes all arbitration agreements
specifically enforceable. See id. at 31, and n.20 (O'Connor, J., dissenting).) To stay the
arbitration proceedings pending litigation of the same issues, as §1281.2(C) provides, is
not compatible with specific enforcement of the agreement to arbitrate – which is what
the FAA requires here. Section 1281.2(c) therefore cannot be given effect unless – as the
California Court of Appeal held – the parties somehow agreed that federal law was to play
no role in governing their contract.
105) The court held that “the word ‘place’ was intended to mean the forum state.” 240
Cal.Rptr., at 560. It added: “We do not find reasonable Volt's interpretation that the
‘place’ where the project is located be construed to mean not only the state of California
but also the nation of the United States of America.”
106) I do not disagree with the Court's holding that the FAA does not pre-empt state
arbitration rules, even as applied to contracts involving interstate commerce, when the
parties have agreed to arbitrate by those rules to the exclusion of federal arbitration law.
I would not reach that question, however, because I conclude that the parties have made
no such agreement.
107) Some of the Court's language might be read to suggest that the Moses Cone principle
applies only to construction of the arbitration clause itself (“ambiguities as to the scope
of the arbitration clause itself [must be] resolved in favor of arbitration”). Such a reading
is flatly contradicted by Moses Cone. In language the Court omits from its quotation, we
made clear that the liberal rule of construction in favor of arbitrability applies “whether
the problem at hand is the construction of the contract language itself or an allegation of
waiver, delay, or a like defense to arbitrability.”Moses Cone, 460 U.S., at 25.
108) Whether or not “the California arbitration rules ... generally foster the federal policy
favoring arbitration,” is not the relevant question. Section 2 of the FAA requires courts to
enforce agreements to arbitrate, and in Moses Cone we held that doubts as to whether the
parties had so agreed were to be resolved in favor of arbitration. Whether California's
arbitration rules are more likely than federal law to foster arbitration, i.e., to induce
parties to agree to arbitrate disputes, is another matter entirely. On that question it is up
to Congress, not this Court, to “fashion[] a legislative response,” and in the meantime we
are not free to substitute our notions of good policy for federal law as currently written.
109) In Scherk, the contract contained the following clause: “The laws of the State of Illinois,
U.S.A. shall apply to and govern this agreement, its interpretation and performance.” 417
U.S. at 509, n.1. Despite discussing the effect of that clause in a different context, id. at
519, n.13, we did not consider the possibility that the FAA might not apply because of the
parties' choice of the law of Illinois. Similarly in Bernhardt the contract provided for
arbitration under New York law. While we recognized a choice-of-law problem as to
whether New York or Vermont law was applicable, 350 U.S. at 205, we resolved the
question of arbitrability under the FAA without any reference to the choice-of-law clause.
110) Paragraph 13 of the Client's Agreement provides:
This agreement shall inure to the benefit of your [Shearson's] successors and assigns[,]
shall be binding on the undersigned, my [petitioners'] heirs, executors, administrators
and assigns, and shall be governed by the laws of the State of New York. Unless
unenforceable due to federal or state law, any controversy arising out of or relating to
[my] accounts, to transactions with you, your officers, directors, agents and/or employees
for me or to this agreement or the breach thereof, shall be settled by arbitration in
accordance with the rules then in effect, of the National Association of Securities Dealers,
Inc. or the Boards of Directors of the New York Stock Exchange, Inc. and/or the American
Stock Exchange Inc. as I may elect. If I do not make such election by registered mail
addressed to you at your main office within 5 days after demand by you that I make such
election, then you may make such election. Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. This agreement to
arbitrate does not apply to future disputes arising under certain of the federal securities
laws to the extent it has been determined as a matter of law that I cannot be compelled
to arbitrate such claims.
111) In a related point, respondents argue that there is no meaningful distinction between
“substance” and “remedy,” that is, between an entitlement to prevail in the law and an
entitlement to a specific form of damages. We do not rely on such a distinction here, nor
do we pass upon its persuasiveness.
112) The dissent makes much of the similarity between this choice-of-law clause and the one
in Volt, which we took to incorporate a California statute allowing a court to stay
arbitration pending resolution of related litigation. In Volt, however, we did not interpret
the contract de novo. Instead, we deferred to the California court's construction of its own
state's law. 489 U.S. at 474 (“the interpretation of private contracts is ordinarily a
question of state law, which this Court does not sit to review”). In the present case, by
contrast, we review a federal court's interpretation of this contract, and our
interpretation accords with that of the only decision-maker arguably entitled to
deference – the arbitrator.
113) Were we to confine our analysis to the plain language of the arbitration clause, we would
have little trouble concluding that a contract clause which bound the parties to “settle”
“all disputes” through arbitration conducted according to rules which allow any form of
“just and equitable” “remedy or relief” was sufficiently broad to encompass the award of
punitive damages. Inasmuch as agreements to arbitrate are “generously construed,”
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, it would seem sensible to interpret the
“all disputes” and “any remedy or relief” phrases to indicate, at a minimum, an intention
to resolve through arbitration any dispute that would otherwise be settled in a court, and
to allow the chosen dispute resolvers to award the same varieties and forms of damages
or relief as a court would be empowered to award. Since courts are empowered to award
punitive damages with respect to certain types of claims, the arbitrators would be
equally empowered. Raytheon Co. v. Automated Business Systems, Inc., 882 F.2d 6, 10 (1st
Cir. 1989).
114) We cite precedent from Illinois, the forum State and place where the contract was
executed, and New York, the State designated in the contract's choice-of-law clause. The
parties suggest no other State's law as arguably relevant to this controversy.
115) The drafters of the Second Restatement justified the rule as follows: “Where one party
chooses the terms of a contract, he is likely to provide more carefully for the protection of
his own interests than for those of the other party. He is also more likely than the other
party to have reason to know of uncertainties of meaning. Indeed, he may leave meaning
deliberately obscure, intending to decide at a later date what meaning to assert. In cases
of doubt, therefore, so long as other factors are not decisive, there is substantial reason
for preferring the meaning of the other party.” Restatement (Second) of Contracts §206,
Comment a (1979).
116) See supra pp. 75-76, 85-86; Food Handlers Local 425 etc. v. Pluss Poultry, Inc., 260 F.2d 835
(8th Cir. 1958).
117) See infra pp. 380-407.
118) See supra pp. 157-59.
119) 9 U.S.C. §206. Section 206 provides in full:
A court having jurisdiction under this chapter may direct that arbitration be held in
accordance with the agreement at any place therein provided for, whether that place is
within or without the United States. Such court may also appoint arbitrators in
accordance with the provisions of the agreement.
120) Riley v. Kingsley Underwriting Agencies, Ltd, 969 F.2d 953 (10th Cir. 1992); David L. Threlkeld
& Co. v. Metallgesellschaft Ltd, 923 F.2d 245 (2d Cir. 1991); Borden, Inc. v. Meiji Milk Products
Co., 919 F.2d 822 (2d Cir. 1990); E.A.S.T. Inc. of Stamford, Connecticut v. M/V Alaia, 876 F.2d
1168 (5th Cir. 1989); J.J. Ryan & Sons, Inc. v. Rhone Poulenc Textile SA, 863 F.2d 315 (4th Cir.
1988); Sedco, Inc. v. Petroleos Mexicanos Mexican National Oil Co., 767 F.2d 1140 (5th Cir.
1985); Sauer-Getriebe KG v. White Hydraulics, Inc., 715 F.2d 348 (7th Cir. 1983); Rhone
Mediterranee etc. v. Achille Lauro, 712 F.2d 50 (3d Cir. 1983); Becker Autoradio U.S.A. Inc. v.
Becker Autoradiowerk GmbH, 585 F.2d 39 (3d Cir. 1978); McCreary Tire & Rubber Co. v. CEAT,
SpA, 501 F.2d 1032 (3d Cir. 1974); Black & Veatch Int'l Co. v. Wartsila NSD North America,
Inc., 1998 WL 953966 (D. Kan. 1998); Daye Nonferrous Metals Co. v. Trafigura Beheer B. V.,
1997 WL 375680 (S.D.N.Y. 1997); TWI Lite Int'l, Inc. v. Anam Pacific Corp., 1996 WL 637843 (N.D.
Cal. 1996); Prograph Int'l, Inc. v. Barhydt, 928 F.Supp. 983 (N.D. Cal. 1996); Hart Enter. Int'l,
Inc. v. Anhui Provincial Import & Export Corp., 888 F.Supp. 587 (S.D.N.Y. 1995); HZI Research
Center, Inc. v. Sun Instruments Japan Co., Inc., 1995 WL 562181 (S.D.N.Y. 1995); Filanto, S.p.A.
v. Chilewich Int'l Corp., 789 F.Supp. 1229 (S.D.N.Y. 1992); Tennessee Imports, Inc. v. Filippi, 745
F.Supp. 1314 (M.D. Tenn. 1990); Meadows Indemnity Co. v. Baccala & Shoop Ins. Serv., Inc.,
1991 U.S. Dist. Lexis 4144 (E.D.N.Y. 1991); McCain Foods Ltd v. Puerto Rico Supplies, Inc., 766
F.Supp. 58 (D.P.R. 1991); Marchetto v. DeKalb Genetics Corp., 711 F.Supp. 936 (N.D. Ill. 1989);
Andrew Martin Marine Corp. v. Stork-Werkspoor Diesel BV, 480 F.Supp. 1270 (E.D. La. 1979);
Siderius, Inc. v. Compania de Acero del Pacifics, SA, 453 F.Supp. 22 (S.D.N.Y. 1978); Ferrara
SpA v. United Grain Growers Ltd, 441 F.Supp. 778 (S.D.N.Y. 1977); Star-Kist Foods v. Diakan
Hope, 423 F.Supp. 1220 (C.D. Cal. 1976); Antco Shipping Co. v. Sidermar, SpA, 417 F.Supp. 207
(S.D.N.Y. 1976); Rogers, Burgun, Shahine & Deschler, Inc. v. Dongsan Constr. Co., 598 F.Supp.
754 (S.D.N.Y. 1984); Oriental Commercial and Shipping Co. v. Rosseel NV, 609 F.Supp. 75
(S.D.N.Y. 1985).
121) 9 U.S.C. §§204, 206 (1982). Section 204 provides in full:
An action or proceeding over which the district courts have jurisdiction pursuant to
section 203 of this title may be brought in any such court in which save for the arbitration
agreement an action or proceeding with respect to the controversy between the parties
could be brought, or in such court for the district and division which embraces the place
designated in the agreement as the place of arbitration if such place is within the United
States.
122) Cargill Int'l SA v. M/T Pavel Dybenko, 991 F.2d 1012 (2d Cir. 1993); Seetransport Wiking Trader
etc. v. Navimpex Centrala Navala, 989 F.2d 572 (2d Cir. 1993); Avila Group, Inc. v. Norma J. of
California, 426 F.Supp. 537, 541 & n.13 (S.D.N.Y. 1977); Beromun AG v. Societa Industriale
Agricola “Tresse” etc., 471 F.Supp. 1163 (S.D.N.Y. 1979).
123) G. Born, International Civil Litigation in United States Courts 171-97 (3d ed. 1996).
124) Arguably, the venue provisions of §204 are also grants of personal jurisdiction. See infra p.
384. It appears fairly clear, however, that this is not the case.
125) Federal Rules of Civil Procedure 4, 81.
126) G. Born, International Civil Litigation in United States Courts 171-73 (3d ed. 1996).
127) See infra pp. 392-95.
128) Merrill Lynch, Pierce, Fenner & Smith v. Lecopulos, 553 F.2d 842 (2d Cir. 1977); Island
Territory of Curacao v. Solitron Devices, 489 F.2d 1313 (2d Cir. 1973), cert. denied, 416 U.S.
986 (1974); In re Reed & Martin Inc. v. Westinghouse Elec. Corp., 439 F.2d 1268 (2d Cir. 1971);
Victory Transport Inc. v. Comisaria General, 336 F.2d 354, 363 (2d Cir. 1964), cert. denied,
381 U.S. 934 (1964) (“By agreeing to arbitrate in New York, where the [FAA] makes such
agreements specifically enforceable, the Comisaria General must be deemed to have
consented to the jurisdiction of the court that could compel the arbitration proceeding in
New York. To hold otherwise would be to render the arbitration clause a nullity.”);
Beromun AG v. Societe Industriale Agricola “Tresse” etc., 471 F.Supp. 1163 (S.D.N.Y. 1979);
Avila Group, Inc. v. Norma J. of California, 426 F.Supp. 537, 541 & n.13 (S.D.N.Y. 1977).
129) E.g., Lect v. Smith, 736 F.2d 409 (7th Cir.), cert. denied, 469 U.S. 1037 (1984). See also infra p.
389-90.
130) See infra p. 387.
131) 9 U.S.C. §203.
132) See Ferrara SpA v. United Grain Growers, Ltd, 441 F.Supp. 778, 781 n.2 (S.D.N.Y. 1977).
133) International Shipping Co. v. Hydra Offshore, Inc., 675 F.Supp. 146, 153 (S.D.N.Y. 1987)(§203
only applies to actions “in which the party invoking the Convention seeks either the
recognition of an agreement in an action to compel arbitration or the enforcement of an
arbitral award”; §203 does not apply to action for preliminary injunction in aid of
arbitration).
134) Tesoro Petroleum Corp. v. Asamera (South Sumatra) Ltd, 798 F.Supp. 400 (W.D. Tex. 1992).
135) Cargill Int'l SA v. M/T Pavel Dybenko, 991 F.2d 1012 (2d Cir. 1993) (considering existence of
subject matter jurisdiction under §1330(a) in action to compel arbitration pursuant to
agreement subject to Convention); Filantro SpA v. Chilewich Int'l Corp., 789 F.Supp. 1229,
1234 (S.D.N.Y. 1992); Oil Basins Ltd v. Broken Hill Proprietary Co., 613 F.Supp. 483 (S.D.N.Y.
1985).
136) 9 U.S.C. §205. Removal may be made “at any time before the trial thereof” and is made to
the “district court of the United States for the district and division embracing the place
where the action or proceeding is pending.”
137) McDermott Int'l, Inc. v. Lloyds Underwriters of London, 944 F.2d 1199 (5th Cir. 1991); H. Rep.
No. 1181, 91st Cong., 2d Sess. (1970), reprinted, 1970 U.S. Code, Cong. & Admin. News 3601.
138) See York Hannover Holding AG v. McDermott Int'l, Inc., 794 F.Supp. 118 (S.D.N.Y. 1992)
(petition to remove arbitrator); Cam SA v. ICC Tankers, Inc., 1989 U.S. Dist. Lexis 5066
(S.D.N.Y. 1989) (removal of state court actions involving entities not formally party to
arbitration agreement); Dale Metals Corp. v. Kiwa Chem. Indus. Co., 442 F.Supp. 78 (S.D.N.Y.
1977).
For a more limited interpretation of §205, compare Tesoro Petroleum Corp. v. Asamera
(South Sumatra) Ltd, 798 F.Supp. 400 (W.D. Tex. 1992), discussed infra pp. 767-68, where an
action to vacate an award was held not subject to §205.
139) McDermott International, Inc. v. Lloyds Underwriters of London, 944 F.2d 1199 (5th Cir. 1991)
(permitting waiver of right to remove under §205, upon showing of “express” waiver).
Under §205, all defendants are ordinarily required to join in a notice of removal. 9 U.S.C.
§205; 28 U.S.C. §1446; In re Amoco Petroleum Additives Co., 964 F.2d 706, 712 (7th Cir. 1992).
Where one defendant seeks to remove separate and independent claims against one or
more other defendants, which are subject to an arbitration provision, consent of all
defendants is not required. Acme Brick Co. v. Agrupacion Exportadora de Maquinaria
Ceramica, 855 F.Supp. 163 (N.D. Tex. 1994).
140) 9 U.S.C. §204.
141) 28 U.S.C. §1391(a); 28 U.S.C. §1391(f).
142) Brunette Machine Works, Ltd v. Kockum Indus. Inc., 406 U.S. 706 (1972).
143) See American Constr. Machinery & Equip. Corp. v. Mechanised Corp. of Pakistan Ltd, No. 85
Civ. 3765 (JFK) (S.D.N.Y. March 5, 1986) (venue proper under both §204 and 28 U.S.C. §1391(f)
(1)).
144) See infra p. 405; Maria Victoria Naviera, SA v. Cementos del Valle, 759 F.2d 1027, 1031 (2d Cir.
1985); Oil Basins Ltd v. Broken Hill Proprietary Co., 613 F.Supp. 483 (S.D.N.Y. 1985).
145) See infra p. 405; E.C. Ernst, Inc. v. Potlatch Corp., 462 F.Supp. 694, 697-99 (S.D.N.Y. 1978);
Aaacon Auto Transport, Inc. v. Ninfo, 490 F.2d 83 (2d Cir. 1974).
146) See infra pp. 405-06.
147) See infra pp. 580-609.
148) See infra pp. 586-87.
149) See infra pp. 592-96.
150) See infra pp. 592-96; National Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326 (5th Cir.), cert.
denied, 108 S.Ct. 329 (1987).
151) Filantro SpA v. Chilewich Int'l Corp., 789 F.Supp. 1229, 1234 (S.D.N.Y. 1992); Tennessee
Imports, Inc. v. Filippi, 745 F.Supp. 1314, 1322 n.4 (M.D. Tenn. 1990).
152) Lower courts have generally concluded that §3 stays may be issued under the Convention,
notwithstanding the absence of any independent stay provision under the FAA's second
chapter. See Rhone Mediterranee etc. v. Achille Lauro, 712 F.2d 50, 54 (3d Cir. 1983); Filantro
SpA v. Chilewich Int'l Corp., 789 F.Supp. 1229, 1234 (S.D.N.Y. 1992); Tennessee Imports Inc. v.
Filippi, 745 F.Supp. 1314 (M.D. Tenn. 1990); Restatement (Third) Foreign Relations Law of the
United States §487(2) (1985).
153) In order for the FAA to apply, an “agreement to arbitrate” must be involved; there is
relatively little U.S. precedent considering whether alternative dispute resolution
provisions constitute such an agreement. See supra pp. 327-28.
154) 9 U.S.C. §2. For detailed discussions of §2 and its “savings clause,” see supra pp. 331-58.
155) See infra pp. 386-91.
156) Section 3 is discussed below, see infra pp. 396-97.
157) Provisions such as §4 are relatively unusual in international practice. Most nations only
provide for enforcement of arbitration agreements through stays of litigation. See supra
pp. 75-76.
158) Joseph Muller Corp. v. Commonwealth Petrochemicals, Inc., 334 F.Supp. 1013 (S.D.N.Y. 1971).
159) See infra pp. 388-89; Roger, Burgun, Shahine & Deschler, Inc. v. Dongsan Construction Co.,
598 F.Supp. 754, 757 n.6 (S.D.N.Y. 1984) (“Although this action involves international
commerce under the Convention, the provisions of section 3 regarding a stay or
proceedings are still applicable because the subcontract is one of the kinds specified in
section 1”).
160) 9 U.S.C. §208 and §307.
161) 9 U.S.C. §4.
162) E.g., David L. Threlkeld & Co. v. Metallgesellschaft Ltd, 923 F.2d 245 (2d Cir. 1991); Bauhinia
Corp. v. China Nat'l Machinery & Equip. Import & Export Corp., 819 F.2d 247 (9th Cir. 1987)
(excerpted below); Commonwealth Edison Co. v. Gulf Oil Corp., 541 F.2d 1263 (7th Cir. 1976);
McCain Foods Ltd v. Puerto Rico Supplies, Inc., 766 F.Supp. 58 (D.P.R. 1991); In re
Management Recruiters Int'l Inc., 765 F.Supp. 419 (N.D. Ohio 1991).
163) In re Pahlberg Petition, 131 F.2d 968 (2d Cir. 1942); Sewer v. Paragon Homes, Inc., 351 F.Supp.
596, 599-600 (D.V.I. 1972); Bartell Media Corp. v. Fawcett Printing Corp., 342 F.Supp. 196
(S.D.N.Y. 1972) (granting §4 order while denying §3 order because action was filed in a
different court); Petition of American Locomotive Co., 87 F.Supp. 754 (D. Mich.), aff'd, 185
F.2d 316 (6th Cir. 1949).
164) 9 U.S.C. §4.
165) See Moses H. Cone Memorial Hospital v. Mercury Construction, 460 U.S. 1, 25 n.32 (1983);
Southland Corp. v. Keating, 465 U.S. 1, 15-16 (1984).
166) See supra pp. 382-83.
167) Southland Corp. v. Keating, 465 U.S. 1, 15-16 n.9 (1984). See Robert Lawrence Co. v.
Devonshire Fabrics, 271 F.2d 402, 408 (2d Cir. 1959); JDC (America) Corp. v. Amerifirst Florida
Trust Co., 736 F.Supp. 1121 (S.D. Fla. 1990).
168) See Prudential-Bache Securities, Inc. v. Fitch, 966 F.2d 981 (5th Cir. 1992) (no federal subject
matter jurisdiction in action to compel arbitration under §4, where only asserted
jurisdictional base was fact that underlying claims were federal securities claims); Klein v.
Drexel Burnham Lambert, Inc., 737 F.Supp. 319 (E.D. Pa. 1990); Drexel Burnham Lambert, Inc.
v. Bock, 696 F.Supp. 957, 963 (S.D.N.Y. 1988).
169) See supra pp. 64-65.
170) 9 U.S.C. §1.
171) Metro Industrial Painting Corp. v. Terminal Constr. Co., 287 F.2d 382, 387 (2d Cir. 1961), cert.
denied, 368 U.S. 817 (1961); Litton RCS, Inc. v. Pennsylvania Turnpike Comm'n, 376 F.Supp.
579 (E.D. Pa. 1974).
172) Securities Indus. Ass'n v. Connolly, 883 F.2d 1114 (1st Cir. 1989); Mayaja, Inc. v. Bodkin, 803
F.2d 157 (5th Cir. 1986); Mesa Operating Ltd v. Louisiana Intrastate Gas Corp., 797 F.2d 238
(5th Cir. 1986); Snyder v. Smith, 736 F.2d 409, 417 (7th Cir. 1984), cert. denied, 469 U.S. 1037
(1984); Varley v. Tarrytown Associates, 477 F.2d 208 (2d Cir. 1973); Masthead Mac Drilling
Corp. v. Fleck, 549 F.Supp. 854 (S.D.N.Y. 1982); Fairchild & Co. v. Richmond, Fredericksburg &
Potomac RR Co., 516 F.Supp. 1305 (D.D.C. 1981); In re Costa and Head (Atrium) Ltd, 486 So.2d
1272 (Ala. 1986) (“slightest nexus of the agreement with interstate commerce”); William
Gibson, Jr., Inc. v. James Graff Communications Inc., 780 P.2d 1131 (Mont. 1989). Some courts,
especially state courts, have taken less expansive approaches. Compare Goodwin v. Elkins
& Co., 730 F.2d 99 (3d Cir. 1984) (refusing to find interstate commerce requirement
satisfied without factual predicate); Bryant-Durham Elec. Co. v. Durham County Hosp.
Corp., 256 S.E.2d 529 (N.C. 1979); Ex parte Williams, 555 So.2d 146 (Ala. 1989); Ex parte
Warren, 548 So.2d 157 (Ala. 1989); Withers-Busby Group v. Surety Industries, Inc., 538 S.W.2d
198 (Tex. Ct. App. 1976).
173) See Reynolds Jamaica Mines v. La Societe Navale Caennaise, 239 F.2d 689, 693 (4th Cir.
1956); Al-Salamah Arabian Agencies Co. v. Reese, 673 F.Supp. 748 (M.D.N.C. 1987); Pioneer
Properties, Inc. v. Martin, 557 F.Supp. 1354 (D. Kan. 1983); El Hoss Engineering and Transp. Co.
v. American Independent Oil Co., 183 F.Supp. 394 (S.D.N.Y. 1960), rev'd on other grounds, 289
F.2d 346 (2d Cir. 1961).
174) Sinva, Inc. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 253 F.Supp. 359 (S.D.N.Y. 1966) (“if
an American citizen, acting as an agent for an Italian national, entered into an agreement
with an Englishman to construct a house in London, an arbitration clause in that
agreement would not sweep the contract within the ambit of the [FAA]”).
175) Merrill Lynch, Pierce, Fenner & Smith Inc. v. Lecopulos, 553 F.2d 842 (2d Cir. 1977); Atlanta
Shipping Corp. v. Cheswick-Flanders & Co., 463 F.Supp. 614 (S.D.N.Y. 1978).
176) See supra pp. 381-82.
177) See supra pp. 381-82.
178) Unionmutual Stock Life Ins. Co. of America v. Beneficial Life Ins. Co., 774 F.2d 524 (1st Cir.
1985); Merrill Lynch, Pierce, Fenner & Smith Inc. v. Lecopulos, 553 F.2d 842 (2d Cir. 1977);
Victory Transport Inc. v. Comisaria General, 336 F.2d 354 (2d Cir. 1964); Merrill Lynch, Pierce,
Fenner & Smith, Inc. v. Shaddock, 822 F.Supp. 125 (S.D.N.Y. 1993) (agreement to arbitrate in
New York is consent to personal jurisdiction in New York); Mangagement Recruiters Int'l,
Inc. v. Nebel, 765 F.Supp. 419 (N.D. Ohio 1991); Atlanta Shipping Corp. v. Cheswick-Flanders &
Co., 463 F.Supp. 614 (S.D.N.Y. 1978); Burger Chef Systems, Inc. v. Baldwin Inc., 365 F.Supp.
1229 (D.N.J. 1973).
179) See infra p. 405-06. Compare E.A.S.T., Inc. of Stamford, Connecticut v. M/V Alaia, 876 F.2d
1168 (5th Cir. 1989) (leaving open whether in rem jurisdiction is sufficient to permit order
compelling arbitration under §§4 and 206).
180) See infra pp. 586-87.
181) Farr & Co. v. Cia Intercontinental de Navigacion de Cuba, 243 F.2d 342, 346 (2d Cir. 1957);
Joseph Muller Corp. v. Commonwealth Petrochemicals, Inc., 334 F.Supp. 1013 (S.D.N.Y. 1971);
Lawn v. Franklin, 328 F.Supp. 791, 793-94 (S.D.N.Y. 1971).
182) See infra p. 586.
183) Lower court interpretations of §4 are confused. Some courts have ordered arbitration
outside the judicial district, but only when that is what the parties' agreement provides.
When the parties have not agreed upon an arbitral forum, courts are divided as to their
authority to select one for the parties. See infra pp. 580-609.
184) Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985). See Nicaragua v. Standard Fruit
Co., 937 F.2d 469 (9th Cir. 1991). See infra pp. 405-06.
185) Maria Victoria Naviera, SA v. Cementos del Valle, 759 F.2d 1027, 1031 (2d Cir. 1985); Oil Basins
Ltd v. Broken Hill Proprietary Co., 613 F.Supp. 483 (S.D.N.Y. 1985). See infra pp. 405-06.
186) E.C. Ernst, Inc. v. Potlatch Corp., 462 F.Supp. 694 (S.D.N.Y. 1978) (where contract did not
select arbitral forum, but there was a substantial likelihood that AAA would select
Arkansas as arbitral forum, district court in New York lacked power to transfer action to
compel arbitration under §4 of FAA to Arkansas under 28 U.S.C. §1404); Aaacon Auto
Transport, Inc. v. Ninfo, 490 F.2d 83 (2d Cir. 1974) (district court in New York lacks power to
transfer action to compel arbitration to Wisconsin where parties' agreement provided for
arbitration in New York). See infra pp. 405-06.
187) See Harbuck v. Marsh Block & Co., 896 F.2d 1327 (11th Cir. 1990); ARW Exploration Co. v.
Aguirre, 947 F.2d 450 (10th Cir. 1991).
188) The American Ins. Co. v. Cazort, 871 S.W.2d 575 (Ark. 1994) (compelling arbitration under
FAA); Downey v. Christensen, 825 P.2d 557 (Mont. 1992); James Stewart Polshek and Assoc. v.
Bergen County Iron Works, 362 A.2d 63 (N.J. Super. 1976).
189) Regina Constr. Corp. v. Envirmech Constr. Corp., 565 A.2d 693 (Md. App. 1989).
190) 9 U.S.C. §303(a).
191) 9 U.S.C. §302.
192) See supra pp. 23-24. The IACAC Rules are reproduced in Appendix M. The U.S. ratification
of the Convention provides:
The United States of America will apply the rules of procedure of the Inter-American
Commercial Arbitration Commission which are in effect on the date that the United States
of America deposits its instrument of ratification, unless the United States of America
makes a later official determination to adopt and apply subsequent amendments to such
rules.
193) 9 U.S.C. §303(b).
194) IACAC Rules Articles 6-8.
195) IACAC Rules Article 16.
196) See J. Dellapenna, Suing Foreign States and Their Corporations (1988); PLI, International
Arbitration Between Private Parties and Governments (G. Aksen & R. von Mehren eds. 1982);
Oparil, Waiver of Sovereign Immunity in the United States and Great Britain by an
Arbitration Agreement, 3 J. Int'l Arb. 61 (1986); Note, Arbitration Clauses as Waivers of
Immunity from Jurisdiction and Execution Under the Foreign Sovereign Immunities Act of
1976, 5 N.Y.L. Sch. J. Int'l & Comp. L. 409 (1984).
197) 28 U.S.C. §1604
198) 28 U.S.C. §§1605 & 1607. For a discussion of the enforcement of arbitral awards under the
FSIA, see infra pp. 895-96.
199) G. Born, International Civil Litigation in United States Courts 211, 226-27 (3d ed. 1996). Also
available for actions to enforce arbitration agreements may be §1605(a)(2) – the FSIA's
“commercial activity” exception. See Id. at 235-67.
200) Several decisions have declined to decide whether the section applies retroactively to
agreements or awards pre-dating the section's enactment. Seetransport Wiking Trader etc.
v. Navimpex Centrala Navala, 989 F.2d 572 (2d Cir. 1993); M.B.L. Int'l Contractors, Inc. v.
Republic of Trinidad & Tobago, 725 F.Supp. 52 (D.D.C. 1989).
201) Subsection 1605(6)(B) refers expressly only to conventions dealing with arbitral awards;
arguably, the subsection grants jurisdiction only where enforcement of an award is sought.
There is, however, no limitation in 1605(a)(6)(B)'s language to this effect. Note that, if
§1605(a)(6) does grant jurisdiction to enforce any agreement subject to the Convention, it
would extend to a vast category of agreements having no connection to the United States.
Assuming such a reading is intended, it raises significant Due Process issues.
202) Cargill Int'l SA v. M/T Pavel Dybenko, 991 F.2d 1012, 1018 (2d Cir. 1993). See also 131 Cong.
Rec. S 5369 (daily ed. May 3, 1985) (“This amendment will reassure businesses that the
international arbitration process will work. It does so by amending the FSIA to say that an
agreement to arbitrate constitutes a waiver of immunity in an action to enforce that
agreement....”). See also Practical Concepts, Inc. v. Republic of Bolivia, 615 F.Supp. 92, 95
(D.D.C. 1985) (federal policy favoring arbitration particularly strong where foreign state
entity is involved).
203) Cargill Int'l SA v. M/T Pavel Dybenko, 991 F.2d 1012 (2d Cir. 1993). The non-signatory was
argued to be subject to the arbitration agreement on a third party beneficiary theory.
204) Caribbean Trading and Fidelity Corp. v. Nigerian Nat'l Petroleum Corp., 1990 U.S. Dist. Lexis
17198 (S.D.N.Y. 1990).
205) E.g., American Constr. Machinery & Equip. Corp. v. Mechanised Corp. of Pakistan Ltd, No. 85
Civ. 3765 (JFK) (S.D.N.Y. March 5, 1986) (holding FSIA is a basis for personal jurisdiction in
action to confirm award); J.J. Ryan & Sons v. Rhone Poulenc Textile SA, 863 F.2d 315 (4th Cir.
1988); Maritime Int'l Nominees Establishment v. Republic of Guinea, 693 F.2d 1094 (D.C. Cir.
1982), cert. denied, 464 U.S. 815 (1983) (dicta); Birch Shipping Corp. v. United Republic of
Tanzania, 507 F.Supp. 311 (D.D.C. 1980); Restatement (Third) Foreign Relations Law of the
United States §456(2)(b) & comment d (1987).
206) Birch Shipping Corp. v. United Republic of Tanzania, 507 F.Supp. 311 (D.D.C. 1980); Libyan
American Oil Co. v. Socialist People's Libyan Arab Jamahirya, 482 F.Supp. 1175 (D.D.C. 1980),
vacated, 684 F.2d 1032 (D.C. Cir. 1981).
207) Cf. Transamerican SS v. Somali Democratic Republic, 767 F.2d 998, 1005 (D.C. Cir. 1985);
Marlowe v. Argentine Naval Comm'n, 604 F.Supp. 703 (D.D.C. 1985).
208) See Cargill Int'l SA v. M/T Pavel Dybenko, 991 F.2d 1012 (2d Cir. 1993); Zernicek v. Petroleos
Mexicanos, 614 F.Supp. 407 (S.D. Tex. 1985), aff'd, 826 F.2d 415 (5th Cir. 1987), cert. denied,
484 U.S. 1043 (1988); Maritime Ventures Int'l Inc. v. Caribbean Trading & Fidelity, Ltd, 689
F.Supp. 1340, 1351 (S.D.N.Y. 1988); Marathon Int'l Petroleum Supply Co. v. I.T.I. Shipping, SA,
728 F.Supp. 1027 (S.D.N.Y. 1990) (no FSIA waiver in action on merits by agreement to
arbitrate in Paris).
209) Verlinden BV v. Central Bank of Nigeria, 488 F.Supp. 1284 (S.D.N.Y. 1980).
210) As noted above, see supra pp. 390-91, some state courts have concluded that they are
obliged to apply §4.
211) See Appendix E.
212) See Appendix F.
213) In practice, however, New York courts have been reluctant to issue orders compelling
arbitration abroad. Hamilton & Co. Inc. v. American Home Assurance Co., 251 N.Y.S.2d 215,
aff'd, 255 N.Y.S.2d 262 (N.Y. 1964) (domestic).
214) E.g., Coleman v. National Movie-Dine, Inc., 449 F.Supp. 945, 949 n.7 (E.D. Pa. 1975) (raising
but not resolving court's “inherent power to compel arbitration”); Textile Workers Union
etc. v. American Thread Co., 113 F.Supp. 137 (D. Mass. 1953).
215) Red Cross Line v. Atlantic Fruit Co., 264 U.S. 109 (1924); supra pp. 35-36, 156-57.
216) See supra pp. 75-76; A. van den Berg, The New York Convention of 1958 129 (1981); A. Redfern
& M. Hunter, International Commercial Arbitration 5 (2d ed. 1991).
217) Barge “Ananconda” v. American Sugar Refining Co., 322 U.S. 42 (1943); Standard Magnesium
Corp. v. Fuchs, 251 F.2d 455, 458 (10th Cir. 1957) (“If the agreement provides that where one
party refuses or fails to submit to arbitration, that an arbitrator may be appointed and
that the arbitration may proceed ex parte, and further provides for the procedure to be
followed in such an ex parte proceeding, there is no occasion to invoke the remedy of §4.
Such a remedy is necessary only in those cases where one party refuses to participate in
the arbitration and a court order is necessary in order for the arbitration to proceed ex
parte.”).
218) 9 U.S.C. §3.
219) Shanferoke Coal & Supply Co. v. Westchester Service Corp., 293 U.S. 449, 453 (1935) (court
may properly “order a stay even when it cannot compel the arbitration”); Kulukundis
Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978, 987-88 (2d Cir. 1942); Andros Compania
Maritima v. Andre & Cie, 430 F.Supp. 88 (S.D.N.Y. 1977); Netherlands Curacao Co. v. Kenton
Corp., 366 F.Supp. 744 (S.D.N.Y. 1973); Zenol, Inc. v. Carblox, Ltd, 334 F.Supp. 866 (W.D. Pa.
1971).
220) Dickstein v. DuPont, 320 F.Supp. 150 (D. Mass. 1970).
221) Coastal (Bermuda) Ltd v. E. W. Saybolt & Co., 761 F.2d 198, 203 (5th Cir. 1985) (§3 “cannot be
the source of the district court's authority to stay a claim between” non-parties); Merritt-
Chapman & Scott Corp. v. Pennsylvania Turnpike Commission, 387 F.2d 768 (3d Cir. 1967);
Nederlands Erts-Tankersmaatschappij NV v. Isbrandtsen Co., 339 F.2d 440 (2d Cir. 1964);
Armco Steel Co. v. CSX Corp., 790 F.Supp. 311 (D.D.C. 1991) (§3 does not permit stay of claims
against non-party, but judicial economy allows stay at request of non-party); Hikers Indus.
v. William Stuart Indus. (Far East), Ltd, 640 F.Supp. 175, 177 (S.D.N.Y. 1986) (same); Lawson
Fabrics, Inc. v. Akzona, Inc., 355 F.Supp. 1146 (S.D.N.Y. 1973).
222) See infra p. 398.
223) American Recovery Corp. v. Computerized Thermal Imaging, Inc., 96 F.3d 88 (4th Cir. 1996)
(decision whether to stay non-arbitrable claims is in trial court's discretion); Collins Radio
Co. v. Ex-Cell-O Corp., 467 F.2d 995, 1000 (8th Cir. 1972) (staying litigation of two non-
arbitrable claims pending arbitration of related claim); Home Life Ins. Co. v. Kaufman, 547
F.Supp. 833 (S.D.N.Y. 1982) (permitting stay of non-arbitrable issues where: “the party
seeking the stay can demonstrate that he will not hinder the arbitration; that the
arbitration will be concluded within a reasonable time; and that the delay will not work
an undue hardship on the party opposing the stay”); Janmort Leasing, Inc. v. Econo-Car
Int'l, Inc., 475 F.Supp. 1282 (E.D.N.Y. 1979); Societe Nationale v. General Tire & Rubber Co.,
430 F.Supp. 1332, 1334 (S.D.N.Y. 1977).
224) E.g., American Shipping Line, Inc. v. Massan Shipping Indus., Inc., 885 F.Supp. 499 (S.D.N.Y.
1995) (refusing to stay litigation of non-arbitrable claims, on grounds that, although
common issues were involved, non-party to arbitration would not be bound by arbitral
award); Armco Steel Co. v. CSX Corp., 790 F.Supp. 311 (D.D.C. 1991) (“presumption that ‘the
arbitration and the lawsuit will each proceed in its normal course’”); Pensacola
Construction Co. v. St. Paul Fire & Marine Ins. Co., 705 F.Supp. 306, 308 (W.D. La. 1988).
225) E.g., Danielsen v. Entre Rios Rys. Co., 22 F.2d 326 (D. Md. 1927); Penalver v. Compagnie de
Navigation Frutiere, Matouba, 428 F.Supp. 1070, 1073 (E.D.N.Y. 1977); Midland Tar Distillers,
Inc. v. M/T Lotus, 362 F.Supp. 1311, 1315 (S.D.N.Y. 1973); Zenol, Inc. v. Carblox, Ltd, 334
F.Supp. 866 (W.D. Pa. 1971); G.B. Michael v. S.S. Thanasis, 311 F.Supp. 170, 183 (N.D. Cal.
1970); Mannesmann Rohrleitungsbau v. S.S. Bernhard Howaldt, 254 F.Supp. 278, 279 (S.D.N.Y.
1965); Fox v. The Guiseppe Mazzini, 110 F.Supp. 212, 213 (E.D.N.Y. 1953); International Refugee
Org. v. Republic S.S. Corp., 93 F.Supp. 798 (D. Md. 1950), appeal dismissed, 189 F.2d 858 (4th
Cir.). 555.
226) Southland Corp. v. Keating, 465 U.S. 1, 29 n.18 (1984) (“§3's ‘courts of the United States’ is a
term of art whose meaning is unmistakable. State courts are ‘in’ but not ‘of’ the United
States.”) (O'Connor, J., dissenting).
227) See Southland Corp. v. Keating, 465 U.S. 1 (1984); supra pp. 356-57. Compare McDermott
Int'l, Inc. v. Lloyds Underwriters of London, 944 F.2d 1199 (5th Cir. 1991) (incorrect dicta that
state courts need not grant stays).
228) See supra pp. 356-57; Berger Farms v. First Interstate Bank of Oregon, 939 P.2d 64 (Ore.
1997) (§3 of FAA is applicable in state court proceedings).
229) E.g., Rhone Mediterranee etc. v. Achille Lauro, 712 F.2d 50, 54 (3d Cir. 1983); McCreary Tire &
Rubber Co. v. Ceat SpA, 501 F.2d 1032 (3d Cir. 1974); Filantro, SpA v. Chilewich Int'l Corp., 789
F.Supp. 1229 (S.D.N.Y. 1992); Tennessee Imports, Inc. v. Filippi, 745 F.Supp. 1314, 1323-25 (M.D.
Tenn. 1990); Restatement (Third) Foreign Relations Law §487(2) (1986).
230) Landies v. North American Co., 299 U.S. 248 (1936); Merritt-Chapman & Scott Corp. v.
Pennsylvania Turnpike Commission, 387 F.2d 768, 771 n.5, 773 (3d Cir. 1967).
231) American Home Assurance Co. v. Vecco Concrete Constr. Co., 629 F.2d 961, 964 (4th Cir.
1980); Wick v. Atlantic Marine Inc., 605 F.2d 166 (5th Cir. 1979); Sam Reisfeld & Son Import
Co. v. SA Eteco, 530 F.2d 679 (5th Cir. 1976); C. Itoh & Co. (America) Inc. v. Jordan Int'l Co., 552
F.2d 1228 (7th Cir. 1977); Hilti, Inc. v. Oldach, 392 F.2d 368 (1st Cir. 1968); Nederlandse Erts-
Tankersmaatschappij NV v. Isbrandtsen Co., 339 F.2d 440 (2d Cir. 1960); Andrew Martin
Marine Corp. v. Stork-Werkspoor Diesel BV, 480 F.Supp. 1270 (E.D. La. 1979); Wren
Distributors, Inc. v. Phone-Mate, Inc., 600 F.Supp. 1576 (E.D.N.Y. 1985); Home Life Ins. Co. v.
Kaufman, 547 F.Supp. 833, 835-36 (S.D.N.Y. 1982); Janmort Leasing Co. v. Econo-Car Int'l Inc.,
475 F.Supp. 1282, 1293 (E.D.N.Y. 1979); Dale Metals Corpo. v. Kiwa Chem Indus. Co., 442
F.Supp. 78, 81-2 (S.D.N.Y. 1977) (stay is appropriate “even though it affects parties who are
not bound to arbitrate”); Lawson Fabrics, Inc. v. Akzona, Inc., 355 F.Supp. 1146 (S.D.N.Y.
1973). Compare Montauk Oil Transp. Corp. v. Steamship Mutual Underwriting Ass'n
(Bermuda) Ltd, 859 F.Supp. 669 (S.D.N.Y. 1994) (refusing to stay action-pending arbitration,
where action involved a non-party).
232) Southland Corp. v. Keating, 465 U.S. 1 (1984); supra pp. 356-57.
233) Uniform Arbitration Act Article 2(d), reprinted in Appendix E; Kielvin Eng. Co. v. Blanco, 210
N.Y.S. 10 (N.Y. Sup. Ct. 1925).
234) Hull v. Norcom, Inc., 750 F.2d 1547 (11th Cir. 1985); Societe Generale de Surveillance v.
Raytheon European Mgmt. & Sys. Co., 643 F.2d 863 (1st Cir. 1981); Shinto Shipping Co. v.
Fibrex & Shipping Co., 572 F.2d 1328 (9th Cir. 1978) (concluding injunction against
arbitration not warranted on the facts); Paine Webber, Inc. v. Fowler, 791 F.Supp. 821 (D.
Kan. 1992); A.B.C., Inc. v. American Fed'n of Television & Radio Artists, 412 F.Supp. 1077
(S.D.N.Y. 1976). See also John Hancock Distributors, Inc. v. Saponavo, 901 F.Supp. 194 (E.D.
Pa. 1995) (enjoining arbitration of six time-barred claims, while requiring arbitration of
other claims).
235) Paine Webber, Inc. v. Fowler, 791 F.Supp. 821 (D. Kan. 1992).
236) In re Y & A Group Sec. Lit., 38 F.3d 380 (8th Cir. 1994) (rejecting argument that FAA
precludes injunction against arbitration); Societe Generale de Surveillance, SA v. Raytheon
European Mgt. & Systems Co., 643 F.2d 863, 868 (1st Cir. 1981); A.B.C., Inc. v. American Fed'n
of Television & Radio Artists, 412 F.Supp. 1077 (S.D.N.Y. 1976).
237) United Nuclear Corp. v. General Atomic Co., 597 P.2d 290, 308 (N.M. 1979) (quoting World
Brilliance Corp. v. Bethlehem Steel Co., 342 F.2d 362, 366 (2d Cir. 1965)); Imperial Ethiopian
Gov't v. Baruch-Foster Corp., 535 F.2d 334, 335 (5th Cir. 1976); Parson & Whittemore Overseas
Co. v. Societe Generale de L'Industrie du Papier, 508 F.2d 969 (2d Cir. 1974); Fertilizer Corp. of
India v. IDI Mgmt, 517 F.Supp. 948, 951 (S.D. Ohio 1981).
238) O.R. Securities, Inc. v. Professional Planning Associates, Inc., 857 F.2d 742, 745 (11th Cir.
1988). See World Brilliance Corp. v. Bethlehem Steel Co., 342 F.2d 362, 365-66 (2d Cir. 1965);
Huntsville Golf Dev., Inc. v. Brindley Constr. Co., 847 F.Supp. 1551 (N.D. Ala. 1993) (§6 of FAA
prescribes expedited motions procedure); S. Rep. No. 536, 68th Cong., 1st Sess. (1924); H.R.
Rep. No. 96, 68th Cong., 1st Sess. (1924).
239) Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 191, 1196 (7th Cir. 1987) (jury
trial required under §4 “only if there is a triable issue concerning the existence or scope
of the agreement. If the arbitrability of the parties' dispute involves no questions or only
legal questions, a jury trial would be pointless because its outcome could not affect the
judge's decision on whether to order arbitration”); SMG Swedish Machine Group, Inc. v.
Swedish Machine Group, Inc., 1991 WL 10662 (N.D. Ill. 1991) (holding that §4 trial was
required to decide whether arbitration clause was mandatory); Oriental Commercial and
Shipping Co. v. Rosseel, NV, 609 F.Supp. 75, 79 (S.D.N.Y. 1985); Janmort Leasing, Inc. v. Econo-
Car Int'l Inc., 475 F.Supp. 1282, 1289-90 (E.D.N.Y. 1979); Atlanta Shipping Corp. v. Cheswick-
Flanders & Co., 463 F.Supp. 614, 617 (S.D.N.Y. 1978); PAS-EBS v. Group Health, Inc., 442
F.Supp. 937, 941 (S.D.N.Y. 1977); Astra Footwear Indus. v. Harwyn Int'l, Inc., 442 F.Supp. 907,
909 (S.D.N.Y.), aff'd, 578 F.2d 1366 (2d Cir. 1978).
240) Commerce Park at DFW Freeport v. Mardian Const. Co., 729 F.2d 334, 340 (5th Cir. 1984); CGB
Marine Services Co. v. M/S Stolt Entente, 1990 U.S. Dist. Lexis 12078 (E.D. La. 1990).
241) For a discussion of the forum non conveniens doctrine in U.S. litigation, see G. Born,
International Civil Litigation in United States Courts 289-366 (3d ed. 1996).
242) For a discussion of the availability of antisuit injunctions in U.S. international litigation,
see G. Born, International Civil Litigation in United States Courts 475-90 (3d ed. 1996).
243) Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213, 218 (1985) (where arbitrable and non-
arbitrable claims are “intertwined,” court has no discretion under §4 to withhold order
compelling arbitration).
244) See supra p. 390.
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Kluwer Arbitration is made available for personal use only. All content is protected by copyright and other intellectual property
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part Two - International
Arbitration Proceedings', in
Gary B. Born , International
Commercial Arbitration:
Commentary and Materials
(Second Edition), 2nd edition
(© Kluwer Law International;
Kluwer Law International
2001) pp. 409 - 410
P "409"
KluwerArbitration
Part Two - International Arbitration Proceedings
Part Two: International Arbitration Proceedings
The heart of most international arbitrations are the arbitral proceedings themselves. In
international matters, arbitral proceedings can take a wide variety of forms, depending on a
host of legal, practical, commercial, cultural, and other considerations.
Many parties agree to international arbitration, in substantial part, because of the procedural
flexibility, neutrality, and expertise which it promises. In many cases, this promise is realized,
with the arbitrators adopting efficient, fair, and transparent procedures, without rigidly
adhering to any particular domestic approach to national court litigation. In some cases,
however, a combination of obstructionist parties and inexperienced arbitrators can produce
chaotic, arbitrary, or inappropriately parochial arbitral proceedings.
The following Chapters examine the conduct of international arbitration proceedings. Chapter
6 examines the procedural conduct of international arbitrations. It begins by exploring the
selection of the procedural (or “curial”) law governing the arbitration proceedings. It also
discusses the procedural rules commonly applicable in international arbitral proceedings, the
availability of interlocutory judicial review of procedural rulings by international arbitrators,
and issues relating to legal representation in international arbitral proceedings. Chapter 6 also
addresses evidence-taking and disclosure in international arbitral proceedings.
Chapter 7 considers the choice of the substantive law governing the parties' dispute in
international arbitration. Chapter 8 discusses the selection of the arbitral situs (or “seat”) in
international arbitrations, while in Chapter 9, we consider the selection and replacement of
international arbitrators. Finally, in Chapter 10, we discuss various of the multiparty issues
which arise in international arbitral proceedings.
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.

Kluwer Arbitration is made available for personal use only. All content is protected by copyright and other intellectual property
laws. No part of this service or the information contained herein may be reproduced or transmitted in any form or by any means, or
used for advertising or promotional purposes, general distribution, creating new collective works, or for resale, without prior
written permission of the publisher.

If you would like to know more about this service, visit www.kluwerarbitration.com or contact our Sales staff at
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part Two : Chapter 6.
Procedural Issues in
International Arbitration', in
Gary B. Born , International
Commercial Arbitration:
Commentary and Materials
(Second Edition), 2nd edition
(© Kluwer Law International;
Kluwer Law International
2001) pp. 411 - 522
P "411" The arbitration proceedings themselves, as distinguished from the parties' underlying contract
P "412" or arbitration agreement, are subject to a set (or sets) of legal rules. The law governing the
P "412" Second, the procedural law governing the arbitration also has a decisive effect on the nation in
P "413" which an action to vacate an arbitral award can properly be brought under the New York
KluwerArbitration
Part Two : Chapter 6. Procedural Issues in International
Arbitration
6 Procedural Issues in International Arbitration
At the heart of any international arbitration are the arbitral proceedings. This Chapter explores
the procedural aspects of international arbitral proceedings, focussing on both legal rules and
practical considerations.
First, we examine the procedural law governing the arbitral proceedings (or “curial law”),
including the autonomy of parties to select the procedural law, the issues governed by the
procedural law, and the process of choosing the applicable procedural law. Second, the
Chapter considers the choice of procedures in international arbitration, including the
autonomy of parties to select procedures, the limits on that autonomy, and the general
discretion of arbitral tribunals to establish arbitration procedures. Third, we describe the
procedural frameworks provided by the institutional arbitration rules of the ICC, LCIA, and AAA.
Fourth, the Chapter explores how international arbitral tribunals customarily approach various
significant “procedural” issues, such as the taking and admissibility of evidence, disclosure or
discovery, privileges, and the like. Finally, we consider the subject of legal representation in
international arbitration, including issues of ethical and professional responsibility.
A. Applicable Procedural Law in International Arbitration (1)
arbitration proceedings is variously referred to as the “curial law,” “lex arbitri,” “procedural
law,” or “loi de l'arbitrage.” (2) The concept of the procedural law governing the arbitral
proceedings plays a vital role in international arbitration.
1. Issues Affected By the Procedural Law of the Arbitration
The procedural law that applies to an international arbitration has a potentially significant
impact on the procedures used in the arbitration. In particular, the procedural law may either
require that certain arbitral procedures be adopted or forbid arbitrators from taking other
procedural steps. The procedural law also has important consequences for actions to vacate or
enforce an arbitral award.
First, the procedural law of an arbitration may directly govern various procedural issues that
arise in the arbitral proceedings. The issues that are governed by the procedural law of an
arbitration are defined differently in different states. (3) The issues potentially governed by the
procedural law include matters such as: (a) the parties' autonomy to agree on substantive and
procedural issues in the arbitration; (b) the arbitrators' liability, ethical standards,
appointment, and removal; (c) the extent of judicial supervision of, or interference in, the
arbitration proceedings (such as reviewing the arbitrator's rulings and ordering provisional
relief or discovery in aid of arbitration); (d) the rights of lawyers to appear, and their ethical
obligations, in the arbitration; (e) pleading rules; (f) evidentiary rules; (g) the permissibility and
administration of oaths; (h) the conduct of hearings; (i) disclosure, “discovery,” and related
issues; (j) the arbitrators' remedial powers, including to grant provisional measures; and (k) the
form and making of the award. (4) In addition, and less clearly, the procedural law sometimes
governs; (l) interpretation and enforceability of the parties' arbitration agreement (including
issues of non-arbitrability); (5) (m) conflict of laws rules applicable to the substance of the
dispute; (6) and (n) quasi-substantive issues, such as rules concerning interest (7) and costs of
legal representation. (8)
Convention. (9) Articles V(1)(e) and VI of the Convention permit awards to be vacated by courts
of the nation “under the law of which [the] award was made.” (10) Most commentators and
courts generally agree that this reference is to the procedural law of the arbitration. (11)
Finally, several of the exceptions to enforceability of arbitral awards under Article V of the
Convention require determination and application of the procedural law. (12) That is, the
standards set forth in the nation's law which provides the procedural law of an arbitration must
be ascertained and applied to decide whether an arbitral award can be denied recognition.
2. Choice of Procedural Law of the Arbitration
In most cases, the procedural law governing an international arbitration will be that of the
arbitral seat or situs. That is the place where the arbitration proceedings will usually be
conducted, the place whose law the parties intended to govern their proceedings, and the
place where any arbitral award will be made. In the overwhelming majority of cases, this
intention will prevail (often
Nevertheless, in some cases, choice of law complexities relating to the applicable procedural
law in an arbitration may arise. One party may argue that some law other than that of the
 arbitral situs must be applied as the applicable procedural law. In most such cases, the law
governing the parties' arbitration agreement or underlying contract will be said to provide the
procedural law of the arbitration. (13) Alternatively, the arbitral tribunal may hold hearings in
more than one country, (14) provoking disputes over what the applicable procedural law is.
3. Sources of Authority Relevant to Choice of Procedural Law in International Arbitration
a. Relevance of International Arbitration Conventions to Choice of Procedural Law Governing
International Arbitrations
In general, contemporary international arbitration conventions provide little guidance in
P "413" selecting the applicable procedural law in international arbitrations. Article 2 of the Geneva
P "414" Protocol 1923 provided that:
The arbitral procedure, including the constitution of the arbitral tribunal, shall be governed by
the will of the parties and by the law of the country in whose territory the arbitration takes
place. (15)
This formulation limited the national laws which were potentially applicable as the procedural
law of an international arbitration to the law of the arbitral situs and the law selected by the
parties. Article 2 also reflects the traditional view that the applicable procedural law in
international arbitrations was the law of the arbitral situs. (16) Article 2 did not, however,
provide a basis for choosing, or allocating priority, between the parties' chosen law and the law
of the arbitral situs. Indeed, it arguably was intended to provide for cumulative application of
both the parties' chosen law and, insofar as mandatory requirements existed, the procedural
law of the arbitral situs.
The New York Convention indirectly addresses the choice of procedural law in international
arbitrations. Unlike Article 2 of the Geneva Protocol, the Convention imposes no direct
obligation on national courts or arbitral tribunals to apply a particular procedural law.
Instead, Article V(1)(d) of the New York Convention permits non-recognition of an arbitral award
if “[t]he composition of the arbitral authority or the arbitral procedure was not in accordance
with the agreement of the parties, or, failing such agreement, was not in accordance with the
law of the country where the arbitration took place.” (17) That is, an arbitral award may be
denied recognition if the arbitration proceedings were conducted so as to violate the
procedural law agreed upon by the parties or, absent agreement, the procedural law of the
arbitral situs. (18) Conversely, a national court cannot rely on a choice of procedural law
different from that provided for by Article V(1)(d) as grounds for refusing to enforce an arbitral
award. (19) In effect, therefore, Article V(1)(d) requires application of the parties' chosen
procedural law or, absent such an agreement, the law of the arbitral situs.
Finally, Article IX(1) of the 1961 European Convention also addresses the choice of procedural
P "414" law governing an arbitration. It provides that an arbitral award may be vacated if “the arbitral
P "415" procedure was not in accordance with the agreement of the parties, or failing such
agreement,” the Convention's provisions for arbitral procedures (i.e., those procedures
established by the tribunal). (20)
b. Relevance of National Arbitration Statutes to Choice of Procedural Law Governing
International Arbitrations
Different national arbitration statutes take a variety of approaches to the choice of the
procedural law governing an international arbitration. First, national laws take differing
approaches to party autonomy to select the procedural law governing their arbitration. Many
national laws specifically permit the parties to select the procedural law, including a foreign
procedural law, governing their arbitral proceedings. (21)
In contrast, it is unclear in some countries whether a foreign law may provide the procedural
law for an arbitration conducted within national borders. For example, in some Middle Eastern
and Latin American states, local procedural law and rules are generally mandatory in
arbitrations (including international arbitrations) conducted locally. (22)
Second, even in nations recognizing the parties' freedom to agree on a foreign procedural law
for an international arbitration, the selection of a foreign procedural law will generally not
render the law of the arbitral situs wholly irrelevant. In virtually all countries, local law
contains mandatory public policy or statutory restrictions that apply to any arbitration
conducted within national territory, even if a foreign procedural law applies generally to the
arbitration. (23) For example, some (but not all) nations have mandatory requirements that
arbitrations be conducted by an odd number of arbitrators, that the arbitrators be local
nationals or lawyers, that arbitrators cannot administer oaths, or that foreign counsel cannot
appear in local arbitrations. (24) Other nations may provide judicial assistance to arbitrations
conducted locally, which may not be capable of waiver by the choice of a foreign curial law.
(25) And some states may, for example, require that arbitrators afford the parties an oral
hearing, an opportunity for cross-examination, a reasoned arbitral award, or other non-
waivable procedural safeguards.
Third, uncertainties often arise in determining whether the parties have made an agreement
choosing the procedural law governing their arbitration and, if so, what procedural law they
P "415" have selected. In particular, it is often difficult to determine whether a choice-of-law clause
P "416" (either in the underlying contract or the arbitration agreement) extends to selection of the
procedural law of the arbitration. Moreover, even when the parties have selected an
applicable procedural law of a designated state, doubts often arise as to whether the parties
intended to adopt the domestic rules of civil procedure applied in that state's local court
proceedings or that state's local arbitration statute (which will often provide very different
 procedural approaches).
c. Selected Materials on the Procedural Law Governing International Arbitration Proceedings
The materials excerpted below illustrate the issues that can arise in selecting and applying the
procedural law in an international arbitration. Article 18 of the UNCITRAL Model Law and
Article 182 of the Swiss Law on Private International Law are leading examples of legislation
affirming the parties' general liberty to select the procedural law governing their arbitration. In
contrast, the Guatemalan and Chilean legislation excerpted below significantly constrains the
ability of parties to select a foreign procedural law. Other legislation, like the Belgian Judicial
Code, provides for general party autonomy, subject to a few specified mandatory limits.
Also excerpted below is the arbitral award in Sapphire International Petroleum Limited v.
National Iranian Oil Company (26) and the Interim Award in ICC Case No. 5029. (27) The two
awards illustrate differing approaches by arbitral tribunals to selection of the procedural law
governing an international arbitration. Finally, the Union of India and National Thermal Power
decisions illustrate the importance of the choice of procedural law to judicial review of a
tribunal's awards.
UNCITRAL MODEL LAW
Article 18
[excerpted below at p. 1016]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 182
[excerpted below at p. 1034]
P "416"
P "417"
GUATEMALA CODE OF CIVIL AND COMMERCIAL PROCEDURE
Articles 287 & 288
287. Mandatory Nature of the Proceedings. The arbitral proceedings shall be conducted in
accordance with the provisions of the following articles and may not be modified under any
circumstances by agreement of the parties.
288. De Jure Arbitration. Arbitral proceedings shall be conducted in accordance with the
following rules:
(1) Arbitrators shall grant the parties a period of time, which may not exceed one-fourth of
the period fixed in the deed embodying the submission, in order to state in writing their
claims, submit the documents on which such claims are based, and produce, also in
writing, any other means of evidence, attaching as many copies as there are parties;
(2) Copies of the documents submitted by each party shall be handed over to the other
parties, granting them another period of time, which may not exceed one-fourth of the
period fixed in the deed embodying the submission, in order to file answers, submit the
documents, and produce the evidence necessary to rebut the arguments of the opponent;
(3) Arbitrators shall take the evidence they deem necessary to prove those facts having a
direct and known bearing on settlement of the dispute submitted to arbitration. The time
limit for the taking of evidence may not exceed one-fourth of the total period designated
in the deed embodying the submission;
(4) Any type of evidence may be taken during arbitration even on the initiative of the
arbitrators, in accordance with the general rules of evidence of this Code. For evidence
that may not be taken by the arbitrators themselves, the arbitrators shall request
assistance from the court of first instance of the place of arbitration, which shall take any
measures deemed suitable for the purpose;
(5) Once the evidence has been taken, the arbitrators shall personally hear the parties or the
lawyers representing them; and
(6) Finally, in accordance with the law, the arbitrators shall render the award on each of the
points submitted to their decision within the remaining part of the period of time
designated in the submission.
P "417"
P "418"
ORGANIC LAW OF THE JUDICIARY (CHILE) LAW 7421 OF JUNE 15, 1953
Article 223
223. An arbitrator may be appointed either as a de jure arbitrator (arbitro de derecho) or as an
amiable compositeur (arbitro arbitrador o amigable componedor).
A de jure arbitrator shall decide in accordance with the law and shall follow the rules
established for ordinary judges as to the conduct of the proceedings and the rendering of the
final award, this being done according to the nature of the action filed.
An amiable compositeur shall decide ex aequo et bono (obedeciendo a lo que su prudencia y la
equidad le dictaren), not being bound by any rules regarding the conduct of the proceedings
and the rendering of the award, other than those determined by the parties in their
submission. Failing such determination by the parties, an amiable compositeur shall apply the
 relevant provisions of the Code of Civil Procedure.
However, in those cases where the law permits, a de jure arbitrator may be empowered to
conduct the proceedings as an amiable compositeur, the strict application of the law being
applied only to the rendering of the final award.
BELGIAN JUDICIAL CODE
Articles 1693 & 1694
1693(1). Without prejudice to the provisions of article 1694, the parties may decide on the rules
of the arbitral procedure and on the place of arbitration. If the parties do not indicate their
intention before the first arbitrator has accepted his office, the decision shall be a matter for
the arbitrators.
1693(2). The president of the arbitral tribunal shall regulate the hearings and conduct the
proceedings.
1694(1). The arbitral tribunal shall give each party an opportunity of substantiating his claims
and of presenting his case.
1694(2). The arbitral tribunal shall make an award after oral proceedings. The parties may
validly be summoned by registered letter, unless they have agreed on any other method of
summons. The parties may appear in person.
1694(3). The procedure shall be in writing where the parties have so provided or insofar as they
have waived oral proceedings.
1694(4). Each party shall have the right to be represented by either a lawyer or a
representative appointed by a special power of attorney in writing, approved by the arbitral
tribunal. Each party may be assisted by a lawyer or by any other person of his choice,
approved by the arbitral tribunal. Parties shall not be represented or assisted by an agent
d'affaires.
P "418"
P "419"
SAPPHIRE INTERNATIONAL PETROLEUM LIMITED v. NATIONAL IRANIAN OIL COMPANY
35 Int'l Law Reports 136 (March 15, 1963)
SOLE ARBITRATOR, CAVIN. Article 39 of the [parties'] agreement provides that ... the only way of
settling any difference concerning the interpretation or performance of the agreement is
arbitration of the kind set out in Article 41 of the agreement. The parties have thus
unequivocally shown their mutual desire to use arbitration in order to obtain a decision which
will settle once and for all their possible differences concerning the interpretation and
performance of the agreement, including claims for damages.
[Among other things, the parties' arbitration] clause provides for the determination of a seat
for the arbitration, which is a necessary element in the activity of any judicial authority. The
judicial authority thus conferred upon the arbitrator necessarily implies that the arbitration
should be governed by a law of procedure and that it should be subject to the supervision of a
State authority, such as the judicial sovereignty of a State.
Authority is to be found, in doctrine and case law, which gives the parties the right to make a
free choice of the law of procedure to be applied to the arbitration, as for example, the State
to whose judicial sovereignty the arbitration is submitted, or in other words “the location” of
the arbitration. In the present case the parties agreed to leave the arbitrator free to determine
the seat of the arbitration, if they failed to agree it themselves. Thus by agreeing beforehand to
whatever seat was fixed by the arbitrator, who would make his choice under express
delegation from the parties, they committed themselves to accept the law of procedure which
results from his choice. In this case it is the law of [the Swiss canton of] Vaud, since the seat of
the arbitration has been fixed at Lausanne [located in Vaud].
Even if this interpretation of the parties' intention is wrong, the rule is that, in default of
agreement by the parties, the arbitration is submitted to the judicial sovereignty of the seat of
the arbitration at the place where the case is heard. Resolution of the Institute of International
Law, Articles 8, 9, 10, 12; Geneva Protocol concerning Arbitral Clauses of September 24, 1923,
Article 2. Thus, in the present case, Lausanne is at the same time the headquarters of the
judicial authority which has jurisdiction to appoint the arbitrator, the seat of the arbitration,
the domicile of the sole arbitrator, and the place where all the arbitration procedure up to and
including judgment has taken place.
The present arbitration, then, is governed by the law of procedure of Vaud and is subject to the
judicial sovereignty of Vaud. Therefore, as far as procedure is concerned, it is subject to the
binding rules of the Code of Civil Procedure of Vaud of November 20, 1911, and in particular to
the 8th Title of this Code.
P "419"
P "420" The case has been heard in accordance with the rules prescribed by the Order of June 13,
1961, in which the arbitrator laid down the arbitral procedure, as he was entitled to do under
Article 41, para. 7, of the agreement if the parties failed to agree upon the procedure to follow,
and in accordance with Article 511 of the Code of Civil Procedure of Vaud. Article I of the above
Order laid down that the Federal Law of Civil Procedure of December 4, 1947, was applicable
where there was no contrary provision in the Order.
The defendant NIOC has refused to co-operate in the procedure and has deliberately made
default. Article 41, para. 8, of the agreement lays down that the absence or default of one party
should not be an obstacle to the arbitral proceedings in any of their stages. Accordingly,
 despite the default of the defendant, the arbitrator has proceeded to hear the case and to give
judgment on the merits.
According to Article 15 of the arbitrator's Order, which is in accordance with Article 12 of the
Federal Law of Civil Procedure, the default of one party and the omission of a procedural step
simply means that the case proceeds without the step which had been omitted. By virtue of
Article 3 of the Federal Law of Civil Procedure, the judge cannot base his judgment on facts
other than those which have been alleged during the case. As a result, the present award is
based upon the facts pleaded by the plaintiff, who alone has taken part in the procedure. But
in applying these rules, the arbitrator has accepted only those facts which have been
satisfactorily proved to him during the procedure ...
PRELIMINARY AWARD IN ICC CASE NO. 5505 OF 1987
XIII Y.B. Comm. Arb. 110 (1988)
[excerpted below at pp. 548-51]
INTERIM ICC AWARD OF 16 JULY 1986 IN CASE NO. 5029
XII Y.B. Comm. Arb. 112 (1987) (©)
L. MALMBERG, (CHAIRMAN), FLETCHER-COOKE, ZAAZONE, ARBITRATORS. [Two French companies
entered into a joint venture with two Egyptian companies. The joint venture thereafter entered
into a contract to construct certain civil works in Egypt. Article 5(1)(b) of the Contract provided:
“The Contract shall be deemed to be an Egyptian Contract and shall be governed by and
construed according to the laws in force in Egypt.” Article 67 of the agreement contained an
arbitration clause, providing for arbitration under ICC Rules. The agreement did not specify an
arbitral situs. Disputes arose and the French companies filed a request for arbitration under
the ICC Arbitration Rules against the Egyptian employer. Pursuant to Article 12 of the ICC
Arbitration Rules, the ICC International Court of Arbitration selected the Netherlands as the
arbitral forum.]
P "420"
P "421"
The defendant argued that Egyptian law of civil procedure governed the arbitration
proceedings. It reasoned that the choice-of-law clause in Article 5 covered both substantive
and procedural subjects, including issues relating to the arbitration. According to defendant,
the text of Article 67 of the agreement “clearly expressed the intention of the parties that the
arbitration is a local arbitration and not international” and “that it is internal and not
external.”
The claimant agreed with the defendant that Egyptian law rules of interpretation should be
applied to the parties' contract, but distinguished between substantive and procedural law.
According to the claimant substantive law is governed by the law chosen by the parties (i.e.,
Egyptian law), but procedural law is governed by the mandatory provisions of the place of
arbitration (i.e. Dutch arbitration law).]...
The choice-of-law clause contained in Article 5(1)(b) of the Contract must be interpreted in
accordance with the rules of contract interpretation of Egyptian law, in particular Articles 150
et seq. of the Egyptian Civil Code. (28) The Arbitral Tribunal will follow these rules of
interpretation in respect of all the jurisdictional issues.
The Arbitral Tribunal holds that the law governing the arbitration is the arbitration law of the
Netherlands. The Arbitral Tribunal notes at the outset that the Contract is a truly international
contract involving parties of different nationalities (i.e. French and Egyptian), the movement of
equipment and services across national frontiers, and the payment in different currencies (i.e.,
Egyptian Pounds and U.S. Dollars). The international character of the Contract is inconsistent
with the defendant's allegation that the parties intended to provide for domestic, internal (i.e.
Egyptian) arbitration. Such intent cannot be derived from the choice-of-law clause contained
in Article 5(1)(b) of the Contract, providing for the applicability of Egyptian law, whilst Article
67, providing for arbitration under the Rules of the ICC, clearly expresses the contrary. As it is
recognized in virtually all legal systems around the world, a basic distinction must be made
between the law governing the substance and the law governing the procedure. That
distinction is also recognized in Egyptian conflict of laws; whereas Article 19 of the Egyptian
Civil Code provides for the law governing the substance of the dispute, Article 22 is concerned
with the law governing the procedure. Accordingly, if the parties had wished that the
arbitration be governed by Egyptian procedural law, they should have made a specific
agreement thereon. Article 5(1)(b) of the Contract is not such a provision as it does not mention
specifically that arbitration is governed by Egyptian law. Failing such agreement, the
P "421" arbitration law of the place governs the arbitration. This principle is in accordance with Article
P "422" V(1)(a), (d) and (e) of the New York Convention of 1958 to which Egypt and the Netherlands
have adhered.
The agreement of the parties in arbitration under the Rules of the International Chamber of
Commerce in Clause 67 meant that, failing their agreement on the place of arbitration, they
gave, under Article 12 of the Rules, a mandate to the Court of Arbitration to fix the place of
arbitration on their behalf. It is to be noted that defendant itself proposed in the alternative
The Hague as the place of arbitration. The prevailing interpretation of the Rules of the ICC
nowadays, is also that the mandatory provisions of the arbitration law of the place of
arbitration govern the arbitration, irrespective of the law governing the substance. Whereas
Article 13(3) of the Rules contains the contractual conflict of laws rules for determining the law
governing the substance of the dispute, Article 11 is concerned with the rules governing the
proceedings [and specifically requires observance of the mandatory procedural requirements
 of the situs.]...
The Arbitral Tribunal emphasizes that the applicability of Dutch arbitration law in the present
case by no means implies that the Dutch rules concerning proceeding before Dutch State
Courts are applicable. According to Dutch arbitration law, parties are free to agree on the rules
of procedure and, failing such agreement, the arbitrator determines the conduct of the
proceedings, subject to a few necessary mandatory provisions. See generally P. Sanders,
National Report Netherlands, VI Y.B. Comm. Arb. 60 (1981). By referring to the Rules of the
International Chamber of Commerce, the parties have “internationalized” the arbitration
within this legal framework...
UNION OF INDIA v. MCDONNELL DOUGLAS CORPORATION
[1993] 2 Lloyd's L. Rep. 48
MR. JUSTICE SAVILLE. By a written agreement dated July 30, 1987 the plaintiffs contracted with
the defendants for the latter to undertake services for the former in and about the launch of a
space satellite. Article 11 of the agreement provided that the agreement was to be governed
by, interpreted and construed in accordance with the laws of India. The agreement also
contained an arbitration clause (art. 8) in the following terms:
In the event of a dispute or difference arising out of or in connection with this Agreement,
which cannot be resolved by amicable settlement, the same shall be referred to an Arbitration
Tribunal consisting of three members. Either Party shall give notice to the other regarding its
decision to refer the matter to arbitration. Within 30 days of such notice, one Arbitrator shall
be nominated by each Party and the third Arbitrator shall be nominated by agreement
between the Parties to this Agreement. If no such agreement is reached within 60 days of the
P "422"
P "423"
mentioned notice, the President of the International Chamber of Commerce shall be
requested to nominate the third Arbitrator.
The third Arbitrator shall not be a citizen of the country of either Party to this Agreement. The
arbitration shall be conducted in accordance with the procedure provided in the Indian
Arbitration Act of 1940 or any reenactment or modification thereof. The arbitration shall be
conducted in the English language. The award of the Arbitrators shall be made by majority
decision and shall be final and binding on the Parties hereto. The seat of the arbitration
proceedings shall be London, United Kingdom. Each Party shall bear its own cost of preparing
and presenting cases. The cost of arbitration including the fees payable to Arbitrators, shall be
shared equally by the Parties to this Agreement....
[The parties'] dispute or difference has been referred to arbitration under the provisions of art.
8. The hearing before the arbitrators is presently fixed to begin in London on Jan. 11, 1993. The
question before me is as to the law governing the arbitration proceedings. The parties are, as I
understand it, agreed that this Court should decide this question, and should do so on the
basis that there is no difference on this issue between English and Indian law.
In essence the plaintiffs contend that the words: “The arbitration shall be conducted in
accordance with the procedure provided in the Indian Arbitration Act 1940” make clear that
the parties have chosen Indian law, or at least those parts of Indian law found in the 1940 Act,
to govern any arbitration proceedings arising under art. 8. The defendants, on the other hand,
contend that by stipulating London as the “seat” of any arbitration proceedings under art. 8,
the parties have made clear not merely that any arbitration will take place in London, but that
English law will govern the arbitration proceedings.
An arbitration clause in a commercial contract like the present one is an agreement inside an
agreement. The parties make their commercial bargain, i.e. exchange promises in relation to
the subject matter of the transaction, but in addition agree on a private tribunal to resolve any
issues that may arise between them. The parties may make an express choice of the law to
govern their commercial bargain and that choice may also be made of the law to govern their
agreement to arbitrate. In the present case it is my view that by art. 11 the parties have chosen
the law of India not only to govern the rights and obligations arising out of their agreement to
arbitrate. In legal terms, therefore, the proper law of both the commercial bargain and the
arbitration agreement is the law of India.
The fact that the law of India is the proper law of the arbitration agreement does not, however,
necessarily entail that the law governing the arbitration proceedings themselves is also the law
of India, unless there is in that agreement some effective express or implied term to that
effect. In other words, it is, subject to one proviso, open to the parties to agree that their
P "423" agreement to arbitrate disputes will be governed by one law, but that the procedures to be
P "424" adopted in any arbitration under that agreement will be governed by another law: see James
Miller & Partners v. Whitworth Street Estates (Manchester) Ltd [1970] 1 Lloyd's Rep. 269; [1970]
A.C. 583. Thus, in an international bargain of the present kind, the parties, subject to the
proviso mentioned (to which I shall return below) may make a choice of a law to govern their
commercial bargain, of a law to govern their arbitration agreement, and of a law to govern the
procedures in any arbitration held under that agreement. In theory at least (and subject to the
proviso) the parties could chose a different law for each of these purposes.
If the parties do not make an express choice of procedural law to govern their arbitration, then
the Court will consider whether they have made an implicit choice. In this circumstance the
fact that the parties have agreed to a place for the arbitration is a very strong pointer that
implicitly they must have chosen the law of that place to govern the procedures of the
arbitration. The reason for this is essentially one of common sense. By choosing a country in
which to arbitrate the parties have, ex hypothesi, created a close connection between the
arbitration and that country and it is reasonable to assume from their choice that they
 attached some importance to the relevant laws of that country, i.e. those laws which would be
relevant to an arbitration conducted in that country. Indeed, English law at least has turned its
face against the notion that it is possible to have arbitral procedures that are wholly
unconnected with any national system of law at all: see, for example, Bank Mellat v. Helliniki
Techniki SA [1984] 1 Q.B. 291 at p. 301.
In the present case, Mr. Veeder, Q.C. for the defendants places great stress on the fact that the
parties have expressly selected London as the “seat” and not just the place of the arbitration.
The word “seat”, he suggests, is a legal term of art, meaning the legal place of the arbitration
proceedings. By choosing the legal place of the arbitration proceedings the parties ipso facto
choose the laws of that place to govern their arbitration proceedings. Indeed, although the
choice of a “seat” also indicates the geographical place for the arbitration, this does not mean
that the parties have limited themselves to that place. As is pointed out by Redfern and
Hunter in the Law and Practice of International Commercial Arbitration 2nd ed. at p. 93, in a
passage approved by the Court of Appeal in Naviera Amazonica Peruana v. Cie. Internacional de
Seguros del Peru [1988] 1 Lloyd's Rep. 116 at p. 121, it may often be convenient to hold meetings
or even hearings in other countries. This does not mean that the “seat” of the arbitration
changes with each change of country. The legal place of the arbitration remains the same even
if the physical place changes from time to time, unless of course the parties agree to change it.
In short, Mr. Veeder suggested that the word “seat” carried with it much more clearly the
meaning conveyed by the French word “siege” than the English word “place” though his
submission was that this word too in an arbitration agreement would be primarily concerned
with the legal rather than the physical place of the arbitration.
Mr. Colman, Q.C. (as he then was) accepted that in the absence of agreement to the contrary,
the choice of a “seat” would carry with it the choice of the law of that place as the law
P "424" governing the arbitration proceedings, though he categorized that result as arising from
P "425" implication rather than from the meaning of the word “seat” itself. In the present case,
however, his submission was that the parties, by stipulating that the arbitration should be
conducted in accordance with the procedure provided in the Indian Arbitration Act, had made
an express choice of Indian law to govern the arbitration proceedings and that this choice
must, on ordinary principles, prevail over anything inconsistent that might otherwise be
implied.
These arguments are nicely balanced. It is clear from the authorities cited above that English
law does admit of at least the theoretical possibility that the parties are free to choose to hold
their arbitration in one country but subject to the procedural laws of another, but against this
is the undoubted fact that such an agreement is calculated to give rise to great difficulties and
complexities, as Lord Justice Kerr observed in the Amazonica decision. For example (and this is
the proviso to which I referred earlier in this judgment) it seems to me that the jurisdiction of
the English Court under the Arbitration Acts over an arbitration in this country cannot be
excluded by an agreement between the parties to apply the laws of another country, or indeed
by any other means unless such is sanctioned by those Acts themselves. Thus, to my mind,
there can be no question in this case that the English Courts would be deprived of all
jurisdiction over the arbitration. However, much of that jurisdiction is discretionary in
character so that if the Court were convinced that the parties had chosen the procedural law of
another country, then it might well be slow to interfere with the arbitral process. Again, for the
sake of avoiding parallel Court proceedings, the Court might be minded to regard the choice of
a foreign legal procedure as amounting to an exclusion agreement within the meaning of §3 of
the Arbitration Act, 1979. Be that as it may, the choice of a procedural law different from the
law of the place of the arbitration will, at least where that place is this country, necessarily
mean that the parties have actually chosen to have their arbitral proceedings at least
potentially governed by their express choice and by the laws of this country.
Such a state of affairs is clearly highly unsatisfactory: indeed in Black Clawson International Ltd
v. Papierwerke Waldhof-Aschaffenburg AG [1981] 2 Lloyd's Rep. 446, 453, Mr. Justice Mustill (as he
then was) described the converse situation (i.e. a foreign arbitration suggested to be governed
by English procedural law) as producing an absurd result.
In the end, therefore, the question is whether the parties have agreed to such a potentially
unsatisfactory method of regulating their arbitration procedures. In my judgment, they have
not because, as Mr. Veeder submitted, there is a way of reconciling the phrase relied upon by
Mr. Colman with the choice of London as the seat of the arbitration, namely by reading that
phrase as referring to the internal conduct of the arbitration as opposed to the external
supervision of the arbitration by the Courts. The word used in the phrase relied upon by Mr.
Colman is “conducted” which I agree with Mr. Veeder is more apt to describe the way in which
the parties and the tribunal are to carry on their proceedings than the supervision of those
proceedings by the Indian courts, for example through the Special Case provisions of the
Indian Act. It is true, as Mr. Colman pointed out, that this would mean that only §3 and
P "425" Schedule 1 of the Indian Act would be applicable (though many of the other provisions are still
P "426" to be found in the English statutes and so would be applicable in the English Courts) but the
construction for which he contends would, to my mind, not only have the unsatisfactory and
possibly absurd results to which I have referred, but would also necessarily give the word
“seat” a meaning which excluded any choice of London as the legal place for the arbitration. In
my view, such a change from the ordinary meaning to be given to that word in an international
arbitration agreement (the ordinary meaning being that submitted by Mr. Veeder) cannot be
accepted, unless the other provisions of the agreement show clearly that this is what the
parties intended. I am not persuaded that this is the case here. On the contrary, for the reasons
given, it seems to me that by their agreement the parties have chosen English law as the law to
govern their arbitration proceedings, while contractually importing from the Indian Act those
 provisions of that Act which are concerned with the internal conduct of their arbitration and
which are not inconsistent with the choice of English arbitral procedural law.
The question posed in the amended summons before me is whether upon the proper
construction of art. 8 of the Launch Agreement the pending arbitration between the parties an
any award made by the arbitral tribunal is subject to the supervisory jurisdiction of the Indian
Courts or the English Courts. For the reasons given my answer to this question is that it is the
latter.
NATIONAL THERMAL POWER CORP. v. THE SINGER CO.
[excerpted below at pp. 751-757]
Notes on Choice of Procedural Law Governing International Arbitration Proceedings
1. Effect of Article V(1)(d) of the New York Convention on parties' autonomy to select procedural
law applicable to arbitral proceedings. Consider Article V(1)(d) of the New York Convention,
which provides that an award may be denied recognition if “[t]he composition of the arbitral
authority or the arbitral procedure was not in accordance with the agreement of the parties, or,
failing such agreement, was not in accordance with the law of the country where the arbitration
took place.” What effect does this provision have on an agreement by the parties selecting the
procedural law of an arbitration? Does Article V(1)(d) require Contracting Parties to give effect
to the parties' selection of a foreign procedural law to govern an arbitration? That is, if a
national law forbids or does not enforce the parties' selection of the procedural law governing
an arbitration, does this violate the New York Convention? Or, does Article V(1)(d) merely allow
Contracting Parties to refuse to recognize arbitral awards which disregard the procedural law
chosen by the parties? If Article V(1)(d) of the Convention permits an arbitral award to be
denied enforcement for the arbitrators' failure to apply the parties' chosen procedural law,
does this imply that the arbitrators must apply that law?
Compare Article 2 of the 1923 Geneva Protocol (see supra pp. 413-14) and Article IX(1) of the 1961
European Convention (see supra pp. 414-15). What approach do these authorities take to the
parties' autonomy to select the procedural law governing their arbitration?
Consider Articles 18 and 19 of the UNCITRAL Model Law. Do these provisions permit the parties
to agree on a procedural law other than that of the arbitral situs? Do they expressly address
the issue of procedural law?
2. Authorities recognizing the parties' autonomy to agree on the procedural law in international
P "426" arbitrations. As Article 182 of the Swiss Law on Private International Law and the Union of India
P "427" decision illustrate, many national legal systems permit the parties to agree upon the
procedural law applicable to international arbitral proceedings. What view did the tribunal in
ICC Case No. 5029 take of the parties' freedom to agree upon Egyptian law as the procedural
law for an arbitration in the Hague?
Commentators routinely remark that the parties are free, under most developed arbitral
regimes, to select the procedural law governing an arbitration. Park, The Lex Loci Arbitri and
International Commercial Arbitration, 32 Int'l & Comp. L. Q. 53 (1983); Hirsch, The Place of
Arbitration and the Lex Arbitri, 34 Arb. J. 43, 45-46 (1979) (“In most countries, ... there is greater
freedom on this issue than on the choice of the substantive law.”); Smit, A-National Arbitration,
65 Tulane L. Rev. 629, 634 (1989).
3. Authorities recognizing the parties' autonomy to agree on foreign procedural law in
international arbitrations. As the tribunal suggested in ICC Case No. 5029, the parties' freedom
to designate the applicable procedural law has been held (almost necessarily) to imply the
ability to select a national procedural law to govern the arbitration from a nation other than
the place where the arbitration is conducted. Thus, the court observed in Union of India,
“[t]here is ... no reason in theory which precludes parties to agree that an arbitration shall be
held at a place or in country X but subject to the procedural laws of Y,” quoting Naviera
Amazonica Peruana SA v. Compania Internacional De Seguros del Peru [1988] 1 Lloyd's Rep. 116,
119. See also van den Berg, When Is an Arbitral Award Non-Domestic Under the New York
Convention of 1958?, 6 Pace L. Rev. 25, 44-45 (1985)(“A distinction must be made between the
place of arbitration in its legal sense and the place of arbitration in its physical sense.
Normally, both senses coincide, but in international arbitration this is not necessarily so.”);
Ballal v. Bank Meilat (1986) 1 All E.R. 239 (“it is a fallacy to suppose that arbitral proceedings
must take their authority from the local municipal law of the country within which they take
place.... The curial law is normally, but not necessarily, the law of the place where the
arbitration proceedings are held. Whilst English law, like most foreign legal systems, may seek
to exercise some measures of control over arbitration proceedings taking place in this country,
whatever their curial law, English law does not deny the possibility of a different curial law.”);
Smit, A-National Arbitration, 63 Tulane L. Rev. 629, 641 (1989); Dicey & Morris, The Conflict of
Laws 580 (12th ed. 1993); Monier v. SARL Scali freres, 45 Rev. Crit. Dr. Int. Pr. 79 (1956) (Cour
d'Appel de Paris 5 July 1955).
Why might parties choose a procedural law to govern an arbitration which is different from the
law of the arbitral situs? What benefits might this provide? Suppose that a U.S. and a German
company wish to arbitrate any disputes that arise between them at the location of a
construction project on which they are collaborating in Saudi Arabia, but that they wish to
apply German (or U.S.) procedural rules in such an arbitration. Alternatively, suppose that a
Korean contractor and Japanese subcontractor on a Dutch construction project wish to
arbitrate in the Netherlands, but subject to Korean procedural rules.
Why do states allow parties to select the procedural law governing their international
arbitrations? Suppose that two companies wished to litigate in U.S. federal court in Washington
 D.C., but that the court would apply Mexican rules of civil procedure. Would such an agreement
be enforced? Would it even be seriously proposed? Why is arbitration different? Is it?
4. Authorities rejecting the parties' autonomy to agree on procedural law in international
arbitrations. Notwithstanding Article V(1)(d) of the New York Convention, and the weight of
contemporary authority, some national laws refuse to permit parties to international
arbitrations seated within national borders to select a foreign procedural law to govern their
arbitration. Consider Article 287 of the Guatemalan Code of Civil and Commercial Procedure.
Does it allow parties to agree upon a foreign procedural law (e.g., English or Swiss) to govern an
international arbitration conducted in Guatemala? See also American Diagnostics Inc. v.
Gradipore Ltd (New South Wales Supreme Court March 26, 1997) (parties cannot exclude
arbitration sited in New South Wales from coverage of New South Wales Commercial
Arbitration Act 1984).
Why do countries, such as Guatemala, require application of local procedural law to
arbitrations conducted locally? What values or objectives are served by such an approach?
Suppose two large, highly-so-phisticated international companies (e.g., U.S. and Argentine)
agree to arbitrate in Guatemala, but want U.S. (or English) procedural rules to apply. Why
should Guatemala's legislature refuse to permit this?
Suppose that you are an arbitrator appointed pursuant to an arbitration agreement providing
for arbitral proceeding to be conducted in Guatemala, pursuant to Swiss law as the procedural
law governing the arbitration. Under Swiss law, as discussed below, arbitrators would have
substantial autonomy to select arbitral procedures, and would not be obliged to apply the
provisions of Article 288 of the Guatemala Code of Civil and Commercial Procedure. See infra
pp. 443-44. Would you, as an arbitrator, apply Article 288? If not, would you not be violating
Guatemalan law? If so, would you not be violating the parties' arbitration agreement? What
sorts of creative compromises might you consider?
P "427"
P "428"
In light of Articles 287 and 288, would you advise a party to agree to arbitrate in Guatemala?
Why or why not?
Compare Article 223 of the Chilean Organic Law of the Judiciary. How does it differ from (or
resemble) the Guatemalan legislation?
5. Parties' autonomy under the FAA to agree on procedural law in international arbitrations. In
the United States, the text of the FAA does not expressly address the question whether parties
to an international arbitration may agree to a foreign procedural law. In principle, however,
the parties enjoy broad freedom under the FAA to agree upon arbitral procedures and, under
U.S. law generally, to select the law governing their relations. Thus, U.S. courts will ordinarily
give effect to agreements selecting a foreign procedural law for an international arbitration
sited in the United States. See generally Volt Information Sciences v. Board of Trustees, 489 U.S.
468 (1989).
The few U.S. authorities to consider directly whether the FAA permits parties to agree upon the
procedural law governing their arbitration answer in the affirmative. Remy Amerique, Inc. v.
Touzet Distribution, SARL, 816 F.Supp. 213, 216-17 (S.D.N.Y. 1993) (“the parties are free to include
in their agreement a choice-of-law provision which impacts upon procedural rules”);
Intercarbon Bermuda, Ltd v. Caltex Trading and Transport Corp., 146 F.R.D. 64 (S.D.N.Y. 1993)
(“The agreement between the parties here did not establish any particular arbitral procedure,
so the question is whether the procedure was in accordance with the law of the United States”);
Flight Systems v. Paul A. Laurance Co., 715 F.Supp. 1125, 1127 (D.D.C. 1989); Splosna Plovba of
Piran v. Agrelak S.S. Corp., 381 F.Supp. 1368, 1370 (S.D.N.Y. 1973); Restatement (Second) Conflict of
Laws §220 comment c (1971).
There is no direct precedent on the extent to which agreement on a foreign procedural law
would affect the power of U.S. courts to provide ancillary relief – such as discovery or
provisional measures – in connection with arbitrations conducted in the United States. See
generally infra pp. 511, 595-96, 635, 960-71, describing the willingness of U.S. courts to order
discovery, grant provisional measures, and take other actions in connection with foreign
arbitrations.
6. Infrequency of choice-of-law clauses expressly selecting procedural law governing the
arbitral proceedings. Notwithstanding the freedom to do so, it is unusual for parties to agree
expressly in their underlying contract or arbitration clause on the procedural law in a future
arbitration. Naviera Amazonica Peruana SA v. Compania Internacional De Seguros del Peru [1988]
1 Lloyd's Rep. 116, 119; Preliminary Award in ICC Case No. 5505 of 1987, XIII Y.B. Comm. Arb. 110
(1988) (“It is quite uncommon to find in an arbitration clause an indication of the law which
shall govern the procedure under which the arbitration shall take place”). In most cases,
contracts simply contain a generally-worded choice-of-law clause, applicable to the
underlying contract, that does not expressly address the procedural law applicable to the
arbitral proceedings.
There are instances, however, where the parties do select the procedural law governing the
arbitration. Consider the following examples:
“The arbitration and the arbitral proceedings shall be governed by the law of State A.”
“The procedural law of the arbitration shall be the law of State B.”
As noted above, however, these types of provisions are rare.
7. Issues subject to the procedural law of an arbitration. The statement that the parties are free
 to choose the procedural law in international arbitration has potentially broad implications.
As described above, numerous important issues can be governed by the procedural law.
Depending upon the national law, these can include: (i) the rules of procedure in the
arbitration, infra pp. 443-45; (ii) the applicable conflict of laws rule to be applied by the
arbitral tribunal, infra pp. 534-37; (iii) the rights of lawyers to appear and their ethical
obligations, infra p. 514-21; (iv) the arbitrator's qualifications and obligations respecting
impartiality, infra pp. 615-29; (v) the arbitrators' powers, including to order provisional
measures; and (vi) “quasi-procedural” rules regarding interest, attorneys' fees, and statute of
limitations, infra pp. 904-13. In addition, the procedural law of the arbitration can affect: (vii)
the availability of provisional relief or court-ordered discovery in aid of arbitration from local
courts, infra pp. 932-33; (viii) the availability and scope of judicial review of an award, infra pp.
706-08, 757-58, 792-93; and (ix) the judicial forum which may consider actions to vacate an
award, infra pp. 757-58.
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Stating that the parties may – and have – subjected all of these various issues to a particular
legal regime through agreement on the “procedural law” is a significant conclusion. We explore
below whether and when the conclusion can be justified.
8. Mandatory procedural requirements of the arbitral situs. Regardless of the parties'
agreement to “foreign” procedural law, arbitral proceedings will almost always remain subject
to at least some mandatorily-applicable rules of the nation in which the arbitration
proceedings are physically conducted. Thus, an egregious violation of U.S. due process
principles in an arbitration conducted in the United States might well not be cured by the
parties' prior agreement that foreign law provided the applicable procedural law.
Note that the tribunal in ICC Case No. 5029 goes out of its way to make it clear that the
mandatory provisions of the law of the arbitral situs apply even where the parties agree on a
foreign procedural law. This is also made explicit in Article 182(3) of the Swiss Law on Private
International Law, excerpted above. Commentators uniformly recognize the overriding
character of the arbitral situs's mandatory rules. See Mann, Lex Facit Arbitrum, reprinted in, 2
Arb. Int'l 241 (1986); Kahn-Freund, Commercial Arbitration and the Conflict of Laws: Recent
Developments in England, 7 U. Br. Col. L. Rev. 155, 169-70 (1972).
9. Issues dealt with by mandatory rules of national arbitration law. The issues that are governed
by the mandatory law of the arbitral situs are defined by that nation's law. Different nations
prescribe different mandatory procedural rules for arbitrations. For example, requirements
regarding legal representation, the language of proceedings, the equality of treatment of the
parties, the “adversial” character of proceedings, the need for and means of administering
oaths, and the discovery powers of arbitrators may be dictated in various countries by
mandatory local law. That may be true regardless whether local law is deemed the procedural
law applicable to the arbitral proceedings. Consider the excerpts above from Swiss,
Guatemalan, Chilean, Belgian, and UNCITRAL arbitration legislation for examples of different
mandatory procedural requirements. Compare the Guatemalan and the Swiss arbitration
statutes. Which is preferable?
Other common topics of mandatory local legislation are the number, identity, and attributes of
arbitrators. Consider the excerpts from the Belgian legislation.
Are the various foregoing procedural requirements desirable? Should they apply to
international (as distinct from domestic) arbitrations? If you were drafting a national
arbitration statute, applicable to international arbitrations, what mandatory procedural
requirements (if any) would you impose? Given the diversity of procedures for dispute
resolution around the world, and in different industries, is it prudent to dictate particular
procedural requirements?
10. Applicable procedural law not ordinarily affected by holding hearings elsewhere for
convenience. As discussed below, most institutional arbitration rules permit arbitral tribunals
to conduct hearings and meetings at locations other than the arbitral situs. See infra pp. 457-
58. As a consequence, parties often agree to arbitration in State X, but that thereafter arbitral
proceedings are physically conducted in other places, for reasons of convenience, without any
intention to change the procedural law applicable to the arbitration. See infra pp. 457-58.
When this occurs, is the procedural law affected by the location of the hearings? Most
authorities suggest not. Even the late Francis Mann, Lex Facit Arbitrum, reprinted in, 2 Arb. Int'l
241, 248 (1986), who attached overriding weight to the arbitral situs's procedural law, wrote:
For the convenience of arbitrators or parties or for other reasons hearings may be held in
different places. Such a practice will not ordinarily involve a change of the seat and, therefore,
of the lex fori.
Other commentators agree. See Hirsch, The Place of Arbitration and the Lex Arbitri, 34 Arb. J. 43,
45 (1979); Park, The Lex Loci Arbitri and International Commercial Arbitration, 32 Int'l & Comp.
L.Q. 21 (1983); A. Redfern & M. Hunter, International Commercial Arbitration 304 (2d ed. 1991).
11. Mandatory law of the place where hearings are conducted for convenience. Although the
issue seldom arises in practice, it would appear that an arbitrator conducting an arbitral
hearing in a particular nation is, with respect to that hearing, bound by the applicable
mandatory law of that state relating to the conduct of arbitral proceedings – even if the
hearing's location is selected solely for reasons of convenience. See Hirsch, The Place of
Arbitration and the Lex Arbitri, 34 Arb. J. 43, 46 (1979). Consider how, as a practical matter,
difficulties with the mandatory law of an alternative situs might arise.
12. Conflict of laws rules applicable to selection of procedural law governing international
P "429" arbitral proceedings. Determining what procedural law applies to the arbitration proceedings
P "430" gives rise to choice of law issues. In general, as illustrated by ICC Case No. 5029 of 1986,
excerpted above, parties seldom agree expressly on the procedural law governing their
arbitration. At most, they will have incorporated a general choice-of-law clause in their
underlying contract or (less likely) designated the law applicable to their arbitration
agreement. Determining what procedural law governs an arbitration therefore ordinarily
requires application of external conflicts rules or presumptions.
13. Possible choices for procedural law in international arbitration. If the parties have not
selected an applicable procedural law, some choice must be made or implied for them. The
two most likely choices are the law of the seat or situs of the arbitration proceedings or the
substantive law agreed upon by the parties to govern their arbitration agreement. According to
one authority:
In most countries it seems to be accepted, or at least assumed, that the lois de l'arbitrage is the
law of the country in which the tribunal has its seat.... The other view ... is to the effect that the
lex [arbitri] is identical to the law chosen by the parties and thus determined by their
autonomous act.
Mann, Lex Facit Arbitrum, reprinted in, 2 Arb. Int'l 241, 245 (1986); Hirsch, The Place of Arbitration
and the Lex Arbitri, 34 Arb. J. 43, 45 (1979). Would any other national laws conceivably be
applicable to an international arbitral proceeding? What about the law governing the
underlying contract (assuming it is different from that governing the arbitration agreement)? If
the parties are from the same state, should that state's law provide the procedural law?
(a) Presumptive intention for procedural law to be that of the arbitral situs. It is widely
observed that parties to an arbitration would not ordinarily select a procedural law from
a different state than that of the arbitral situs. That is, many authorities have held that
parties presumptively intend the procedural law of an arbitration to be the law of the
arbitral situs they select. See Bank Mellat v. Hellinki Techniki SA [1984] Q.B. 291, 301; Mann,
Lex Facit Arbitrum, reprinted in, 2 Arb. Int'l 241, 248 (1986) (“by their direct or indirect,
express or implied choice of the seat the parties at the same time choose the lex arbitri”);
Dicey & Morris, The Conflict of Laws 580 (12th ed. 1993) (“Where the parties have failed to
choose the law governing the arbitration proceedings, those proceedings must be
considered, at any rate prima facie, as being governed by the law of the country in which
the arbitration is held, on the ground that it is the country most closely connected with
the proceedings”); Judgment No. 1056 of 29 September 1995, XXII Y.B. Comm. Arb. 111??
(Singapore High Court) (1997) (“the appropriate procedure would not have been English
procedure but Chinese procedure since the arbitration took place in China.”); Final Award
in ICC Case No. 5294, reprinted in S. Jarvin, Y. Derains & J. Arnaldez, Collection of ICC
Arbitral Awards, 1986-1990, at 180 (1994) (“Since Zurich is the place of the arbitration, the
procedure is governed by the ICC Rules and the Zurich Rules of Civil Procedure”); Final
Award of 29 December 1998, XXIV Y.B. Comm. Arb. 13 (1999 Hamburg Friendly Arbitration)
(“This choice of the [German] arbitration seat leads, in the absence of an agreement to
the contrary, to the application of German procedural law”); James Miller & Partners, Ltd.
v. Whitworth Street Estates (Manchester), Ltd, 1 All E.R. 796 (H.L. 1970) (English substantive
law governed contract; Scottish law governed arbitral procedure in Scottish arbitration).
Compare Hirsch, The Place of Arbitration and the Lex Arbitri, 34 Arb. J. 43, 46 (1979). The
reluctance of the court in Union of India to give effect to the parties' apparent selection of
foreign procedural law is also illustrative of the presumption that parties intend the law
of the arbitral situs to provide the procedural law of the arbitration.
For U.S. authorities, see Spector v. Torenberg, 852 F.Supp. 201 (S.D.N.Y. 1994) (“the
arbitration took place in New York and therefore pursuant to New York's procedural rules
governing arbitration”); Splosna Plovba of Piran v. Agrelak SS Corp., 381 F.Supp. 1368, 1370
(S.D.N.Y. 1973) (by agreeing to arbitration in London, “the parties implicitly agreed that
British [sic] law should apply to the arbitration, since it is a recognized principle that the
law of the country in which the arbitration proceeding takes place governs, unless the
parties to such arbitration agree to the adoption of laws of a different jurisdiction”);
Restatement (Second) Conflict of Laws §220 (1971) (“in the absence of any contractual
provision to the contrary, the procedural (or curial) law governing arbitrations is that of
the forum of the arbitration ... since this is the system of law with which the agreement to
arbitrate in a particular forum will have its closest connection”).
Is the presumption that the law of the arbitral situs provides the procedural law of the
arbitration appropriate? What do you think parties usually expect, as to applicable
procedural law, when they site an arbitration in a particular country?
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Consider the award in Sapphire, and in particular the tribunal's explanation for why the
law of the Canton of Vaud was applicable to procedural matters. Note the tribunal's
conclusion that, because the arbitral seat was in Vaud, the procedural law of Vaud had
presumably been intended to be selected by the parties. Is that persuasive?
How was the arbitral situs selected in Sapphire? Is the argument for selecting the
procedural law of the arbitral situs stronger or weaker when the arbitral tribunal (or an
arbitral institution) selects the arbitral situs?
 (b) Possibility that the applicable procedural law is the substantive law chosen by the parties to
govern their arbitration agreement. Some authorities have concluded that the procedural
law of an arbitration is provided by the law that the parties have selected to govern their
arbitration agreement. What are the arguments in favor of this view? Suppose that the
choice of law provision in the arbitration clause provides “This provision and all issues
relating to it shall be governed by the laws of [State A].”
(c) Possibility that the applicable procedural law is the substantive law chosen by parties to
govern their underlying contract. As ICC Case No. 5029 and ICC Case No. 5505 illustrate, it is
sometimes argued that the procedural law in an international arbitration should be the
same as the substantive law agreed to by the parties to govern their underlying
contractual relationship. See Judgment No. 1996/627 of 1 February 1996, XXII Y.B. Comm.
Arb. 807 (Turkish Court of Appeals, 15th Legal Division 1996) (1997) (interpreting Turkish
choice of law clause in underlying contract as selecting Turkish law as procedural law
governing arbitration seated in Switzerland). That argument can rely either on an
interpretation of the choice-of-law clause in the underlying contract or upon a broader
contention that selection of an applicable substantive law implies the intention to select
the same procedural law for later arbitral proceedings. The latter argument is strongest
when the parties have not in fact chosen the arbitral situs in their arbitration agreement
(or otherwise) – and the arbitral tribunal or appointing authority must do so – and when
the law governing the underlying contract also governs the arbitration agreement.
Suppose that a choice-of-law clause in the underlying contract provides “This Agreement
shall be interpreted under, governed by, and enforced in accordance with the laws of
[State A].”

(d) Authorities rejecting argument that choice-of-law clause in underlying contract applies to
procedural law of the arbitration. As ICC Case No. 5029 and Union of India illustrate, it may
not be clear whether the parties to an international arbitration have in fact agreed upon
an applicable procedural law. Most commercial contracts contain broadly-worded
choice-of-law clauses that at least arguably extend to the procedural law governing the
arbitration. Interpreting these clauses is seldom a precise endeavor, but the weight of
authority concludes that a choice-of-law clause in the parties' underlying contract does
not encompass the procedural law of the arbitration.
Consider ICC Case No. 5029 and ICC Case No. 5505. Both cases deal with arguments that the
intended meaning of the parties' choice-of-law clause was (among other things) to select
the procedural law. Both decisions arrive at the sensible conclusion that choice-of-law
clauses are ordinarily intended to select the law governing the merits of the parties'
dispute, and not the procedural law of the arbitration. See also ···.
Compare the similar issues that arise with respect to the effect of a choice-of-law clause
in the underlying contract on the law governing the arbitration agreement. As discussed
above, parties sometimes intend a general choice-of-law clause to encompass the
arbitration clause in their contract (even thought it is separable). See supra pp. 110-11.
Does the same view apply to the procedural law governing the arbitral proceedings?
(e) Choice-of-law clauses under Volt. Related issues have arisen under the Volt decision
where lower U.S. courts have considered whether particular choice-of-law clauses
incorporate state arbitration rules. See supra pp. 376-78. Consistent with the general
trend of international authority, the Supreme Court has suggested, in Mastrobuono, that
choice-of-law clauses ordinarily apply to substantive law, and not arbitration statutes or
similar procedural rules. See supra pp. 376-78. Compare Valero Refining, Inc. v. M/T
Lauberhorn, 813 F.2d 60, 65 (5th Cir. 1987) (interpreting choice-of-law clause as “merely
requir[ing] that the procedures that the arbitrators use be in accordance with the laws
applicable in New York”).
(f) Distinction between “internal” and “external” issues. Consider the court's analysis of the
choice-of-law clause in Union of India. If the clause did not select the procedural law –
the law regulating the arbitral proceedings – what did it select? Note the court's
distinction between what appear to be “internal” and “external” procedural laws
governing the arbitration. What does this distinction mean? What is “internal” and what is
P "431" “external,” according to the Union of India court? Consider the discussion below of
P "432" depecage. See infra p. 433; Minmetals Germany GmbH v. Ferco Steel Ltd, [1999] 1 All E.R.
315 (“In international commerce a party who contracts into an agreement to arbitrate in a
foreign jurisdiction is bound not only by the local arbitration procedure but also by the
supervisory jurisdiction of the courts of the seat of the arbitration. If the award is
defective or the arbitration is defectively conducted the party who complains of the
defect must in the first instance pursue such remedies as exist under that supervisory
jurisdiction. That is because by his agreement to the place in question as the seat of the
arbitration he has agreed not only to refer all disputes to arbitration but that the conduct
of the arbitration should be subject to that particular supervisory jurisdiction.”).
14. Meaning of parties' choice of procedural law governing the arbitration. Although it rarely
occurs, suppose two parties agree that the law of State A should govern the arbitral
proceedings. What does this agreement mean? Does it mean that rules of civil procedure
applicable in local judicial proceedings in State A should be binding on the arbitral tribunal?
Or does it mean that the arbitration statute and arbitration practice of State A should apply?
For analysis, see ICC Case No. 5029. Compare the reasoning in Sapphire. Which decision adopts
the more persuasive approach?
 (a) Applicability of local rules of civil procedure. Note the procedural law applied by the
tribunal in Sapphire. In general, Sapphire's resort to the domestic rules of civil procedure
applicable in local courts for the procedural law of an international arbitration is
unusual, particularly in contemporary international commercial arbitration. Why is that
so? Why wouldn't it make sense to apply relatively detailed (and predictable) local rules
of civil procedure in international arbitrations? Note that, as a practical matter, if an
international arbitration ends up being conducted by two local law firms, based in the
arbitral situs, before an arbitrator who is also from the arbitral situs, local litigation
procedures and practices will tend to be used, at least as a point of departure. See infra
pp. 446-47.
(b) Applicability of national arbitration statute. In contrast to Sapphire, most contemporary
authorities interpret an agreement selecting a national law as the procedural law in an
international arbitration as agreement on the arbitration statute of the situs, rather than
the local rules of judicial procedure. In many jurisdictions, the local arbitration statute
(a) will not specify detailed procedural rules that apply in particular arbitral
proceedings, (b) will allow the parties substantial autonomy to agree upon procedural
rules, and (c) may set out a few general procedural principles (e.g., equality of treatment,
adversarial procedure, and an opportunity for all parties to be heard). See infra pp. 443-
44. Consider in this regard the Swiss, Belgian, and UNCITRAL legislation.
15. Refusal of foreign procedural law to allow itself to be chosen. The national legal regime
that the parties select for the procedural law may not permit itself to be selected, at least in
some respects, for application to a foreign arbitration. See Mann, Lex Facit Arbitrum, reprinted
in, 2 Arb. Int'l 241, 249 (1986). That is particularly true with respect to the so-called “external”
procedural law of the arbitration, focussing on judicial supervision of and assistance to the
arbitral process. Thus, English courts have held that, even where parties have agreed to
conduct an arbitration in a foreign state, with English law providing the applicable procedural
law, English courts will not appoint an arbitrator (although they would do so in an “English”
arbitration in England). Naviera Amazonica Peruana SA v. Compania International De Seguros del
Peru [1988] 1 Lloyd's Rep. 116, 119.
Similarly, the FAA permits federal courts to provide various types of assistance to the
arbitration process. For example, under §7 of the FAA, an arbitrator may petition the district
court where he is “sitting” for enforcement of his discovery orders. But it is not clear that an
arbitrator “sitting” in England, in an arbitration where the parties had selected U.S. law as the
procedural law, could avail himself of §7. For a detailed discussion, see infra pp. 508-11.
Why might national courts refuse to lend their support to an international arbitration located
abroad, if the parties desired their aid?
16. Insistence of foreign procedural law on applying itself. Contrast the English court's attitude
to the selection of a foreign procedural law in Naviera Amazonica (i.e., refusing to apply the
English arbitration statute to a foreign arbitration), with the Indian court's approach in
National Thermal Power Corporation. In the latter, the Indian court held that Indian law was the
procedural law of an arbitration conducted in London and therefore that Indian courts
(applying Indian law) could vacate awards issued by the tribunal.
17. Potential confusion arising from selection of procedural law other than that of the arbitral
situs. The National Thermal Power Corporation decision illustrates the confusion that can result
P "432" from selecting a procedural law different from that of the arbitral situs. Suppose that Indian
P "433" law (the procedural law) requires acts that English law (the arbitral situs's law) forbids – or
vice versa. Suppose English courts confirm the tribunal's award while Indian courts vacate it.
See infra pp. 727-28, 761.
The application of multiple, conflicting national laws governing different procedural issues in
same arbitration is not common, but when it occurs it causes considerable confusion. Note the
remarks in Union of India about the absurdity of multiple procedural laws. Arbitrators sitting in
one nation may be subject to legal requirements (or, conceivably, injunctions) from different
countries purporting to require them, or the parties, to take various actions. Those actions may
be inconsistent with what the law in the arbitral situs requires, with what the arbitrators
believe is just and appropriate, or with what the parties' arbitration agreement appears to
require. All of this is wholly inconsistent with the promise that arbitration provides a neutral,
relatively efficient mechanism for resolving international disputes.
18. Procedural law in international arbitration and depecage. Commentary (including the
foregoing discussion) generally treats the procedural law as a single legal regime governed by
one nation's laws. Indeed, some commentators have said that “it is unlikely that the parties
could choose two different lex arbitri, each being applicable to different questions.” Hirsch, The
Place of Arbitration and the Lex Arbitri, 34 Arb. J. 43, 45 (1979). Why is this comment wrong? Give
examples.
In fact, it is misleading to assume that there is a single, monolithic procedural law in every
international arbitration. Instead, “the” procedural law is often subject to depecage, with
different issues being subject to different, overlapping national legal regimes. The Union of
India decision is a good illustration of this, and its distinction between “internal” and
“external” procedural laws is one way to consider depecage in this context.
For example, U.S. courts will grant provisional relief in aid of foreign arbitrations, see infra pp.
970-71, and order pre-trial discovery in aid of foreign arbitrations, see infra p. 511. Courts in
other countries have purported to remove arbitrators in foreign arbitrations or to apply local
ethical rules to local lawyers engaged in representations in foreign arbitrations. Multiple
 national laws may apply to such issues as a lawyer's right to appear, his ethical duties, the
applicable conflicts rules in the arbitration, and issues of privilege. In order to determine what
national law governs a particular procedural issue – and what nation's courts may intervene to
enforce that law – the laws of each of the nations having some connection to the relevant
aspect of the arbitration must be considered. The laws of various of these nations may, by their
own terms, apply to different aspects of the arbitration. This may be confusing, but it is the
practical reality.
19. A-national arbitral procedures. It is often said that an arbitration proceeding must be
governed by the law of some nation. The late Dr. F.A. Mann is routinely cited for his declaration
that “every arbitration is subject to the law of a given State.” Mann, Lex Facit Arbitrum, reprinted
in, 2 Arb. Int'l 241 (1986). List the various ways in which this statement is ambiguous. List the
ways in which it is misleading. Try and formulate an interpretation of the statement that is
both accurate and useful.
Some commentators have suggested that an arbitration does not need be governed by a
national procedural law. See Paulsson, Delocalisation of International Commercial Arbitration:
When and Why It Matters, 32 Int'l & Comp. L. Q. 53 (1983). Other commentators have rejected
that view, concluding that any arbitration must be governed by the laws of some nation (even if
not the arbitral situs). See Mann, Lex Facit Arbitrum, reprinted in, 2 Arb. Int'l 241 (1986); Smit, A-
National Arbitration, 63 Tulane L. Rev. 629 (1989).
What would be the content of an a-national procedural law? What advantages would be
realized from the application of a single, uniform international procedural law? Note that such
a procedural regime would obviate the need for choice of law analysis, such as that set out
above. Note also that the same international standards would apply regardless of the arbitral
situs. Would an a-national procedural law resolve forum selection issues (such as judicial
appointment of arbitrators or assistance to the arbitral process)? How would an international
procedural law interact with local mandatory procedural rules?
20. Judicial forum to vacate an arbitral award. The National Thermal Power Corporation decision
illustrates one very important consequence of selecting the procedural law governing an
international arbitration. As discussed in detail below, Article V(1)(e) of the New York
Convention has frequently been interpreted as permitting an award to be vacated (or set
aside) by a court of the state whose procedural law governed the arbitration. See infra pp. 757-
60. That is, if an arbitration is conducted in State A, under the procedural law of State B, then
State B's courts will have the power to set aside or vacate the award under Article V(1)(e) of the
Convention. Hence, the National Thermal Power Corporation decision, holding that Indian law
was the procedural law of the arbitration, had the highly significant effect of allowing Indian
courts to vacate an arbitral award made in England – consistent with the Convention. We
consider this issue in detail below. See infra pp. 712-30, 744-63.
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B. Applicable Procedural Rules in International Arbitration (29)
1. Parties' Autonomy to Select Arbitral Procedure
Historically, it was frequently said or assumed that arbitrators were required to apply the
domestic procedural rules applicable in national courts in the arbitral situs. (30) For the most
part, however, it is now widely accepted that international arbitral proceedings ordinarily
need not adopt the domestic procedural rules of local courts.
Rather, one of the most fundamental characteristics of contemporary international
commercial arbitration is the parties' broad freedom to agree upon the procedures to be
followed in their arbitration. As explained below, this principle is acknowledged in the New
York Convention (and other international agreements concerning arbitration); (31) it is
guaranteed by national arbitration statutes in many developed jurisdictions; (32) it is
confirmed in the decisions of national courts and arbitral tribunals; (33) and it is contained in
and facilitated by the rules of most leading arbitration institutions. (34) The freedom of parties
to select their own arbitral procedures is related to the parties' freedom to select the
procedural law that governs their arbitration, which we examined previously. (35)
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As discussed below, the autonomy of parties to choose their own arbitral procedures (like their
autonomy to choose the applicable procedural law) (36) is often qualified by the mandatory
requirements of applicable national law. In leading arbitral forums, these requirements are
ordinarily minimal. (37) In most developed states, the mandatory constraints of national law
apply only to preclude fundamentally one-sided or entirely arbitrary procedural agreements
between the parties. (38)
2. Sources of Authority Relevant to Choice of Procedures in International Arbitration
The New York Convention recognizes the central role of the parties in fashioning the arbitration
procedure, and permits non-recognition of an award if the arbitrators fail to adhere to the
parties' agreed procedures. As discussed above, Article V(1)(d) permits nonrecognition of an
arbitral award if “the arbitral procedure was not in accordance with the agreement of the
parties.” The Inter-American Convention is even more direct. It expressly provides, in Articles 2
and 3, that the arbitration shall be conducted according to the “agreement of the parties.” (39)
Likewise, as we have seen, the Geneva Protocol of 1923 required that “the arbitral procedure,
including the constitution of the arbitral tribunal, shall be governed by the will of the parties
and by the law of the country in whose territory the arbitration takes place.” (40)
 Arbitration legislation in most major trading nations also guarantees parties the freedom
mutually to designate the procedural rules governing the conduct of the arbitration, subject
only to minimal mandatory rules of national law. (41) The UNCITRAL Model Law provides, in
Article 19(1), that “[s]ubject to the provisions of this Law, the parties are free to agree on the
procedure to be followed by the arbitral tribunal in conducting the proceedings.” The Swiss
Law on Private International Law contains a similar provision in Article 182(1). As discussed in
P "435" greater detail below, U.S. courts have reached much the same result under the FAA. (42)
P "436" Likewise, the procedural rules of leading arbitral institutions grant the parties broad
freedom to adopt, by agreement, such procedures as they deem appropriate. (43)
3. Mandatory Rules of National Law Relating to Arbitral Procedure
The parties' freedom to adopt arbitral procedures, like their freedom to agree to the
procedural law governing an arbitration, is subject to the mandatory requirements of
applicable national laws. The relevant national law for these purposes will in the first instance
be that of the state in which the arbitration is conducted. (44) Alternatively, or additionally,
the mandatory norms of a foreign procedural law selected by the parties to govern their
arbitration may apply. (45)
As noted above, the developed jurisdictions where international arbitrations commonly take
place do not impose significant mandatory limitations on the freedom of the parties (or the
power of the arbitral tribunal) to conduct an arbitration. “As a speedy and informal alternative
to litigation, arbitration resolves disputes without confinement to many of the procedural and
evidentiary structures that protect the integrity of formal trials.” (46) Nevertheless, most
jurisdictions require that arbitral proceedings satisfy at least some minimal standards of
procedural fairness and equality. (47)
The UNCITRAL Model Law is illustrative of the basic requirement of procedural fairness that
most developed arbitration statutes impose. Article 18 of the Model Law requires that “[t]he
parties shall be treated with equality and each party shall be given a full opportunity of
presenting his case.” Similarly, Article 182(3) of the Swiss Law on Private International Law
provides: “Whatever procedure is chosen [by the parties and/or tribunal], the arbitral tribunal
shall assure equal treatment of the parties and the right of the parties to be heard in an
adversarial procedure.” In the United States, judicial decisions have held that the FAA imposes
similar requirements of basic procedural fairness. (48)
P "436"
P "437"
Every jurisdiction will of course impose its own standard of “due process” or “natural justice.”
Both in verbal formulation and in specific application, these standards will differ from country
to country. (49) For the most part, however, differences among national standards of
procedural fairness in developed arbitral situses will not be significant, in part because of a
desire by national courts to accommodate the needs of international arbitration and avoid
parochial, local procedural requirements. (50)
In addition to general fairness constraints, some countries impose other, more formal limits on
arbitrations conducted within their territory. For example, some national laws place limits
(like nationality) on the identity of arbitrators, or of counsel, in arbitral proceedings. (51) In
other states, local law may not permit arbitrators to administer oaths or may forbid particular
arrangements with respect to the arbitral process (e.g., an even number of arbitrators). (52)
And, as the Guatemalan Code of Civil and Commercial Procedure illustrates, some nations
impose detailed procedural regimes on all arbitrations conducted within national borders. (53)
4. Delegation of Parties' Autonomy to Choose Arbitral Procedure to Arbitrators
Although national law in most developed states will permit the parties to agree upon the
arbitral procedures, subject only to minimal due process or procedural regularity
requirements, parties often will not agree in advance on detailed procedural rules. At most,
their arbitration agreement will provide for arbitration pursuant to a set of institutional rules,
which will ordinarily supply only a broad procedural framework. (54) Filling in the considerable
gaps in this framework will be left to the subsequent agreement of the parties or, when they
cannot agree, the arbitral tribunal.
Under most national arbitration laws, (55) and most institutional arbitration rules, (56) the
P "437" arbitral tribunal in an international arbitration has very substantial discretion to establish
P "438" arbitral procedures where the parties have not agreed upon them. This authority has
enormous practical importance because it is a rare case where the parties to an arbitration
will find common ground on all of the procedural issues that confront them.
5. Selected Materials Concerning the Choice of Procedural Rules in International Arbitration
The materials excerpted below explore the foregoing issues, including the parties' autonomy to
choose arbitral procedures, the role of mandatory procedural rules of the arbitral situs, and
the general procedural authority of the arbitrators. First, consider Article V(1)(d) of the New
York Convention, Articles 2 and 3 of the Inter-American Convention, Article 19 of the UNCITRAL
Model Law, Article 182(1) of the Swiss Law on Private International Law, and Articles 1693 and
1694 of the Belgian Judicial Code. Second, and in contrast, compare Articles 287 and 288 of the
Guatemalan Code of Civil and Commercial Procedure and Article 223 of the Chilean Organic
Law of the Judiciary, and their approach to arbitral procedures.
Third, review the various institutional arbitration rules excerpted below and the awards in
Sapphire and ICC Case No. 5029. Consider in particular their approaches to the parties'
autonomy to select arbitral procedures and to the respective roles of the parties and the
 arbitral tribunal in adopting arbitral procedures. Finally, consider the decisions in ICC Case No.
7626 and Card v. Stratton Oakmont, Inc., (57) which give practical examples of the resolution of
procedural issues by arbitral tribunals.
NEW YORK CONVENTION
Article V(1)(d)
[excerpted below at p. 988]
INTER-AMERICAN CONVENTION ON INTERNATIONAL COMMERCIAL ARBITRATION
Articles 2, 3 & 5(1)(b)
[excerpted below at p. 995]
UNCITRAL MODEL LAW
Article 19
[excerpted below at p. 1016]
P "438"
P "439"
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 182
[excerpted below at p. 1034]
BELGIAN JUDICIAL CODE
Articles 1693 & 1694
[excerpted above at p. 418]
GUATEMALA CODE OF CIVIL AND COMMERCIAL PROCEDURE
Articles 287 & 288
[excerpted above at p. 417]
ORGANIC LAW OF THE JUDICIARY (CHILE) LAW 7421 OF JUNE 15, 1953
Article 223
[excerpted above at p. 418]
ICC RULES (1998 VERSION)
Article 15
[excerpted below at p. 1064]
UNCITRAL ARBITRATION RULES
Article 15
[excerpted below at p. 1026]
LCIA RULES (1998 VERSION)
Article 14
[excerpted below at pp. 1079-80]
AAA COMMERCIAL ARBITRATION RULES (1999 VERSION)
Articles 21-40
[excerpted below at pp. 1051-53]
P "439"
P "440"
SAPPHIRE INTERNATIONAL PETROLEUM LIMITED v. NATIONAL IRANIAN OIL COMPANY
35 Int'l Law Reports 136 (March 15, 1963)
[excerpted above at pp. 419-20]
INTERIM ICC AWARD OF 16 JULY 1986 IN ICC CASE NO. 5029
XII Y.B. Comm. Arb. 113 (1987)
[excerpted above at pp. 420-22]
FINAL AWARD IN ICC CASE NO. 7626 OF 1995
XXII Y.B. Comm. Arb. 132 (1997) (©)
UNIDENTIFIED ARBITRATOR. [An Austrian company (“Company A”) entered into a technical
cooperation agreement with an Austrian company (“Company B”). The agreement required
Company A to provide technical assistance to Company B. Disputes about this assistance arose,
and Company B commenced arbitral proceedings against Company A under the ICC Rules. The
arbitral situs was England. One issue in the arbitration was the admissibility into evidence of
certain diaries kept by two employees of Company A. Company B opposed the efforts of
Company A to introduce the diaries.]
There is one procedural issue which we deal with at the outset: the admissibility of the diaries
 of Dr. Y and Dr. V [an employee of Company A]. Company B has objected to its admission in this
arbitration on the basis of Section 21 of the Indian Evidence Act.
Dr. Y and Dr. V kept a daily notebook into which they contemporaneously summarized items of
business significance. They entered into that notebook comments and issues discussed with
Mr. X at various meetings. Company A presented a copy of the relevant pages of the notebook
recording notes of the meetings with Mr. X ... At the hearing the Tribunal requested and were
provided with a copy of the German text from the notebooks, with a transcription and English
translation. Dr. Y had his notebook with him and referred to it during the hearing. He gave
evidence and was examined and explained to the Tribunal what various notes meant and the
context in which they were recorded. It is worth noting that Mr. X also had notebooks with him
to which he referred and to which no objection was expressed. Mr. X's notebooks were not
offered as supporting evidence by Company B.
P "440"
P "441"
Company B argues that Dr. Y's diary entries are inadmissible in evidence in this arbitration. It
submits that except for statements recorded in books in the course of business by a person
who is dead, admissions made in a written record such as a diary cannot be presented and
relied upon by the party who keeps or made the diary. Company B referred us to Section 21 of
the Indian Evidence Act which provides:
Admissions are relevant and may be proved as against the person who makes them, or his
representative in interest; but they cannot be proved by or on behalf of the person who makes
them or by his representative in interest....
Section 32 of the Indian Evidence Act provides that written evidence may be relied on in
certain circumstances where the maker of the statement is dead or not easily available.
This is an international arbitration procedure. The strict rules of evidence, as they apply in
England where the Tribunal is sitting, or in India, do not apply. In accordance with the power
given to the arbitrators in the Terms of Reference, and under the ICC Rules, the Tribunal has the
right to determine whether and what evidence shall be admitted. The Tribunal considers that
the diary notes of Dr. Y and Dr. V are admissible. They were used as an aide memoire by Dr. Y as
to what occurred and were explained to the Tribunal. Company B had the opportunity to cross-
examine him on that evidence. It is up to the Tribunal to give to those diary notes whatever
credence and weight it considers appropriate. The notes are not in themselves proof of what
was discussed, but do indicate and support the evidence given by Dr. Y. Furthermore, and in
any event, the Tribunal does not consider that the Indian Evidence Act has any relevance to the
conduct of and the admission of evidence in this arbitration.
CARD v. STRATTON OAKMONT, INC.
933 F.Supp. 806 (D. Minn. 1996)
DAVIS, DISTRICT JUDGE.... In his Statement of Claim [in the arbitration], Petitioner made
references to a civil complaint for Preliminary and Permanent Injunction filed by the [U.S.
Securities and Exchange Commission (“SEC”)] against Stratton Oakmont [and certain related
matters.] Respondents assert that consideration of these SEC proceeding in the ... arbitration,
by the panel, evidences partiality and a manifested disregard of the law. In support of this
argument, Respondents cite [domestic U.S. judicial decisions which] granted motions to strike
from complaints ... references to SEC consent judgments or SEC complaints pursuant to the
applicable Federal Rules of Evidence. Petitioner argues, and this Court agrees, that reliance on
[these decisions] is misplaced as the Federal Rules of Evidence do not apply to arbitration
proceedings.
P "441" We commence by discussing what arbitration is and what it is not. Arbitration is a creature
P "442" born of a contract between the parties who are desirous of avoiding litigation in a court of
law. Arbitration requires the parties agree to rules of arbitration. Frequently, rules of
arbitration specifically exclude the application of judicial rules of evidence. Instead, the
arbitrators determine the materiality and relevance of all evidence offered. Arbitrators are not
judges of a court nor are they subject to the general superintending power of a court.
Arbitration provides neither the procedural protections nor the assurance of the proper
application of substantive law offered by the judicial system. Those who choose to resolve
dispute by arbitration can expect no more than they have agreed. One choosing arbitration
should not expect the full panoply of procedural and substantive protection offered by a court
of law. In short, “by agreeing to arbitrate, a party ‘trades the procedures and opportunity for
review of the courtroom for the [perceived] simplicity, informality, and expedition of
arbitration.’” [In deciding whether communicating settlement offers to the arbitrators was
grounds for vacating a award, the court held that such conduct fell within the broad procedural
rule of arbitration and that the court did not have the power to draft a contract between the
parties or the power to impose judicial rules of evidence on an arbitration proceeding.]
In the present case, the Submission Agreements entered into by the parties provided that
arbitration would proceed in accordance with the Constitution, By-Laws, Rules, Regulations
and/or Code of Arbitration Procedure of the sponsoring organization, NASD. Section 34 of the
Code of Arbitration Procedure, which governs NASD arbitration proceedings, provides the
following:
Evidence. The arbitrators shall determine the materiality and relevance of any evidence
proffered and shall not be bound by the rules governing the admissibility of evidence.
Section 35 provides:
Interpretations of Provisions of Code and Enforcement of Arbitrator Rulings. The arbitrators
 shall be empowered to interpret and determine the application of all provisions under this
Code and to take appropriate action to obtain compliance with any ruling by the arbitrators.
Such interpretations and actions to obtain compliance shall be final and binding upon the
parties.
These sections make clear that the panel had the authority and discretion to determine
materiality and relevance without reference to the judicial rules or evidence and that the
decision to accept such evidence by the panel is final and binding upon Respondents.
Accordingly, this Court has no power to judicially impose its rules of evidence on this
arbitration proceeding.
P "442" Respondents also argue that the panel improperly failed to make a tape recording of
P "443" Petitioner's cross examination. Section 37 of the Code of Arbitration Procedure provides:
A verbatim record by stenographic reporter or a tape recording of all arbitration hearings shall
be kept. If a party or parties to a dispute elected to have the record transcribed, the costs of
such transcription shall be born by the party or parties making the request unless the
arbitrators direct otherwise. The arbitrators may also direct that the record be transcribed. If
the record is transcribed at the request of any party, a copy shall be provided to the
arbitrators.
Respondents assert that a verbatim record of the arbitration hearings was kept by tape
recording, except for a significant portion of the hearing – Petitioner's cross-examination.
Respondents argue that failure to record Petitioner's cross-examination constitutes
misbehavior by the panel and further evidences the prejudice to Respondents as a result of
the panel's numerous misdeeds.
Respondents do not point to any authority supporting their argument that an arbitration award
may be vacated because a verbatim record of a portion of an arbitration proceeding was not
made. There is no evidence before the Court that the panel purposefully orchestrated the
failure of the tape record while Petitioner was cross-examined. Respondents argue, however,
that the particular portion not recorded is so critical to its ability to have the award vacated
that it clearly establishes partiality. Assuming Respondent could point to portions of
Petitioner's cross-examination that completely contradict his claims of excessive trading, such
evidence could be used to vacate the award as it is not proper for this Court to revisit the
arguments and evidence presented to the arbitrators. In reviewing an arbitration award, this
Court must focus on whether the arbitral process itself was flawed, not the result.
Furthermore, even though Section 37 of the Code of Arbitration Procedure may have been by its
literal terms violated by the panel it does not follow that the award must be nullified as the
Code does not have the force of law. Respondents must point to a statutory violation to warrant
vacation of an arbitral award, not a violation of the Code of Arbitration Procedure....
Notes on Procedures Applicable in International Arbitration
1. Parties' autonomy under most developed legal systems to choose arbitral procedures. Article
19 of the UNCITRAL Model Law and Article 182 of the Swiss Law on Private International Law
illustrate the prevailing approach in most developed legal systems to the parties' autonomy to
choose the procedures applicable in an international arbitration. As the decision in Card
illustrates, the FAA allows the same freedom, in both domestic and international arbitrations
in the United States. See infra p. 444, 841-47. As one U.S. court has declared, parties have broad
freedom to select dispute resolution mechanism “short of authorizing trial by battle or ordeal
or, more doubtfully, by a panel of three monkeys.”Baravati v. Josephthal, Lyon & Ross, Inc., 28
F.3d 704, 709 (7th Cir. 1994).
Why do contemporary legal systems allow parties this procedural freedom? What advantages
are gained? What are the costs? In that vein, what is wrong with trial by a panel of three
monkeys, if that is what the parties desire?
Is it appropriate that questions of procedural regularity and due process be resolved through
private bargaining and agreement? Does this not compromise the quality of civil justice? Why
should courts enforce agreements to use arbitrary, unfair, or inefficient procedures?
P "443"
P "444"
Are parties permitted to design their own litigation procedures when litigating in national
(including U.S.) courts? Why not? Should arbitration be different?
2. Parties' lack of autonomy to choose arbitral procedure in some jurisdictions. Consider the
Guatemalan Code of Civil and Commercial Procedure, excerpted above, and the approach that
it takes to arbitral procedures. Is this desirable? Compare Article 223 of the Chilean Organic
Law of the Judiciary.
Why would not arbitrations be fairer and more efficient if – as in national courts – a single,
predictable, tested, and refined set of procedural rules applied in all cases? Is justice or
efficiency really served by having part-time arbitrators re-invent the procedural wheel anew in
every case? What benefits does such procedural flexibility provide?
Consider whether the arbitration in Card would have been more just if the Federal Rules of
Evidence had applied. Or, whether the arbitration in ICC Case No. 7626 would have been more
fair if English or Indian rules of evidence had applied?
If international arbitrators are permitted to ignore national procedural rules, why can't (or
shouldn't) they also ignore national substantive law? Is there any principled distinction
between procedural and substantive issues in this regard? Note that, under most legal systems,
 arbitrators are not free to ignore applicable national substantive law unless the parties have
expressly permitted them to decide ex aequo et bono or as amiable compositeur. See supra pp.
556-57. Do the parties expect internationally-neutral procedural rules when they agree to
international arbitration?
3. Impact of selection of arbitral situs on procedural rules in international arbitration. Compare
the differences between Swiss and U.S. law, on the one hand, and Guatemalan or Chilean law,
on the other, with respect to arbitral procedures. The parties' selection of the arbitral situs
will, among other things, affect the parties' autonomy to choose their own arbitral procedures.
Would you rather arbitrate in Switzerland or Guatemala? Does the answer depend on the
dispute and who you represent?
4. Parties' autonomy to choose arbitral procedures under the FAA. As Card illustrates, the FAA
has long been interpreted to grant parties to arbitrations sited in the United States broad
freedom to choose the arbitral procedures applicable in their proceedings. The text of the FAA
does not contain any express affirmative recognition of the parties' freedom to select the
arbitral procedure. Nonetheless, U.S. courts have afforded parties relatively broad freedom to
designate procedural rules governing the arbitral process in both domestic and international
arbitrations. This is reflected in numerous U.S. judicial decisions, like that in Card, rejecting
challenges to arbitral awards based on procedural objections and declining to interfere on an
interlocutory basis with the parties' agreed procedural regime. See infra pp. 461-68, 841-47.
This recognition of party autonomy with respect to arbitration procedures is even more
pronounced in international arbitrations, where U.S. courts have displayed particular
deference to procedural decisions of arbitrators. See infra p. 843.
5. Parties' autonomy to choose arbitral procedures under leading institutional rules. Consider
the excerpts from the ICC, LCIA, UNCITRAL, and AAA Commercial Arbitration Rules set out
above. What approach do these provisions take to the parties' autonomy to choose arbitral
procedures? Do the ICC, LCIA, UNCITRAL, and AAA Commercial Arbitration Rules all adopt
precisely the same approach? Which rules would you prefer to apply as an arbitrator? Which
rules provide most flexibility? least flexibility?
6. Procedural frameworks under leading institutional arbitration rules. Compare briefly the
procedural frameworks provided for in the leading institutional arbitration rules – ICC, LCIA,
AAA Commercial, and UNCITRAL. We discuss these in detail below, but for present purposes
note the similarities and differences in arbitral procedures under them. Note also the many
procedural issues and details which are not addressed by most institutional rules.
7. Arbitrators' authority under national law to adopt arbitral procedures in absence of parties'
agreement. Suppose that the parties are unable to agree upon procedures for their arbitration.
Who then is responsible under national law for establishing the arbitral procedures?
Consider the excerpts from the UNCITRAL Model Law and Swiss Law on Private International
Law, giving the arbitral tribunal broad powers to adopt arbitral procedures. Compare the
approach to the arbitral tribunal's procedural authority in Article 1693(1) of the Belgian Judicial
Code. How does the Belgian statute differ from its UNCITRAL and Swiss counterparts?
Who else, other than the arbitrators, might have this procedural authority? Consider the
possibility of interlocutory orders from local courts in the arbitral situs on disputed procedural
issues. See infra pp. 461-68. Consider also the approach of the Guatemalan Code of Civil and
Commercial Procedure and the Chilean Organic Law of the Judiciary. Which basic approach is
preferable?
P "444"
P "445"
8. Arbitrators' authority under FAA to adopt arbitral procedures in absence of parties'
agreement. As discussed elsewhere, and as Card demonstrates, the FAA allows arbitrators very
broad discretion to adopt arbitral procedures and regulate the arbitral proceedings. See infra
pp. 461-68, 841-47. Recall the statement in Card that:
Arbitrators are not judges of a court nor are they subject to the general superintending power
of a court. Arbitration provides neither the procedural protections nor the assurance of the
proper application of substantive law offered by the judicial system. Those who choose to
resolve dispute by arbitration can expect no more than they have agreed. One choosing
arbitration should not expect the full panoply of procedural and substantive protections
offered by a court of law.
See also Transport Workers Union v. Philadelphia Trans. Co., 283 F.Supp. 597, 600 (E.D. Pa. 1968)
(“Although arbitration hearings are of quasi-judicial nature, the prime virtue of arbitration is its
informality, and it would be inappropriate for courts to mandate rigid compliance with
procedural rules.”).
For a similar Swiss formulation:
“Parties who choose arbitral tribunals desire more flexible and informal proceedings than
those offered by the courts, especially in Germanic legal systems.”
Judgment of 26 May 1994, XXIII Y.B. Comm. Arb. 754 (Bezirksgericht Affoltern am Albis 1994)
(1998).
9. Arbitrators' authority under institutional arbitration rules to adopt arbitral procedure in
absence of parties' agreement. Consider Article 15(1) of the ICC Rules, Article 14(2) of the LCIA
Rules, and Article 15(1) of the UNCITRAL Rules. What procedural powers do these provisions
grant to arbitrators? Is this wise? What alternatives are there?
 What limitations do these provisions place on the arbitral tribunal's power to adopt arbitral
procedures? How do these limitations vary among the leading institutional rules?
10. Arbitral tribunal's interpretation of procedural authority under institutional arbitration rules.
The award in ICC Case No. 7626 indicates how international arbitral tribunals typically interpret
their procedural authority under the ICC and other leading institutional arbitration rules.
Consider the tribunal's analysis of its authority under the ICC Rules. Compare the court's
analysis in Card of the arbitral tribunal's powers on procedural issues under the NASD Rules.
11. No obligation of arbitral tribunal to apply local procedural rules of arbitral situs's courts in
international arbitration. Historically, it was sometimes said that international arbitrators were
obliged to apply the rules of civil procedure applicable in local courts. See Geneva Protocol of
1923 Article 2. This view is reflected in the arguments unsuccessfully made in ICC Case No. 5029
and ICC Case No. 7626. As these decisions illustrate, most developed jurisdictions, and most
international arbitral tribunals, do not require the application of the local procedural rules of
the arbitral situs's domestic courts in international arbitrations.
12. Effect on arbitration procedures of choice-of-law clause selecting procedural law applicable
to arbitral proceedings. Suppose the parties have expressly agreed that the procedural law of
the arbitral situs will apply to the arbitral proceedings. For example: “The arbitral proceedings
shall be governed by the law of State X.” What does such a clause mean for the arbitral
procedures?
As noted above, most contemporary arbitral tribunals and national courts interpret choice-of-
law clauses selecting the procedural law governing the arbitration as not incorporating local
rules of civil procedure. See supra p. 432. Instead, such clauses are interpreted as making
applicable the arbitration legislation of the arbitral situs (which in turn, in most developed
states, typically affords the parties and arbitral tribunal broad discretion to adopt procedural
rules). See supra pp. 431-33.
Consider again the analysis in Sapphire and compare it with the results in ICC Case No. 7626 and
ICC Case No. 5029. The tribunal's application of the local procedural rules of the arbitral situs's
courts in Sapphire is highly unusual; the tribunals' refusals in ICC Case No. 7626 and ICC Case No.
5029 are much more representative of contemporary practice. If the parties take the relatively
unusual step of specifying the procedural law of the arbitral situs, should this imply the
procedural rules of the arbitral situs's courts?
13. Wisdom of applying domestic procedural rules of arbitral situs's local courts in international
P "445" arbitration. What approach should an arbitrator take to the local procedural rules of the
P "446" arbitral situs's courts? Just because the arbitrator must not apply these rules does not mean
he should not. What about ethical rules affecting the parties' lawyers and their presentation of
evidence?
Consider ICC Case No. 7626 and Card. Why is it that English rules of evidence should not have
been applied by the tribunal in ICC Case No. 7626? Wouldn't these rules provide a predictable,
neutral set of procedures for both parties?
In international disputes, between parties from different nations, the litigants may have
dramatically different procedural expectations and wishes (reflecting their respective
backgrounds). Consider whether either the Austrian or Indian party in ICC Case No. 7626 was
likely familiar with English procedural or evidentiary rules.
In Card, where both parties were U.S. nationals, why wouldn't the Federal Rules of Evidence
have been a sensible regime? In agreeing to arbitrate, didn't the parties select procedural
flexibility and (possibly) efficiency in preference to the more formal procedures of most
national courts?
Recall the aspirations of arbitration to provide an expeditious, uncomplicated means of
dispute resolution tailored to the needs of particular disputes. See supra pp. 7-11, 409. Note
also that the Federal Rules of Evidence were designed with a particular context (e.g., public
jury trials) in mind; the same is true of other national procedural rules. As suggested above, are
rules designed for this sort of specialized context likely to be appropriate for an international
arbitration which is intended to be culturally neutral?
14. Mandatory procedural requirements of arbitral situs. Notwithstanding either the parties'
agreement on procedural steps, or the arbitral tribunal's general discretion, almost every
nation has some basic procedural requirements which cannot be ignored. Note the references
to mandatory law in Article 182(3) of the Swiss Law on Private International Law. Compare
Article 18 of the UNCITRAL Model Law, Articles 1693 and 1694 of the Belgian Judicial Code,
Articles 287 and 288 of the Guatemalan Code of Civil and Commercial Procedure, and Article
223 of the Chilean Organic Law of the Judiciary.
15. Mandatory procedural requirements under FAA. What mandatory procedural requirements
apply to arbitrations conducted in the United States? Should the same procedural rules apply
in an international arbitration, sited in the United States, as in a domestic U.S. litigation? a
domestic U.S. arbitration? an international arbitration sited abroad? Why or why not?
U.S. courts have not clearly articulated what minimum procedural requirements apply to
arbitrations sited in the United States. A number of U.S. authorities suggest that arbitral
procedures must comport with the due process clause (which requires only fairly broad
compliance with principles of fairness, due notice, and equality of treatment). See infra pp.
841-46.
Other U.S. courts have suggested that even the due process clause's general limits do not apply
in arbitrations, on the grounds that arbitrations do not constitute state action. See Federal
 Deposit Ins. Corp. v. Air Florida Sys., Inc., 822 F.2d 833, 842 n.9 (9th Cir. 1987) (arbitration is
“private, not state, action” and not subject to the due process clause), cert. denied, 485 U.S. 987
(1988); Elmore v. Chicago & Illinois Midland Ry. Co., 782 F.2d 94, 96 (7th Cir. 1986) (same); Austern
v. Chicago Bd. Options Exchange, Inc., 716 F.Supp. 121, 125 (S.D.N.Y. 1989) (same), aff'd, 898 F.2d
882 (2d Cir.), cert. denied, 498 U.S. 850 (1990).
16. Mandatory requirements of procedural law chosen by the parties. As we have seen, it is
possible for parties to agree to arbitrate in State A, in accordance with the procedural or curial
law of State B. See supra pp. 426-28. If they do so, it is possible (if unlikely) that the law of State
B would impose mandatory procedural requirements that did not exist under the laws of State
A. In general, these requirements would need to be complied with in order to produce an
enforceable award. See New York Convention Article V(1)(e).
17. Content of mandatory procedural requirements under developed national arbitration
legislation. Consider the mandatory procedural requirements imposed by Article 1694 of the
Belgian Civil Code, Article 182(3) of the Swiss Law on Private International Law, and Article 18 of
the UNCITRAL Model Law. What procedural obligations do these provisions impose? What is the
value of imposing these requirements? What exactly do these requirements demand? Consider
ways in which these procedural requirements might be violated.
Compare the general procedural requirements of these developed arbitration statutes with
those imposed by the Guatemalan and Chilean legislation. Which approach is wiser?
18. Mandatory procedural requirements of states other than the arbitral situs. It is also
conceivable that the mandatory procedural requirements of countries other than the arbitral
situs might be relevant to an arbitration. Specifically, it is important as both a practical and
legal matter that the procedures adopted in an international arbitration satisfy mandatory
P "446" requirements in countries where any eventual arbitral award might need to be enforced. That
P "447" is because Article V(1)(b) of the New York Convention and Article 5(1)(b) of the Panama
Convention contemplate the non-recognition of arbitral awards made in violation of basic
principles of fairness. See infra pp. 832-49. National courts will be influenced in their
application of Articles V(1)(b) and 5(1)(b) by local approaches to procedural fairness. As a
consequence, due process principles prevailing in eventual enforcement forums can (or
should) have a significant indirect effect on the procedures used in international arbitrations.
It is important, however, to note that most courts in developed jurisdictions have been
reluctant to invoke Article V(1)(b) of the New York Convention to deny recognition to foreign
awards based upon procedural defects. In particular, courts have frequently held that local
procedural rules in the enforcement forum do not apply to foreign arbitrations. See supra p.
445.
Consider the refusal of the tribunal in ICC Case No. 7626 to apply Indian rules of evidence.
Would it not have been equally plausible to apply Austrian rules of evidence? Could
international arbitrations ever proceed if both parties' local procedural rules had to be
applied? On the other hand, if the Austrian party prevails, what may be the reaction of Indian
courts to the tribunal's refusal to apply Indian evidentiary rules? What would be the reaction of
U.S. courts under the FAA? See Card and infra pp. 461-68.
19. Arbitral tribunal's failure to comply with applicable institutional (or other) arbitration rules.
Suppose that an arbitral tribunal fails to comply with the (fairly minimal) procedural
requirements set out in applicable institutional arbitration rules. Note that this is, apparently,
what occurred under the NASD Rules in Card. Should the resulting arbitral award be vacated?
In all cases? We discuss this in detail below, see infra p. 857.
As discussed above, Article V(1)(d) of the New York Convention allows for non-recognition of an
arbitral award where the “arbitral procedure was not in accordance with the agreement of the
parties.” National law is generally the same. See UNCITRAL Model Law Article 19 & 34(2)(a)(iv);
Swiss Law on Private International Law Articles 182(2), 189 & 190(2)(d); FAA §10(c). Whatever may
have occurred in Card, most international arbitral tribunals are therefore fairly scrupulous in
their procedural decisions and actions.
As discussed below, both U.S. and non-U.S. courts have denied recognition to arbitral awards
where the tribunal did not comply with applicable institutional rules. See infra pp. 845-46, 857.
In this respect, Card is somewhat unusual (but not alone) in its broad suggestion that
arbitrators need not obey procedural rules incorporated into the parties' arbitration
agreement. Nonetheless, most courts will require proof that a procedural misstep materially
disadvantaged a party and affected the ultimate award. See infra p. 857.
20. Allocation of power to adopt arbitral procedures between arbitrators and parties. Suppose
that the parties are agreed on one procedural approach or issue, and the arbitral tribunal
disagrees. For example, suppose that both parties desire a 2-week hearing and broad
document discovery, while the arbitral tribunal wants only a 3-day hearing and minimal
document discovery. Who decides what procedure is adopted?
In practice, some sort of negotiated compromise is almost always reached on most procedural
“disputes” between the parties and the arbitrators. But, who has the authority to decide the
issue if no compromise is struck? Compare the ICC, LCIA, and UNCITRAL arbitration rules. What
are the differences in their approaches? Which approach is most desirable? Compare the
approaches of the UNCITRAL Model Law and the Swiss Law on Private International Law with
that of Article 1693(1) of the Belgian Judicial Code.
Does the New York Convention bear on a tribunal's obligation to respect the parties'
procedural agreements? Are such agreements subject to Article II?
 21. Arbitral tribunal's exercise of its power to adopt arbitral procedures. In some cases, the
parties' procedural freedom in international arbitration can produce a happy marriage of civil
law, common law, and other procedures that is relatively efficient and effective. It can also
allow the parties to agree upon innovative or other procedures specially adapted to their
particular dispute. In other cases, particularly where irresponsible party behavior coincides
with a reticent or incompetent tribunal, it can yield a morass of procedural confusion and
inconsistency that makes parties long for judicial proceedings.
As a practical matter, a tribunal's use of its discretion to adopt arbitral procedures will often
be influenced significantly by the arbitrators' legal training, experience, personality, and other
personal characteristics. We summarize these below.
(a) Arbitrators' legal background. The legal training and experience of an arbitrator can
significantly affect his approach to arbitral procedures. Arbitrators with common law
P "447" backgrounds will likely approach procedural issues differently from those with civil law
P "448" backgrounds; arbitrators with Islamic, socialist, or non-Western backgrounds will take
yet other approaches. See Wetter, The Conduct of Arbitration, 2 J. Int'l Arb. 7 (1985);
Gaillard, et al., Transnational Rules in International Arbitration (ICC 1993); ICC, Taking of
Evidence in International Arbitral Proceedings (1990); Overview of Methods of Presenting
Evidence in Different Legal Systems, ICCA Congress Series No. 7 at 112 (Kluwer 1996).
In general, arbitrators with civil law backgrounds can be expected to adopt more
“inquisitorial” procedures, with somewhat less scope for adversarial procedures than is
familiar to U.S. lawyers. ICC, Taking Evidence in International Arbitral Proceedings (1990);
Shenton, Supplementary Rules Governing the Presentation and Reception of Evidence in
International Commercial Arbitration, X Y.B. Comm. Arb. 145, 149-51 (1985). Arbitrators from
common law jurisdictions will be inclined to adopt “adversarial” procedures more
broadly similar to those prevailing in U.S. litigation – such as broad, party-initiated
discovery, depositions, lengthy oral hearings, counsel-controlled cross-examination, and
the like.
In some cases, arbitrators may not be legally-qualified. This is very common in some
nations and in some industries, where arbitrators are often businessmen experienced in a
trade or non-legal experts. The use of lay arbitrators is much less common in
international arbitration, where legal training is often (and rightly) perceived as critical
to the handling of conflict of laws, jurisdictional, and related issues. Obviously, a lay
arbitrator will have a fundamentally different procedural approach than most lawyers.

(b) Personal characteristics of arbitrators. The importance of the differences between civil
law, common law, and other backgrounds can be exaggerated. Intangible, individual
characteristics of the arbitrators – age, temperament, ego, intelligence, time
commitments, and interest – significantly influence procedural preferences. For example,
an elderly academic who is not enthusiastic about factual details will approach
procedural issues very differently from a compulsively-busy, underemployed practitioner
who likes to impress with his grasp of minutiae. Arbitrators with long attention spans and
keen memories approach procedures differently from those with different thought
processes. Individuals who value control of events will prescribe a different procedure
from those who don't. And arbitrators with substantial experience will take different
approaches than novices.
Consider, from among your class-mates (and various faculty instructor(s)) who you would
want as an arbitrator in the following cases:
a. You represent Company A in a case where it needs to obtain discovery of complex
facts and then present a detailed (and boring) factual argument.
b. You represent Company A in a case where it plans to make personal attacks on the
integrity and honesty of a contracting partner and its management.
c. You represent Company A where it has a powerful, but complex, legal claim, and is
concerned that its counter-party intends to respond with obfuscation and a blizzard
of incidental, prejudicial facts.
Change sides in each example and suppose you represent the counter-party.

(c) Nature of dispute. A number of other factors also influence a tribunal's decisions about
arbitral procedures. Most importantly, the specifics of the parties' dispute often
significantly affect arbitral procedures. Indeed, one of the advantages of arbitration is
the possibility of tailoring procedures to a specific set of factual and legal issues to
provide an efficient and accurate fact-finding mechanism. See supra pp. ···.
(d) Identity of legal advisers. Also important are the identities and procedural preferences of
the parties' legal advisers: where both parties' lawyers have similar expectations and
legal backgrounds, this will significantly influence the tribunal's procedural decisions. For
example, two sets of U.S. law firms will often gravitate towards U.S.-style adversarial
proceedings, while two Continental European law firms or academics will likely favor
more familiar, civil law procedures. Of course, the ability and willingness of opposing
counsel to work together also dramatically impacts the arbitral process.
 (e) International procedures. While influenced by their legal training, experienced arbitrators
in cases with parties of diverse nationalities will often seek to arrive at procedural
decisions that are “international,” rather than replicating parochial procedural rules in
local courts. Several sets of self-avowedly “international” procedural rules, suitable for
use in international arbitrations, exist. E.g., IBA, Rules on the Taking of Evidence in
International Commercial Arbitration, reprinted in Appendix N; supra pp. 46-47; Draft
P "448" Transnational Rules of Civil Procedure, reprinted in 30 Cornell Int'l L.J. (1997). We consider
P "449" these procedures below. See infra pp. 469-95.
22. Differences between arbitral procedures and litigation procedures. As a general matter, it is
elementary that arbitration proceedings are different from judicial proceedings. One of the
reasons that some parties choose to arbitrate is their desire to obtain the comparative
informality, flexibility, and occasional speed of arbitration. In theory, a party “trades the
procedures and opportunity for review of the courtroom for the simplicity, informality, and
expedition of arbitration.”Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614,
628 (1985). See supra pp. 7-11, 278-79, 443-45 & infra pp. 841-43.
Nevertheless, particularly in major matters, the contrast between litigation and arbitration can
be exaggerated and the procedures of an arbitration can assume a fairly “judicial” cast.
“Though litigation is compulsory and arbitration is consensual, both are judicial processes of
an adversarial character.” Nariman, Standards of Behavior of Arbitrators, 4 Arb. Int'l 311 (1988).
Tribunals and parties often conclude that complex cases require considerable issue definition,
scheduling, and the like, and it is very common in international arbitration to encounter
written pleadings, briefs, testimony under oath, cross-examination, verbatim transcripts, and a
measure of disclosure or discovery. Indeed, some contemporary critics of arbitration argue
that it has lost the informality and expedition that once characterized it, and urge reforms
returning to less judicial procedures. Wetter, The Present Status of the International Court of
Arbitration of the ICC: An Appraisal, 1 Am. Rev. Int'l Arb. 91, 101 (1990).
23. Evidentiary decisions in international arbitration. In most developed jurisdictions,
international arbitrators enjoy broad discretion to make evidentiary decisions, usually without
reference to local national evidentiary rules. The award in Parker v. United Mexican States is
illustrative of this. See also Shufelt v. Guatemala (Guatemala v. USA), 2 R.I.A.A. 1083 (Sier
Herbert Sisnett, sole arbiter 1930) (“On the question of evidence over which there was some
argument, I may point out that in considering the cases quoted on both sides it is clear that
international courts are by no means as strict as municipal courts and cannot be bound by
municipal rules in the receipt and admission of evidence. The evidential value of any evidence
produced is for the international tribunal to decide under all the circumstances of the case.”);
McDonald v. City of West Branch, 466 U.S. 284, 292 (1984) (quoting Alexander v. Gardner-Denver
Co., 415 U.S. 36, 58 n.19 (1974)) (“Arbitral factfinding is generally not equivalent to judicial
factfinding .... [T]he record of the arbitration proceedings is not as complete; the usual rules of
evidence do not apply; and rights and procedures common to civil trials, such as discovery,
compulsory process, cross-examination, and testimony under oath, are often severely limited
or unavailable.”).
Some institutional rules expressly grant the arbitral tribunal power to decide evidentiary
issues. For example, Rule 33(1) of the ICSID Rules provides that: “The Tribunal shall be the judge
of the admissibility of any evidence adduced and of its probative value.”
24. Non-participation in arbitral proceedings. Parties will sometimes fail to participate in an
arbitration, either accidentally or deliberately. Although non-participation is seldom well-
advised, parties occasionally do so in the belief that it will enhance jurisdictional objections or
in an effort to disrupt the arbitral process. See Donahey, Defending the Arbitration Against
Sabotage, 13, J. Int'l Arb. 93 (1996). Nonetheless, arbitral tribunals will proceed with an
arbitration in the absence of one party. Final Award in ICC Case No. 5294, reprinted in S. Jarvin,
Y. Derains & J. Arnaldez, Collection of ICC Arbitral Awards, 1986-1990, at 180 (1994) (proceeding
with arbitration despite respondent's default).
Consider how various institutional arbitration rules deal with the possibility of default by one
party to an arbitration. See ICC Rules Article 6(3); LCIA Rules Article 15(8); UNCITRAL Rules
Article 28. What powers do these provisions grant to the arbitrators in cases of default? How
should such powers be exercised?
Leading institutional arbitration rules uniformly provide that arbitral proceeding may go
forward without the defaulting party's presence. Article 28(1) of the UNCITRAL Rules provides
that, if the claimant fails to communicate its statement of claim in due time, the tribunal shall
terminate the arbitration; if the respondent fails to defend, the tribunal “shall order that the
proceedings continue.” Article 6(3) of the ICC Rules similarly provides for the appointment of
an arbitrator on behalf of the defaulting party, the setting of the basic framework of the case
(the “terms of reference”) without the defaulting party's participation, and finally: “If one of the
parties refuses or fails to take part in the arbitration or any stage thereof, the arbitration shall
proceed notwithstanding such refusal or failure.”
If a party defaults, the tribunal will often proceed on an ex parte basis, ensuring that the
defaulting party receives notice of the ongoing proceedings. It is reasonable to assume, in most
P "449" cases, that the boycotting party will resist enforcement of the tribunal's ultimate award
P "450" (assuming it is unfavorable to him). The enforcement action will involve scrutiny of the
arbitral procedure, and care should be taken that no basis for legitimate challenge exists.
Under most institutional rules, an arbitral tribunal is not a court empowered to issue a default
judgment predicated solely on one party's non-participation. Rather, it is responsible for
deciding the issues presented to it and rendering a decision; one party's non-participation
 does not abrogate that obligation. A tribunal should direct the claimant to make written
submissions, present written evidence, and, where appropriate, appear at a hearing with its
witnesses. The tribunal should, without substituting itself for the defaulting party, satisfy itself
that the claimant's claims are well-founded in law and fact. This procedure culminates in a
reasoned award, setting forth the facts (including the default) and the basis for decision.

C. Overview of International Arbitration Procedures Under Commonly-Adopted

Institutional Rules
1. Procedural Rules of Leading International Arbitration Institutions
As we have seen, most developed national laws allow parties' broad freedom to agree upon the
procedures governing an international arbitration. (58) Parties frequently exercise this freedom
by adopting or incorporating the procedural rules adopted by an international arbitration
institution. As a consequence, many international arbitrations are conducted pursuant to
institutional rules, which in turn have a decisive influence on the arbitral process.
There are a number of significant international arbitral institutions – most notably, the
International Chamber of Commerce (“ICC”), London Court of International Arbitration (“LCIA”),
and American Arbitration Association (“AAA”). (59) Each of these institutions has promulgated a
set of arbitral rules, which apply to arbitrations where the parties have so elected. In addition,
the UNCITRAL Arbitration Rules are available for selection by parties who desire an ad hoc (i.e.,
non-administered) arbitration. In agreeing to arbitrate in accordance with a particular set of
institutional rules, the parties are deemed under U.S. and most other developed legal systems
to have consented to their substantive and procedural provisions. (60)
2. Exercise of Arbitral Tribunal's Discretion
As noted above, all leading institutional rules provide only a general framework for arbitral
proceedings. Within the broad framework provided by the institutional rules, the parties and
P "450" tribunal are left free to work out the details of particular arbitral procedures as they see fit.
P "451" “Arbitration rules, such as those of the AAA, are intentionally written loosely, in order to
allow arbitrators to resolve disputes without the many procedural requirements of litigation.”
(61) In these circumstances, much depends upon the identities, experience, and interests of
the parties' lawyers and the arbitrators, the nature of the dispute, and luck.
3. Procedural Time-Table of International Arbitrations
There are significant similarities between the ICC, AAA International, LCIA, and UNCITRAL
Arbitration Rules. Each set of rules states important (and generally similar) substantive
principles on subjects such as choice of law, (62) separability of the arbitration agreement, (63)
provisional relief, (64) and waiver of appellate review. (65) In addition, all leading institutional
rules set forth, in relatively broad outline, the procedural framework of the arbitral
proceedings. While these rules vary, sometimes significantly, (66) they generally make
provision for: (a) filing a request for arbitration; (b) filing a reply; (c) the appointment and
challenge of arbitrators; (d) the situs and language of the arbitration; (e) challenges to the
jurisdiction of the arbitral tribunal; (f) discovery, hearings, and evidentiary matters; (g) written
submissions; (h) the form and making of awards; (i) the arbitrators' fees; and (j) costs of the
arbitration.
The following sections briefly outline each of the critical steps in a “normal” international
commercial arbitration. Special attention is paid to the treatment of these steps under
leading institutional arbitration rules. Of course, every arbitration is unique, and individual
cases may vary substantially from the following outline.
a. Initiating the Arbitration – The Notice, Request or Demand
P "451" The first significant procedural step under most arbitral rules is the filing of a “Notice of
P "452" Arbitration,” “Request for Arbitration,” or “Demand for Arbitration.” (67) This document
usually serves the same basic functions as a civil “complaint” under U.S. law, a “claim form”
under English law, or a “Klage” under German law – notification of the defendant that the
action has commenced, identification of claims and requested relief, and formally marking the
filing of the action, including for statute of limitations purposes. In addition, the request or
notice often addresses the basis for jurisdiction (i.e., the arbitration agreement). It also usually
contains the claimant's nomination of an arbitrator or its views concerning the appropriate
number, and means of selection, of arbitrators.
Institutional arbitration rules specify the necessary contents of a notice or request for
arbitration, typically requiring only a minimum of information about the parties, the dispute,
the contractual basis for the claimant's claims, the arbitration agreement, the relief requested,
and the arbitrators. (68) National law may also impose requirements for the notice of
arbitration. (69) The request will also often append the principal documents in the case
(together with translations, where necessary). (70)
As a practical matter, there is considerable variation in the types of notices or requests for
arbitration that are employed in international arbitration. Some notices for arbitration are
only one or two pages long, and provide only information expressly required by the applicable
arbitration rules. Other requests are lengthy documents which thoroughly describe the relevant
facts, outline the claimant's legal theory, and attach considerable amounts of documentary
evidence. Whatever its style, a request should include a clearly-formulated demand for relief.
The notice of arbitration or request must generally be served upon the respondent, as well as
to the appropriate arbitral institution. Institutional rules set forth specific requirements
 concerning service, which must be satisfied. Under some regimes (i.e., the ICC), the request for
arbitration is sent to the arbitral institution and it is the institution that notifies the
P "452" respondent of the filing. (71) Time limitations for replies to the request or notice are typically
P "453" set out in the institutional rules. Parties should also ensure that mechanisms of service
comply with mandatory due process requirements in the arbitral situs and states where
enforcement would need to be sought.
b. Reply and Counterclaims
Under most institutional rules, the respondent will be required, within specified time-limits, to
reply to the claimant's request for arbitration and assert any counter-claims. The time for
replying is ordinarily fairly short: Article 5 of the ICC Rules permits 30 days, while Article 6 of
the AAA Commercial Rules allows 10 days. These deadlines are often extended, (72) however, by
agreement between the parties, leave of the arbitral institution, or unilateral act of the
respondent.
Institutional arbitration rules usually prescribe (in fairly minimalist fashion) the contents that
must be included in an answer. These are broadly similar to the requirements for the request
for arbitration. In addition, many institutional rules require the respondent to assert
counterclaims at the time of making its reply. (73) As discussed below, however, parties are
often able to amend their cases, including by adding new claims and counterclaims. If a
respondent does assert counterclaims, the claimant is entitled to respond (usually within the
same time period available for the initial reply). (74)
c. Appointment of Arbitrators
Perhaps the most vital initial step in any arbitration is the appointment of the arbitrator or
arbitrators who will resolve the dispute. (75) Virtually all international commercial arbitration
agreements specify either one or three arbitrators (with three arbitrators typically being
appropriate for larger cases and one arbitrator for smaller matters). (76) Alternatively, parties
can leave open the number of arbitrators, in which case the appointing authority (or a national
P "453" court) will decide the issue. Where the parties have not otherwise agreed, leading institutional
P "454" arbitration rules provide for selection of the number of the arbitrators by the arbitral
institution (usually pursuant to specified guidelines). (77)
The identity of the arbitrators will significantly affect the character and quality of the arbitral
proceedings and may directly impact the outcome. Selection of an incompetent, biased, or
corrupt arbitrator can result in a profoundly unhappy process and produce new controversies
at least as serious as the parties' initial dispute. And, given the differences between civil,
common law, and other legal systems, the legal (or non-legal) background of an arbitrator can
significantly affect his handling of the arbitration. (78)
If the parties cannot agree on the arbitrators, leading institutional rules provide procedures for
their appointment. As examined in detail below, in cases involving three-person tribunals,
institutional rules often provide for the selection of the two “co-arbitrators” (or “party-
nominated” arbitrators) by each of the parties. (79) Party nominations of co-arbitrators are
subject to specified time-limits and procedural requirements (such as submission of a
declaration of independence by the nominee). With respect to presiding or sole arbitrators,
leading institutional rules provide for appointment by the arbitral institution (where the
parties do not themselves agree). (80) Provision is sometimes made for selection of a presiding
arbitrator by the co-arbitrators nominated by the parties (with the arbitral institution
available for making the selection if the co-arbitrators cannot agree).
Appointment practices vary between institutions, at least as much because of custom and
personality as by virtue of differences in formal rules. In general, the chairman or sole
arbitrator will not have the same nationality as that of either party. (81) Other important
considerations in the appointment process are restrictions or qualifications contained in the
parties' arbitration agreement, the procedural law of the arbitration, the applicable law of the
parties' dispute (if it can be ascertained at the outset), requisite commercial, legal or technical
expertise, and the language of the arbitration.
P "454"
P "455"
d. Challenges to Arbitrators (82)
Most institutional rules also set forth procedures for the “challenge” of both party-appointed
and other arbitrators. (83) Although challenges are most often based on an arbitrator's alleged
bias, other grounds also exist. For example, an arbitrator may suffer some legal incapacity
under applicable law (84) or he may not have the available time to properly fulfil his duties as
arbitrator. (85)
Nevertheless, most challenges are for an alleged lack of impartiality and that is the focus of
institutional rules. The UNCITRAL Rules, for example, provide that “[a]ny arbitrator may be
challenged if circumstances exist that give rise to justifiable doubts as to the arbitrator's
impartiality or independence.” The ICC, AAA International, AAA Commercial, and LCIA
Arbitration Rules contain similar provisions, permitting parties to challenge arbitrators within
specified periods following their nomination (or after learning of the grounds for the
challenge). (86) Under all of these institutional rules, challenges to an arbitrator are resolved
by the appointing authority, subject either to interlocutory or eventual judicial review.
If a party does not pursue a challenge at the time of learning of the basis for the challenge, it
will generally be deemed to have waived the challenge. Most institutional rules require that
challenges be made within specified (and short) time periods, (87) and many national laws
 deem failure to object to bases for partiality as a waiver. (88)
e. Jurisdictional Challenges
Disputes over the formation, validity, and interpretation of arbitration agreements are a
P "455" common feature in contemporary international commercial arbitration. As discussed
P "456" elsewhere, jurisdictional challenges frequently result in national court proceedings. (89) In
addition, the arbitral tribunal itself may be called upon to resolve questions of jurisdiction.
Most institutional arbitration rules provide specifically that the arbitral tribunal has the power
to decide its own jurisdiction. (90) Procedurally, institutional rules typically require that
jurisdictional challenges be raised at the outset of the proceedings, failing which it will be
waived. (91)
Jurisdictional challenges can come in numerous forms. A party may challenge the tribunal's
competence to take any action at all – for example, on the ground that the asserted arbitration
agreement was never entered into, that it was void or illegal, that it has been revoked, or that
it did not bind the respondent (as opposed to some other party). (92) Alternatively, a party may
challenge the submission of particular claims against it – for example, on the ground that they
fall outside the scope of the arbitration agreement or are nonarbitrable. (93)
Whatever the nature of the jurisdictional challenge, proceedings considering this challenge
before the arbitral tribunal are likely to be similar. In many cases, jurisdictional issues will not
be particularly fact-intensive. They will involve the application of disputed legal issues to
agreed facts (usually, only a few contractual clauses or items of correspondence). In those
cases, jurisdictional determinations can be made principally through written submissions, with
a hearing for oral argument on legal issues if the parties desire. In other cases, there will be
significant factual disputes – for example, when there is dispute as to whether or not the
parties agreed orally to an unexecuted written instrument or whether one entity is the agent or
alter ego of another. Here, evidentiary submissions and hearings may well be required. (94)
The arbitral tribunal can either decide the issue of jurisdiction as a preliminary issue, and
P "456" issue an interim award confined to jurisdiction, or consider the question of jurisdiction
P "457" together with the merits. The course that the tribunal takes will often depend on the desire
of the parties, the complexity of the case, and the extent to which jurisdictional issues are
intertwined with the merits. In general, the more sensible course is to conduct a preliminary
proceeding on the question of jurisdiction. That permits the parties to fully address the issue
and, if jurisdiction is lacking, avoids the expense of presenting the case on the merits. If, after a
preliminary proceeding, it becomes clear that the issues are inextricably interconnected with
the merits, a ruling on jurisdiction can be reserved.
If the arbitrators do conduct preliminary jurisdictional proceedings, they will, thereafter,
usually issue an interim award upholding their jurisdiction, or a final award declining
jurisdiction. That award will then generally be subject to an action to vacate, under applicable
national law, usually only in the country where the award was made. (95) In addition, a party
may resist enforcement of the award in the national courts where the prevailing party seeks to
enforce it. (96)
f. Selecting the Situs of Arbitration (97)
As discussed elsewhere, selecting the situs or “seat” of an arbitration is of great importance.
(98) Parties will often designate the arbitral situs in their arbitration clause. (99) Doing so is
strongly advised, both to ensure the selection of a desirable forum and to avoid litigation in
national courts (potentially in multiple countries) over enforcement of the arbitration
agreement.
If the parties do not select an arbitral situs, leading institutional arbitration rules provide that
either the arbitration institution or the arbitral tribunal will do so. (100) Under the ICC Rules,
P "457" the ICC International Court of Arbitration will select the situs. (101) Under the AAA International
P "458" Rules, the AAA makes an “initial” designation, subject to confirmation or alteration by the
tribunal. (102) Other institutional rules grant the arbitrators the power to select the situs. (103)
As we have seen, it is common to conduct hearings outside the arbitral situs for the
convenience of the parties. (104) For example, although a U.S. and a German company may
select Switzerland as the arbitral situs (or seat), they may choose to have hearings conducted
in London – for example, because the arbitrator(s) live there or because counsel for the parties
or crucial witnesses are located there. Institutional arbitration rules generally contain express
provisions permitting the tribunal to conduct hearings, for reasons of convenience, at places
other than the arbitral situs. (105)
g. Preparatory Conference
After an arbitral tribunal is constituted, one of its first tasks will be to hold a preparatory
meeting or conference with the parties or their representatives. Some institutional arbitration
rules expressly or impliedly require such procedural meetings (106) and most experienced
international arbitrators will do so as a matter of course. (107)
One purpose of the preparatory conference will be to introduce the parties, their legal
representatives, and the members of the tribunal, and hopefully to set the stage for a
cooperative proceeding. Equally important, the conference will permit discussion and
agreement on basic practical issues and a procedural regime and timetable for the
arbitration. (108) With respect to the former, fairly non-controversial logistical issues such as
means of communications, addresses, and number of copies must be discussed. With respect
to the latter, a range of often-sensitive issues such as types of submissions and evidence,
 discovery, hearing format, and timing must be resolved.
h. Disclosure, Discovery, and Evidence-Taking (109)
P "458" Leading institutional arbitration rules provide arbitral tribunals with broad discretion on
P "459" whether and how to conduct disclosure, “discovery,” or evidence-taking. Article 20(1) of the
ICC Rules provides that the “Arbitral Tribunal shall proceed within as short a time as possible
to establish the facts of the case by all appropriate means.” Article 22(1) of the LCIA Rules
grants the arbitral tribunal power, among other things, “to conduct such inquiries as may be
necessary or expedient” and to order production of documents or other materials. The IBA
Rules on the Taking of Evidence also contemplate that an arbitral tribunal can order a measure
of discovery.
Some international arbitrators will permit a measure of pre-hearing “disclosure” or
“discovery.” (110) In common law jurisdictions, the parties often will be permitted to make
discovery requests of one another, and will be obliged to respond thereto. The resulting
requests, responses, and objections will often resemble that which occurs in common law
litigation (although discovery will usually be less extensive, even in common law contexts). In
non-common law contexts, little or no discovery will be permitted, and parties will instead
disclose such factual materials as they wish together with their written pleadings. (111)
i. Written Submissions
Prior to any hearing on the merits of the dispute, the parties will typically exchange written
submissions. Most institutional arbitration rules expressly address this topic, sometimes
detailing the required contents of the submissions. (112) The parties' submissions are variously
referred to as Memorials, Statements of Claim (or Defense), Memoranda, or briefs.
The number, character, and size of written submissions in international arbitration varies
enormously. There will often be only one or two rounds of written submissions prior to a
hearing. A second round is used, often in larger (or complex) cases, in order that parties may
reply to their adversary's claims. Exchanges of written submissions may be either simultaneous
or (more commonly) sequential.
The parties' principal written submissions will ordinarily attach copies of documents relevant
to the case. They may also attach written statements of (fact and expert) witnesses. Depending
upon the arbitral procedure, the parties' written submissions may also identify with some
particularity the proposed basis of proof for significant factual claims.
P "459"
P "460"
j. Hearings and Evidentiary Presentation (113)
Institutional arbitration rules typically make provision for oral hearings whenever requested by
one or both parties, or when deemed appropriate by the tribunal. (114) As a practical matter,
most international arbitrations have an evidentiary hearing as their central event.
The arbitral tribunal is granted broad discretion under most institutional arbitration rules and
national laws to schedule and conduct hearings. This discretion is subject only to the general
requirement that the parties be treated equally and given a full opportunity to present their
case. (115)
Like a court, an arbitral tribunal must resolve a range of evidentiary issues. These include the
admissibility of evidence, the weight to be accorded such evidence, the relevance of certain
lines of questioning, the rights of counsel to object to one another's questioning, privileges, and
the like. Institutional arbitration rules and many national law provide that these issues are
within the discretion of the arbitrators. (116)
k. Making the Award
The final step in most arbitrations is the award. Following the principal hearing, the members
of the arbitral tribunal will deliberate together in the absence of the parties. On some
occasions, post-hearing written submissions may be filed or requested; requests for additional
hearings for the presentation of evidence or oral agreement are also not infrequent.
After deciding on the merits of the dispute, the tribunal will author an award, usually drafted
by the chairman. Leading institutional rules usually address such issues as the form, timing,
and minimum contents of the award. (117) National law will often also impose similar
requirements. (118) After the tribunal makes its final award, the arbitrators will usually cease to
have legal authority (for a brief period) to make corrections or clarifications.
P "460"
P "461"
D. Limited Grounds for Interlocutory Judicial Review of Arbitrators' Procedural
Decisions
During the course of an arbitration, countless significant procedural and substantive decisions
are made by the arbitrators (or appointing authority). Depending upon the case, an arbitral
situs may be selected arbitrators may be appointed, challenged, or removed; procedural rules
will be fixed (or amended); time schedules may be fixed for submissions and hearings;
provisional measures may be ordered; discovery may be required; jurisdictional and choice-of-
law decisions may be made; and preliminary substantive decisions may be reached. One party
is usually unhappy with aspects of each of the preliminary decisions. If there is an opportunity,
the disappointed party may seek interlocutory judicial review of the arbitrators' ruling in a
 national court.
The extent to which interlocutory judicial review of an interim decision of an arbitral tribunal is
available is ordinarily governed by the national law in the place where relief is sought. As
discussed elsewhere, judicial review of arbitrators' awards or orders will usually (but not
always) be available only in the arbitral situs. (119) In rare cases, where an arbitration is
subject to a foreign procedural law, the courts of the state whose arbitration law applies may
be capable of reviewing the arbitral tribunal's awards or orders. (120)
This section examines the general principle, applicable in most developed states, that
national courts may not ordinarily interfere with the procedural conduct of an international
arbitral proceeding. Under this principle, national courts will generally not review procedural
orders or decisions of arbitrators on an interlocutory basis, and will instead reserve any
judicial review until the tribunal makes a final award. The stated policy underlying this
approach is to permit arbitral proceedings to be conducted expeditiously (without the delay
that interlocutory judicial review would entail) and without the second-guessing of arbitral
decisions by national courts.
Article 5 of the UNCITRAL Model Law states the basic prohibition against interlocutory national
court interference in international arbitration proceedings: “In matters governed by the
[UNCITRAL Model] Law, no court shall intervene except where so provided in this Law.” This rule
limits judicial review of arbitral decisions to the actions specifically authorized by the Model
Law (e.g., appointing an arbitrator, confirming or vacating final awards or jurisdictional
awards). (121)
Under the FAA, U.S. courts have consistently refused invitations to interfere in an ongoing
P "461" arbitral proceeding. As discussed below, §10(d) of the FAA is generally interpreted as excluding
P "462" judicial review of interim arbitral awards and other decisions. (122) Moreover, efforts to
obtain other forms of interlocutory injunctive relief against arbitrators' decisions in the course
of an arbitration have usually been denied by U.S. courts. The decisions in Stanton v. Paine
Webber Jackson & Curtis, Inc., (123) and Mobil Oil Indonesia Inc. v. Asamera (Indonesia) Ltd. (124)
excerpted below, illustrates this. Nevertheless, as the notes following Stanton describe, there
are limited circumstances in which U.S. courts will intervene in an ongoing arbitration.
The FAA's general approach to interlocutory judicial review is not the only possible approach to
the subject. Under the UNCITRAL Model Law and the Swiss Law on Private International Law, an
arbitrator's jurisdictional decisions are subject to immediate appeal, as are a limited number
of other issues (particularly, selecting or challenging arbitrators). (125) And, in England, certain
arbitrations (but generally not international arbitrations) are subject to interlocutory judicial
appeals on issues of law. (126) In reading the following materials, consider which approach best
serves the purposes of the international arbitral process.
UNCITRAL MODEL LAW
Article 5
[excerpted below at p. 1013]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 190
[excerpted below at p. 1035]
STANTON v. PAINE WEBBER JACKSON & CURTIS INC.
685 F.Supp. 1241 (S.D. Fla. 1988)
GONZALEZ, DISTRICT JUDGE. This cause has come before the court upon the Third Verified
Emergency Motion for Temporary Restraining Order and Preliminary Injunction of the plaintiffs.
Plaintiffs seek an order enjoining the defendants, Paine Webber Jackson & Curtis, Inc. (“Paine
Webber”) and Robert Diamond (“Diamond”) from requesting the issuance of and serving
subpoenas for the attendance of witnesses or production of documents, other than for
attendance or production before the arbitration panel.
P "462" Plaintiffs brought the underlying action against Paine Webber and Diamond for violations of
P "463" the Commodity Exchange Act, Florida securities laws, and common law. Defendants moved
for, and this court ordered arbitration of plaintiff's claims pursuant to the FAA. The court
retained jurisdiction to enforce the arbitration award.
A hearing before the American Arbitration Association panel is scheduled to begin shortly.
Defendants Paine Webber and Diamond have requested that the arbitration panel issue
subpoenas duces tecum to various third parties. The documents sought are records of
commodities accounts maintained by plaintiffs with firms other than Paine Webber and
plaintiffs' tax returns. Defendants claim that production of these documents is necessary
because they tend to disprove plaintiffs' claims of unsophistication and financial unsuitability.
It appears from plaintiffs' Motion that the arbitrators have issued several of the subpoenas
requested. The subpoenas require pre-hearing production of documents to the defendants.
Plaintiffs contend that the issuance of these subpoenas to third parties violates the law and
the production of documents constitutes impermissible prehearing discovery.
Plaintiffs are correct that all discovery between parties must be stayed by the court pending
arbitration. See Suarez-Valdez v. Shearson/American Express, Inc., 845 F.2d 950, 951 (11th Cir.
1988). “An agreement to arbitrate is an agreement to proceed under arbitration and not under
court rules.”Id. However, the court can find no support for plaintiffs' contention that the court
 may interfere with the procedures of the arbitration panel. The Federal Arbitration Act, 9 U.S.C.
§1 et seq., sets forth the district courts' powers to enforce arbitration agreements. These
include the power to (1) stay court proceedings when an issue therein is arbitrable (9 U.S.C. §3);
(2) compel such issues to arbitration (9 U.S.C. §4); (3) enforce summons issued by arbitrators (9
U.S.C. §7); and (4) confirm, vacate, modify, or correct an arbitration award (9 U.S.C. §§9-13).
Nothing in the Act contemplates interference by the court in an ongoing arbitration
proceeding. See Foremost Yarn Mills, Inc. v. Rose Mills, Inc., 25 F.R.D. 9, 11 (E.D. Pa. 1960) (“[I]t is
clearly evident that the Arbitration Act does not in any wise attempt to regulate the
procedures before the arbitrators or prescribe rules or regulations with respect to hearings
before arbitrators.”).
The FAA does provide the parties with some protection from the arbitrators' acts. When the
arbitrators have by their misbehaviour prejudiced the rights of any party or have exceeded
their powers, the court may vacate an award made by the arbitrators. 9 U.S.C. §10. The
procedures and standards for vacating an award must be followed. However, the plaintiffs are
not seeking to vacate an award by the arbitrators. They are asking the court to impose judicial
control over the arbitration proceedings. Such action by the court would vitiate the purposes
of the FAA: “to facilitate and expedite the resolution of disputes, ease court congestion, and
provide disputants with a less costly alternative to litigation.”Recognition Equipment, Inc. v.
NCR Corp., 532 F.Supp. 271, 275 (N.D. Tex. 1981).
Furthermore, the court finds that under the FAA, the arbitrators may order and conduct such
discovery as they find necessary. See Corcoran v. Shearson/American Express, Inc., 596 F.Supp.
P "463" 1113, 1117 (N.D. Ga. 1984); Mississippi Power Co. v. Peabody Coal Co., 69 F.R.D. 558 (S.D. Miss. 1976)
P "464" (arbitrator, in his discretion, may permit and supervise discovery he deems necessary); see
also 9 U.S.C. §7 (arbitrators may issue summons to bring witnesses and documents before
them). Plaintiffs' contention that §7 of the Arbitration Act only permits the arbitrators to
compel witnesses at the hearing, and prohibits pre-hearing appearances, is unfounded.
MOBIL OIL INDONESIA INC. v. ASAMERA (INDONESIA) LTD
392 N.Y.S.2d 614 (1977), rev'd on other grounds, 401 N.Y.S.2d 186 (1977)
In this action involving contract rights to explore and produce vast petroleum reserves, the
parties seek a determination of which procedural rules shall govern arbitration of their
disputes. The contract, dated July 16, 1968, contained a broad arbitration clause providing that
“[a]ny dispute arising out of or relating to this Agreement shall be settled by arbitration in
accordance with the Rules of the International Chamber of Commerce” (hereinafter “Rules” or
“ICC”) and designated New York City as the place of arbitration. At the time the agreement was
executed, and indeed at the time of institution on November 6, 1974 of the arbitration, the 1955
Rules were in force. On June 1, 1975, after arbitration had commenced, new Rules were put into
effect (1975 Rules). Following several meetings to prepare the “Terms of Reference” which would
govern the arbitral proceeding, at which counsel, the parties, and the three arbitrators were
present, a majority of the arbitrators ruled that all proceedings thereafter would be conducted
under the 1975 Rules.
On October 31, 1975 petitioner-respondent applied to the ICC Court of Arbitration for a
direction that the arbitrators apply the 1955 Rules. The Court refused to interfere, held that it
was for the arbitrators to decide the procedural issue presented, and directed the arbitrators
to formalize their decision. On March 30, 1976 the arbitrators, again by a majority vote, ruled in
an interlocutory award that the 1975 Rules were applicable. They concluded the parties
intended to refer to the Rules as they were from time to time and that the general principle, as
well as New York law, is to apply procedural rules as they exist at the time the procedural
issues arise. See Matter of Clayton v. Clement, 33 N.Y.2d 386, 390, 353 N.Y.S.2d 173, 175 308 N.E.2d
690, 692. The dissenting arbitrator, the esteemed former Judge John Van Voorhis, likewise
seeking the intent of the parties, found the parties intended the 1955 Rules to apply. It is
submitted, as the Court below found, that prehearing discovery is permitted under the 1975
Rules but not under the 1955 Rules....
That the parties agreed to arbitrate is undisputed as is the fact that the issues raised on
arbitration bear a reasonable relationship to the contract. Furthermore, that the arbitrators'
result is rational, although it may not have been the result others would have reached is
beyond preadventure. The parties agreed to be bound by the Rules of the ICC and it was for the
arbitrators to determine which Rules of the ICC were intended.
P "464"
P "465"
Despite petitioner's position to the contrary, no evidence is presented that greater restriction
exists on the authority of an ICC arbitrator than on the authority of any other commercial
arbitrator under the Rules of the American Arbitration Association (AAA). Nor is any limitation
of the arbitrators' broad powers found in the agreement itself.
Under the broad arbitration clause in the case at bar, questions of interpretation are for the
arbitrators to decide and this is so even if the contract determination affects the very ground
rules of the arbitration. If, for example, the agreement provided for arbitration pursuant to
New York law, a determination by the arbitrators would not be overturned because the
arbitrators applied the substantive law as of the time of arbitration rather than as of the time
of agreement, or vice versa. Such determination as to substantive law goes no more nor less to
the parties' agreement to arbitrate than a provision as to which procedural rules to apply. It
follows logically and naturally that the determination of the parties' intention as to procedural
rules is gauged by the same standard applied to substantive rules: Did the parties agree to
arbitrate and did the arbitrators make a rational determination of which procedural rules to
apply? As the answer to both portions of the question is in the affirmative, it was improper for
 the Court below to impose its judgment in the place and stead of the arbitrators.
Notes on Interlocutory Judicial Review of Arbitrators' Procedural Decisions
1. Arbitrators' authority under national arbitration legislation to issue interim orders or awards.
Most national arbitration legislation expressly or impliedly permits arbitrators to make
various types of interim procedural rulings, orders, or awards. These can concern such matters
as the applicable law, jurisdictional objections, the time and manner for making submissions,
the time and manner of hearings, discovery, the admissibility of evidence, requests for
extensions of time, and the like. The arbitral tribunal's interim award in Mobil Oil, deciding
what version of the ICC Rules was applicable, is a good example. See UNCITRAL Model Law
Articles 16, 17, 19, 24 & 29; Swiss Law on Private International Law Articles 182, 183, 186 & 188.
Many interim rulings are denominated as “orders” or “instructions” or simply take the form of
letters from the tribunal to the parties. These rulings differ from “awards” in that they do not
adopt the form of awards (e.g., signed by all arbitrators, state reasons, etc.) and are (as
discussed below) not generally subject to judicial review. In addition, such rulings are not
subject to provisions of institutional arbitration rules (e.g., the ICC Rules) requiring institutional
review of awards or imposing formal requirements.
2. Arbitrators' authority under FAA to issue orders or awards. U.S. courts have held that
arbitrators have the power to issue interim orders or awards (absent contrary agreement). For
example, various U.S. courts have recognized arbitral tribunals' power to make preliminary or
interim decisions on issues of arbitrability (see supra pp. 89-91), procedural rules (see Mobil Oil;
supra pp. 464-65), discovery (see infra pp. 473-76), and provisional measures (see infra pp. 924-
26).
3. National arbitration legislation limiting interlocutory judicial review of decisions in arbitral
proceedings. In most developed jurisdictions, national arbitration legislation limits
interlocutory judicial review of an arbitral tribunal's procedural or other interim orders or
decisions. Article 5 of the UNCITRAL Model Law is a leading example of legislation imposing
such limits.
4. National arbitration legislation limiting judicial confirmation or review to “final” awards.
Consider the FAA and the Swiss Law on Private International Law. Do they contain any
limitation equivalent to Article 5 of the UNCITRAL Model Law? Note the limitations on the types
of arbitral rulings that may be reviewed under Article 190(1) and 190(3) of the Swiss Law on
Private International Law and §§9 and 10 of the FAA. See infra pp. 467-68. The limitation of
judicial review (or confirmation) to “final” awards serves the same basic purpose as Article 5 of
the UNCITRAL Model Law.
P "465"
P "466"
Consider Articles 34-36 of the UNCITRAL. Model Law. What sorts of rulings by an arbitral
tribunal may be the subject of actions to set aside?
5. Rationale for limits on interlocutory judicial review. The rationale for limits on interlocutory
judicial review is that “a district court should not ‘hold itself open as an appellate tribunal’
since applications for interlocutory relief ‘result only in a waste of time, the interruption of the
arbitration proceeding, and ... delaying tactics in a proceeding that is supposed to produce a
speedy decision.’”Michaels v. Mariforum Shipping, SA, 624 F.2d 411, 414 (2d Cir. 1980) (quoting
Compania Panemena Maritima v. J.E. Hurley Lumber Co., 244 F.2d 286, 288-89 (2d Cir. 1957)). Or,
in the words of the Mobil Oil court, “for the court to entertain review of intermediary arbitration
decisions involving procedure or any other interlocutory matter, would disjoint and unduly
delay the proceedings, thereby thwarting the very purpose” of arbitration. Mobil Oil Indonesia
Inc. v. Asamera Oil (Indonesia) Ltd, 401 N.Y.S.2d 186, 188 (N.Y. 1977).
Is the foregoing rationale persuasive? If the arbitrators have committed some gross procedural
or other interlocutory error, is it not better to know sooner rather than later? What is the cost of
such knowledge? Particularly in international arbitration?
Suppose that an arbitrator refuses to permit one party to proffer critical evidence, in
undeniable breach of clear provisions in the parties' arbitration agreement. Suppose a sole
arbitrator persists in having indefensible ex parte contacts about the merits of the dispute with
one party's counsel. Should such procedural errors go uncorrected?
6. Interim arbitral decisions generally not subject to interlocutory actions to vacate or confirm
under §§9 and 10 of the FAA. As Stanton illustrates, if the arbitrators render an interim decision
(for example, limited to issues of choice-of-law or liability), that is not intended to be a final
disposition, then no provision of the FAA confers any power of interlocutory judicial review.
Lower U.S. courts have refused to review interim awards on subjects such as an arbitrator's
partiality, selection of arbitral situs, discovery or evidentiary orders, provisional measures,
choice-of-law, and jurisdiction. E.g., In re Y ??-A Group Sec. Lit., 38 F.3d 380 (8th Cir. 1994) (“the
usual rule is that under the FAA no appeal [sic] can be taken to the district court [from an
award] until a final decision is rendered”); Metallgesellschaft AG v. M/V Capitan Constante, 790
F.2d 280 (2d Cir. 1986) (enforcing partial award dealing with one party's claims, essentially on a
summary judgment basis, over defense that award was not final); Michaels v. Mariforum
Shipping, SA, 624 F.2d 411, 413-15 (2d Cir. 1980) (refusing to entertain challenge to interim award
on merits of some, but not all, of parties' claims); Travelers Ins. Co. v. Davis, 490 F.2d 536, 541-42
& n.12 (3d Cir. 1974) (no declaratory relief available as to legal issue submitted to arbitration);
Aerojet-General Corp. v. American Arbitration Association, 478 F.2d 248 (9th Cir. 1973) (refusing to
entertain challenge to selection of arbitral situs); Compania Panemena Maritima v. J.E. Hurley
Lumber Co., 244 F.2d 286, 288-89 (2d Cir. 1957) (refusing to permit interim judicial review of
arbitrators' evidentiary decisions); Yasuda Fire & Marine Ins. Co. v. Continental Casualty Co., 840
 F.Supp. 578 (N.D. Ill. 1993) (arbitrators' order that discovery not be shared with non-parties is
not final award subject to FAA §10 action to vacate); Ligon Nationwide, Inc. v. Bean, 761 F.Supp.
633 (S.D. Ind. 1991) (no interlocutory judicial review of arbitrators' decision that claim in
arbitration was not time barred); Stanton v. Paine Webber Jackson & Curtis, Inc., 685 F.Supp.
1241 (S.D. Fla. 1988) (no interlocutory review of arbitrators' discovery decisions); Hunt v. Mobil
Oil Corp., 583 F.Supp. 1092 (S.D.N.Y. 1984) (“In effect, the Hunts again are seeking interlocutory
review of arbitration related matters [such as charging] the arbitrators with alleged conflicts of
interest and appearances of impropriety and the AAA with breach of its duty to oversee the
administration of the arbitration”); Puerto Rico Maritime Shipping Authority v. Star Lines, Ltd,
454 F.Supp. 368, 374-75 (S.D.N.Y. 1978) (vacating order requiring turnover of funds received prior
to final resolution by tribunal); Marc Rich & Co. v. Transmarine Seaways Corp., 443 F.Supp. 386,
387-88 (S.D.N.Y. 1978) (no interlocutory challenge to arbitrator's impartiality); Catz American Co.
v. Pearl Grange Fruit Exchange, Inc., 292 F.Supp. 549, 551 (S.D.N.Y. 1968) (refusing to entertain
interlocutory challenge to arbitrators' impartiality); Luff v. Ryan, 128 F.Supp. 105, 108-09 (D.D.C.
1955); Mobil Oil Indonesia v. Asamera Oil (Indonesia) Ltd, 401 N.Y.S.2d 186, 188 (1977) (refusing to
entertain challenge to interlocutory decisions regarding applicable procedural rules and
discovery). Compare Belanger v. State Farm Mutual Automobile Ins. Co., 426 N.Y.S.2d 140, 141-42
(App. Div. 1980) (granting interlocutory injunction to require arbitrators to conduct arbitration
in English).
7. “Finality” exception to §10(d) of the FAA. Section 10(d) of the FAA permits an award to be
P "466" vacated by a U.S. district court where “the arbitrators ... so imperfectly executed [their powers]
P "467" that a mutual, final and definite award upon the subject matter submitted was not made.” A
limited number of lower court decisions have vacated awards which purported to be final, but
which were in fact indefinite, ambiguous, or not dispositive of the parties' dispute. Colonial
Penn Insurance Co. v. Omaha Indemnity Co., 943 F.2d 327 (3d Cir. 1991); Bell Aerospace Co. v. Local
516, 500 F.2d 921 (2d Cir. 1974); Zephyros Maritime Agencies v. Mexicana De Cobre, SA, 662 F.Supp.
892, 895 (S.D.N.Y. 1987); Sea Dragon, Inc. v. Gebr. Van Weelde Scheep-vaartkantoor BV, 574
F.Supp. 367, 371 (S.D.N.Y. 1983).
Vacation of an award can generally be successfully resisted under §10(d) if it is not “final” and
“definite.” That is, “the award must both resolve all the issues submitted to arbitration, and
determine each issue fully so that no further litigation is necessary to finalize the obligations of
the parties under the award.”Puerto Rico Martime Shipping Authority v. Star Lines Ltd, 455
F.Supp. 368 (S.D.N.Y. 1978). Section 10(d) has no application to an interim award that the
arbitrators did not intend to be their final determination on the issues submitted to them. It is
only when arbitrators “imperfectly execute” their powers and made an award that purports to
be final, but is in fact not, that vactur is appropriate under §10(d). In order to be ‘final,’ an
arbitration award must be intended by the arbitrators to be their complete determination of
all claims submitted to them.” Michaels v. Mariform Shipping SA, 624 F.2d 411 413-14 (2d Cir.
1980). See also Mobil Oil Indonesia Inc. v. Asamera Oil (Indonesia) Ltd, 401 N.Y.S.2d 186 (N.Y.
1977); Ligon Nationwide, Inc. v. Alton Bean, 761 F.Supp. 633 (S.D. Ind. 1991) (refusing to permit
action to vacate or confirm awards that request for arbitration was timely filed and could be
amended: “Without question, the two ‘awards’ appealed herein are not final. They do not
decide either liability or damages; their nature is purely procedural and precursory to a final
arbitration.”).
8. “Interim” awards finally disposing of discrete issues subject to review under FAA §§9 and 10.
In cases where an “interim” award definitively disposes of discrete issues, and where there are
equitable reasons for reviewing or enforcing an award, U.S. courts have generally done so.
Metallgesellschaft AG v. M/V Capitan Constante, 790 F.2d 280, 283 (2d Cir. 1986); Sperry Int'l
Trade v. Government of Israel, 670 F.2d 8 (2d Cir. 1982); Zephyros Maritime Agencies v. Mexicana
De Cobre, 662 F.Supp. 892, 894 (S.D.N.Y. 1987); Eurolines Shipping Co. v. Metal Transp. Corp., 491
F.Supp. 590 (S.D.N.Y. 1980); Puerto Rico Maritime Shipping Authority v. Star Lines, Ltd, 454
F.Supp. 368, 373-74 (S.D.N.Y. 1978). Although there is no precise line between “final” interim
awards (which can be judicially reviewed) and “interlocutory” interim awards (which cannot be
judicially reviewed), U.S. lower courts have generally resisted invitations to reconsider
procedural, evidentiary, and similar rulings.
9. Possibility of interlocutory judicial review under national arbitration statutes in exceptional
circumstances. Notwithstanding the general rule against interlocutory judicial review of
interim arbitral decisions, there are circumstances in which such review is available.
(a) Challenge to arbitrator's impartiality. Consider Article 13(3) of the UNCITRAL Model Law
and Articles 180(2) and 180(3) of the Swiss Law on Private International Law. What do
these provisions permit by way of interlocutory judicial interference with the arbitral
proceedings? Why? What safeguards are placed on the availability of such interlocutory
judicial review?
Although U.S. courts generally will not entertain challenges to the impartiality of
arbitrators during the course of an arbitration, there are exceptions. For decisions
suggesting that interim judicial action to remove a biased or otherwise inappropriate
arbitrator may be available in extreme cases, see Michaels v. Mariforum Shipping, SA, 624
F.2d 411, 415 n.5 (2d Cir. 1980); York Hannover Holding AG v. McDermott Int'l, Inc., 1993 U.S.
Dist. Lexis 6192 (S.D.N.Y. May 11, 1993); Masthead Mac Drilling Corp. v. Fleck, 549 F.Supp.
854, 856 (S.D.N.Y. 1982); Compania Espanola de Petroleos SA v. Nereus Shipping, SA, 527 F.2d
966 (2d Cir. 1975). See infra pp. 643-51, for a more detailed discussion of the circumstances
in which an arbitrator may be subject to interim judicial challenge under the FAA.
 (b) Challenges to selection of arbitral situs. As with interlocutory challenges to an arbitrator's
impartiality, some U.S. courts have held that interim judicial review of the selection of an
arbitral forum is available in exceptional circumstances. See Aerojet-General Corp. v.
American Arbitration Association, 478 F.2d 248 (9th Cir. 1973); infra pp. 609-13. In most
cases, however, such review is denied under the FAA. See infra pp. 609-13.
(c) Review of arbitrator's discovery or evidentiary orders. Do either the UNCITRAL Model Law or
the Swiss Law on Private International Law permit interlocutory judicial review of an
P "467" arbitral tribunal's discovery or evidentiary rulings? What if a party resists compliance
P "468" with such a ruling (e.g., a discovery order) and judicial enforcement is sought?
As Stanton illustrates, U.S. courts have generally refused to interfere with the discovery
process in arbitration. See infra pp. 495-514. Nevertheless, if an arbitral tribunal seeks to
obtain judicial enforcement of its discovery orders under §7 of the FAA, the court where
enforcement is sought will review the order. See infra pp. 508-10, for a more detailed
discussion.

(d) Review of arbitrators' provisional measures. When arbitrators grant provisional relief, their
awards will lack coercive effect unless judicial enforcement is sought. In the course of
ordering enforcement, the court will review the arbitrator's order. See Swiss Law on
Private International Law Article 183; UNCITRAL Model Law Articles 17 & 35.
Under the FAA, U.S. courts will enforce awards of provisional measures made by an
arbitral tribunal (and, of course, in so doing will review the award). Sperry Int'l Trade v.
Government of Israel, 670 F.2d 8 (2d Cir. 1982); Puerto Rico Maritime Shipping Authority v.
Star Lines, Ltd, 454 F.Supp. 368, 374-75 (S.D.N.Y. 1978); infra pp. 971-80.

(e) Review of arbitrators' jurisdictional decisions. Consider Article 16 of the UNCITRAL Model
Law and Article 186 of the Swiss Law on Private International Law. What do they provide
with respect to interlocutory judicial decisions on jurisdiction? Why?
In theory, U.S. courts have no power to review arbitrators' jurisdictional decisions on an
interlocutory basis. See supra pp. 89-92. Nevertheless, by commencing litigation on the
merits of a dispute, a party can compel its adversary to raise an arbitration agreement as
a defense, thereby often effectively allowing an interlocutory decision on arbitrability.
See supra pp. 92-93. Alternatively, a party can seek an injunction against an ongoing
arbitration, again provoking an interlocutory decision on the subject. See supra pp. 399,
406-07.

10. Rationale for exceptions to limitations on interlocutory judicial review of arbitrators' interim
rulings. Why are the topics identified above singled out for the possibility of at least a measure
of interlocutory judicial review? What features do these topics have which makes judicial
review especially important?
11. Continuing jurisdiction of court to “supervise” arbitration. A number of U.S. lower courts have
retained jurisdiction over the case after either staying litigation or compelling arbitration.
Moreover, some courts have specifically reserved the right to supervise the arbitration in order
to ensure that it proceeds promptly. Nederlandse Erts Tankersmaatschappij NV v. Isbrandtsen
Co., 339 F.2d 440 (2d Cir. 1964); Leesona Corp. v. Cotwool Mfg. Corp., 315 F.2d 538 (4th Cir. 1963);
Legg, Mason & Co. v. Mackall & Coe, Inc., 351 F.Supp. 1367 (D.D.C. 1972). This is particularly
common where statutory claims are asserted, see supra p. 294.
A few lower U.S. courts have, in compelling arbitration, specified what substantive law the
arbitrators should apply. See, e.g., G.B. Michael v. SS Thanasis, 311 F.Supp. 170 (N.D. Calif. 1970).
U.S. courts have done so particularly where federal statutory claims – such as those under the
antitrust or securities laws – are involved. See, e.g., PPG Industries, Inc. v. Pilkington plc, 825
F.Supp. 1465 (D. Ariz. 1993); supra p. 294. In other cases, courts have included provisions in
orders compelling arbitration setting forth various aspects of the arbitral procedure. Euro-Mec
Import, Inc. v. Pantrem & C., SpA, 1992 WL 350211 (E.D. Pa. 1992) (“The parties must reach
agreement within forty-five (45) days on how the arbitration will proceed in Geneva and inform
the court of their agreement; the court will order the location and terms of arbitration”);
Builders Federal (Hong Kong) Ltd v. Turner Construction, 655 F.Supp. 1400 (S.D.N.Y. 1987).
Nevertheless, the concept of judicial “supervision of the arbitral process is largely alien to the
promise of swift, non-national dispute resolution by international arbitration. It is also
inconsistent with well-established rules under the FAA against interlocutory judicial review of
interim arbitral awards. See supra pp. 462-67. Most courts will refuse to exercise any sort of
supervisory authority after ordering arbitration. Local 205 etc. v. General Elec. Co., 172 F.Supp.
960 (D. Mass. 1959).
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E. Evidence-Taking and Evidence-Presentation in International Arbitration (127)
The taking and presentation of evidence (including disclosure or discovery) are as important in
international arbitration as they are in litigation. The manner in which evidence is taken and
presented in international arbitration depends on a variety of factors. Particularly important
are the terms of the parties' arbitration agreement, any applicable institutional arbitration
rules, and the national procedural law governing the arbitration. Equally important are the
identity and attitude of the arbitral tribunal, which will typically possess a considerable
measure of discretion in adopting procedures for taking and presenting evidence. Finally, the
 taking of evidence in international arbitration can also be significantly affected by the actions
of national courts, which may have the power to either assist arbitral tribunals in taking
evidence or offer alternative means of discovery to the parties to an arbitration.
This section first examines the evidence-taking provisions of leading institutional arbitration
rules and national arbitration statutes, and the evidence-taking authority that these provisions
grant to international arbitral tribunals. Second, the section discusses the practical exercise of
P "469" evidence-taking authority by tribunals in international arbitration. Third, the section considers
P "470" in greater detail the impact of national arbitration legislation (and particularly the FAA in
the United States) on the evidence-taking powers of international arbitral tribunals.
1. Evidence-Taking by International Arbitral Tribunals Under Institutional Arbitration Rules
and National Law
There is great diversity in the modes of taking evidence in international arbitration. In a
considerable number of cases, the parties will agree to a relatively consensual process for both
taking and presentation of evidence in the arbitration. These agreements can produce many
different forms of evidence-taking. For example, there can be agreement that each party will
rely on its own documents and witnesses, with no right to seek disclosure or discovery from the
other party. Alternatively, parties can voluntarily agree to the disclosure to one another of
certain categories of information or documents. Or, parties sometimes agree that each shall
have the right to obtain discovery from one another (either pursuant to ad hoc standards or
pre-existing procedures). (128)
If voluntary evidence-taking does not occur, the manner of evidence-taking and evidence-
presentation in international arbitration is subject to the parties' arbitration agreement, any
applicable institutional rules, applicable national law, and the discretion of the arbitrators.
The interplay between these various sources of authority can be complex. As a practical
matter, however, it will often mean that the arbitral tribunal will have fairly substantial
discretion to define the manner of evidence-taking and evidence-presentation. The way in
which that discretion is actually exercised varies substantially among arbitral proceedings (as
discussed below).
In general, however, evidence-taking in the arbitral process often differs significantly from its
counterpart in a national court. As one national court succinctly put it:
When contracting parties stipulate that disputes will be submitted to arbitration, they
relinquish the right to certain procedural niceties which are normally associated with a formal
trial. One of these accoutrements is the right to pre-trial discovery. While an arbitration panel
may subpoena documents or witnesses, the litigating parties have no comparable privilege.
(129)
Indeed, the differences between disclosure and information-gathering in litigation and
arbitration can be sufficiently marked that the very term “discovery” is often a misnomer when
used in connection with international arbitration. (130)
P "470"
P "471"
Excerpted below are provisions from selected national arbitration statutes addressing the
taking and presentation of evidence in international arbitrations – including Articles 19, 24,
and 27 of the UNCITRAL Model Law, Article 184 of the Swiss Law on Private International Law,
Article 1696 of the Belgian Judicial Code, Articles 287 and 288 of the Guatemala Code of Civil
and Commercial Procedure, §7 of the FAA, and §7 of the Uniform Arbitration Act. Consider the
differences between these provisions, both as regards their effects and rationale, and the ways
that they might interact with various institutional arbitration rules.
Also excerpted below are evidence-taking and discovery provisions from leading institutional
arbitration rules, including the UNCITRAL, ICC, AAA International, and AAA Commercial
Arbitration Rules. Consider these various provisions, focussing on how they differ from one
another and from the discovery sections of the Federal Rules of Civil Procedure. Finally,
reexamine the arbitral award in ICC Case. No. 7626.
UNCITRAL MODEL LAW
Articles 18, 19, 24, and 27
[excerpted below at pp. 1016, 1017, 1018]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Articles 182 & 184
[excerpted below at p. 1034]
BELGIAN JUDICIAL CODE
Articles 1693, 1694 & 1696
[Articles 1693 and 1694 are excerpted above at p. 418]
1696(1). The arbitral tribunal may order an investigation, a report of an expert, an on-site
inspection, or a personal appearance of the parties and may accept a sworn statement as
being decisive or request supplementary oath. It may also, pursuant to the conditions set forth
in article 877 of this Code, order the production of documents held by any party.
1696(2). When the arbitral tribunal orders an investigation and the witnesses do not appear
voluntarily or refuse to take the oath or to testify, the arbitral tribunal shall authorize the
parties, or one of them, to petition the Court of First Instance (tribunal de première instance),
 with a fixed period of time, to have a juge commissoire appointed to supervise the
investigation. The investigation shall be conducted according to the rules customarily applied
in civil matters. Any time limits applicable to the arbitration are suspended by operation of
law until the investigation is completed.
P "471" 1696(3). The arbitral tribunal may not order the authentication of handwriting nor rule on an
P "472" objection relating to the production of documents or on the alleged unauthenticity of the
documents. In this case, it will allow the parties to bring the matter before the Court of First
Instance (tribunal de première instance) within a fixed period of time.
1696(4). Any time limits applicable to the arbitration are suspended by operation of law until
the day on which the arbitral tribunal receives notification, from the most diligent party, of the
final decision regarding the objection.
GUATEMALA CODE OF CIVIL AND COMMERCIAL PROCEDURE
Articles 287 & 288
[excerpted above at p. 415]
FEDERAL ARBITRATION ACT
9 United States Code §7
[excerpted below at p. 1000]
UNIFORM ARBITRATION ACT
Section 7
[excerpted below at p. 1006]
UNCITRAL ARBITRATION RULES
Article 24
[excerpted below at p. 1028]
AAA COMMERCIAL RULES (1999 VERSION)
Article 23
[excerpted below at p. 1051]
LCIA RULES (1998 VERSION)
Articles 20 & 22
[excerpted below at pp. 1081-83]
ICC RULES (1998 VERSION)
Article 20
[excerpted below at p. 1065]
P "472"
P "473"
IBA RULES ON THE TAKING OF EVIDENCE IN INTERNATIONAL COMMERCIAL ARBITRATION
[See Appendix N]
FINAL AWARD IN ICC CASE NO. 7626 OF 1995
22 Y.B. Comm. Arb. 132 (1997)
[excerpted above at pp. 440-41]
Notes on Evidence-Taking and Evidence-Presentation Provisions of Institutional Arbitration
Rules and National Laws
1. Parties' autonomy under national law with respect to evidence-taking and evidence-
presentation procedures. Consider Articles 18, 19(1), and 24(1) of the UNCITRAL Model Law,
Article 182 of the Swiss Law on Private International Law, and Article 1693 of the Belgian
Judicial Code. Note the parties' broad freedom to agree upon arrangements with respect to
evidence-taking. National arbitration legislation in most other developed jurisdictions is
similar. This comports with the general autonomy of parties, under most developed arbitration
statutes, to select the procedure governing their international arbitration. See supra pp. 426-
28, 443-44. Is there anything special about evidence-taking or evidence-presentation that calls
for stricter limits on party autonomy? Compare the fundamentally different approach of the
Guatemalan legislation to evidence-taking.
2. Parties' autonomy under the FAA with respect to evidence-taking and evidence-presentation
procedures. Compare the FAA's fairly skeletal provisions to Articles 18, 19, and 21 of the
UNCITRAL Model Law and Article 182 of the Swiss Law on Private International Law.
Nonetheless, as discussed above, U.S. courts have recognized broad party autonomy to agree
upon issues such as evidence-taking, discovery, and evidence-presentation. See supra p. 444.
3. Arbitral tribunal's authority under national law to specify manner of evidence-taking and
evidence-presentation procedures. Consider Articles 19(2) and 24(1) of the UNCITRAL Model Law,
Article 182 of the Swiss Law on Private International Law, and Article 1693(1) of the Belgian
Judicial Code. Note that these provisions grant arbitrators broad power – where the parties
have not otherwise agreed – to adopt particular procedures for issues such as evidence-taking
and discovery. Also compare §7 of the FAA and §7 of the Uniform Arbitration Act. Finally,
 consider Article 1696 of the Belgian Judicial Code.
How are the various statutes different? Which of the approaches of these various national laws
to the subject of discovery is preferable? Why? What should a national arbitration statute
ideally provide regarding discovery in an international arbitration? Who should be in control of
such evidence-taking – an arbitral tribunal, a national court or someone else? What role (if any)
should a national court play in evidence-taking in an international arbitration?
The interplay between national arbitration laws and the parties' arbitration agreement
(including applicable institutional rules) can be complex. In particular, if the parties'
agreement or applicable institutional rules grant the arbitral tribunal broad power to order
evidence-taking or discovery, is such a grant of discretion constrained by narrower provisions
of national law? For example, under Article 27 of the UNCITRAL Model Law, does a national
court's “rules on taking evidence” limit the parties' arbitration agreement granting the
arbitrators power to order broad document discovery and depositions? Conversely, does a
narrow grant of (or prohibition against) evidence-taking or discovery power in an arbitration
agreement curtail broader national law grants of authority? For more detailed discussion, see
infra pp. 491-95.
4. Arbitral tribunal's authority under the FAA to specify manner of evidence-taking and
evidence-presentation procedures. Consider §7 of the FAA. Although §7 does not specify the
arbitrators' authority with respect to evidence-taking or discovery in any detail, U.S. courts
P "473" have repeatedly held that the FAA permits an arbitral tribunal broad discretion to adopt
P "474" particular forms of evidence-taking or discovery. The decision in Card, excerpted above, is a
representative example of this freedom under the FAA. See supra pp. 441-43. See also Berhardt
v. Polygraphic Co. of Am., 350 U.S. 198, 203 (1956); Legion Ins. Co. v. Insurance General Agency,
Inc., 822 F.2d 541, 543 (5th Cir. 1987); Parsons & Whittemore Overseas Co. v. Societé Generale de
L'Industrie du Papier, 508 F.2d 969, 975-76 (2d Cir. 1974); Laminoirs etc. v. Southwire Co., 484
F.Supp. 1063, 1066-67 (N.D. Ga. 1980).
5. National arbitration statutes forbidding arbitrators from ordering disclosure or discovery. In
some civil law jurisdictions, arbitrators are forbidden by statute from ordering unwilling
parties to disclose information; instead, the parties (rather than the arbitral tribunal) must
request the assistance of a national court. Consider Article 1696 of the Belgian Judicial Code. Is
this a desirable procedural regime for obtaining disclosure of information in arbitration? Note
that it requires application by (or on behalf of) the arbitral tribunal to national courts and that
it transfers decisions about the need for and appropriate scope of discovery away from the
arbitral tribunal. Is this either efficient or consistent with the parties' objectives in agreeing to
arbitrate?
6. National arbitration statutes authorizing judicial assistance in taking evidence or obtaining
disclosure in aid of arbitration. What happens if an arbitral tribunal orders disclosure or
discovery, and a party refuses to comply? What powers does the arbitral tribunal have in these
circumstances? See infra p. 489 for discussions of a tribunal's power to draw adverse
inferences. Note the arbitrators' power under the arbitration legislation excerpted above to
apply to national courts for judicial assistance in compelling a party to give discovery. Note
also that the arbitrators can in turn authorize the parties to seek judicial assistance in ordering
discovery. Consider for example Article 1696 of the Belgian Judicial Code. Is this approach
appropriate?
7. National arbitration statutes forbidding judicial assistance in taking evidence or obtaining
disclosure in aid of arbitration. In contrast to the foregoing approach, other countries restrict
judicial assistance in aid of discovery in arbitration. Assume that the result is that arbitrators
are left without means of coercively compelling the pre-hearing disclosure of information. They
can, nonetheless, draw adverse inferences of fact and, less clearly, impose liability for breach
of implied terms of the arbitration agreement. See infra p. 489. Is this approach to discovery in
arbitration sensible? Compare it with the UNCITRAL Model Law regime. What are the
advantages and disadvantages of each?
8. Arbitrator's power to order disclosure or discovery generally limited to parties. Suppose that
A and B are parties to an arbitration, but critical evidence is in the hands of C. Under the
UNCITRAL Model Law, the Swiss Law on Private International Law, and the Belgian Judicial
Code, is the arbitral tribunal empowered to order C to provide the evidence? Do the
institutional arbitration rules excerpted above provide the tribunal with this authority? Is C
bound by the rules?
As discussed below, national law may in some cases give arbitrators power to order discovery
from non-parties. See infra p. 508. Section 7 of the FAA is one example of such legislation.
9. Scope of permitted discovery or disclosure in arbitration under national arbitration statutes.
What is the scope of “discovery” permitted under the UNCITRAL Model Law and FAA? Note that
each law refers to “taking evidence,” not to “discovery.” Is this choice of language significant?
How broad a discovery order may a tribunal make? Can a tribunal compel pre-hearing oral
depositions and pre-hearing production of documents? Or, is the tribunal limited to requiring
that evidence be adduced at a hearing? See infra pp. 508-14 for a more detailed discussion.
10. Power of arbitral tribunal to order discovery ?? disclosure under institutional arbitration
rules. An arbitral tribunal's power to order evidence-taking and/or discovery is often defined
in part by the parties' arbitration agreement and any applicable institutional arbitration rules.
Consider whether the various institutional rules set forth above grant the arbitral tribunal the
right to order discovery. Which rules do so and which do not? Do the rules impose any limits on
the scope of discovery? On the manner and procedures of discovery?
 Compare in particular the ICC Rules, the UNCITRAL Rules, and the AAA Commercial Rules.
Consider the following criticism (by a common law practitioner): Morgan, Discovery in
Arbitration, J. Int'l Arb. 12-14 (Sept. 1986) (“the [UNCITRAL Arbitration] Rules do not constitute
anything like an evenly balanced compromise between different jurisdictions, being heavily
slanted towards continental practice, and do not empower the tribunal to order general
discovery of relevant documents. Indeed, the only power that exists in this context is a very
limited one of ordering discovery in relation to matters on which expert evidence may be
called.”).
Also read the IBA Rules, reproduced in Appendix N. How do they compare with the institutional
P "474" rules set forth above? Which rules permit a tribunal to order the broadest scope of discovery?
P "475" Which rules, if any, would permit a tribunal to order U.S.-style discovery like that permitted
by the Federal Rules of Civil Procedure? Which, if any, would forbid such action?
11. Express provision in arbitration agreement concerning discovery ordered by arbitral tribunal.
In relatively rare cases, the parties will include a provision in their arbitration agreement or
underlying contract dealing expressly with discovery. This most frequently will occur by the
incorporation of the IBA Rules, the Federal Rules of Civil Procedure, or some other pre-existing
set of rules. Alternatively, the parties can also include their own specially-drafted provisions in
the arbitration agreement dealing with discovery. The following excerpts illustrate efforts by
various parties to deal with discovery contractually:
The Arbitration hearing will be held in The Hague, Holland, except that, to the extent that the
dispute pertains to the local market, business practices, or requires evidence primarily
obtainable in the Licensed Territory [the USA], the parties authorize the arbitrators to conduct
all or part of the proceedings in the Licensed Territory....
Remy Amerique, Inc. v. Touzet Distribution, SARL, 816 F.Supp. 213, 215 (S.D.N.Y. 1993).
In order to resolve the disputes hereunder expeditiously and economically, the parties will
confer and cooperate with each other on necessary and reasonable discovery, based on the
types of discovery set forth in Rules 26-37 of the Federal Rules of Civil Procedure, but which
shall be conducted in such a way as to limit the burdensomeness, delay, and expense of the
conventional discovery processes.
Baker & Stabile, Arbitration of Antitrust Claims: Opportunities and Hazards for Corporate
Counsel, 48 Bus. Law. 395, 433 (1993).
In conducting the arbitration, each party agrees it will produce at the request of counsel for the
other party, without objections other than those based on physical or legal impossibility or the
attorney-client or a similar privilege recognized in the jurisdiction in which the arbitration is
conducted:
(a) all documents or classes of documents and physical objects in the responding party's
control or to which it has access that the requesting party believes relevant to the just
determination of the dispute, and
(b) a statement of the expected testimony from any person on whose statements the
responding party will rely, covering all points to which such person is expected to testify.
The parties shall, in good faith, with the assistance and subject to the order of the arbitrator(s)
if necessary, agree on procedures to permit such production to be conducted in a manner that
enables access to the requested statements, documents and things that are relevant to the
proceedings, and nevertheless avoids unnecessary expense or disruption to the business of the
parties, for the primary purpose of assuring the orderly and prompt resolution of the dispute
referred to arbitration. The arbitrators may draw adverse inferences from the failure of a party
to produce tangible evidence or a statement from an expected witness.
Ehrenhaft, Discovery in International Arbitration Proceedings, 9 Private Investments Abroad 1
(Publication 662, Private Investments Abroad 2000).
12. Interpreting scope of arbitral tribunal's authority to order discovery under parties'
agreement and institutional rules. A provision in an arbitration agreement or institutional rules
dealing with discovery often only begins debate about the scope of discovery that can be
ordered. Consider the various institutional rules, excerpted above, and the IBA Rules. What
discovery powers do they grant to arbitral tribunal and what limits do they impose on a
tribunal's discovery powers?
Questions about the scope of the arbitrators' authority can arise in two principal contexts.
First, such issues may arise in the arbitration proceeding itself, when one party resists
proposals for tribunal-ordered discovery. Second, as discussed below, see infra pp. 491-514, a
tribunal can generally only coercively enforce its discovery orders by seeking the assistance of
national courts; in such judicial enforcement actions, the extent of the tribunal's authority
under applicable arbitration legislation to order discovery also can arise. As discussed in
detail below, the seemingly broad terms of the institutional rules may be subjected to
limitations derived from national law in both contexts. See infra pp. 492-93.
P "475"
P "476"
13. Power of arbitrators under institutional arbitration rules to order disclosure or discovery.
Consider the various institutional arbitration rules excerpted above. What powers do they
grant arbitrators to order the parties to provide disclosure or discovery to one another and/or
the tribunal?
 (a) Power of arbitral tribunal under LCIA Rules. Consider Article 22.1(d) & (c) of the LCIA Rules.
What discovery powers does it provide to an LCIA arbitral tribunal to order the parties to
give discovery to one another? Is there any doubt about this?
(b) Power of arbitral tribunal under ICC Rules to order disclosure or discovery. Although Article
20 of the ICC Rules does not expressly permit arbitrators to order discovery, does an ICC
tribunal have the implied authority to do so? The answer is generally in the affirmative.
See the discussion of Article 20's predecessor in the 1988 ICC Rules in W. Craig, W. Park & J.
Paulsson, International Chamber of Commerce Arbitration §26.01 (2d ed. 1990) (“This
authority [to order production of documents] is implicit in the arbitrator's mandate
under Article 14(1) ... to establish the facts ‘by all appropriate means.’”); Y. Derains & E.
Schwartz, A Guide to the New ICC Rules of Arbitration 252-54 (1999). Nevertheless, the ICC
Rules must be interpreted and enforced under national laws (which may provide for
different results in different countries).
(c) Power of arbitral tribunal under UNCITRAL rules to order disclosure or discovery. Consider
Article 24(3) of the UNCITRAL Rules. What powers to order disclosure or discovery does it
grant to arbitrators? What are the limits on this power? Compare it to the LCIA Rules.
(d) Power of arbitral tribunal under AAA Rules to order disclosure or discovery. Consider Rule R-
23 of the domestic AAA Commercial Arbitration Rules and Rule 19 of the AAA International
Rules. Does either grant the power to order pre-hearing discovery? Chiarella v. Viscount
Industries Co., 1993 WL 497967 (S.D.N.Y. 1993) (interpreting AAA Commercial Arbitration
Rules to permit pre-hearing discovery: “Although this language does not specifically
authorize an arbitrator to order pre-hearing discovery, it confers on arbitrators broad
powers to ensure that evidence is presented at arbitration hearings in such a manner as
to ensure that legal and factual issues are sufficiently developed. Plaintiff has cited no
authority explicitly limiting the power of an arbitrator to order discovery under the AAA
rules or to order the in camera inspection of documents.”).
14. Choice of law governing discovery. There is virtually no precedent considering conflict of
laws issues in connection with discovery in international arbitration. Nevertheless, contractual
provisions and institutional rules concerning discovery must be interpreted and enforced
under some national law. Albeit without analysis, U.S. courts have generally applied U.S. law to
the interpretation of discovery provisions in arbitration agreements and institutional rules. See
infra pp. 492-93.
In principle, an arbitral tribunal's power to order discovery should generally be governed by
the procedural law applicable to the arbitral proceedings. See supra p. 412-13. In rare cases,
where discovery is sought outside the arbitral situs, the law of the place where discovery is
sought may also apply. See infra pp. 493-94, 511.
15. Interpreting scope of arbitral tribunal's authority to order discovery under FAA. Many U.S.
courts have given arbitral tribunals broad discretion under the FAA to interpret applicable
institutional rules, including where they do so to order pre-hearing discovery. Chiarella v.
Viscount Industries Co., 1993 WL 497967 (S.D.N.Y. 1993) (interpreting AAA Commercial Arbitration
Rules to permit pre-hearing discovery: “Although this language does not specifically authorize
an arbitration to order pre-hearing discovery, it confers on arbitrators broad powers to ensure
that evidence is presented at arbitration hearings in such a manner as to ensure that legal and
factual issues are sufficiently developed. Plaintiff has cited no authority explicitly limiting the
power of an arbitrator to order discovery under the AAA rules or to order the in camera
inspection of documents.”); United Nuclear Corp. v. General Atomic Co., 597 P.2d 290, 302 (N.M.
1979); Buckeye Cellulose Corp. v. District 65, etc., 689 F.2d 629, 630-33 (6th Cir. 1982). Compare
infra p. 492, suggesting that §7 of the FAA limits pre-hearing discovery.
2. Arbitrators' Exercise of Authority to Adopt Procedures for Evidence-Taking or Evidence-
Presentation in International Arbitration
One of the most significant procedural acts of an arbitral tribunal is ordering disclosure or
P "476" discovery of documents or other materials. This first requires determining that an arbitral
P "477" tribunal has the authority to order a particular type of evidence-taking, disclosure or
discovery. Even if such power exists, an arbitrator must also be willing to exercise his powers in
a particular way in a given case. How an arbitral tribunal will exercise its discretion with
respect to evidence-taking and evidence-presentation is a very delicate topic, turning on the
identity and background of the arbitrators, the interests of the parties and their legal advisers,
and the nature of the dispute.
As a practical matter, in international arbitration, tribunals are often reluctant to order
extensive disclosure or discovery like that ordinarily available in common law litigation. (131)
The general reticence of international arbitrators to order disclosure or discovery arises from
several related considerations. A requirement that a party hand over unfavorable information
to its adversary, and the tribunal, is striking even in common law settings; for parties from civil
law jurisdictions, the requirement is much more controversial. With arbitrators seeking to
fashion neutral arbitral procedures, acceptable to parties from diverse legal cultures,
disclosure or discovery often requires special justification.
Whatever its merits, disclosure and discovery is also almost inevitably slow and expensive –
two characteristics that are inconsistent with at least the aspirations of the arbitral process.
Moreover, parties often agree to arbitration, and its confidentiality, with the purpose or in the
expectation that it will not involve discovery like that in national courts. (132) Finally,
uncertainties concerning the scope of an arbitrator's authority to order disclosure or discovery
and the difficulties sometimes encountered in enforcing discovery orders, persuade many
 arbitrators that requiring extensive disclosure is more trouble than it is worth.
Beyond these general considerations, an arbitral tribunal's approach to disclosure and
evidence-taking will inevitably be significantly influenced by the legal training and experience
of its members. (133) There are particularly important differences between civil law and
common law approaches to discovery. (134) In most civil law jurisdictions, “discovery” as such
does not exist; evidence-taking is largely controlled by the court and the parties have no right
to demand relevant materials from one another or from witnesses. (135) On the other hand,
many common law practitioners view discovery as an inevitable feature of dispute-resolution
and may be reluctant to deny either party that right. (136)
P "477"
P "478"
The importance of the differences between civil and common law backgrounds can be
exaggerated. While influenced by their legal training, experienced arbitrators in cases with
parties of diverse nationalities will usually seek to arrive at procedural decisions that are
“international,” rather than replicating parochial procedural rules in local courts. (137)
Moreover, intangible, individual characteristics of the arbitrators – age, temperament,
intelligence, time commitments, and interest – significantly influence their procedural
preferences.
A number of other factors also influence a tribunal's decisions about arbitral procedures. Most
importantly, the specifics of the parties' dispute often significantly affect arbitral procedures.
Indeed, one of the advantages of arbitration is the possibility of tailoring procedures to a
specific set of factual and legal issues to provide an efficient and accurate fact-finding
mechanism. (138)
Also important are the identities and procedural preferences of counsel to the parties: where
both parties' counsel have similar expectations and legal backgrounds, this will significantly
influence the tribunal's procedural decisions. For example, two sets of American lawyers from
U.S. law firms will often gravitate towards U.S.-style adversarial proceedings, while two
Continental European or Latin American law firms will likely favor more familiar, civil law
procedures.
Excerpted below are materials that illustrate how evidence-taking and disclosure takes place
in international commercial arbitrations. First, read the recently-revised International Bar
Association's Rules on the Taking of Evidence in International Commercial Arbitration. Second,
consider the excerpts from the Standard Rules of Evidence, a less-well-known effort than the
IBA Rules. Third, read the procedural decisions in ICC Case No. 7170 and ICC Case No. 5542,
which deal with discovery disputes. Fourth, read the UNCITRAL Notes on Organizing Arbitral
Proceeding, and consider how evidence-taking and discovery mechanisms will take place
within the broader setting of the arbitration. Finally, consider the award in Parker v. United
Mexican States, which illustrates an international tribunal's approach to evidentiary issues.
IBA RULES ON THE TAKING OF EVIDENCE IN INTERNATIONAL COMMERCIAL ARBITRATION
[See Appendix N]
P "478"
P "479"
STANDARD RULES OF EVIDENCE
Article 5
5(1). Each party shall deliver to the arbitrator, and exchange with the other parties, a list of all
the classes of its documents related to the dispute.
5(2). The other party shall be entitled to request, within 30 days after receipt of such list, a full
list of the documents of one or more of such classes (List of Documents) and to inspect one or
more of such documents, inspection to take place in such a way as to minimize the
inconveniences to the other parties; the applicant shall advance the costs related to discovery,
as fixed by the arbitrator.
5(3). In case of refusal to provide the List of Documents or to allow inspection within 30 days
after receipt of the notice to this effect, the other party shall be entitled to apply to the
arbitrator for an Order of Discovery. The parties are entitled to be heard on such application.
5(4). Before issuing such an order, the Arbitrator shall satisfy himself that such documents are
not irrelevant to the dispute, and that the application does not aim totally or partially to
confuse the matter through the production of quantity of unnecessary documents. An
application for discovery will have to be examined by the Arbitrator by proceeding to test the
relevance of a portion of such documents. On a party's application, before or after his order,
the Arbitrator shall conduct a hearing at which the application or his order will be discussed.
5(5). Whenever the arbitrator, after such an examination, has the impression that a large
number of the documents, production of which is sought, is irrelevant, he shall be entitled to
appoint a lawyer as his expert to divide the documents in three classes; those which he
considers relevant, the irrelevant ones and those which might be relevant. The party which
seeks production of documents, the relevance of which has been challenged, will have to
advance the costs of the expert and to deposit an amount that covers the costs caused to the
other party by its inspection (such as the time spent by the other side's staff to attend
inspection of the documents which are found irrelevant). All the costs caused by the inspection
of the irrelevant documents are to be borne by the party which has applied for their
production, even if its claim is eventually successful. Likewise the Arbitrator may, on
application, appoint an expert to divide already produced documents into said three
 categories and to report on them and place the expert and the Arbitrator's costs and the other
parties' costs to the charge of the party which has produced irrelevant documents even if the
claim of that party succeeds.
5(6). Apart from general discovery, the production of specific documents may be ordered by
the Arbitrator on a party's application at any stage of the proceedings until the hearing for the
final addresses of the parties to the Arbitrator.
5(7). Before deciding on the application, the arbitrator shall invite the parties to file their
written arguments or to be heard if they so wish.
P "479"
P "480"
5(8). The unjustified refusal by a party to discover documents as well as the refusal of a party to
testify may be used by the Arbitrator as one of the elements of his decision.
UNCITRAL NOTES ON ORGANIZING ARBITRAL PROCEEDINGS
[excerpted below at pp. 1115-30]
PROCEDURAL ORDER IN ICC CASE NO. 7170 OF 1992
D. Hascher, Collection of Procedural Decisions in ICC Arbitration 1993-1996 56
(1977) (©)
Regarding the testimony of Mr. [X]
1. If plaintiff so requests the testimony of Mr. [X] shall be taken.
2. Mr. [X] can testify close to his home, before a public notary, in Italian, if necessary.
3. The Tribunal will not be present.
4. Counsel for defendant may be present and may put questions. In that case simultaneous
translation is to be provided into English, provisionally at the expense of the plaintiff.
5. An English-language transcript of all declarations shall be provided, authenticated by the
notary public and by a qualified translator and shall be sent to the parties, the Tribunal
and the Secretariat by [date] at the latest. 6. Counsel for the plaintiff should send per
telefax a proposal with all specifications at their earliest convenience and addressed to
counsel for defendant, the Tribunal and the Secretariat.
PROCEDURAL ORDER IN ICC CASE NO. 5542 OF 1987
D. Hascher, Collection of Procedural Decisions in ICC Arbitration 1993-1996 63
(Hascher, ed.) (©)
[The arbitration occurred under ICC Rules, with its seat in Ethiopia. The chairman of the
P "480" tribunal was a civil lawyer.] 18. In their Submission on the merits of [date], Claimant required
P "481" the Defendant: “to disclose all documents passing between itself and the [Bank],” and “to
disclose all documents in their possess or control relating to this contract.” The second request
was directed to the Engineer as well.
19. The grounds for the Claimant's request was that “(it) understands the continued non-
payment of the foreign currency element of Certificates Nos. [A] and [B] and [C] subsequently
Certificates Nos. [D] and [E] has arisen as a result of an instruction issued to the [Bank] by the
Defendant.” As to the second request, Claimants stated that
“(it) understands the Defendant instructed the Engineer to issue a certificate under Clause 63.1
immediately it (the Defendant) received the notice of termination by the Claimant.”
The certificate thus referred to is the document issued by the Engineer which allows the
Employer, according to clause 63.1 of the General Conditions of the contract in dispute, “after
giving 14 days' notice in writing to the Contractor (to) enter upon the Site and the Works and
expel the Contractor therefrom,” which the Employer actually did in the instant case.
20. By telex of [date], solicitors to Defendant, objected that Claimant's application for
“discovery” was premature, and that the “discovery” required would “involve the generation of
massive number of copy documents many of which are probably not relevant to the matter in
issue in the arbitration.”
21. In its “Submission for hearing on [date],” Claimant stated again that it “required to see” the
documents indicated in its Submission in the merits, however limiting the request as to the
documents passed between the Defendant and the Engineer to those which were passed from
[a particular date] to the present date.
22. In its own Submission of [date], Defendant relied on article 249 of the Ethiopian Code of
Civil Procedure, stating that this provision gives “power to the Courts to require the
presentation of any document in the absence of which the Court considers the issues of the
case cannot be correctly framed.” However, Defendant stated that Ethiopian Courts, “exercise
this power not at the request of the Claimant but on their own initiative” and that they do so
“very rarely,” and only when “they are convinced of the relevance and importance of the
documents.”
Defendant concluded that under the Ethiopian law of procedure, which he considers to be
applicable “to the present dispute,” Claimant's request was not to be granted, “since” (the
latter) “did not request for the disclosure of specific documents (title, date, reference number,
etc.) and did not show the relevance of disclosure of all documents without exception”
 (relevance which, says the Defendant, “cannot be reasonably presumed”).
23. Finally, at the hearing of [date], Claimant amended its request for disclosure in the
following terms:
P "481" “All documents passing between the Defendant and the Engineer relating to or in any way
P "482" referring to: (a) Any request by the Claimant, for an extension of time the contract period, (b)
the issue by the Engineer of a certificate under clause 63.1 of the Conditions of Contract of Civil
Works.
All documents passing between the Defendant and the [Bank] relating to or in any way referring
to any instruction or similar request by the Defendant to the [Bank] not to make payment to the
Claimant of any of certificates Nos. [A-E] inclusive....”
24. The parties have agreed in the Terms of Reference, that:
“(t) rules governing the proceedings before the arbitrators shall be those resulting from the
Rules of Conciliation and Arbitration of the International Chamber of Commerce, as published
by the latter in 1975, and, where these Rules are silent, any rules which the arbitral tribunal
may settle, whether or not reference is thereby made to a municipal procedural law to be
applied in the arbitration.”
Following to the execution of the Terms of Reference, amended Rules of Conciliation and
Arbitration were published by the ICC, which entered in force on 1st January 1988. However, it is
not necessary to enter here into the discussion of the applicability of the Rules ratione
temporis, since their provisions which are relevant in the instant case (namely Articles 24 and
26, already referred to, and article 14-1, 1st sentence, to which reference will be made
hereunder) are identical in the 1975 and in the 1988 versions.
25. Now, while the ICC Rules do not contain any provision dealing with “discovery” properly
speaking, it is enough to recall here that according to Article 4(1) “(t)he arbitrator shall proceed
within as short a time as possible to establish the facts of the case by all appropriate
measures.”
This provision allows the arbitrators to ask the parties to produce the documents in their
possession or control, which in their view are relevant to the case. Moreover, one might notice,
ex abundente cautela, that as the Defendant recalls itself, article 249 of the Ethiopian Code of
Civil Procedure does confer such power on the Ethiopian Courts, which shows that such a
measure – being, indeed discovery by inspection of one party's files – is not alien to Ethiopian
law.
In addition, the Tribunal stresses that no request or injunction for production of documents
might be addressed by an arbitral tribunal to third parties, on which such a tribunal has no
jurisdiction of whatever kind.
26. In the circumstances of the case, the Tribunal considers that the amended request for
disclosure of documents, such as presented by the Claimant during the hearing of [date], may
furnish a basis to an order to [be] issued in this respect. However, the same is to be restricted
by deciding that the documents passing between the Defendant and the Engineer relating to
P "482" the implementation of clause 63.1 of the Conditions of Contract are those relating or referring
P "483" to the certificate referred to by the Defendant in its letter of [date], this certificate being the
only one which may be relevant to the issue of the expulsion of the Contractor by the Employer.
As to the documents passing by the Defendant and the [Bank], they would be relevant only
insofar as they concern the foreign currency element of Certificates Nos. [A-E] inclusive.
27. Consequently, disclosure of documents is hereby ordered by the Tribunal within the limits
thus indicated.
Further, it is hereby ordered that the Claimant is not entitled to any inspection of the
Defendant's files.
FINAL AWARD IN ICC CASE NO. 7626 OF 1995
XXII Y.B. Comm. Arb. 132 (1997)
[excerpted above at pp. 440-41]
PARKER v. UNITED MEXICAN STATES (U.S. v. MEX.)
4 R.I.A.A. 35, 39 (General Claims Commission 1926)
For the future guidance of the respective Agents, the Commission announces that, however
appropriate may be the technical rules of evidence obtaining in the jurisdiction of either the
United States or Mexico as applied to the conduct of trials in their municipal courts, they have
no place in regulating the admissibility of and in the weighing of evidence before this
international tribunal. There are many reasons why such technical rules have no application
here, among them being that this Commission is without power to summon witnesses or issue
processes for the taking of depositions with which municipal tribunals are usually clothed. The
Commission expressly decides that municipal restrictive rules of adjective law or of evidence
cannot be ere introduced and given effect by clothing them in such phrases as “universal
principles of law,” or “the general theory of law,” and the like. On the contrary, the greatest
liberality will obtain in the admission of evidence before this Commission with the view of
discovering the whole truth with respect to each claim submitted.
As an international tribunal, the Commission denies the existence in international procedure
of rules governing the burden of proof borrowed from municipal procedure. On the contrary, it
holds that it is the duty of the respective Agencies to cooperate in searching out and
 presenting to this tribunal all facts throwing any light on the merits of the claim presented. The
Commission denies the “right” of the respondent merely to wait in silence in cases where it is
reasonable that it should speak. To illustrate, in this case the Mexican Agency could much
more readily than the American Agency ascertain who among the men ordering typewriting
materials from Parker and signing the receipts of delivery held official positions at the time
P "483" they so ordered and signed, and who did not. On the other hand, the Commission rejects the
P "484" contention that evidence put forward by the claimant and not rebutted by the respondent
must necessarily be considered as conclusive. But, when the claimant has established a prima
facie case and the respondent has offered no evidence in rebuttal the latter may not insist that
the former pile up evidence to establish its allegations beyond a reasonable doubt without
pointing out some reason for doubting. While ordinarily it is incumbent upon the party who
alleges a fact to introduce evidence to establish it, yet before this Commission this rule does
not relieve the respondent from its obligation to lay before the Commission all evidence within
its possession to establish the truth, whatever it may be.
For the future guidance of the Agents of both Governments, it is proper to here point out that
the parties before this Commission are sovereign Nations who are in honor bound to make full
disclosures of the facts in each case so far as such facts are within their knowledge, or can
reasonably be ascertained by them. The Commission, therefore, will confidently rely upon each
Agent to lay before it all of the facts that can reasonably be ascertained by him concerning
each case no matter what their effect may be. In any case where evidence which would
probably influence its decision is peculiarly within the knowledge of the claimant or of the
respondent Government, the failure to produce it, unexplained, may be taken into account by
the Commission in reaching a decision. The absence of international rules relative to a division
of the burden of proof between the parties is especially obvious in international arbitrations
between Governments in their own right, as in those cases the distinction between a plaintiff
and a respondent often is unknown, and both parties often have to file their pleadings at the
same time. Neither the Hague Convention of 1907 for the pacific settlement of international
disputes, to which the United States and Mexico are both parties, nor the statute rules of the
Permanent Court of International Justice at the Hague contain any provision as to a burden of
proof. On the contrary, article 75 of the said Hague Convention of 1907 affirms the tenet
adopted by providing that “The parties undertake to supply the tribunal as fully as they
consider possible, with all the information required for deciding the case.”
Notes on Arbitrators' Exercise of Evidence-Taking and Disclosure Powers
1. IBA Supplementary Rules of Evidence. In 1983, the International Bar Association published
the “Supplementary Rules of Evidence” for use in international arbitration. The Rules were
revised and reissued in 1999, re-titled the “IBA Rules on the Taking of Evidence in International
Commercial Arbitration.” The 1999 version of IBA Rules is reproduced in Appendix N and
discussed above. See supra pp. 46-47.
Review the 1999 IBA Rules, and consider whether or not they are likely to be useful in a
particular case. Note that the IBA Rules apply only when the parties agree to them (which is
very seldom). Nevertheless, even when they are not formally adopted, the IBA Rules can
influence both the arbitral tribunal's disposition of discovery and evidentiary issues and the
parties' approach to negotiating a mutually acceptable treatment of discovery. For
commentary on the IBA Rules, see D. Shenton, An Introduction to the IBA Rules of Evidence, 1 Arb.
Int'l 118 (1985); M. Rubino-Sammartino, International Arbitration Law 374-75 (1990); Veeder,
Evidential Rules in International Commercial Arbitration: From the Tower of London to the New
1999 IBA Rules (Nov. 1999); Buehler & Dorgan, Witness Testimony Pursuant to the 1999 IBA Rules
of Evidence in International Commercial Arbitration – Novel or Tested Standards?, 17 J. Int'l Arb. 3
(2000); IBA Working Party, Commentary on the New IBA Rules of Evidence in International
Commercial Arbitration, 2 Bus. Law Int'l 14 (2000).
P "484"
P "485"
The IBA Rules were originally designed to provide a neutral set of procedures that would be
equally fair and familiar to both civil law and common law parties. Shenton, Supplementary
Rules Governing the Presentation and Reception of Evidence in International Commercial
Arbitration, X Y.B. Comm.Arb. 145, 146 (1985). Some commentators have remarked, however, that
the IBA Rules ultimately adopted a largely common law approach to arbitration. M. Rubino-
Sammartano, International Arbitration Law 375 (1990). The 1999 version of the IBA Rules have an
even greater common law orientation, which will do little to reduce such comments.
2. Standard Rules of Evidence. In 1987, the Mediterranean and Middle East Institute of
Arbitration drafted a set of discovery and evidentiary rules, titled the Standard Rules of
Evidence, intended as an alternative to the IBA Rules. The Standard Rules take a somewhat
more limited approach to discovery than the IBA Rules. Consider, for example, the excerpts
above concerning document “discovery” under the Standard Rules of Evidence. Which
approach is more suitable for international arbitrations between commercial enterprises?
3. Characteristics of evidence-taking and disclosure in international arbitration. Although
generalizations are risky, as a practical matter, evidence-taking and disclosure in international
arbitration often have several recurrent features.
 (a) Control of the tribunal – as opposed to the parties – over disclosure under institutional rules
and national laws. Consider the extent to which disclosure in international arbitration is –
or is not – party-initiated under the institutional arbitration rules, national laws, and
various model rules excerpted above. Note how the diary pages which were at the heart
of the procedural dispute in ICC Case No. 7626 were produced.
Note that Article 3(2) of the 1999 IBA Rules permits party-initiated disclosure requests
(“Requests to Produce”). This approach is atypical particularly outside the common law
world, and does not reflect contemporary international practice. Is it nonetheless wise?
Compare Article 3 of the 1999 IBA Rules with the Standard Rules of Evidence.
Compare the discovery provisions of Article 3(2) of the 1999 IBA Rules and the Standard
Rules of Evidence with the pretrial discovery provisions of the Federal Rules of Civil
Procedure; if you were counsel for a party in an arbitration, which was anxious to obtain
broad discovery, would you prefer the above arbitration rules or the Federal Rules? Note
that most institutional arbitration rules do not grant the parties the general right to make
discovery demands on other parties (or non-parties) as a matter of course. Discovery
instead generally occurs only if ordered by the tribunal, usually as part of its initial
procedural timetable for the arbitral proceedings.

(b) Limited scope of “discovery” in international arbitration as compared to U.S. pre-trial

discovery. In practice, discovery or disclosure in international arbitration is significantly
more limited than that in U.S. and other common law litigation. Consider the scope of the
“discovery” which was ordered in ICC Case No. 5542. Compare the scope of the tribunal's
ultimate order to that originally sought, and to what would be available under the
Federal Rules of Civil Procedure. What were the differences between what was sought and
what was ordered? Note also the procedural background of the “discovery” order, which
included an explanation at an oral hearing for why the requested materials were
important. Compare also the common law oriented terms of Article 3(3) of the 1999 IBA
Rules.
Even in common law jurisdictions, like the United States, discovery tends to be more
limited in arbitration than in litigation. See United Nuclear Corp. v. General Atomic Co., 597
P.2d 290, 302 (N.M. 1979) (“As a general rule, discovery is very limited in arbitration
proceedings.”); O.R. Sec., Inc. v. Professional Planning Assoc., 857 F.2d 742, 747-48 (11th Cir.
1988) (“Arbitration proceedings are summary in nature to effectuate the national policy of
favoring arbitration, and they require ‘expeditious and summary hearing, with only
restricted inquiry into factual issues’”). In the view of an experienced common law
practitioner, discovery in arbitration “should respond in a manner which satisfies the
factual needs of the dispute without plunging the arbitration into the excesses of
discovery which sometimes accompany litigation.” von Mehren, Rules of Arbitral Bodies
Considered From a Practical Point of View, 9 J. Int'l Arb. 105, 111 (1992). See supra pp. 470-71.
Nonetheless, when parties from common law jurisdictions arbitrate before a common law
arbitrator in a common law state, discovery along common law lines is a very distinct
possibility.

(c) Parties' agreement on procedures for evidence-taking and disclosure. In international

arbitration, procedures often proceed with some substantial measure of agreement
P "485" between the parties. Before any decisions are made by the tribunal as to disclosure, the
P "486" parties' counsel often agree upon a satisfactory approach to discovery. This is
contemplated by most leading institutional rules and almost invariably welcomed by
tribunals. UNCITRAL Rules Article 1(1); LCIA Rules Article 14. The terms of the parties'
agreement can define the scope and character of disclosure.
(d) Commonly-used approaches to evidence-taking and disclosure in international arbitration.
Where no agreement between the parties is reached, the arbitrators will usually issue
procedural orders defining the scope and mechanisms of disclosure. They will do so after
hearing from the parties what legal and factual issues the case presents, and how each
would prefer evidence-taking to be structured. At least in significant cases, it is common
for the tribunal to order each party to produce, at a fairly early stage in proceedings,
documents and other materials on which it wishes to rely. Each party will also ordinarily
be required to prepare and produce written “witness statements” by the individuals on
whose testimony it proposes to rely. Each party will then review its adversary's
submissions and, if “discovery” is permitted, request that additional documents or
categories of documents be disclosed. The tribunal will often suggest that the parties
comply with such requests, subject to its own views concerning relevance, materiality,
privilege, and the like. As a practical matter, many requests will be for specific
documents and, where U.S.-style requests for categories of documents are made, stricter
standards of relevance are very likely to be applied. If the tribunal's initial suggestion
does not resolve matters, it may then hear a party's application for a more formal
disclosure order. Note that this is what ultimately transpired in ICC Case No. 5542.
Compare also Article 3 of the 1999 IBA Rules.
 (e) Impact of procedural law applicable to arbitration on evidence-taking and disclosure. As
discussed above, the national procedural law applicable to the arbitration has a
potentially significant impact on evidence-taking and disclosure. See supra pp. 412-13,
473-75. As a practical matter, the applicable procedural law will often be that of the
arbitral situs. Arbitrators will almost always take care to ensure that they act in
accordance with the evidence-taking provisions of the arbitration statute of the arbitral
situs. Note the provisions of Article 2(1) of the 1999 IBA Rules.
Consider what weight the arbitral tribunal in ICC Case No. 5542 gave to the Ethiopian Code
of Civil Procedure (note that the arbitral situs was Ethiopia). Recall the discussion above
concerning the procedural law of the arbitration, and the inapplicability of rules of civil
procedure used in local courts to an international arbitral tribunal. What exactly was the
importance of the Ethiopian Code of Civil Procedure in the tribunal's analysis in ICC Case
No. 5542?
Consider also the weight that the arbitral tribunal in ICC Case No. 7626 gave to the
procedural law of the arbitration in determining issues of evidence-taking. Note the
tribunal's discussion of what nation's law (England or India) provided the procedural law
of the arbitration in ICC Case No. 7626.
Consider again Article 1696 of the Belgian Judicial Code, Article 184 of the Swiss Law on
Private International Law, and §7 of the FAA, which are excerpted above. Note how each
provision affects disclosure in arbitral proceedings.

(f) Importance of institutional arbitration rules to exercise of arbitral tribunal's evidence-

taking authority. Also critical to an international arbitral tribunal's exercise of disclosure
or evidence-taking powers are the terms of any applicable institutional arbitration rules.
As the order in ICC Case No. 5542 illustrates, the ICC Rules have generally been understood
by arbitral tribunals as authorizing discovery orders. See also supra p. 476. Arbitral
tribunals typically rely upon the general grant of evidence-taking authority in
institutional rules as the primary basis for any discovery orders they make.
(g) Evidence-taking generally limited to parties to the arbitration. Evidence-taking in
international arbitration is ordinarily limited to the parties to the arbitration. Disclosure
is seldom sought or ordered from non-parties. The order in ICC Case No. 5542 (and
particularly paragraph 25) is a good example of this approach.
The limitation of evidence-taking in international arbitration is in substantial part a
result of limits on the arbitral tribunal's power. The powers conferred by the arbitration
agreement and any institutional rules it incorporates extend only to the parties to that
agreement. See supra p. 474. As discussed below, there are instances in which national
law may grant arbitrators power to take evidence from non-parties, either with or without
judicial assistance from national courts, but this authority is infrequently exercised. See
infra p. 508.
Note how Article 3(8) of the 1999 IBA Rules deals with possible disclosure by or discovery
from nonparties. What does Article 3(8) mean?
P "486"
P "487"
4. Document disclosure in international arbitration. The most common and significant mode of
disclosure in international arbitration is document disclosure. Consider the procedural order
in ICC Case No. 5542. It illustrates the reluctance that many tribunals display when requested to
order document disclosure. Note the tribunal's refusal to order one party to permit the other
to inspect its files. Note also the tribunal's concern regarding the materiality of the documents
requested. Compare the provisions of the 1999 IBA Rules and the Standard Rules of Evidence
regarding document disclosure.
5. Depositions in international arbitration. A common feature of U.S. litigation is the deposition
on oral examination. In U.S. practice, a deposition involves the oral questioning of a party or
witness, under oath and with a verbatim transcript, by an attorney for a party. The party or
witness is accompanied by its attorney, who has limited rights to object to particular
questions. Depositions ordinarily take place well in advance of hearings, and are not attended
by the judge (or tribunal). The transcript of the deposition can, in certain circumstances, be
used as evidence at subsequent hearings. See generally C. Wright & A. Miller, Federal Practice
and Procedure §§2101-2120 (1970).
Depositions are not infrequently used in domestic U.S. arbitrations, but are much less common
in international arbitration. See M. Rubino-Sammartano, International Arbitration Law 383
(1990). In cases where U.S. counsel are involved, parties sometimes voluntarily agree to
reciprocal depositions of the parties' officers and relevant employees. McClelland,
International Arbitration: A Practical Guide for the Effective Use of the System for Litigation of
Transnational Commercial Disputes, 12 Int'l Law. 83, 91 (1978); Goekjian, ICC Arbitration From a
Practitioner's Perspective, 14 J. Int'l L. & Econ. 407, 421 (1980). In international cases involving
non-U.S. counsel, and particularly counsel from civil law jurisdictions, oral depositions are
virtually unheard of.
Is a tribunal's authority to order depositions, over a party's objections, any different from its
authority to order document production? As a practical matter, arbitrators are less willing to
do so. In significant part, this is because such depositions can involve personal inconvenience
to the deponents and because they are conducted outside the presence of, and control of, the
tribunal. Moreover, unfamiliarity of non-U.S. practitioners with the procedural mechanics of
depositions (objections, admissibility) is a deterrent to their use. In appropriate cases,
 however, these considerations should not prevent a tribunal from ordering depositions. In
particular, they permit a party access to witnesses in the other party's control who have
information unfavorable to the latter. In principle, a tribunal's authority to compel depositions
of persons within the control of the parties should be no different from its authority to order
production of documents.
Consider the procedural order in ICC Case No. 7170. The practical impact of the order is almost
identical to that of a U.S.-style deposition. Consider the various issues that needed to be
resolved for this “civil law deposition” to proceed. Who would be permitted to examine – and
cross-examine – the witness? What language would be used? On what topics could questions be
asked? What if the witness refused to answer certain questions? What record would be kept of
the deposition? Note that the deposition will occur outside the tribunal's presence. Is this
appropriate?
What provisions do the 1999 IBA Rules make for depositions? What is an “Evidentiary Hearing”?
Consider the various provisions of the Belgian Judicial Code, the Swiss Law on Private
International Law, the UNCITRAL Model Law, and the FAA, excerpted above. To what extent
does each permit or forbid depositions?
6. Depositions under §7 of the FAA. The express terms of §7 of the FAA permit witnesses to be
summoned to testify before the tribunal (i.e., at an evidentiary hearing). There is no express
provision in §7 for pre-hearing depositions, either before the tribunal or in its absence. Some
U.S. courts have therefore concluded that §7 does not authorize arbitrators to order pre-
hearing discovery. Integrity Ins. Co. v. American Centennial Ins. Co., 885 F.Supp. 69, 72-73
(S.D.N.Y. 1995) (arbitrator may not rely on §7 to order pre-hearing depositions of non-parties).
Other U.S. courts have sometimes upheld tribunal-ordered pre-hearing depositions. United
Nuclear Corp. v. General Atomic Co., 597 P.2d 290, 302 (N.M. 1979) (discovery in arbitration said
(incorrectly) to be generally limited to “taking of depositions of witnesses who cannot be
subpoenaed or who are unable to attend the hearings”); Oceanic Transport Corp. v. Alcoa S.S.
Co., 129 F.Supp. 160 (S.D.N.Y. 1954); Avon Converting Co. v. Home Ins. Co., 93 N.Y.S.2d 90 (Sup. Ct.
1949). Note also that, under §7 of the Uniform Arbitration Act, arbitrators can “permit”
depositions, but not compel them.
7. Written witness statements in international arbitration. As noted above, it is common
P "487" practice in contemporary international arbitration for witnesses to provide evidence through a
P "488" written “witness statement,” which can subsequently be tested or amplified through oral
questioning. In this regard, consider Article 4 of the revised IBA Rules. Is the procedure set out
therein sensible? What risks does it create? Consider the following explanation of the IBA
procedure (based upon the pre-1999 version of the IBA Rules):
Article 5 provides a somewhat novel compromise between the common law and civil law
approaches. Verbal testimony is presented to the tribunal prior to the hearing in the form of a
written deposition. The right of a party to cross-examine exists only on those matters that are
directly in issue and in respect of which advance notice is given by means of an oral evidence
notice. The arbitrator has the unfettered power to decide whether oral testimony will be heard
and cross-examined. The witness is first questioned by the arbitrator. He may thereafter be
examined and re-examined by the parties in common law manner. The procedure can be
stopped by the arbitrator at any stage if he considers that it is unlikely to serve any further
relevant purpose. Witnesses can be called without the prior filing of a witness's statement only
if it can be shown that the witness has refused to give one and cannot be compelled to do so
but is, apparently, prepared to give oral testimony at the hearing (Article 5.12). It is felt for
obvious reasons that such occasions are likely to be extremely rare.
Shenton, An Introduction to the IBA Rules of Evidence, 1 Arb. Int'l 118, 123-124 (1985).
8. Compelling attendance of party's witness at evidentiary hearings. Suppose that one party
submits a written witness statement from a senior employee, which is directly relevant to the
parties' dispute, but the party indicates that the witness will not be available for an oral
hearing before the tribunal. What power does a tribunal have to compel attendance of the
party's witness at a hearing? Consider the tribunal's authority under the ICC, LCIA, AAA,
UNCITRAL, and IBA Rules. Consider also the national arbitration legislation excerpted above.
One course of action is for a tribunal to order a party to produce employees whose written
testimony it has procured. What if the witness is not an employee or otherwise subject to the
control of either party? What if a party indicates that it does not intend to rely on the
testimony of an employee who clearly possesses material information about the disputed
matters? What can the other party do? What can the tribunal do?
Consider Article 4(7) of the 1999 IBA Rules. What if the arbitrators wish to question someone who
submitted a witness statement and who the parties have agreed need not appear at the
hearing?
What limitations are there upon the tribunal accepting into evidence (and relying upon) a
written witness statement from an individual who did not appear at a hearing or submit to
cross-examination? What obligations are there on a tribunal to accept the written witness
statement of a material witness, even if he or she is not available for cross-examination?
Consider Article 4(8) of the 1999 IBA Rules.
9. Party representatives as witnesses. In some jurisdictions, national law limits the ability of
party representatives (e.g., the parties themselves, if natural persons, or officers, directors, or
employees of juridical entities) to provide witness evidence. Other jurisdictions adopt
different rules, including allowing such testimony subject to the fact-finder's weighing of a
witness's credibility. How should these sorts of evidentiary restrictions be applied in
 international arbitrations? Consider the following dissent by an Iranian judge, protesting
against the admission of testimony from a party in an arbitration before the Iran-U.S. Claims
Tribunal:
Although the Tribunal acknowledges that the Claimant has presented no evidence or
documentation in order to establish its nationality, the majority has exempted the Claimant
from the obligation to do so. Without the slightest legal basis, it has accepted the assertions
solely on the basis of the statements of Mr. Jennings himself, who is an interested party in his
claim and thus it has made it clear that its Award is invalid. Is it not unfair and oppressive that
the unsubstantiated statements by the Claimant in an international forum be accepted as
establishing its allegations, and that such a considerable sum be awarded against a sovereign
government merely on the basis of an allegation brought against it? Indubitably, those persons
with an interest in the Tribunal's arbitration will not relax their vigilance and will not readily
overlook such high-handed decisions, nor will the international legal system, closely following
the Tribunal's decision. 5 Iran-U.S. C.T.R. at 23.
P "488"
P "489" Compare Article 4(2) of the 1999 IBA Rules.
10. Site inspections in international arbitration. In some cases, visits by the arbitrators to a
particular site may be necessary or appropriate. Such inspections will virtually always occur
with the agreement of the parties, whose representatives will attend. Video recordings,
photographs, and other records of the visit can be made. Care should be taken to avoid ex
parte communications with the arbitrators in the course of the visit.
Consider Article 7 of the 1999 IBA Rules. What practices does Article 7 forbid?
There is no express provision in §7 of the FAA for court-ordered site inspections. The section
should be interpreted, however, as impliedly authorizing such judicial assistance.
11. Expert reports in international arbitration. In some cases, arbitrators appoint an expert to
assist them, in addition to any experts retained by the parties. Expert advice is typically
sought on issues of fact, but also occasionally on matters of foreign law. Some institutional
rules specifically permit such appointments. See ICC Rules Article 20(4) (“The Arbitral Tribunal,
after having consulted the parties, may appoint one or more experts, define their terms of
reference, and receive their reports.”); UNCITRAL Rules Article 27. National law also sometimes
addresses the power of arbitrators to order expert reports. Consider Article 1696 of the Belgian
Judicial Code.
Parties occasionally request the tribunal to appoint an expert. Arbitrators are not required
under most national laws to do so, and often do not. Pepsico, Inc. v. Iran, 13 Iran-United States
C.T.R. 3, 17 (1986); Arenco-BMD Maschinenfabrik GmbH v. Societa Ceramica Italiana Pozzi-Richard
Ginori SpA, XI Y.B. Comm. Arb. 511 (1984). Conversely, a tribunal can appoint an expert sua
sponte, without a request by a party. It would be unusual for an arbitrator to appoint an expert
over both parties' objections.
Consider Articles 5 and 6 of the 1999 IBA Rules. How do they deal with experts?
If an expert is appointed, the tribunal should solicit and consider the parties' views on his
qualifications and on the specific terms of his assignment. Compare ICC Rules Article 20(4). The
latter point is particularly important: to be useful, the expert's report must be focussed on
precise issues of fact, and must not purport to resolve the parties' dispute. The parties must
also be permitted to review and comment on the expert's report, to provide contrary evidence,
and in appropriate cases, to examine the expert. Of course, the expert is merely a witness and
ordinarily may not have ex parte communications with the tribunal or participate in the
tribunal's deliberations.
12. Sanctions for failure to comply with arbitrators' orders regarding evidence-taking. Consider
what sanctions, if any, a tribunal may impose under various national arbitration statutes
against a party that refuses to comply with its discovery requests or orders. In particular,
consider Article 1696 of the Belgian Judicial Code and Article 184 of the Swiss Law on Private
International Law. In most jurisdictions, arbitrators will not have the power to impose coercive
sanctions (i.e., civil contempt, monetary fines) like those available in domestic litigation.
Consider the various provisions of the 1999 IBA Rules relating to sanctions for failure to comply
with evidence-taking or disclosure obligations, including Articles 4(8), 5(5), 9(4) and 9(5).
It is also unusual for arbitrators to seek judicial enforcement of discovery orders. In many
states, this is at least a theoretically available avenue for the tribunal. Consider again Article
1696 of the Belgian Judicial Code and Article 184 of the Swiss Law on Private International Law.
We discuss the topic of judicial assistance to arbitral tribunals in detail below. See infra pp.
495-514.
Rather than impose sanctions or seek judicial enforcement of discovery orders, arbitrators are
much more likely to exercise the very formidable power to draw adverse inferences from a
party's refusal to produce requested documents or witnesses. See IBA Rules, Articles 4(8), 5(5),
9(4) and 9(5); Forsythe Int'l, SA v. Gibbs Oil Co., 915 F.2d 1017, 1023 n.8 (5th Cir. 1990) (“Arbitrators
may ... devise appropriate sanctions for abuse of the arbitration process”); Bigge Crane &
Rigging Co. v. Docutel Corp., 371 F.Supp. 240, 246 (E.D.N.Y. 1973). A party that contemplates
withholding non-privileged information must reckon carefully with the impact that this will
have upon its ultimate case on the merits.
For a decision refusing to enforce an arbitral award because it contained sanctions for non-
compliance with a discovery order of the tribunal, which were held to exceed the arbitrator's
authority, see Buckeye Cellulose Corp. v. District 65, etc., 689 F.2d 629, 630-33 (6th Cir. 1982).
 13. Privileges in tribunal-ordered disclosure. An important feature of evidence-taking in many
national litigation systems is the treatment of various sorts of privileges – most significantly,
P "489" the attorney-client privilege and various privileges attaching to settlement discussions and
P "490" communications between counsel. There is relatively little authority concerning the
appropriate treatment of privileges when discovery is ordered by the tribunal in an
international arbitration.
(a) Availability of privileges in international arbitration. As a practical matter, most
international arbitral tribunals give effect to otherwise-available privileges under
applicable law. ICC Case No. 7626 is a representative example.
(b) Availability of privileges in arbitration under the FAA. In general, lower U.S. courts have
assumed that otherwise-applicable privileges are unaffected either by the parties'
agreement to arbitrate or the fact that it is the arbitral tribunal (rather than a court) that
has ordered discovery. See Robbins v. Day, 954 F.2d 679 (11th Cir. 1992); Western Employers
Ins. Co. v. Merit Insurance Co., 492 F.Supp. 53 (N.D. Ill. 1979) (assuming that accountants'
privilege was applicable to subpoenas issued by arbitral tribunal, at least where judicial
enforcement of subpoena was sought); Great Scott Supermarkets, Inc. v. Local Union No.
337, 363 F.Supp. 1351 (E.D. Mich. 1973) (enforcing arbitral award after considering but
rejecting challenge to arbitrator's order for alleged attorney work product); Local Lodge
1746 etc. v. Pratt & Whitney Division etc., 329 F.Supp. 283 (D. Conn. 1971) (requiring in
camera inspection by arbitrator to prevent parties from having access to classified or
confidential information); Minerals & Chemicals Philipp Corp. v. Panamerican Commodities,
SA, 224 N.Y.S.2d 763 (Sup. Ct. 1962) (holding, under state law, that arbitrators' subpoena
would not be enforced as to privileged materials and that in camera judicial inspection
was required before disclosure to arbitrators); Di Maina v. N.Y. State Dept. of Mental
Hygiene, 386 N.Y.S.2d 590 (Sup. Ct. 1976) (holding, under state law, that subpoena would
be enforced, on theory that applicable privileges had been waived and that arbitrator
could maintain confidentiality of materials in any event); Langemyr v. Campbell, 279
N.Y.S.2d 41 (1967) (5th and 14th amendments).
Is it appropriate to apply generally-applicable privilege rules in an arbitral proceeding?
Does an agreement to arbitrate constitute a waiver of privileges, on the theory that
accepting the informality of arbitral procedures also abandons legal privileges? Or are
privileges like other substantive legal rights, which are given full effect in the arbitral
process?

(c) Judicial review of arbitrator's decisions concerning privileges under the FAA. Privilege issues
are often fact-driven. Judicial review of an arbitrator's factual determinations (as to the
capacity in which communications were made, the existence of a privileged relationship,
etc.) will be deferential under the FAA. Great Scott Supermarkets, Inc. v. Local Union No.
337, 363 F.Supp. 1351 (E.D. Mich. 1973) (enforcing arbitral award after considering but
rejecting challenge to arbitrator's order for alleged attorney work product).
(d) Choice of law governing privileges. Assuming that privileges can, in principle, be asserted
in arbitration, what law governs the existence and scope of a privilege? Alternatives
include the procedural law of the arbitration, the law governing the parties' arbitration
agreement, the law of the judicial forum where enforcement of the arbitrators' discovery
orders is sought, and the law most closely connected to the allegedly privileged
communications. Western Employers Ins. Co. v. Merit Insurance Co., 492 F.Supp. 53 (N.D. Ill.
1979) (applying law of enforcing court).
ICC Case No. 7626 involved a choice of law question affecting an issue related to
privileges: specifically, what law governed the admissibility of a party's representative's
diary? Consider the possible laws applicable to this issue. How should the issue have
been analyzed?
For a discussion of choice-of-law issues relating to privileges in the litigation context, see
G. Born, International Civil Litigation in United States Courts 891-92 (3d ed. 1996).

14. Admission and evaluation of evidence. Consider the excerpts from Parker v. United Mexican
States. What law governed the tribunal's admission and evaluation of evidence? Would a
different approach arguably be required in a more ordinary commercial arbitration, as
contrasted to a claims commission established by international treaty (as in Parker)? As a
practical matter, the tribunal's approach in Parker is illustrative of the reluctance of
international arbitrators to rely on strict rules of evidence drawn from national law.
International arbitral tribunals are nonetheless frequently requested to apply national
evidentiary rules. Is doing so wise? Is the analysis in Parker persuasive? What other reasons are
there against (and for) applying strict rules of evidence drawn from national law? Recall the
historically “informal” character of international arbitration. See supra pp. 7-11, 278-79, 449,
470-71.
If a national evidentiary rule is to be applied, what state's law is applicable? Possibilities
include the law governing the underlying contract, the arbitration agreement, and the arbitral
procedure. In practice, the procedural law of the arbitration would ordinarily govern issues
relating to the admissibility and weighing of evidence. See supra pp. 412-13, 449.
P "490"
P "491"
If a tribunal does not apply national law evidentiary rules, does it then apply no rules at all? If
 so, would this be acting ex aequo et bono? If not, what determines the content of the tribunal's
international evidentiary rules?
3. Effect of the FAA on Discovery Powers of Arbitral Tribunals in International Arbitration
This section examines in greater detail the principal statutory sources of authority in the
United States for international arbitrators to order discovery. As we have seen, the FAA and
state arbitration laws deal with both the powers of arbitrators to order discovery and to obtain
U.S. judicial assistance in enforcing its orders. Section 7 of the FAA authorizes arbitrators, in a
“proper case,” to subpoena witnesses and documents “deemed material as evidence in the
case.” If the subpoena is not complied with, §7 provides that the arbitrators may petition the
U.S. court in the district where they “are sitting” for an order compelling obedience.
Section 7 of the Uniform Arbitration Act is similar, as are many other U.S. state arbitration laws.
Section 7 of the Uniform Arbitration Act permits an arbitral tribunal to subpoena witnesses and
documents and, on application of a party, to permit depositions. Unlike §7 of the FAA, either
the arbitrators or a party may seek judicial enforcement of the subpoena.
FEDERAL ARBITRATION ACT
9 United States Code §7
[excerpted below at p. 1000]
UNIFORM ARBITRATION ACT
§7
[excerpted below at p. 1006]
FEDERAL RULES OF CIVIL PROCEDURE (UNITED STATES)
Rule 81
Rule 81(a)(3). In proceedings under Title 9, U.S.C. relating to arbitration,... these [Federal Rules
of Civil Procedure] apply to appeals, but otherwise only to the extent that matters of
procedure are not provided for in those statutes.
P "491"
P "492"
STANTON v. PAINE WEBBER JACKSON & CURTIS, INC.
685 F.Supp. 1241 (S.D. Fla. 1988)
[excerpted above at pp. 462-64]
Notes on Arbitrators' Discovery Powers Under the FAA
1. Inapplicability of Federal Rules of Civil Procedure in international arbitrations sited in the
United States. The Federal Rules of Civil Procedure are not applicable in international or other
arbitrations sited in the United States (unless otherwise agreed by the parties). Lower U.S.
courts have unanimously recognized this. Great Scott Supermarkets, Inc. v. Local Union No. 337,
363 F.Supp. 1351, 1354 (E.D. Mich. 1973); Commercial Solvents Corp. v. Louisiana Liquid Fertilizer
Co., 20 F.R.D. 359 (S.D.N.Y. 1957); Foremost Yarn Mills, Inc. v. Rose Mills, Inc., 25 F.R.D. 9 (E.D. Pa.
1960). Compare In re Koala Shipping & Trading Inc., 587 F.Supp. 140 (S.D.N.Y. 1984). Rule 81(a)(3)
of the Federal Rules of Civil Procedure applies to judicial actions under the FAA, and not to
arbitral proceedings themselves. Thus, arbitrators in arbitrations sited in the United States are
not required to adopt or follow the evidence-taking or discovery provisions of the Federal
Rules of Civil Procedure.
2. Arbitrators' broad discretion under FAA to adopt procedures for evidence-taking and
discovery. As we have seen, the FAA has been uniformly interpreted to accord arbitrators, in
both domestic and international arbitrations, broad discretion in procedural matters,
including those concerning evidence-taking and discovery. See supra pp. 428, 443-45.
3. Scope of arbitrators' power under FAA §7 to order “discovery.” Section 7 of the FAA provides
that the arbitrators “may summon in writing any person to attend before them or any of them
as a witness and in a proper case to bring with him or them any book, record, document or
paper which shall be deemed material as evidence in the case.” What is the scope of
“discovery” that a tribunal is authorized to order under §7? What is the meaning of the phrase
“deemed material as evidence in the case”? Is the scope of “discovery” referred to in §7
broader or narrower than the scope of discovery permitted under the Federal Rules of Civil
Procedure?
4. Scope of judicial assistance for arbitrator's “discovery” orders under FAA §7. Consider the
decision in Stanton and the court's conclusion that §7 allows arbitrators broad powers to order
discovery from parties to an arbitration. Is this approach to the substantive scope of an
arbitrator's discovery powers sensible? We consider the availability of U.S. judicial assistance
to arbitrators and parties in arbitrations in greater detail below. See infra pp. 495-514.
5. Arbitrators' authority under FAA §7 to order pre-hearing discovery. As noted above, §7 of the
FAA can be read as only authorizing arbitrators to require witnesses to attend arbitral hearings
– as opposed to requiring pre-hearing discovery of documents and depositions. See supra p.
487.
As discussed in detail below, see infra p. 509, lower U.S. courts are divided over the question
whether §7 permits arbitrators to order pre-hearing depositions or other pre-hearing
discovery. Compare Stanton v. Paine Webber Jackson & Curtis, Inc., 685 F.Supp. 1241 (S.D. Fla.
 1988) (“contention that §7 ... only permits the arbitrators to compel witnesses at the hearing,
and prohibits pre-hearing appearances, is unfounded”) and Meadows Indem. Co. v. Nutmeg Ins.
Co., 157 F.R.D. 42, 45 (M.D. Tenn. 1994) (arbitrator's power under §7 to compel document
production from third parties at arbitral hearing encompasses lesser power to compel
production prior to hearing) with COMSAT Corp. v. National Science Foundation, 190 F.3d 29 (4th
Cir. 1999) (§7 does not permit pre-hearing discovery orders by arbitrators to non-parties) and
Integrity Ins. Co. v. American Centennial Ins. Co., 885 F.Supp. 69, 72-73 (S.D.N.Y. 1995) (arbitrator
may not rely on §7 to order pre-hearing depositions of non-parties).
6. Relationship between FAA §7 and the parties' agreement. What is the relationship between §7
and the parties' agreement or the institutional rules agreed to by the parties? First, assuming
that parties' arbitration agreement or the institutional rules incorporated by the parties'
agreement permit broader discovery than that contemplated by §7, does §7 in any way limit
the effect of the parties' agreement on the arbitrators' power? Second, if not, is court-ordered
P "492" enforcement of a tribunal's broad discovery orders, pursuant to the parties' agreement,
P "493" available under §7?
(a) Scope of “discovery” under institutional rules. Consider the scope of “discovery”
contemplated under the various institutional rules set forth above. (Note that none of the
rules actually refers to “discovery.”) Do the rules contain limits on the scope of allowable
discovery that may be ordered by the arbitrators? How does §7 of the FAA, which permits
arbitrators to subpoena “material” evidence, compare with the standards set forth in the
institutional rules excerpted above?
(b) Effect of parties' agreement to broad discovery on FAA §7. As described above, parties
sometimes agree to permit the arbitral tribunal to order broad discovery – for example,
by agreeing to discovery as provided for by the Federal Rules of Civil Procedure or
adopting institutional rules expressly or impliedly permitting expansive tribunal-ordered
discovery. See supra pp.···. If such an agreement exists, and the tribunal orders discovery
consistent with it, but exceeding the scope of “discovery” contemplated by §7, will a U.S.
court enforce the order? Although few reported U.S. cases appear to address the issue, it
is likely that enforcement could be obtained: §7 is drafted with sufficient flexibility to
permit courts to take into account the parties' agreement on the scope of discovery.
Compare United Nuclear Corp. v. General Atomic Co., 597 P.2d 290, 302 (N.M. 1979) (“Neither
the [FAA] nor the rules of the [American Arbitration Association] give a party an absolute
right to demand discovery.”) with Chiarella v. Viscount Industries Co., 1993 WL 497967
(S.D.N.Y. 1993) (interpreting AAA Commercial Arbitration Rules to permit pre-hearing
discovery: “Although this language does not specifically authorize an arbitrator to order
pre-hearing discovery, it confers on arbitrators broad powers to ensure that evidence is
presented at arbitration hearings in such a manner as to ensure that legal and factual
issues are sufficiently developed. Plaintiff has cited no authority explicitly limiting the
power of an arbitrator to order discovery under the AAA rules or to order the in camera
inspection of documents.”).
Query whether §7 is the sole basis for enforcement of an arbitrator's discovery order.
Arguably §4 and §206, permitting orders to compel arbitration in accordance with the
arbitration agreement, or traditional equitable powers, would provide a basis for federal
court enforcement.

(c) Effect of parties' agreement restricting discovery on FAA §7. Suppose that the parties'
arbitration agreement forbids or limits discovery, or that it incorporates institutional
rules that have the same effect. What impact does such an agreement have on §7? Does §7
grant discovery rights that are non-waivable? That seems highly unlikely, at least insofar
as discovery from other parties to the arbitration is concerned; the consensual nature of
arbitration, and the tradition of party autonomy over procedural matters, make it
difficult to conceive of §7 as forbidding agreements limiting discovery between parties.
Does the same conclusion necessarily apply to non-parties, who are not bound by and
who presumably cannot invoke an arbitration agreement limiting discovery?
(d) Effect of choice of foreign procedural law. Suppose the parties to an arbitration sited in
the United States agree to a foreign curial law that restricts (or broadens) the available
scope of discovery. Assuming that §7's venue requirements are satisfied, see infra pp. 493-
94, U.S. courts should in principle respect restrictions placed on the scope of discovery
by a foreign curial law. Doing otherwise would frustrate the parties' legitimate
expectations and interfere with the conduct of the arbitration.
(e) Affirmative grant of authority under FAA §7. Under U.S. law, the absence of an express
provision concerning discovery in the parties' agreement or applicable institutional rules
does not preclude the tribunal from ordering discovery. Rather, with respect to
international arbitrations sited in the United States, §7 of the FAA and §7 of the Uniform
Arbitration Act affirmatively authorize at least a measure of tribunal-ordered discovery.
7. Practical implementation of FAA §7 by arbitral tribunal. In practice, §7 involves a procedure
for the issuance of subpoenas in the name of the arbitrators that is not dissimilar from U.S.
district court practice. For example, the American Arbitration Association makes available to
parties in AAA arbitrations forms for issuance of subpoenas. Parties may complete the forms
(identifying the witnesses and requested materials) and return them to the AAA for execution
by the arbitrators; after that occurs, the parties serve the subpoenas on the designated
recipient. See also G. Wilner, Domke on Commercial Arbitration §24.03, at 371 (Rev. Ed. 1992).
Unless otherwise agreed, the materials that are subpoenaed are directed to the arbitrators,
who will generally make them available to the parties. Wilkes-Barre Publishing Co. v. Newspaper
 Guild of Wilkes-Barre, 559 F.Supp. 875 (M.D. Pa. 1982).
8. To what arbitrations is FAA §7 applicable? As noted above, in the absence of agreement
between the parties forbidding discovery, §7 would appear to provide affirmative authority to
P "493" an arbitral tribunal to order at least some discovery. See supra pp. 492-93. What arbitrations
P "494" and arbitrators enjoy the benefit of this grant of authority to order discovery? For example,
is §7 applicable to an arbitration in London between two U.S. companies, in a dispute
governed by English law? Section 7 permits petitions for enforcement of arbitrators' subpoenas
to “the United States court in and for the district in which such arbitrators, or a majority of
them, are sitting.”See Thompson v. Zavin, 607 F.Supp. 780 (C.D. Cal. 1984) (§7 “restricted to the
district in which the arbitrators sit”).
Does §7 apply only to arbitral tribunals “sitting” within the United States? Where does a
tribunal “sit”? In most cases, not surprisingly, the tribunal “sits” at the seat of the arbitration,
which will be ordinarily where all the arbitration hearings will be conducted. What if the
tribunal conducts hearings somewhere other than the arbitral situs selected in the parties'
arbitration agreement? See supra p. 429. What if the arbitrators rule that a hearing will be
conducted, and they will sit, in the district where one party's headquarters (containing relevant
documents) is located? See Gorske, An Arbitrator Looks at Expediting the Large, Complex Case, 5
Ohio St. J. Disp. Res. 381, 385 (1990) (describing how parties and arbitrators moved arbitration
hearing temporarily to locale of unwilling third party, so that §7 discovery could be ordered).
What if an arbitral tribunal conducting hearings outside the United States hears claims based
on U.S. substantive law? Does this have any relevance to where the tribunal “sits”? Suppose
that an arbitration sited in London is governed by New York procedural law? See supra pp. 411-
33 for a discussion of curial law.
Does a tribunal have the authority, over the objection of one party, to move the place where it
“sits” to somewhere other than the arbitral situs? Recall the discussion above, supra p. 429
about the tribunal's authority to hold hearings outside the arbitral situs for convenience.
Finally, consider whether the venue provisions in the final sentence of §7, relating to judicial
enforcement of tribunals' orders, are also relevant to the first sentence.
9. Territorial limits on service of tribunal's discovery orders under FAA §7. Section 7 provides
that, in “summoning” a witness, the arbitrators shall issue a summons that “shall be served in
the same manner as subpoenas to appear and testify before the court.” Under Rule 45 of the
Federal Rules of Civil Procedure, a subpoena generally can be served only within the judicial
district in which the U.S. district court issuing the subpoena is located. G. Born, International
Civil Litigation in United States Courts 864-66 (3d ed. 1996).
Does §7 similarly limit the extraterritorial service of subpoenas on persons located outside the
United States? For affirmative answers, see Thompson v. Zavin, 607 F.Supp. 780, 783 n.5 (N.D. Cal.
1984); Commercial Solvents Corp. v. Louisiana Liquid Fertilizer Co., 20 F.R.D. 359 (S.D.N.Y. 1957)
(“the arbitrators could not perhaps compel the attendance of the witnesses ... because service
of subpoenas could not be made upon them within the Southern District.”). Does §7's reference
to the “manner” of service incorporate jurisdictional limitations from Rule 45?
Suppose a non-U.S. company is involved in arbitration in a U.S. judicial district, and the
tribunal desires to issue a summons to it (as opposed to a non-party witness). If the company
has no presence within the district, is service under §7 impossible? Does the company's
agreement to arbitration within the district constitute a waiver of objections to service or
consent to service within the district at the arbitral situs?
10. Effect of U.S. state law on arbitrators' authority to order discovery. Section 7 of the Uniform
Arbitration Act grants arbitrators authority to order discovery and seek assistance from a state
court. Many state laws are similar. E.g., N.Y. C.P.L.R. §7505; Matter of Sun-Ray Cloak Co., 11
N.Y.S.2d 202 (App. Div. 1939) (arbitrator has authority under N.Y. C.P.L.R. §2302 to issue
subpoenas to third parties); In re Landegger, 54 N.Y.S.2d 76 (N.Y. 1945) (arbitrator has authority
under N.Y. C.P.L.R. §2302 to subpoena witness for appearance).
When an arbitration arises from an agreement subject to the FAA or New York Convention, can a
state law validly grant an arbitrator authority to order discovery? Or does the FAA preempt
state discovery provisions? There is no lower court precedent. Does a state statute granting an
arbitrator the power to compel discovery, in circumstances different from those under §7 of the
FAA, interfere with federal pro-arbitration policies? What about the provision in §7 of UAA
permitting a party (as opposed to the arbitrators) to seek judicial enforcement of a subpoena?
Could that interfere with the arbitral process? See infra pp. 509-10.
11. Tribunal-ordered discovery from third parties under FAA §7. As a practical matter, discovery
in international arbitration is generally limited to the parties to the arbitration. See supra p.
474. As we have seen, the tribunal cannot, under an arbitration agreement, compel a non-party
witness to produce documents or testify. See supra p. 474.
Note, however, that under some national laws – including particularly §7 of the FAA, see infra p.
508 – arbitrators are empowered to seek judicial assistance in obtaining discovery in aid of
arbitration, and that such assistance may extend to issuing subpoenas to non-party witnesses.
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12. Possible obligation of arbitrators under U.S. law to order discovery. In general, U.S. courts
have been unwilling to accept claims that an arbitrator's refusal to order production of vital
evidence is misconduct, amounting to a failure to permit a party the opportunity to present its
case. Nu Swift plc v. White Knight I SA, Mealey's International Arbitration Report, at E-1 (Feb.
1997) (rejecting proceedings to vacate award on grounds that arbitral tribunal refused to order
 document discovery); Iron Ore Co. of Canada v. Argonaut Shipping, Inc., XII Y.B. Comm. Arb. 173
(S.D.N.Y. 1985); Standard Tankers (Bahamas) Co. v. Motor Tank Vessel, AKTI, 438 F.Supp. 153, 156
(E.D.N.C. 1977); Hyman v. Pottberg's Executors, 101 F.2d 262, 265 (2d Cir. 1939) (“It is at best very
doubtful whether the failure to require the production of this evidence could be regarded as a
refusal to hear evidence pertinent and material within §10(c)”); Asiatic Petroleum Corp. v. New
England Petroleum, 410 N.Y.S.2d 91 (App. Div. 1978) (“It is the law that an award may not be
vacated for [the tribunal's] refusal to enforce the subpoenas.”).
Some commentators have queried whether this position is not too deferential. If the
arbitrators are granted wide powers to decide disputes, and to order discovery, is there no
obligation on the arbitrators to exercise some minimal effort to ensure that the parties'
dispute is decided on the basis of the relevant facts? One need not entirely embrace common
law notions of discovery to acknowledge the importance of developing basic facts. For a
decision suggesting somewhat more rigorous obligations on arbitrators to ensure that the
parties have access to a minimal level of discovery, see Chevron Transp. Corp. v. Astro Vencedor
Compania Naviera, 300 F.Supp. 179 (S.D.N.Y. 1969) (“affirmative duty of arbitrators to insure that
relevant documentary evidence in the hands of one party is fully and timely made available to
the other side before the hearing is closed”).
4. Discovery Ordered by National Courts in Aid of Arbitration at Request of the Tribunal or a
Party (139)
This section examines the circumstances in which an arbitral tribunal or a party itself may
obtain discovery from a national court, with an emphasis on U.S. practice. As noted above, §7
of the FAA permits arbitrators (as distinguished from parties to an arbitration) to obtain
judicial assistance in taking evidence from U.S. district courts. The opinions in Oceanic
Transport Corporation of Monrovia v. Alcoa SS Co. and Stanton v. Paine Webber Jackson & Curtis,
Inc. illustrate some of the issues that arise in determining the scope of available judicial
P "495" assistance for arbitral tribunals under §7. Article 27 of the UNCITRAL Model Law, Article 184 of
P "496" the Swiss Law on Private International ternational Law, and the other statutory materials
excerpted below, illustrate approaches to court-ordered disclosure in selected other
jurisdictions.
Section 7 has also occasionally been invoked by parties (as distinguished from the tribunal)
seeking discovery in an arbitration. Lower U.S. courts have generally refused requests under §7
by parties for court-ordered discovery in aid of arbitration. The decision excerpted below in
Commercial Solvents illustrates this. (140) Nevertheless, a few courts, including the district
court in Koch Fuel International Inc. v. M/V South Star, have granted court-ordered discovery at
the request of a party under §7 in “exceptional circumstances.” (141)
U.S. courts have also considered whether avenues other than §7 of the FAA are available for
providing court-ordered discovery in aid of arbitration at the request of a party. They have
uniformly held that the Federal Rules of Civil Procedure are not available for such purposes.
(142) Greater uncertainty surrounds the availability of 28 U.S.C. §1782 in international
arbitrations. Section 1782, which is excerpted below, grants U.S. district courts the power to
order persons found within their districts to give discovery “for use in a proceeding in a foreign
or international tribunal.” The provision is available at the request of either a “tribunal” or “any
interested person” in proceedings before the tribunal. As the decision, excerpted below, in
National Broadcasting Company v. Bear Stearns & Co. illustrates, (143) §1782 has produced
challenging interpretative questions.
UNCITRAL MODEL LAW
Article 27
[excerpted below at p. 1018]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 184
[excerpted below at p. 1034]
BELGIAN JUDICIAL CODE
Article 1696
[excerpted above at pp. 471-72]
P "496"
P "497"
GUATEMALAN CODE OF CIVIL AND COMMERCIAL PROCEDURE
Article 288
[excerpted above at p. 417]
FEDERAL ARBITRATION ACT
9 United States Code §7
[excerpted below at p. 1000]
UNIFORM ARBITRATION ACT
§7
[excerpted below at p. 1006]
 FEDERAL RULE OF CIVIL PROCEDURE
Rule 81
[excerpted above at p. 491]
28 UNITED STATES CODE §1782
Assistance to foreign and international tribunals and to litigants before such tribunals
(a) The district court of the district in which a person resides or is found may order him to give
his testimony or statement or to produce a document or other thing For use in a proceeding in
a foreign or international tribunal. The order may be made pursuant to a letter rogatory issued,
or request made, by a foreign or international tribunal or upon the application of any
interested person and may direct that the testimony or statement be given, or the document
or other thing be produced, before a person appointed by the court. By virtue of his
appointment, the person appointed has power to administer any necessary oath and take the
testimony or statement. The order may prescribe the practice and procedure, which may be in
whole or part the practice and procedure of the foreign country or the international tribunal,
for taking the testimony or statement or producing the document or other thing. To the extent
that the order does not prescribe otherwise, the testimony or statement shall be taken, and
the document or other thing produced, in accordance with the Federal Rules of Civil Procedure.
A person may not be compelled to give his testimony or statement or to produce a document
or other thing in violation of any legally applicable privilege.
P "497"
P "498"
(b) This chapter does not preclude a person within the United States from voluntarily giving his
testimony or statement, or producing a document or other thing, for use in a proceeding in a
foreign or international tribunal before any person and in any manner acceptable to him.
OCEANIC TRANSPORT CORPORATION OF MONROVIA v. ALCOA STEAMSHIP COMPANY
129 F.Supp. 160 (S.D.N.Y. 1954)
CLANCY, DISTRICT JUDGE. This motion to punish for contempt a subpoenaed witness that failed
to respond is denied. The witness conveyed to the parties in writing its informed opinion that
unless directed by the Court it would not answer the subpoena. The Statute [9 U.S.C. §7]
provides that in such case the District Court may compel the attendance of the witness if it be
“a proper case” to justify the issuance of the subpoena. The Court must then rule, among other
things, whether or not the subpoenaed material would be material as evidence. The Court is
unable to recognize why the matter subpoenaed from the protesting witness is or can be
material or even relevant evidence in this case. It was the plaintiff's task to establish its
materiality. I say this even though it appears in the papers that the request for a subpoena to
issue was argued before the arbitrators and it is apparently their judgment that some
evidence, material to the case before them, would be supplied. However great a respect we
owe the arbitrators, it is a fact that when the statute imposed upon the District Court the duty
to determine whether or not to compel the attendance of a witness and his production of
papers, it imposed upon the Court the duty to determine whether or not the proposed
evidence is material. [The Court rejected the tribunal's conclusion that the requested items
were material to the dispute.] ...
It follows from all this that the motion to punish for contempt is denied. And, it also follows
from what has been said that this is not a proper case for the subpoena's issuance. The motion
to vacate is therefore granted....
COMMERCIAL SOLVENTS CORPORATION v. LOUISIANA LIQUID FERTILIZER COMPANY
20 F.R.D. 359 (S.D.N.Y. 1957)
P "498" BICKS, DISTRICT JUDGE. This motion was brought on by Commercial Solvents Corporation
P "499" (“petitioner”) to vacate ... an ex parte order issued, (144) and a notice of taking certain
depositions.... Pursuant to a provision in a written contract between the parties evidencing a
transaction involving commerce to settle by arbitration controversies thereafter arising out of
such contract or transaction, (145) petitioner mailed to Louisiana Liquid Fertilizer Co., Inc.
(“respondent”), a demand for arbitration.... Respondent submitted an answering statement in
accordance with the rules of the American Arbitration Association.... Then followed the
respondent's notice of taking the depositions of five employees of petitioner in the State of
Louisiana, pursuant to the Federal Rules of Civil Procedure.
Respondent's position is that it is essential that it have this means of obtaining information
allegedly peculiarly within the knowledge of employees of petitioner residing in Louisiana in
order adequately to prepare for the hearing to be held before the arbitrators. It is argued that
since the [FAA] does not provide a procedure for depositions and discovery, Rule 81(a)(3) of the
Federal Rules of Civil Procedure, (146) fills the void and authorizes application of the federal
discovery rules for the purposes for which they are here sought to be invoked.... At this stage, in
the instant matter, the parties have submitted to arbitration, there is no proceeding pending
in another court relating to the matter submitted to arbitration, and there has been no
occasion to initiate any of the proceedings expressly authorized in the Act.
Rule 81(a)(3), it is to be noted, authorizes the application of the Federal Rules “in proceedings
under Title 9, U.S.C.” By its attempted invocation of that Rule under the present circumstances,
respondent has failed to note the distinction between “matters of procedure” and
“proceedings” as those terms are employed in the Rule. Application of the federal rules in
proceedings under the [FAA] to supply “matters of procedure” not provided for therein, is
 authorized. Rule 81(a)(3) comes into play, however, only in proceedings under the Act. The
instant matter involves none.
Respondent urges that it is entitled to avail itself of the discovery rules because, save for the
agreement to arbitrate, the federal courts would have jurisdiction of the subject matter of a
suit arising out of the controversy between the parties and in such a suit the federal discovery
rules would obtain. The argument contains its own answer. By voluntarily becoming a party to a
contract in which arbitration was the agreed mode for settling disputes thereunder respondent
chose to avail itself of procedures peculiar to the arbitral process rather than those used in
P "499" judicial determinations.... Arbitration may well have advantages (147) but where the converse
P "500" results a party having chosen to arbitrate cannot then vacillate and successfully urge a
preference for a unique combination of litigation and arbitration. The proposition that
“[a]rbitration is merely a form of trial, to be adopted in the action itself, in place of the trial at
common law ...”, Murray Oil Products Co., Inc. v. Mitsui & Co., 146 F.2d 381, 383 (2d Cir. 1944),
which stated thus broadly might indicate the propriety of pre-hearing discovery in arbitration,
was rejected by the Supreme Court in Bernhardt v. Polygraphic Co., 1956, 350 U.S. 198 (1956). As
the Supreme Court said: “the remedy by arbitration, whatever its merits or shortcomings,
substantially affects the cause of action.... The nature of the tribunal where suits are tried is an
important part of the parcel of rights behind a cause of action. The change from a court of law
to an arbitration panel may make a radical difference in ultimate result.”
The fundamental differences between the fact-finding process of a judicial tribunal and those
of a panel of arbitrators demonstrate the need of pretrial discovery in the one and its
superfluity and utter incompatibility in the other.... As Judge Learned Hand said in American
Almond Products Co. v. Consolidated Pecan Sales, 144 F.2d 448, 451 (2d Cir. 1944): “Arbitration
may or may not be a desirable substitute for trials in courts; as to that the parties must decide
in each instance. But when they have adopted it, they must be content with its informalities;
they may not hedge it about with those procedural limitations which it is precisely its purpose
to avoid. They must content themselves with looser approximations to the enforcement of their
rights than those that the law accords them, when they resort to its machinery.”
For matters of procedure relating to the hearings before the arbitrators we refer not to the
[Federal] Rules of Civil Procedure but to the Commercial Arbitration Rules of the American
Arbitration Association which the parties agreed should control. Section 30 of those rules
provides: “The parties may offer such evidence as they desire and shall produce such
additional evidence as the Arbitrator may deem necessary to an understanding and
determination of the dispute.” While the arbitrators could not perhaps compel the attendance
of the witnesses whose depositions are sought to be taken because service of subpoenas could
not be made upon them within the Southern District of New York or within 100 miles of the
place the hearing is to be held, 9 U.S.C. §7; Rule 45(e)(1), Fed.R.Civ.P., they may be relied on to
draw such inferences from the failure of the petitioner to produce them as they in their
unreviewable judgment think the circumstances justify. Mere suggestion as to the testimony
these witnesses would give if available at the hearing would in an arbitration hearing probably
cast the onus upon the petitioner to negative the unsupported assertion that if called their
P "500" testimony would be unfavorable to its position. Fortunately or otherwise, depending on one's
P "501" views as to the soundness of the broad claims made by arbitration enthusiasts, almost
“anything goes” before arbitrators. Kallus v. Ideal Novelty & Toy Co., 45 N.Y.S.2d 554 (Sup. Ct.
1948).
Respondent's reliance upon cases decided by the New York Supreme Court under the state
arbitration statute is misplaced. Firstly, they depend on express statutory authority. See
Interocean Mercantile Corporation v. Buell, 201 N.Y.S. 753 (App. Div. 1923); New York Civil Practice
Act, §§1459 and 308. Further, notwithstanding such authority, the state court will not grant
examinations before trial in arbitration proceedings except under extraordinary
circumstances. See In re Schwartz, 217 N.Y.S. 233 (N.Y. Sup. Ct. 1925); In re Katz, 160 N.Y.S.2d 159
(App. Div. 1957). Lastly, pre-trial discovery clearly involves a matter of procedure which is
within the power of the federal courts or Congress to prescribe. Cf. Bernhardt v. Polygraphic Co.,
... Reason and authority compel that in federal courts pre-hearing examinations under court
aegis in matters pending before arbitration tribunals are unwarranted.
KOCH FUEL INTERNATIONAL INC. v. M/V SOUTH STAR
118 F.R.D. 318 (E.D.N.Y. 1987)
DEARIE, DISTRICT JUDGE. This admiralty claim, brought pursuant to 28 U.S.C. §1333, requires the
Court to revisit an issue that has attracted some controversy: whether discovery can be had on
the subject matter of a dispute that is to be arbitrated. For the reasons stated below, the Court
finds that this case presents the exceptional circumstances warranting the limited discovery
now authorized.
On December 28, 1987, the plaintiff applied to this Court for an order of arrest and an order
allowing expedited discovery of the defendant ship. This Court signed an order, pursuant to
rules governing admiralty and maritime claims, granting the relief requested based on
plaintiff's representations that the defendant ship, a foreign vessel, was preparing to leave the
local port and that the arrest and discovery were necessary to secure its claim and also to
substantiate the allegations in its complaint that the defendants had converted a portion of
the plaintiff's cargo of fuel oil. Plaintiff caused the order of arrest to be delivered to the master
of the defendant vessel on December 28, 1987.
On December 29, 1987, attorneys for both parties appeared before this Court pursuant to an
application by defendant M/V SOUTH STAR to vacate the order signed the previous day. At that
conference the defendant alleged that the contract between the parties provided for the
 resolution of any dispute through arbitration in London under English law. The defendant did
agree, however, to certain limited discovery notwithstanding the existence of the arbitration
agreement. Specifically, defendant agreed to produce the vessel's records and to permit an
inspection of the vessel by plaintiff's authorized surveyors. Defendant strenuously objected,
P "501" however, to plaintiff's application to take brief depositions of a limited number of crew
P "502" members. Defendant argues that depositions should not be allowed because they are not
utilized under English law in the arbitration. Indeed, defendant argues that depositions are
“anathema” to this method of dispute resolution in England. Defendant argues further that the
vessel's records and the inspection are more than sufficient to allow plaintiff to establish his
claims in arbitration.
Plaintiff, on the other hand, insists that in this setting the records and inspection are
insufficient and that the depositions of a small group of those with knowledge concerning the
shipment is necessary to prove its claims. More specifically, plaintiff argues that the testimony
of the various crew members might well provide some of the most important evidence in this
dispute, and that if the depositions are not taken now, testimony of these individuals will
never be had – in arbitration or otherwise.
Plaintiff alleges that the deposition request is not a mere fishing expedition in search of any
relevant facts. Rather, plaintiff points out, it has already obtained certain information from
certain crew members supporting its position. In addition, plaintiff represents that it has
evidence of attempts to frustrate a surveyor's efforts to calculate the extent of the losses by
tampering with certain internal systems of the vessel. These matters, plaintiff urges, are the
matters to be pursued at deposition. Finally, plaintiff claims the depositions would be
completed in one day, thus allowing for the release of the merchant vessel pursuant to an
agreement of the parties.
The issue before the Court, then, is whether limited discovery in the form of the depositions
should be allowed where the parties have agreed to arbitrate their dispute and where the
testimony sought is that of crew members preparing to depart the country who will thus most
likely be unavailable to provide testimony in this dispute in the future. In this connection, it is
not without some significance to note that defendant's counsel have provided no assurances
that any of the crew members will be made available to plaintiff in the future.
Although discovery on the subject matter of a dispute to be arbitrated generally has been
denied, Commercial Solvents Corp. v. Louisiana Liquid Fertilizer Co., Inc., 20 F.R.D. 359 (S.D.N.Y.
1957), courts have recognized that discovery may be appropriate in exceptional circumstances.
See, e.g., E.C. Ernst, Inc. v. Potlatch Corp., 462 F.Supp. 694, 695 n.1 (S.D.N.Y. 1978); Bergen Shipping
Co. v. Japan Marine Services, Ltd, 386 F.Supp. 430, 435 n.8 (S.D.N.Y. 1974); Bigge Crane & Riggin
Co. v. Docutel Corp., 371 F.Supp. 240 (E.D.N.Y. 1973); Ferro Union Corp. v. SS Ionic Coast, 43 F.R.D.
11 (S.D. Tex. 1967). One of the “exceptional circumstances” in which discovery has been deemed
proper is where a vessel with crew members possessing particular knowledge of the dispute is
about to leave port. See e.g., Bergen Shipping Co., 386 F.Supp. at 435 n.8; Ferro Union Corp.,
supra, at 14. This Court believes that the facts here meet the “exceptional circumstances” test.
Although this case may be routine in the sense that it represents a relatively garden variety
commercial dispute as defendant argues, for discovery purposes the circumstances are hardly
routine. The only persons possessing first-hand knowledge of the facts recited and alleged in
plaintiff's verified complaint are the crewmen and executive officers of the M/V SOUTH STAR,
P "502" none of whom is an American citizen and all of whom will presumably be unavailable once the
P "503" ship leaves the United States. Here, plaintiff seeks only minimal deposition discovery. In the
words of the Ferro Union court, “this court cannot conceive how defendants can be harmed by
allowing the depositions to proceed....” 43 F.R.D. at 14.
Defendant's argument that the relevant facts are discoverable through alternative methods,
such as inspection by authorized surveyors, is not convincing. Although the physical and
documentary evidence may show a diversion of the cargo, it may not show with certainty the
theft through usage that is alleged in the complaint. Defendant's contention that deposition
testimony is improper here because it is not used under English arbitration is similarly
unconvincing.
The Court is well aware of the strong federal policy favoring arbitration. The Court is also aware
that arbitration should not generally be encumbered by protracted discovery or other
procedural mechanisms. See Commercial Solvents Corp., 20 F.R.D. at 361. However, in deferring
to the arbitration forum in accordance with the parties' agreement, the Court should not
blindfold the arbitrators and frustrate, perhaps irreparably, the fact-finding process by failing
to afford the parties a brief opportunity to preserve evanescent evidence. This Court finds
applicable the cogent reasoning of the Ferro Union court in a case strikingly similar to the one
at bar:
[T]o allow [the deposition discovery] to proceed would, it seems to this court, be an aid to the
ultimate arbitration proceedings. This decision does not mean that the arbitrators who might
be ultimately appointed to determine this matter should or should not consider the results of
the discovery here allowed. This decision does mean, however, that potentially valuable
information will be available for the arbitrators to consider if they so desire. To deny discovery
here could well mean that the information sought would never be available to the arbitrators
or, if available, only at great expense. 43 F.R.D. at 14.
In sum, defendant's request to vacate the order allowing discovery is denied. Plaintiff shall be
permitted a physical inspection of the ship and appropriate access to its records pursuant to
the agreement between the parties. In addition, plaintiff shall be permitted the brief
depositions of the five individuals requested.
 NATIONAL BROADCASTING COMPANY v. BEAR STEARNS & CO.
165 F.3d 184 (2d Cir. 1999)
CABRANES, CIRCUIT JUDGE.... National Broadcasting Company, Inc. and NBC Europe, Inc. (jointly,
“NBC”), respondents in an arbitration proceeding in Mexico initiated by the Mexican television
P "503" broadcasting company TV Azteca S.A. de C.V. (“Azteca”), appeal from an order ... quashing
P "504" subpoenas directed by NBC to Azteca's investment bankers and advisors, Bear Stearns & Co.,
Inc.; Merrill Lynch & Company, Salomon Brothers, Inc.; SBC Warburg, Inc. and Violy Byorum &
Partners (the “Third Parties”) and denying NBC's cross-motion to enforce the subpoenas. The
district court quashed the subpoenas, concluding that 28 U.S.C. §1782, which gives United
States courts the authority to order testimony or production of evidence for use “in a
proceeding in a foreign or international tribunal,” does not apply to private commercial
arbitration under the auspices of non-governmental organizations. We affirm.
In 1994, NBC and Azteca, a then-privately-held Mexican television broadcasting company,
entered into an agreement under which NBC would provide Azteca with programming and
other services. In exchange, NBC'S compensation included the option to purchase up to 10% of
Azteca's shares at any time before May 1997 according to a preset pricing formula. The
agreement also provided that any disputes would be resolved through private commercial
arbitration administered by the International Chamber of Commerce (“ICC”), a private
organization based in Paris, France, under ICC rules and Mexican law. Purporting to act under
the agreement, NBC on April 3, 1997 sought to purchase 1% of Azteca's shares. On April 28, 1997,
Azteca, alleging that NBC had failed to perform under the agreement, initiated arbitration
against NBC in Mexico pursuant to the 1994 agreement. On July 15, 1997, NBC filed its answer,
and on July 29, 1997, amended its answer and included counterclaims; the counterclaims
alleged that Azteca improperly induced NBC to forgo exercising its option for the full 10% of
Azteca's shares by leading NBC to believe, among other things, that (I) Azteca had no plans to
conduct an initial public offering of securities (“IPO”), and (ii) Azteca's estimate of the value of
the company's shares was not significantly above the contractually agreed exercise price.
Azteca replied that it never contemplated a public offering or misstated the value of its shares
during the relevant time period.
In anticipation of the ICC arbitration proceeding in Mexico but prior to the appointment of the
arbitration panel, NBC applied ex parte, pursuant to 28 U.S.C. §1782, to the United States
District Court for the Southern District of New York for authorization to serve document
subpoenas on the six third-party financial institutions engaged by Azteca with regard to its IPO
plans. On August 1, 1997, Judge Batts granted the application, and NBC later served the
subpoenas, which demanded the production of documents bearing on the timing of Azteca's
IPO plans and the valuation of Azteca shares. Within a month, Azteca and five of the third-party
financial institutions moved to quash the subpoenas; NBC cross-moved to compel compliance
with them.
On January 16, 1998, Judge Sweet granted the motion to quash the subpoenas and denied NBC's
cross-motion, concluding that the term “foreign or international tribunal” in 28 U.S.C. §1782, a
statute authorizing district courts to assist discovery efforts in connection with proceedings
before such tribunals, does not encompass private international commercial arbitration. This
timely appeal followed.
P "504" We review the district court's interpretation of 28 U.S.C. §1782 de novo. Ordinarily, because
P "505" commercial arbitration is a creature of contract, only the parties to the arbitration contract
are bound to participate. If discovery were to be obtained from the Third Parties – none of
which was a party to the arbitration agreement at issue here – the authority to compel their
participation would have to be found in a source other than the parties' arbitration agreement.
That source, NBC claims, is §1782.
Appellees first argue that §1782, regardless of its meaning, is not available to NBC because the
[FAA], which provides a role for the federal courts in arbitration, is the exclusive means for
obtaining evidence from non-parties in connection with private arbitration proceedings.
The FAA applies to private commercial arbitration conducted in this country; and it applies
also to arbitrations in certain foreign countries by virtue of legislation implementing the [New
York] Convention, and the Inter-American Convention. The statute principally provides for the
enforcement of agreements to arbitrate, supplying judicial assistance to facilitate arbitration,
and providing for confirmation, vacation, or modification of the arbitrators' resulting decisions.
Section 7 of the FAA provides statutory authority for invoking the powers of a federal district
court to assist arbitrators in obtaining evidence. Under this provision, arbitrators may
subpoena witnesses and direct those witnesses to bring material documentary evidence to an
arbitral hearing; if witnesses fail to comply, the district court for the district in which the
arbitrators are sitting may compel compliance with such subpoenas.
The methods for obtaining evidence under §7 are more limited than those under §1782 in two,
and possibly three, ways. First, §7 explicitly confers authority only upon arbitrators; by
necessary implication, the parties to an arbitration may not employ this provision to subpoena
documents or witnesses. See 9 U.S.C. §7; see also Burton v. Bush, 614 F.2d 389, 390 (4th Cir. 1980)
(“While an arbitration panel may subpoena documents or witnesses, the litigating parties have
no comparable privilege.”). Second, §7 explicitly confers enforcement authority only upon the
“district court for the district in which such arbitrators, or a majority of them, are sitting.” Third,
the express language of §7 refers only to testimony before the arbitrators and to material
physical evidence, such as books and documents, brought before them by a witness; open
questions remain as to whether §7 may be invoked as authority for compelling prehearing
depositions and pre-hearing document discovery, especially where such evidence is sought
 from non-parties.
If the broader evidence-gathering mechanisms provided for in §1782 were applicable to
proceedings before non-governmental tribunals such as private arbitral panels, we would need
to decide whether 9 U.S.C. §7 is exclusive, in which case the two statutes would conflict.
Because we conclude instead that §1782 does not apply to proceedings before private arbitral
panels, we need not reach this issue....
Our inquiry begins with the language of the statute itself, and particularly the phrase “foreign
or international tribunal,” which is not otherwise defined in the statute. Because the term
P "505" “foreign or international tribunal” is undefined, it is to be given its ordinary or natural meaning.
P "506" In support of its position, NBC cites numero s references to private arbitration panels as
“tribunals” or “arbitral tribunals” in court cases, international treaties, congressional
statements, academic writings, and even the Commentaries of Blackstone and Story. This
authority amply demonstrates that the term “foreign or international tribunals” does not
unambiguously exclude private arbitration panels. On the other hand, the fact that the term
“foreign or international tribunals” is broad enough to include both state-sponsored and
private tribunals fails to mandate a conclusion that the term, as used in §1782, does include
both. In our view, the term “foreign or international tribunal” is sufficiently ambiguous that it
does not necessarily include the arbitral panel at issue here. Accordingly, we look to legislative
history and purpose to determine the meaning of the term in statute.
The current version of §1782 was enacted in 1964 as part of legislation to implement
recommendations of the Commission on International Rules of Judicial Procedure (the
“Commission”), a body created by Congress in 1958 to “study existing practices of judicial
assistance and cooperation between the United States and foreign countries with a view to
achieving improvements.” The Commission recommended a series of changes in domestic civil
procedure to accommodate international proceedings, in the hope that foreign countries
would be encouraged to reciprocate with procedural improvements of their own.
The §1782 that emerged from Congress in 1964 replaced the old §1782, which had provided
limited evidence-gathering assistance to “judicial proceedings in any court in a foreign
country” (emphasis added), and 22 U.S.C. §§270-270g, which conferred certain powers on
commissioners or members of “international tribunals.” With respect to the revisions to the old
§1782, the House and Senate committee reports stated that “[t]he word ‘tribunal’ is used to
make it clear that assistance is not confined to proceedings before conventional courts,” to
which the predecessor statute had been expressly limited. Nonetheless, it is apparent in
context that the authors of these reports had in mind only governmental entities, such as
administrative or investigative courts, acting as state instrumentalities or with the authority of
state. The House and Senate committee reports, in explaining the choice of the word
“tribunal,” state that, “[f]or example, it is intended that the court have discretion to grant
assistance when proceedings are pending before investigation magistrates in foreign
countries.” The new §1782 would facilitate the collection of evidence for use “before a foreign
administrative tribunal or quasi-judicial agency.” The absence of any reference to private
dispute resolution proceedings such as arbitration strongly suggests that Congress did not
consider them in drafting the statute.
The legislative history behind the replacement of §§270-270g is even more compelling than
that behind the revisions to the old §1782. The term “international tribunal” derives directly
from §§270-270g, which authorized commissioners or members of international tribunals to
administer oaths, to subpoena witnesses or records, and to charge contempt. There is no
question that the statute applied only to intergovernmental tribunals. Congress had enacted
P "506" §§270-270c in 1930 in direct response to problems that arose in arbitration proceeding
P "507" between the United States and Canada, and it added §§270d-270g in 1933 explicitly to
accommodate proceedings before the United States-German Mixed Claims Commission. It
bears underscoring that those international arbitrations were intergovernmental, not private,
arbitrations. More importantly, the old structure applied only to international tribunals
It is clear that the 1964 legislation was intended to broaden the scope of the repealed 22 U.S.C.
§§270-270g by extending the reach of the surviving statute to intergovernmental tribunals not
involving the United States. Significantly, however, there is no indication [in the legislative
history] that Congress intended for the new provisions to reach private international tribunals,
which lay far beyond the realm of the earlier statute.... In sum, the legislative history reveals
that when Congress in 1964 enacted the modern version of §1782, it intended to cover
governmental or intergovernmental arbitral tribunals and conventional courts and other state-
sponsored adjudicatory bodies.
The legislative history's silence with respect to private tribunals is especially telling because
we are confident that a significant congressional expansion of American judicial assistance to
international arbitral panels created exclusively by private parties would not have been
lightly undertaken by Congress without at least a mention of this legislative intention.
The popularity of arbitration rests in considerable part on its asserted efficiency and cost-
effectiveness – characteristics said to be at odds with full-scale litigation in the courts, and
especially at odds with the broad-ranging discovery made possible by the Federal Rules of
Civil Procedure. Few, if any, non-American tribunals of any kind, including arbitration panels
created by private parties, provide for the kind of discovery that is commonplace in our
federal courts and in most, if not all, state courts. If the parties to a private international
arbitration make no provision for some degree of consensual discovery inter se in their
agreement to arbitrate, the arbitrators control discovery, and neither party is deprived of its
bargained-for efficient process by the other party's tactical use of discovery devices.
 The limitations in §7 of the FAA, described above, are consistent with these traditional
discovery limits, which would be overridden by the application of §1782 to proceedings before
private arbitral panels. Opening the door to the type of discovery sought by NBC in this case
likely would undermine one of the significant advantages of arbitration, and thus arguably
conflict with the strong federal policy favoring arbitration as an alternative means of dispute
resolution. Furthermore, such broad discovery in proceedings before “foreign or international”
private arbitrators would stand in stark contrast to the limited evidence gathering provided in
9 U.S.C. §7 for proceedings before domestic arbitration panels. Such an inconsistency not only
P "507" would be devoid of principle, (148) but also would create an entirely new category of disputes
P "508" concerning the appointment of arbitrators and the characterization of arbitral panels as
domestic, foreign, or international. As noted above, therefore, it is our view that Congress
intended not this broad result, but rather only the limited expansion described in the House
and Senate reports....
Notes on Court-Ordered Discovery In Aid of International Arbitrations
1. Arbitrator's ability under national law to obtain judicial assistance from foreign courts.
Consider Article 27 of the UNCITRAL Model Law, Article 184 of the Swiss Law on Private
International Law, Article 1696 of the Belgian Judicial Code, and Article 288(4) of the
Guatemalan Code of Civil and Commercial Procedure.
How does each statute define an arbitrator's power to obtain judicial assistance in aid of its
discovery orders? What is the scope of the judicial assistance that is available to the tribunal
under each statute? Under each statute, is an arbitrator entitled to apply to courts located
outside the place where the arbitration is sited for assistance in taking evidence? To the courts
of the arbitral situs? What are the applicable procedures? Can the parties agree to exclude the
tribunal's evidence-taking power?
2. Inapplicability of local rules of judicial procedure to permit court-ordered discovery in aid of
international arbitration proceedings. In most instances, local rules of judicial procedure are
not applicable either in arbitral proceedings, see supra p. 432, or to permit court-ordered
discovery in aid of arbitral proceedings. Thus, lower U.S. courts have uniformly held that Rule
81(a)(3) does not make the Federal Rules of Civil Procedure available for court-ordered
discovery in aid of arbitration proceedings, but instead deals only with the Rules' applicability
in judicial proceedings to compel, or in aid of, arbitration, or to enforce or vacate an arbitral
award. In addition to Commercial Solvents, see Penn Tanker Co. v. C.H.Z. Rolimpex, Warszawa,
199 F.Supp. 716 (S.D.N.Y. 1961); Foremost Yarn Mills, Inc. v. Rose Mills, Inc., 25 F.R.D. 9 (E.D. Pa.
1960); International Union of Electrical etc. v. Westinghouse Electric Corp., 48 F.R.D. 298 (S.D.N.Y.
1969). Compare Complaint of Koala Shipping & Trading Inc., 587 F.Supp. 140, 143 (S.D.N.Y. 1984).
3. Arbitrator's discovery power under national law not necessarily limited to parties. Consider
the various national arbitration statutes excerpted above. Do they limit the arbitrator's
discovery powers to parties to the arbitration? Consider §7 of the FAA in this regard. What is the
rationale underlying this approach?
4. Section 7 of the FAA grants arbit al tribunal power to seek court-ordered discovery. As we
have seen, §7 of the FAA grants an arbitral tribunal authority to order testimony and document
production in certain circumstances. See supra pp. 491-95. If those orders are not complied
with, §7 authorizes the tribunal to seek judicial assistance in compelling compliance.
Compare the rights of arbitrators to seek judicial assistance under other national laws,
excerpted above, such as the UNCITRAL Model Law, the Swiss Law on Private International Law,
the Belgian Judicial Code, and the Guatemalan Code of Civil and Commercial Procedure. Which
approach is most desirable? Should arbitrators have the power, absent express agreement by
the parties, to seek judicially-ordered discovery?
5. No interlocutory judicial review of arbitral tribunal's discovery rulings in U.S. courts. As
described below, some lower courts have refused to enforce discovery orders by tribunals
under §7 of the FAA on the grounds that they exceeded the evidence-taking purposes of that
provision. See infra p. 509. U.S. courts have generally said that discovery in arbitration is
intended to be focussed on producing evidence, as opposed to fishing for possibly useful
information.
Nevertheless, if a tribunal does not seek judicial assistance under §7, U.S. courts have usually
refused to intervene in an ongoing arbitration because of alleged improprieties or deficiencies
in the discovery orders of the tribunal. Stanton v. Paine Webber Jackson & Curtis, Inc., 685
F.Supp. 1241, 1242-43 (S.D. Fla. 1988) (“Nothing in the Act contemplates interference by the
court in an ongoing arbitration proceeding.”) (excerpted at supra pp. 462-64); Compania
P "508" Panemena Maritima v. J.E. Hurley Lumber Co., 244 F.2d 286 (2d Cir. 1957); Mobil Oil Indonesia Inc.
P "509" v. Asamera Oil (Indonesia) Ltd, 392 N.Y.S.2d 614 (App. Div. 1977), aff'd, 401 N.Y.S.2d 186 (Ct. App.
1977) (refusing to consider action to vacate interim award in which arbitrators confirmed their
power to order discovery under 1975 version of ICC Rules); Foremost Yarn Mills, Inc. v. Rose Mills,
Inc., 25 F.R.D. 9, 11 (E.D. Pa. 1960).
6. Minimal judicial review of arbitral tribunal's discovery rulings in actions to enforce arbitral
awards in U.S. courts. U.S. courts have generally been extremely reluctant to entertain
challenges to final arbitral awards based on the tribunal's alleged failure to order discovery, or
on its having ordered allegedly overly broad discovery. See Hyman v. Pottberg's Executors, 101
F.2d 262 (2d Cir. 1939); Iron Ore Co. of Canada v. Argonaut Shipping, Inc., No. 85 Civ. 3460 (S.D.N.Y.
September 30, 1985); Eddie S.S. Co. v. Czarnikow-Rionda Co., 480 F.Supp. 731 (S.D.N.Y. 1979).
Compare Chevron Transp. Corp. v. Astro Vencedor Compania Naviera, SA, 300 F.Supp. 179 (S.D.N.Y.
1969).
 7. Divergent lower U.S. court decisions concerning scope of arbitrator's power under FAA §7 to
order “discovery.” Lower U.S. courts have produced divergent answers to questions about the
scope of judicial assistance in ordering “discovery” which is available under §7. See Willenken,
The Often Overlooked Use of Discovery in Aid of Arbitration and the Spread of the New York Rule
to Federal Common Law, 35 Bus. Law. 173, 182 (1979). See supra p. 492.
(a) Lower U.S. court decisions restricting scope of tribunal-ordered discovery under §7. Some
courts have held that §7 does not permit a tribunal to order “discovery,” but only to
require the production of “evidence” at a hearing. Consider the comment in Oceanic
Transport that:
However great a respect we owe the arbitrators, it is a fact that when the statute [§7 of
the FAA] imposed upon the District Court the duty to determine whether or not to compel
the attendance of a witness and his production of papers, it imposed upon the Court the
duty to determine whether or not the proposed evidence is material.
For similar decisions, see Burton v. Bush, 614 F.2d 389, 390 (4th Cir. 1980); Integrity Ins. Co.
v. American Centennial Ins. Co., 885 F.Supp. 69 (S.D.N.Y. 1995) (“an arbitrator does not have
the authority to compel nonparty witnesses to appear for pre-arbitration depositions”);
Wilkes-Barre Publishing Co. v. Newspaper Guild of Wilkes-Barre, 559 F.Supp. 875 (M.D. Pa.
1982) (refusing to enforce subpoena under §7 for “anything [one party] wants,” and
remanding to arbitrator for relevance determination); Great Scott Supermarkets v. Local
337 etc., 363 F.Supp. 1351, 1254-55 (E.D. Mich. 1973); Local Lodge 1746 etc. v. Pratt & Whitney
Division etc., 329 F.Supp. 283 (D. Conn. 1971) (enforcing arbitrator's subpoena, but requiring
in camera review by arbitrator and only permitting arbitrator to provide parties with
“relevant evidence in the dispute”; “Arbitration has never afforded to litigants complete
freedom to delve into and explore at will, the adversary party's files under the pretense
of pre-trial discovery.”); United Nuclear Corp. v. General Atomic Co., 597 P.2d 290, 302 (N.M.
1979).
(b) Lower U.S. court decisions permitting broad tribunal-ordered discovery under §7. Other
federal courts have been reluctant to second-guess arbitrators' determinations
concerning materiality, and have enforced what appear to be fairly broad pre-hearing
discovery orders issued by arbitrators. Consider the lower court's decision in Stanton,
excerpted above, refusing to interfere with a arbitral tribunal's pre-hearing discovery
orders. See also Meadows Indem. Co. v. Nutmeg Ins. Co., 157 F.R.D. 42 (M.D. Tenn. 1994)
(upholding arbitrators' pre-hearing subpoena requiring document production by non
party witness under §7 of FAA: “The power of the [arbitral] panel to compel production of
documents from third-parties for the purposes of a hearing implicitly authorizes the
lesser power to compel such documents for arbitration purposes prior to a hearing”);
Commercial Metals Co. v. International Union Marine Corp., 318 F.Supp. 1334 (S.D.N.Y. 1970)
(enforcing subpoena for materials because they might be relevant to arbitration);
Complaint of Koala Shipping & Trading Inc., 587 F.Supp. 140, 143 (S.D.N.Y. 1984) (relying on
F.R. Civ. P. 26 to order fairly broad discovery); Corcoran v. Shearson/American Express, Inc.,
596 F.Supp. 1113, 1117 (N.D. Ga. 1984); Mississippi Power Co. v. Peabody Coal Co., 69 F.R.D.
558 (S.D. Miss. 1976).
8. Parties' inability to seek court-ordered discovery from adverse parties. Why didn't the courts
in Commercial Solvents and M/V South Star rely on §7 of the FAA? Note that §7 permits the
tribunal to order discovery, not the parties themselves. Why is this distinction drawn in §7?
What policies does it serve?
(a) Parties' inability to seek court-ordered discovery under FAA §7. Lower courts have almost
uniformly held, as a matter of federal law, that court-ordered discovery at a party's
request, for use in an arbitration, is ordinarily improper. E.g., Suarez-Valdez v.
P "509" Shearson/American Express, Inc., 845 F.2d 950, 951 (11th Cir. 1988); Burton v. Bush, 614 F.2d
P "510" 389 (4th Cir. 1980) (“While an arbitration panel may subpoena documents or witnesses,
the litigating parties have no comparable privilege.”); H.K. Porter Co. v. Local 37 etc., 400
F.2d 691 (4th Cir. 1968); Lummus Co. v. Commonwealth Oil Ref. Co., 273 F.2d 613 (1st Cir.
1959); Hires Parts Service, Inc. v. NCR Corp., 859 F.Supp. 319 (N.D. Ind. 1994) (staying all
district court discovery pending arbitration: “permitting discovery on two levels, district
court level and arbitration level, is a great waste of resources and frustrates the basic
purpose of [the FAA]”); Stanton v. Paine Webber Jackson & Curtis, Inc., 685 F.Supp. 1241,
1242 (S.D. Fla. 1988) (“all discovery between parties must be stayed by the court pending
arbitration”); Thompson v. Zavin, 607 F.Supp. 780 (C.D. Cal. 1984); Recognition Equipment,
Inc. v. NCR Corp., 532 F.Supp. 271 (N.D. Tex. 1981); Mississippi Power Co. v. Peabody Coal
(district court's discovery order “left the parties standing with one foot in the district
court and the other in the arbitrator's office”); Econo-Car Int'l, Inc. v. Antilles Car Rentals,
Inc., 61 F.R.D. 8, 10 (D.V.I. 1973), rev'd on other grounds, 499 F.2d 1391 (3d Cir. 1974); Local
1746, Int'l Assn of Machinists etc. v. Pratt & Whitney, 329 F.Supp. 283, 286-87 (D. Conn. 1971);
Foremost Yarn Mills, Inc. v. Rose Mills, Inc., 25 F.R.D. 9 (E.D. Pa. 1960). Compare Local 66 etc.
v. Leona Lee Corp., 434 F.2d 192, 194 (5th Cir. 1970) (per curiam decision permitting, without
analysis, court-ordered discovery before arbitration).
(b) Parties' inability to seek court-ordered discovery under New York law. New York state courts
have taken much the same approach as that in Commercial Solvents and M/V South Star,
refusing to grant court-ordered discovery in “aid” of arbitration at the request of parties.
E.g., Motor Vehicle Accident Indem. Corp. v. McCabe, 243 N.Y.S.2d 495 (App. Div. 1963). See
also McRae v. Superior Court, 34 Cal.Rptr. 346 (Dist. Ct. 1963); United Nuclear Corp. v.
General Atomic Corp., 597 P.2d 290, 302 (N.M.), cert. denied, 444 U.S. 911 (1979).
 (c) Parties' inability under leading national arbitration statutes to seek court-ordered
discovery. Consider the excerpts from the UNCITRAL Model Law, Swiss Law on Private
International Law, and Belgian Judicial Code. What do they provide with respect to a
party's ability to obtain assistance from a local court in taking evidence or ordering
discovery in aid of an arbitration?
9. Rationale for Commercial Solvents. Consider the rationale of Commercial Solvents in refusing
to order discovery requested by a party to a pending arbitration. Why shouldn't a national
court order such discovery? Note that, under 28 U.S.C. §1782, U.S. courts will frequently order
discovery in aid of foreign judicial proceedings at the request of a litigant in those
proceedings. See, e.g., In re Application of Asta Medica, SA, 981 F.2d 1 (1st Cir. 1992); Malev v.
United Technologies, 964 F.2d 97 (2d Cir. 1992). Is international arbitration different?
The Commercial Solvents decision cites two factors in denying discovery: (a) the risk of judicial
interference in the arbitral process; and (b) the fact that, in agreeing to arbitration, parties
impliedly agree to forego the benefits and avoid the costs of judicial discovery. Are these
sufficient reasons for preventing access to the full truth? Compare Jones, The Accretion of
Federal Power in Labor Arbitration – The Example of Arbitral Discovery, 116 U. Pa. L. Rev. 830
(1968) (characterizing limited discovery in arbitration as return to “sporting theory of justice”).
10. Court-ordered discovery under FAA in aid of arbitration at the request of a party in
“exceptional circumstances.” Consider the opinion in M/V South Star. Is the result in that case
wise? Is the objective of avoiding judicial interference in the arbitral process threatened by the
“exceptional circumstances” exception recognized in M/V South Star?
Most lower U.S. federal courts have, as a matter of federal law, permitted discovery in aid of
arbitration only in limited cases involving something akin to “exceptional circumstances.” See
Chevron Transp. Corp. v. Astro Vencedar Compania Naviera, 300 F.Supp. 179 (S.D.N.Y. 1969); Ferro
Union Corp. v. S.S. Ionic Coast, 43 F.R.D. 11 (S.D. Tex. 1967) (depositions of sailors about to leave
the jurisdiction; “To deny discovery here could well mean that the information sought would
never be available to the arbitrators or, if available, only at great expense.”); Bergen Shipping
Co. v. Japan Marine Serv., Ltd, 386 F.Supp. 430 (S.D.N.Y. 1974) (vessel about to leave jurisdiction);
Vespe Contracting Co. v. Anvan Corp., 399 F.Supp. 516, 522 (E.D. Pa. 1975) (continuing work on
construction project would effectively destroy evidence).
11. What constitutes “exceptional circumstances” under FAA §7? In order to satisfy the
“exceptional circumstances” exception to §7, U.S. courts have generally required a fairly
compelling demonstration of need for particular evidence, that otherwise will likely be
unavailable, in circumstances in which the arbitral tribunal itself is not constituted or is
otherwise unable to take or safeguard the evidence. E.g., Levin v. Ripple Twist Mills, Inc., 416
F.Supp. 876, 881-82 (E.D. Pa. 1976); Mississippi Power Co. v. Peabody Coal Co., 69 F.R.D. 558, 566-
68 (S.D. Miss. 1976); Vespe Contracting Co. v. Anvan Corp., 399 F.Supp. 516, 522 (E.D. Pa. 1975)
(arbitration tribunal not constituted and evidence was “disappearing” as construction work
P "510" progressed). See also Stein & Wotman, The Arbitration Hearing, in International Commercial
P "511" Arbitration in New York 87 (McClendon and Goodman eds. 1986) (“discovery under court
supervision will not be granted except under extraordinary circumstances and then only where
it is shown to be absolutely necessary for the protection of the rights of a party”).
12. Lower U.S. courts permitting liberal discovery in aid of arbitration at request of a party. A few
lower U.S. federal courts have found what appear to be fairly routine requests for pre-
arbitration discovery to be sufficiently “exceptional” to grant relief. These decisions have
typically placed principal emphasis on the absence of any delay to the arbitral process
resulting from court-ordered discovery. E.g., Local 66 etc. v. Leona Lee Corp., 434 F.2d 192 (5th
Cir. 1970) (apparently not requiring any showing of exceptional circumstance); Bigge Crane &
Rigging Co. v. Docutel Corp., 371 F.Supp. 240 (E.D.N.Y. 1973) (relying principally on size of claim,
minimal cost of court-ordered discovery, and absence of any showing that arbitration would be
delayed); Steamship Co. of 1949, Inc. v. China Union Lines, 123 F.Supp. 802 (S.D.N.Y. 1954).
13. Court-ordered discovery under FAA §7 in aid of a foreign arbitration. In M/V South Star, the
court ordered discovery in aid of foreign arbitration – more precisely, in aid of an arbitration
to be conducted in England under English law. Is it appropriate for a U.S. court to order
discovery in aid of foreign arbitratration, conducted outside the United States? Recall that
under §7, an arbitrator can only obtain judicial assistance in the district where he “sits.”
Is it relevant to the availability of U.S. court-ordered discovery in aid of a foreign arbitration
that comparable discovery would not be available under the foreign procedural law of the
arbitration? If the foreign procedural law does not permit court-ordered discovery at a party's
request, doesn't the M/V South Star result threaten to interfere both with the parties'
expectations and the conduct of the arbitration under the curial law?
For other U.S. lower court decisions approving court-ordered discovery, at a party's request, in
aid of a foreign arbitration, see Bergen Shipping Co. v. Japan Marine Services, Ltd, 386 F.Supp.
430, 435 n.8 (S.D.N.Y. 1974); Ferro Union Corp. v. SS Ionic Coast, 43 F.R.D. 11 (S.D. Tex. 1967)
(arbitration in New York; discovery ordered in Texas).
14. Discovery in arbitration under U.S. state law. U.S. state arbitration statutes also frequently
provide for state court judicial assistance to arbitral tribunals. Consider, for example, §7 of the
Uniform Arbitration Act.
Like §7 of the FAA, N.Y. C.P.L.R. §7505 permits arbitrators to require the attendance of third
parties as witnesses at hearings. Matter of Minerals & Chemicals Philipp Corp., 224 N.Y.S.2d 763
(1st Dept.), appeal dismissed, 230 N.Y.S.2d 732 (1962); Matter of Re-Anne Mfg. Corp., 149 N.Y.S.2d
161 (Sup. Ct. N.Y. Co. 1955).
 For U.S. state court decisions limiting the scope of tribunal-ordered disclosure that would be
judicially enforced, see Landegger v. Parsons & Whittemore, 54 N.Y.S.2d 76, 77, modified, 54
N.Y.S.2d 701 (1945); In re Meyer, 53 N.Y.S.2d 851 (Sup. Ct. 1944); Avon Converting Co. v. Home Ins.
Co. of New York, 93 N.Y.S.2d 90 (Sup. Ct. 1949) (enforcing order for deposition concerning
matters that were “clearly material and necessary to the issues before the arbitrator”); In re
Meyer, 53 N.Y.S.2d 851 (N.Y. 1944) (arbitrator's subpoena power under §2302 subject to same
limits as court's subpoena power). See also J. Weinstein, H. Korn & A. Miller, New York Civil
Practice??7505.06 (1992) (“the arbitrator does not have authority to order the parties to provide
pre-hearing disclosure unless they have agreed”).
15. What U.S. law – federal or state – governs the availability of court-ordered discovery in aid
of arbitration at a party's request? Suppose that U.S. state law allows a party to an arbitration
to seek the assistance of a state court in compelling an adverse party, or a non-party witness,
to make discovery. In an arbitration subject to either the domestic FAA or the New York
Convention, can these state discovery mechanisms be used or are they preempted?
Consider the final sentence of the Commercial Solvents decision. Is the court holding that the
FAA preempts state law permitting discovery, at the request of a party, in aid of arbitration?
See Thompson v. Zavin 607 F.Supp. 780, 782-83 (D.C. Cal. 1984) (§7 and pro-arbitration policies of
FAA preclude federal court from ordering discovery at request of party to arbitration; reaching
same conclusion as a matter of state law); Recognition Equip., Inc. v. NCR Corp., 532 F.Supp. 271,
273-74 (N.D. Tex. 1981) (§7 of FAA impliedly excludes court-ordered discovery at request of
party). Compare Bigge Crane and Rigging Co. v. Docutel Corp., 371 F.Supp. 240 (E.D.N.Y. 1973) and
Bergen Shipping Co. v. Japan Marine Serv., Ltd, 386 F.Supp. 430, 435 n.8 (S.D.N.Y. 1974). If a state
permits discovery in aid of arbitration, how does that conflict with the purposes of the FAA?
Does the rationale of Commercial Solvents – that judicial interference in the arbitral process
must be prevented – warrant preempting state law?
P "511"
P "512"
Suppose that the parties' underlying contract is governed (through a choice-of-law clause) by
the law of a State whose arbitration law permits discovery in aid of arbitration. Does that
choice-of-law clause constitute an agreement to the discovery provisions of the state
arbitration statute? See Volt Information Sciences v. Trustees of Stanford University, 489 U.S. 468
(1989), excerpted above at pp. 358-80.
16. Availability of 28 U.S.C. §1782 for obtaining discovery in aid of arbitration. Consider §1782,
excerpted above. What are the various ways that it might be used in an international
arbitration?
(a) Is an arbitral tribunal a “tribunal”? What is a “foreign or international tribunal”? Why
wouldn't an ICC-appointed or AAA-appointed tribunal qualify as an “international
tribunal”? If they do not, then what would?
The legislative history of §1782 does not shed substantial light on the provision's
applicability in arbitration. See 1964 U.S. Code, Cong., and Ad. News 3782.

(b) Lower court decisions holding that international commercial arbitration tribunals are not
“tribunals” for purposes of §1782. Consider the court's analysis of §1782 in NBC, and in
particular its interpretation of the phrase “tribunal.” It is, of course, clear that the phrase
“tribunal” is widely considered as encompassing commercial arbitration tribunals. See,
for example, the ICC, LCIA, and UNCITRAL Rules. Why exactly is it that the NBC court
concludes that the term “tribunal” in §1782 does not include these tribunals? Is the NBC
analysis persuasive? For other U.S. lower court decisions reaching similar conclusions, see
In re Application of Medway Power Ltd, 985 F.Supp. 402 (S.D.N.Y. 1997); In re Application of
the Republic of Kazakhstan, 168 F.3d 880 (5th Cir. 1999).
(c) Lower court decisions holding that commercial arbitration tribunals are “tribunals” for
purposes of §1782. Not all U.S. courts have agreed with NBC's analysis of §1782. One
district court concluded, albeit in dicta, that a foreign arbitral tribunal would be a
“tribunal” for purposes of §1782. See In re Application of Technostroyexport, 853 F.Supp.
695, 697 (S.D.N.Y. 1994) (“an arbitrator or arbitration panel is a ‘tribunal’ under §1782”); In
re Trygg-Hansa Ins. Co., 1995 WL 505339 (E.D. La. 1995) (apparently treating party to foreign
arbitration as “interested party” for purposes of §1782).
(d) How should §1782 be interpreted? Does the NBC conclusion serve the purposes of
international commercial arbitration? What policy grounds does the court cite in support
of its interpretation? What risk is there that arbitral proceedings would become less
efficient and expeditious if §1782 applied to international arbitrations?
Note that NBC involved an application for discovery by a party to arbitral proceedings,
rather than by an arbitral tribunal itself. Would party-initiated discovery in U.S. courts
under §1782 threaten to delay and complicate arbitral proceedings? Would arbitrator-
initiated discovery have the same risk?

(e) What arbitral tribunals might utilize §1782? Suppose that §1782 is available in connection
with arbitral proceedings; is it only available to a tribunal sitting outside the United
States? When §1782 refers to a “foreign or international” tribunal, how could that
encompass a tribunal sitting in the United States? Recall the discussion above regarding
awards not considered to be “domestic” under the New York Convention. See supra pp.
119-26. Why wouldn't a tribunal, sitting in the United States, but whose award would be
non-domestic, be regarded as “international” under §1782?
 17. Availability of 28 U.S.C. §1782 to “interested parties.” Note that §1782 permits assistance to
both the “international tribunal” and “any interested person.” In light of the rationale of
Commercial Solvents, is it reasonable to interpret §1782 as permitting parties to an arbitration
to unilaterally obtain judicial assistance? Is there some reason that parties to foreign
arbitrations should have greater access to discovery orders from U.S. courts under §1782 than
parties to domestic arbitrations have under FAA §7? Note that §1782 was enacted to put U.S.
courts at the disposal of foreign tribunals and litigants, in the hopes that foreign courts would
reciprocate. Arguably, the expectation was that foreign arbitral tribunals and/or courts could
control the discovery efforts of parties to foreign arbitrations if that was thought necessary.
Even if authority to order party-requested discovery under §1782 exists, should it be exercised?
and if so, in what circumstances? Recall the considerations discussed in Commercial Solvents
underlying limits on judicially-ordered discovery for parties to arbitrations. Those
considerations are entirely applicable to applications for discovery under §1782 by parties to
an arbitration. If §1782 is interpreted to permit judicial assistance in aid of arbitrations, it
should be limited to restrict discovery efforts by parties (as opposed to the arbitral tribunal).
18. Restrictions in parties' arbitration agreement on applications by the parties for court-
P "512" ordered discovery. Consider Article 22.2 of the LCIA Rules. What is the effect of this provision?
P "513" Are there similar provisions in the other institutional rules? Is it an implied requirement of
agreeing to arbitration that the parties forego access to court-ordered discovery? Assuming
that it is not, is the LCIA's prohibition a desirable one? Compare Article 24 of the UNCITRAL
Model Law.
Is there any need for an express authorization in institutional arbitration rules to permit an
arbitrator (as opposed to a party) to seek court enforcement of his discovery orders (for
example under §7 of the FAA)? Is there any such authorization in the institutional rules
excerpted above?
19. Availability of extraterritorial discovery under FAA §7. Suppose that a tribunal, with the
United States designated as the arbitral situs, orders discovery and then seeks judicial
enforcement pursuant to §7 from a party to the arbitration. Suppose further that the party is a
multinational company based in Europe, but with a U.S. branch office. And suppose finally that
the tribunal seeks discovery of documents located in the European head office of the party. Is
such extraterritorial discovery available under §7?
Note that the discovery and subpoena powers of U.S. district courts ordinarily permit discovery
(during litigation) of documents located outside the United States. See generally G. Born,
International Civil Litigation in United States Courts 856-92 (3d ed. 1996). Should any different
rule apply under §7? Specifically, could a district court compel the European party to produce
documents and witnesses from its European head office?
20. Availability of Hague Evidence Convention for discovery in aid of arbitration. Under the
Hague Evidence Convention, a “judicial authority” in one member state may send a “letter of
request” to the Central Authority of another member state, seeking assistance in obtaining
evidence. The receiving state is, in general, obliged to assist the requesting judicial authority.
See G. Born, International Civil Litigation in United States Courts 895-920 (3d ed. 1996). Article I(2)
of the Convention provides that “A-Letter [of Request] shall not be used to obtain evidence
which is not intended for use in judicial proceedings, commenced or contemplated.”
Is the Hague Evidence Convention available for international arbitration? First, is an arbitral
tribunal a “judicial authority” that may directly send letters of request to foreign states?
Second, may an arbitral tribunal apply to a national court in the arbitral situs and request that
it issue a letter of request? There is little authority on either question. See Hague Conference on
Private International Law: Special Commission Report on the Operation of the Hague Service
Convention and the Hague Evidence Convention, 28 I.L.M. 1556, 1566-67 (1989) (“the matter had
been discussed in 1985 and it was felt there was no demand for making such an extension. The
laws of some countries did however provide for judicial assistance in obtaining evidence for
arbitration, and the Convention could then possibly be used to obtain evidence located
abroad. Although the wording of the English text of Article 1, paragraph 2 of the Convention
seemed to exclude this possibility, the French text was more general.”).
21. Availability of letters rogatory for discovery in aid of arbitration. Historically, courts in one
nation have in theory been available to assist courts of other states in obtaining evidence.
Through the mechanism of “letters rogatory,” a court of one nation could request that a court in
a second state obtain certain evidence for it from persons located on the territory of the
requested state. See G. Born, International Civil Litigation in United States Courts 893-95 (3d ed.
1996). May an arbitral tribunal apply to a local court, and obtain from it a letter rogatory
requesting the assistance of a court in another state? Again, there is virtually no authority on
the point. Willenken, The Often Overlooked Use of Discovery in Aid of Arbitration and the Spread
of the New York Rule to Federal Common Law, 35 Bus. Law. 173, 183-84 (1979).
22. Discovery in actions to compel arbitration. In actions to compel arbitration or stay litigation,
under §§3 and 4 of the domestic FAA, or §206 of the FAA, discovery is available under the
Federal Rules of Civil Procedure as in other civil actions. Lower courts have held that there is
no need for any showing of “exceptional circumstances” in order to obtain discovery in these
cases, provided that the discovery is limited to the issue of arbitrability. See F.R. Civ. P. 81(a)
(3); Oriental Commercial and Shipping Co., Ltd v. Rosseel, NV, 609 F.Supp. 75, 79 (S.D.N.Y. 1985);
Levin v. Ripple Twist Mills, Inc., 416 F.Supp. 876, 881-82 (E.D. Pa. 1976); International Union of
Electrical etc. v. Westinghouse Electric Corp., 48 F.R.D. 208, 300-01 (S.D.N.Y. 1969) (relying on Rule
81, and distinguishing between “[d]iscovery into the merits of a grievance ... [and] discovery
into the question of arbitrability itself”); RLC Electronics, Inc. v. American Electronics
 Laboratories, Inc., 332 N.Y.S.2d 119 (App. Div. 1972) (applying state law). See 7 J. Moore, J. Lucas &
K. Sinclair, Moore's Federal Practice para. 81.05[7] (2d ed. 1987).
Efforts to use discovery on the issue of arbitrability to obtain information relevant to the
P "513" merits of the parties' dispute, Willenken, The Often Overlooked Use of Discovery in Aid of
P "514" Arbitration and the Spread of the New York Rule to Federal Common Law, 35 Bus. Law. 173, 184
(1979), will usually be too transparent to succeed. Oppenheimer Fund, Inc. v. Sanders, 437 U.S.
340, 352 n.17 (1978), citing with approval Mississippi Power Co. v. Peabody Coal Co., 69 F.R.D. 558
(S.D. Miss. 1976).
23. Waiver of right to arbitrate by seeking court-ordered discovery. A party that wishes to obtain
prearbitration court-ordered discovery must exercise care to ensure that its efforts are not
later deemed a waiver of its right to compel arbitration. See De Sapio v. Kohlmeyer, 362
N.Y.S.2d 843, 847 (Ct. App. 1974) (“utilization of judicial discovery procedures is also an
affirmative acceptance of the judicial forum”); supra pp. 239-42.
24. Request for discovery from arbitrators held to waive right to seek court-ordered discovery.
One lower court has held that a party's request that the arbitral tribunal issue subpoenas
constitutes a waiver of rights to seek court-ordered discovery. Cotter v. Shearson Lehman
Hutton, 546 N.Y.S.2d 319.

F. Representation in International Arbitral Proceedings

A topic of keen interest, especially to lawyers, is the right of parties to legal representation in
international arbitration proceedings. Despite its practical importance, few arbitration clauses
address the question. On the other hand, most institutional arbitration rules provide that
parties may be represented in arbitral proceedings, either expressly or impliedly indicating
that a party is free to be represented by persons of its own choice. (149) This freedom is
applauded by the international bar and arbitration community.
The topic of representation in international arbitral proceedings gives rise to important issues.
First, there are restrictions in some countries on the identities of the representatives who may
appear in arbitration proceedings conducted within national territory. Second, ethical
limitations, or other constraints imposed by rules of professional responsibility or otherwise,
apply to representatives in international arbitrations, as in other contexts, and can restrict a
party's choice of counsel.
In many developed jurisdictions, national law imposes no (or virtually no) limitations on the
identities of persons that may serve as a parties' representative in an international arbitration
conducted on national territory. That is true in the United States, as well as most European and
many Middle Eastern jurisdictions. In a few countries, the freedom of parties to select their
legal representatives in international arbitration is ensured by statute. (150)
Nonetheless, a number of countries impose (or have imposed) limitations on the identities of
legal representatives permitted to appear in arbitrations (including international arbitrations)
conducted on national territory. Most frequently, these limitations require that legal
representatives be admitted to the local bar association in the arbitral situs. For example,
Japanese law was frequently said to require that lawyers admitted to practice in Japan appear
P "514" in international arbitrations conducted in Japan. (151) Similarly, in a highly-publicized 1988
P "515" Singapore judicial decision, an unfortunate New York law firm was enjoined on the eve of a
hearing from representing its client in an arbitration sited in Singapore. (152) Although
Singapore subsequently amended its local bar restrictions, to respond to foreign criticisms,
other countries retain comparable limitations. (153) The decision of the Barbados High Court in
Lawler, Matusky & Skeller v. Attorney General, excerpted below, illustrates this general issue.
Putting aside general requirements for local bar admission, international arbitration can raise
questions of conflicts of interest and other ethical restrictions, just as national court litigation
does. In national court proceedings, compliance with applicable rules of ethics and
professional responsibility is ordinarily enforced by the judiciary of the local bar. How are such
issues best dealt with in international arbitration? There is as yet no clear answer, as the
decision of the Bidermann Indus. Licensing, Inc. v. Avmar NV, excerpted below, illustrates.
ICC ARBITRATION RULES (1998 VERSION)
Article 21(4)
[excerpted below at p. 1066]
LCIA ARBITRATION RULES
Article 18
[excerpted below at p. 1081]
UNCITRAL ARBITRATION RULES
Article 4
[excerpted below at p. 1024]
LAWLER, MATUSKY & SKELLER v. ATTORNEY GENERAL OF BARBADOS
Civ. Case No. 320 of 1981
(High Court Barbados Aug. 22, 1983)
P "515" [An arbitration was to be conducted in Barbados. One party wished to be represented by Mr.
P "516" Kannry, who was admitted to practice law in jurisdictions other than Barbados, but not in
P "516"
Barbados. The other party prompted the Attorney General of Barbados to file an action
precluding Mr. Kannry from acting in the arbitration.] It is submitted on behalf of the Attorney
General that if Mr. Kannry were to represent the claimants at the arbitration hearings in
Barbados, he would be practising law in breach of section 12(1)(a); and that the arbitrator
cannot authorize or permit Mr. Kannry to do any act which would be in contravention of the law
of Barbados. My task therefore is to determine whether representation of a party at a hearing
in Barbados in a private arbitration constitutes the practice of law within the meaning of the
Act ...
Far from the Legal Profession Act disclosing in clear and unambiguous terms the intention to
reserve exclusively to attorneys-at-law advocacy and like functions, the indications are that it
was not Parliament's intention to make such a significant change in the law. In my judgement
the Act did not affect the powers of an arbitrator in a private arbitration to regulate its
procedure or the common law right of a party, if permitted by the arbitrator, to be represented
by someone chosen by him.
The findings of the arbitrator disclose, that, in giving his ruling, he took into account Mr.
Kannry's qualifications and references, general as well as in the particular case, his own
experience and the possibility of prejudice being caused to the claimants if they were
deprived of Mr. Kannry's continued assistance. In my opinion these were all matters which he
could properly take into consideration and it cannot be said that he exercised his discretion in
any improper manner.
I would answer the first question in this way: The Arbitrator had and still has, the power in law
to determine and has correctly and validly determined that the applicants are entitled to be
represented at hearings in Barbados by Mr. Jack Kannry, a person not registered under the
provisions of the Legal Profession Act.
The Arbitration Act ... governs the proceedings and the High Court of Barbados has jurisdiction
under the Act and common law to control them. The Court may set aside an award where the
arbitrator misconducts himself or the proceedings or where an arbitration or award has been
improperly procured (Section 26). The court may on application give relief where an arbitrator
is not impartial or there is a dispute whether a party has been guilty of fraud (Section 27). And
at common law the court may intervene if there is a breach of the rules of natural justice. There
are good reasons therefore for requiring an attorney-at-law registered in Barbados to be
associated with Mr. Kannry. Any applications to the court would be dealt with by someone
acquainted with the case. The reasons given by the arbitrator for directing that Mr. Kannry be
assisted by a Barbados attorney-at-law at all hearings were to enable Mr. Kannry to be advised
on Barbadian law. It seems to me that the considerations I mentioned earlier are more to the
point. However that may be, the arbitrator's direction is in my opinion concible. I would
therefore answer the second question by saying that the arbitrator could permit the applicants
to be represented by Mr. Kannry and could also permit such representation subject to the
proviso that Mr. Kannry be associated with an attorney-at-law registered under the Legal
Profession Act.
P "516"
P "517"
BIDERMANN INDUS. LICENCING, INC. v. AVMAR N.V.
N.Y.L.J., Oct. 26, 1990, at 23 (N.Y. Sup. Ct.)
Petitioner Bidermann Industries, Inc. (“BILI”), makes this application for an order pursuant to
CPLR §7503 staying the arbitration demanded by respondents, Avmar N.V. (“Avmar”), Leit Moti,
Inc. (“LMI”) and Karl Lagerfeld (“Lagerfeld”), as to the issue of whether BILI's counsel, Coudert
Brothers, should be disqualified from representing them in the arbitration proceedings
pending between BILI and the respondents. The issue presented is one of apparent first
impression: May the issue of attorney disqualification be determined in an arbitration, or is it
a matter exclusively within the province and jurisdiction of the courts? ...
BILI next argues that the issue of disqualification is not arbitrable because it is not within the
scope of the arbitration agreement executed between BILI and the respondents. Further, BILI
contends it is against public policy to arbitrate the ethical obligations of attorneys, since that
is within the exclusive jurisdiction of the courts. Respondents argue that the arbitration
provision encompasses any dispute arising out of the agreements or their alleged breach. They
also contend that the issue of disqualification is a procedural issue in the arbitration and as
such is clearly within the province of the arbitrators to decide.
Pursuant to the license agreement executed by the parties, BILI and respondents agreed that:
Any controversy, dispute or claim arising out of or relating to this Agreement, or the breach
thereof, shall be settled by arbitration which shall be held in the City of New York in
accordance with the rules of the American Arbitration Association and judgment upon the
award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.
The license agreement between BILI and respondents deals with the contractual obligations
and aspects of trademark use and design services as well as designating arbitration as the
means of resolution of dispute between the parties.
Generally, New York favors arbitration. “Those who agree to arbitrate should be made to keep
their solemn written promises.”Matter of Grayson-Robinson Stores, Inc., 8 N.Y.2d 133, 138 (1960).
It is the strong policy of this state to encourage use of arbitration as an easy expeditious
method of settling dispute which, ideally, dispenses with the need for protracted litigation....
It is a threshold question for the courts, however, upon application pursuant to CPLR §7503(C)
“to determine whether the parties agreed to submit their disputes to arbitration, [and] if so,
 whether the particular disputes come within the scope of their agreement.”County of Rockland
P "517" v. Primiano Construction Co., 51 N.Y.2d 1 (1980), an arbitration agreement will be enforced by
P "518" the courts provided it does not transgress a provision or statute or violate public policy....
“Public policy, whether derived from, and whether explicit or implicit in statue or decisional
law, or in neither, may also restrict the freedom to arbitrate.”Susquehanna Valley Central
School Dist. v. Susquehanna Valley Teacher's Ass'n, 37 N.Y.2d 614, 616-617 (1975). It is for courts to
decide whether the enforcement of an agreement to arbitrate would contravene an important
public policy.
Where an important interest of public at large is likely to be affected by the resolution of a
dispute, decision by arbitration is inappropriate, notwithstanding agreement by parties to the
dispute. For example, even if child custody and visitation agreements provide for arbitration
as the forum for dispute resolution, the courts have jurisdiction to consider the issues de
novo.... Violations of state antitrust laws are not arbitrable, ... nor are violations of criminal law
... and matters involving civil penalties....
Similarly, the regulation of attorneys, and determinations as to whether clients should be
deprived of counsel of their choice as a result of professional responsibilities and ethical
obligations, implicate fundamental public interests and policies which should be reserved for
the courts and should not be subject to arbitration....
Among the competing public interests which must be balanced against a client's right to
counsel of her choice is “the courts' duty to protect the integrity of the judicial system and
preserve the ethical standards of the legal profession.”Matter of Abrams, 62 N.Y.2d 183, 196
(1984).
The general policy favoring arbitration ... must be balanced against the important policy
favoring judicial determination of attorney disqualification. While jurisdiction to discipline an
attorney for misconduct is vested exclusively in the Appellate Division, disqualification in a
particular matter should be sought in the court in which the motion is pending, or, if no action
is pending, at a Special Term of the Supreme Court ... The court has the inherent power to
disqualify an attorney for a party upon a finding that it is improper for him to represent the
litigant or to participate in a proceedings....
Although no New York case specifically precludes arbitration of attorney disqualification
issues, a number of cases imply that attorney conduct is the exclusive province of the courts. A
New York City Council regulation involving the sale of taxicabs, which limited the usual and
normal privileges of attorneys, was held invalid because regulation of conduct of attorneys was
found to be vested in the courts.... In Erdheim v. Selkowe, 51 A.D.2d 705 (1st Dept. 1976), the
Appellate Division, First Department held that arbitrators have no jurisdiction to discipline
attorneys, as this is within the exclusive jurisdiction of the Appellate Division.
In Erlanger, the Supreme Court denied a motion which sought to disqualify counsel from
representing the other party at arbitration on the grounds of conflict of interest on the merits.
The Court of Appeals did not address the appropriateness of raising the issue in court rather
than in the arbitration. Although not dispositive, this decision suggests that the issue may be
litigated in court rather than in the arbitration. Erlanger v. Erlanger, 20 N.Y.2d 778-9 (1967).
P "518"
P "519"
Based on these cases which indicate that attorney regulation questions should be addressed in
the courts, I hold that the issue of attorney disqualification is not appropriate for arbitration.
INTER-AMERICAN ARBITRATION COMMISSION RULES
Article 4
[excerpted below at p. 1090]
INTER-AMERICAN ARBITRATION CONVENTION
Article 3
[excerpted below at p. 995]
Notes on Legal Representation in International Arbitration Proceedings
1. Freedom under institutional arbitration rules for parties to select legal representatives. As
noted above, most institutional arbitration rules provide that the parties may be represented
by legal or other agents or advisers, and either expressly or impliedly grant the parties
freedom to select these advisers. Article 4 of the IACAC Rules is a good example. Is there any
conceivable basis for questioning the wisdom of such provisions? What about their
enforceability?
What if the parties' arbitration agreement provides that neither party may be represented by
legal counsel during the arbitration? Would this be against public policy?
2. Requirements under national law that representatives in international arbitrations be
qualified to practice law in the arbitral situs. Consider the issue that was decided in the Lawler
case. Was Mr. Kannry, who was not admitted to practice law in Barbados, permitted to
represent a party in an international arbitration whose seat was in Barbados?
A few nations have adopted legislation (or interpreted existing law) as requiring that the
representatives in an international arbitration conducted on national territory be admitted to
the practice of local law. See Builders Federal (Hong Kong) Ltd v. Turner (East Asia) Ptd Ltd,
March 30, 1988 (Singapore Legal Profession Act held to preclude representation by New York
lawyers in Singapore arbitration; act subsequently amended); Ragan, Arbitration in Japan:
 Caveat Foreign Drafter and Other Lessons, 7 Arb. Int'l 93 (1991); Eastman, Note, 94 Am. J. Int'l 400
(2000).
What would the likely effect of this local legislation be on the provisions of the institutional
rules exerted above? That is, suppose that the parties' arbitration agreement purported to
grant both parties freedom to be represented by foreign counsel. Would this override local law
prohibitions? If not, would there be a right in damages against the party that invoked local law
to invalidate the parties' agreement? Would the eventual arbitral award be enforceable
outside the arbitral situs? Consider Article V(1)(d) of the New York Convention. See infra pp. 833-
34, 848-49.
3. Unauthorized practice of law restrictions in developed jurisdictions. As Lawler indicates,
national law limitations on the identity of legal representatives in international arbitrations
are often derived from local bar rules, and in particular restrictions on the unauthorized
practice of law. Although such restrictions are sometimes associated in debate with less
developed jurisdictions, that is not always the case. For example, a recent California court
decision apparently held that non-California lawyers engaged in an arbitration sited in
California would violate Californian prohibitions against the unauthorized practice of law. See
Birbower, Montalbano, Condon & Frank v. Superior Court, 17 Cal.4th 119 (1998), cert. denied, 525
U.S. 920 (1998) (New York law firm's representation in connection with California-sited
arbitration constituted unauthorized practice of law; court refuses to adopt “arbitration”
exception). Compare Williamson v. John D. Quinn Const. Corp., 537 F. Supp. 616 (S.D.N.Y. 1982)
(holding that New York restrictions on unauthorized practice of law by non-New York lawyers
did not apply to participation in arbitration sited in New York).
P "519"
P "520"
4. Freedom under most developed national laws for parties to international arbitrations to
select legal representatives from foreign jurisdictions. Most developed jurisdictions allow
parties to international arbitrations the freedom to select legal representatives from either
the local bar or from foreign jurisdictions. That is, in these jurisdictions, a representative in an
international arbitration does not need to be locallyqualified. See Zublin Mukibbah Joint
Venture v. Malaysia, No. R8-24-41-89 (June 19, 1989); Polkinghorne, The Right of Representation in
a Foreign Venue, 4 Arb. Int'l 333 (1988). Japanese Special Measures Law Concerning the Handling
of Legal Business By Foreign Lawyers, Law No. 66 of 1986, Art. 2(11), as amended by law No. 65 of
1996.
Consider the opinion in Lawler. What did the court conclude was required under the Barbados
Legal Profession Act?
5. Allocation of competence between national courts and arbitral tribunals with respect to local
restrictions on foreign lawyers. Who possesses the competence to interpret and enforce local
statutory (or other) restrictions on representation by foreign lawyers in an international
arbitration – the local national court, the local bar association, or the arbitral tribunal? What
did the court in Lawler decide? What would the arbitral tribunal in the underlying dispute in
Lawler have the freedom to do? What could it not do?
How should competence to enforce local bar restrictions be allocated? What is wrong with the
arbitral tribunal doing so?
6. Rationale for local restrictions on representation by foreign lawyers in international
arbitrations. What is the rationale for national law requirements that parties be represented in
international arbitrations by locally-qualified lawyers? Is it naked protectionism or
unreconstructed parochialism? Consider one observer's comment that it is important “not only
for the international arbitration community, but for the much larger international business
community, for international arbitration not to become clogged by the vested interests of a
local bar. Only if it fends off or limits the spread of localism will arbitration live up to its
promise of assistance and support to the continuing growth of international trade, finance, and
investment.” Lowenfeld, Singapore and the Local Bar: Aberration or Ill Omen, J. Int'l Arb. 71
(1988).
An arbitral award made in a particular nation becomes, of course, an expression of that state's
sovereignty. The award is recognized under the New York Convention as having been made in
that state, is subject to actions to vacate in that state (and, generally, not elsewhere), is
entitled to recognition in other nations because it was made in that state (depending on
membership in the New York Convention and other international treaties), and so forth. Does
not a state therefore have a profound interest in ensuring that the proceeding that produce an
award of such consequence are entirely regular, transparent, and fair? Is not the imposition of
strict, policeable ethical requirements, such as through the requirement of admission to the
local bar, a good way to accomplish this? Are there less restrictive alternatives? Why should
nations be expected to adopt such alternatives?
Who would enforce ethical restrictions on foreign lawyers appearing in local arbitration? The
arbitral tribunal? The local bar association or courts? The foreign lawyers' bar association or
home courts? Does not a flat requirement of local admission solve all these problems? At what
cost?
7. Requirements for joint representation. In some jurisdictions, there are requirements that, if
foreign lawyers appear in an arbitration sited locally, they be assisted by local counsel (at
least in some circumstances). Note the concluding sentence of the Lawler decision. Is joint
representation what was contemplated there? Is it wise? What are the advantages and
disadvantages of requirements of joint representation?
Suppose that you were in-house counsel for a U.S. company with a dispute, very possibly
 subject to Singapore substantive law, which was being arbitrated in Singapore. Putting aside
what Singapore law compels, would you be content with your usual outside U.S. counsel to run
the case alone? Why or why not? What would a Singapore lawyer be able to offer that the New
York lawyers could not?
8. International limitations on power of states to forbid representation by foreign counsel in
international arbitration. Consider whether states are entirely free to restrict the freedom of
foreign counsel to appear in international arbitrations. Note the combined effect of Article 4 of
the IACAC Rules and Article 3 of the Inter-American Convention. Does this require signatory
states to give effect to Article 4 of the IACAC Rules, permitting parties freely to select their
legal representatives? Consider the combined effect of Article II of the New York Convention
and provisions of institutional arbitration rules allowing parties to select their legal
representatives.
9. Ethical and professional responsibility issues in international arbitration. Like domestic
P "520" litigation in a national court, international arbitrations give rise to a variety of ethical issues.
P "521" For examples, can a lawyer represent Party A against Party B in an international arbitration
if he is handling or just concluded a directly related matter on behalf of Party B and possesses
sensitive confidential information received from Party B? Or, can a lawyer interview witnesses
and draft their witness statements for submission in an international arbitration? Or, is a
lawyer permitted to contact the opposing party directly, or its employees and officers? All of
these, and other issues, arise as commonly in international arbitration as in other contexts.
Paulsson, Standards of Conduct for Counsel in International Arbitration, 3 Am. Rev. Int'l Arb. 214
(1992).
10. Substantive law applicable to ethical and professional responsibility issues in international
arbitration. What law governs ethical and professional responsibility issues in an international
arbitration? For example, suppose that a U.S. lawyer and a German lawyer represent opposing
parties in an arbitration sited in Stockholm, Sweden. What law governs the lawyers' obligations
with respect to conflicts of interest? Interviewing of witnesses? Contacts with the opposing
party? Candor towards the tribunal? Is it U.S., German, or Swedish law? There is very little
developed commentary or authority on the foregoing questions, which can have considerable
importance in actual practice.
Note that some institutional rules address at least some issues that are arguably ethical in
nature. See LCIA Rules Article 20.6 (witness interviews).
11. Forum selection and arbitrability questions relating to ethical and professional issues in
international arbitration. Putting aside what substantive standards apply to ethical and
professional responsibility obligations, what forum should apply these standards (and decide
what standards apply)? Should the arbitral tribunal do so? Does an arbitral tribunal have the
authority to decide issues of professional responsibility? Note that different nations have
differing sources (i.e., statutory, self-regulatory) of ethical and professional responsibility rules.
Suppose that a French partner in a New York law firm, who is based in the firm's London office,
represents a French company in an arbitration sited in Stockholm under ICC Rules against a
Danish company. Suppose further that the Danish company was a former client of the French
lawyer and that it objects to his representation of an adverse party in the Stockholm
arbitration. If the lawyer does not withdraw, who should decide whether the objection is
merited? The French bar? The New York bar (responsible for regulating the French lawyer's New
York partners)? The English Law Society (responsible for regulating foreign lawyers practising in
England and Wales)? The Stockholm bar or courts (since Stockholm is the arbitral situs)? New
York or Danish courts (in an action brought by the Danish company on contractual or fiduciary
duty theories)?
Should a local court or bar association in the place where a lawyer is qualified have
competence to decide issues relating to his or her conduct in an international arbitration sited
elsewhere? What problems would arise from such a conclusion? Could different legal
representatives, on opposing sides of the same international arbitration, be subject to
differing ethical rules? Is that a problem? Could one legal representative be subject to
multiple ethical regimes?
Consider the result and analysis in Biderman. Is the court's analysis of the arbitrability of
ethical issues wise? Why should conflicts issues be arbitrable? Couldn't arbitral tribunals
interpret and apply national ethical rules (just as they interpret and apply national
substantive law)? What is there about ethical issues that arguably makes them non-arbitrable?
As a matter of interpretation, would most arbitration agreements extend to issues of conflicts
of interest? Suppose that the ICC or LCIA Rules provided that the ICC (or LCIA) would decide
ethical issues raised during an arbitration with respect to the parties' legal representatives.
Would this be a good idea? Would it be enforceable?
12. Settlement communications. Inevitably, many arbitrations involve settlement (or “without
prejudice”) communications between counsel from different jurisdictions. Many domestic legal
regimes grant such communications varying degrees of confidentiality from disclosure. In an
international arbitration, what standards of confidentiality should apply to settlement
communications? The short answer is that it is not clear, and that great care should be taken in
agreeing in advance with counsel from other jurisdictions about the confidentiality of
settlement communications.
P "521"
References
1) For commentary, see Craig, Uses and Abuses of Appeal From Awards, 4 Arb. Int'l 174 (1988);
Hirsch, The Place of Arbitration and the Lex Arbitri, 34 Arb. J. 43 (1979); Lalive, Problemes
Relatives a l'Arbitrage International Commercial, 120 Recueil des Cours 573 (1967); Park,
Judicial Controls in the Arbitral Process, 5 Arb. Int'l 230 (1989); Park, The Lex Loci Arbitri and
International Commercial Arbitration, 32 Int'l & Comp. L. Q. 21 (1983); Paulsson,
Delocalisation of International Commercial Arbitration: When and Why it Matters, 32 Int'l &
Comm. L. Q. 53 (1983); Mann, Lex Facit Arbitrum, reprinted in, 2 Arb. Int'l 241 (1986); Smit,
Substance and Procedure in International Arbitration: The Development of a New Legal
Order, 65 Tulane L. Rev. 1309 (1991).
2) See Park, The Lex Loci Arbitri and International Commercial Arbitration, 32 Int'l & Comp. L.
Q. 21 (1983); Mann, Lex Facit Arbitrum, reprinted in, 2 Arb. Int'l 241, 244-45 (1986); Hirsch, The
Place of Arbitration and the Lex Arbitri, 34 Arb. J. 43 (1979); Splosna Plovba of Piran v.
Agrelak S.S. Corp., 381 F.Supp. 1368, 1370 (S.D.N.Y. 1973).
3) Hirsch, The Place of Arbitration and the Lex Arbitri, 34 Arb. J. 43, 44 (1979) (“The scope of the
lex arbitri differs from one country to another.”).
4) See generally Hirsch, The Place of Arbitration and the Lex Arbitri, 34 Arb. J. 43 (1979); Mann,
Lex Facit Arbitrum, reprinted in, 2 Arb. Int'l 241 (1986); Dicey & Morris, The Conflict of Laws
580-85 (12th ed. 1993).
5) See Mann, Lex Facit Arbitrum, reprinted in, 2 Arb. Int'l 241 (1986).
6) See infra pp. 536-39.
7) Hunter & Triebel, Awarding Interest in International Arbitration, 6 J. Int'l Arb. 7 (1989).
8) A. Redfern & M. Hunter, International Commercial Arbitration 411-12 (2d ed. 1991).
9) See infra pp. 706-07, 726-28, 757-58, 792-93.
10) See infra pp. 723-28, 757-58.
11) See infra pp. 723-25.
12) New York Convention Article V(1)(a) & V(1)(d). See infra pp. 795-96.
13) See infra pp. 429-32.
14) See infra p. 429.
15) Geneva Protocol of 1923 Article 2.
16) See Sapphire Int'l Petroleum Ltd v. National Iranian Oil Co., 35 Int'l Law Reps. 136 (1963).
17) New York Convention Article V(1)(d). Similarly, Article IX(1) of the 1961 European
Convention permits non-recognition of an award if the arbitral procedure was not
consistent with the law of “the State in which, or according to the law of which, the award
was made.”
18) See infra pp. 832-49.
19) Under the Convention, enforcement of an award cannot properly be denied under Article
V(1)(d) because of the arbitral proceedings' non-compliance with any other nation's law,
see infra pp. 833-34. Nonetheless, other Article V exceptions permit non-recognition on
procedural grounds under the enforcing forum's laws. Article V(1)(b) and V(2)(b) permit
non-recognition of awards where the enforcing forum's public policy or standards of
procedural fairness were offended. See infra pp. 832-49. These exceptions could be
invoked to deny recognition to awards by a nation on grounds similar to violations of the
procedural law.
20) See 1961 European Convention on International Commercial Arbitration Article IX(1), infra
p. 426.
21) See infra pp. 426-27.
22) See infra pp. 427-28; S. Saleh, Commercial Arbitration in the Arab Middle East 54 (1984).
23) See infra p. 429.
24) See infra p. 429.
25) See infra p. 432.
26) 35 Int'l Law Reports 136 (March 15, 1963).
27) XII Y.B. Comm. Arb. 113 (1987).
©) International Council Commercial Arbitration.
28) Article 150 of the Egyptian Civil Code provides:
“When the wording of a contract is clear, it cannot be deviated from in order to ascertain
by means of interpretation the intention of the parties.”
“When a contract has to be construed, it is necessary to ascertain the common intention
of the parties and to go beyond the literal meaning of words, taking into account the
nature of the transaction as well as that loyalty and confidence which should exist
between the parties in accordance with commercial usage.”
29) For commentary, see Baker & Davis, The UNCITRAL Arbitration Rules in Practice (1992);
Blessing, The ICC Arbitral Process, Part III: The Procedure Before the Arbitral Tribunal, 3 ICC
Ct. Bull. 18 (1992); Buehler & Dorgan, Witness Testimony Pursuant to the 1999 IBA Rules of
Evidence in International Commercial Arbitration – Novel or Tested Standards?, 17 J. Int'l
Arb. 3 (2000); W. Craig, W. Park & J. Paulsson, International Chamber of Commerce
Arbitration (2d ed. 1990); Donahey, Defending the Arbitration Against Sabotage, 13 J. Int'l
Arb. 92 (1996); Gaillard et al., Transnational Rules in International Arbitration (ICC 1993); D.
Hascher, Collection of Procedural Decisions in ICC Arbitration 1993-1996 (1997); ICC, Taking of
Evidence in International Arbitral Proceedings (1990); Blessing, The Procedure Before the
Arbitral Tribunal, 3(2) ICC Ct. Bull. 18 (1992); Hunter, Modern Trends in the Presentation of
Evidence in International Commercial Arbitration, 2 Am. Rev. Int'l Arb. 204 (1992); Patocchi
& Meakin, Procedure and the Taking of Evidence in International Arbitration: The Interaction
of Civil Law and Common Law Procedures, 7 Int'l Bus. L.J. 884 (1996); Paulsson, Standards of
Conduct for Counsel in International Arbitration, 3 Am. Rev. Int'l Arb., 214 (1992); Paulsson,
Overview of Methods of Presenting Evidence in Different Legal Systems, ICCA Congress Series
No. 7 at 112 (Kluwer 1996); Reymond, Civil and Common Law Procedures: Which is the More
Inquisitorial?, 5 Arb. Int'l 357 (1989); Saleh, Reflections on admissibility of Evidence:
Interrelation Between Domestic Law and International Arbitration, 15 Arb. Int'l 141 (1999);
Smit, Managing an International Arbitration: An Arbitrator's View, 5 Am. Rev. Int. Arb. 129
(1994); Smit, Roles of the Arbitral Tribunal in Civil Law and Common Law Systems With
Respect to Presentation of Evidence, ICCA Congress Series No. 7, at 160 (1996); Triebel, An
Outline of the Swiss/German Rules of Civil Procedure and Practice Relating to Evidence, 47
Arbitration 221 (1982).
30) Geneva Protocol of 1923 Article 2; Sapphire Int'l Petroleum Ltd v. National Iranian Oil Co., 35
Int'l Law Reps. 136 (1963).
31) See infra pp. 435-36; New York Convention Article V(1)(d).
32) See infra pp. 435-36, 443-44. E.g., UNCITRAL Model Law Article 19; Swiss Private
International Law Statute Article 182(1) & (2); English Arbitration Act, 1996, §§34-38.
33) See infra pp. 443-44. E.g., Final Award in ICC Case No. 7626 of 1995, XXII Y.B. Comm. Arb. 132
(1997).
34) See infra p. 444. E.g., ICC Rules Article 15(1).
35) See supra pp. 411-33. As detailed above, the procedural law (or curial law) of an
arbitration is related to, but distinguishable from, the procedural rules applicable in the
arbitration. The procedural or curial law will often (at least in developed states) not
specify particular procedural details (e.g., types and timing of submissions, evidentiary
rules, discovery, time-tables, cross-examination, etc.). Rather, the procedural law will
often leave these issues to be agreed by the parties or ordered by the arbitrators. See
supra p. 432 & infra pp. 435-36.
36) See supra p. 429.
37) See infra pp. 446-47.
38) See infra pp. 446-47.
39) Article 2 of the Inter-American Convention provides that the arbitrators shall be
appointed “in the manner agreed upon by the parties.” Article 3 provides that “[i]n the
absence of an express agreement between the parties, the arbitration shall be conducted
in accordance with the rules of procedure of the Inter-American Commercial Arbitration
Commission.”
40) Geneva Protocol of 1923, Article 2. The final clause of Article 2 refers to the law of the
arbitral situs, acknowledging that it may impose mandatory constraints on the parties'
procedural arrangements. As discussed elsewhere, however, these mandatory constraints
ordinarily preclude only extreme examples of unfair or arbitrary procedural agreements.
41) As described below, however, some states do not permit parties any significant freedom
to select the procedures governing their arbitration. Instead, domestic legislation
specifies in detail the procedures which arbitrators must apply. See infra pp. 446-47.
42) See infra p. 444.
43) Obtaining mutual agreement of the parties to an arbitration after it has begun to just
about anything can sometimes be difficult. The principle of party autonomy applies, of
course, only where the parties have or can agree on procedural issues; if they cannot, then
the tribunal must set forth the procedural rules itself. See infra pp. 444-45.
44) That is partially because, as we explore in detail below, the New York Convention permits
non-recognition of an arbitral award if “the arbitral procedure was not in accordance with
the agreement of the parties, or, failing such agreement, was not in accordance with the
law of the country where the arbitration took place.” New York Convention Article V(1)(d).
See supra p. 414-15, 435 & infra pp. 832-49. It is also because many national arbitration
laws are expressly or presumptively applicable to arbitrations conducted on within that
state's borders.
45) This is discussed above. See supra p. 435.
46) Forsythe Int'l, SA v. Gibbs Oil Co., 915 F.2d 1017, 1022 (5th Cir. 1990).
47) See infra pp. 444-45, 841-43. Indeed, many institutional arbitration rules themselves
impose requirements of equality and fairness. ICC Rules Article 15(2); AAA International
Rules Article 16(2) (“the parties [shall be] treated with equality and ... each party [shall
have] the right to be heard and ... given a fair opportunity to present its case.”); UNCITRAL
Rules Article 15(1).
48) See infra pp. 446, 841-43. 9 U.S.C. §9, contains the grounds for denying recognition to an
arbitral award subject to the domestic FAA. Section 9 permits nonrecognition if “the
arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient
cause shown, or in refusing to hear evidence pertinent and material to the controversy; or
of any other misbehaviour by which the rights of any party have been prejudiced.”
49) For example, civil law jurisdictions will be less vigorous in assuring procedural
opportunities that common law courts would demand, such as cross-examination,
opportunity for oral hearings, and party-appointed experts. Triebel, An Outline of the
Swiss/German Rules of Civil Procedure and Practice Relating to Evidence, 47 Arbitration 221
(1982).
50) In any event, when the parties have themselves agreed upon and pursued particular
procedures, challenges based on procedural fairness will usually not survive defenses of
waiver or estoppel. See infra p. 847, discussing the requirement under the FAA that a party
challenging an arbitral procedure have complained at the time.
51) See infra pp. 514-21, 625-26.
52) See supra pp. 473-74.
53) Guatemalan Code of Civil and Commercial Procedure Articles 287 & 288; infra pp. 443-44.
54) See infra pp. 445-46.
55) See infra pp. 444-45.
56) See infra p. 445.
57) 933 F.Supp. 806 (D. Minn. 1996).
©) International Council Commercial Arbitration.
58) See supra pp. 443-44.
59) These institutions are described briefly above, see supra pp. 13-19.
60) See supra p. 329.
61) Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434 (11th Cir. 1998). As
we have seen, national law in most leading arbitral situses allows the parties and the
arbitrators the autonomy to establish those procedures which they wish, subject to fairly
minimal due process protections. See supra pp. 443-47.
62) See UNCITRAL Rules Article 33; ICC Rules Article 17; AAA International Rules Article 29; LCIA
Rules Article 14.2 & 16.3.
63) See UNCITRAL Rules Article 21; ICC Rules Article 6; AAA International Rules Article 15; LCIA
Rules Article 23.1.
64) See UNCITRAL Rules Article 26; ICC Rules Article 23; AAA International Rules Article 22; LCIA
Rules Article 25.
65) See UNCITRAL Rules Article 32; ICC Rules Article 28(6); AAA International Rules Article 28;
LCIA Rules Article 26.9.
66) The ICC Rules provide for a materially greater degree of administrative involvement over
the course of the arbitration than is the case under other leading arbitral regimes. The
AAA Commercial Rules adopt a peculiarly American approach to the arbitrators' duties of
independence.
67) See ICC Rules Article 4; UNCITRAL Rules Article 3; AAA International Rules Article 2; AAA
Commercial Rules Article 6; LCIA Rules Article 1.
There are a wide variety of terms used to describe written submissions in arbitration; to a
limited extent, institutional rules provide names for some submissions (such as the ICC's
“Request for Arbitration”), but often this is not the case. Examples of commonly-used
titles include “statement of claim,” “points of claim,” “memorial,” and so forth. There is no
precise definition of these terms, and the label attached to a particular submission is
usually not important. In general, a “memorial,” “complaint,” a “statement of case,” and a
“brief” are fairly detailed documents submitted after the process of issue definition has
largely concluded and factual development has commenced.
68) See UNCITRAL Rules Article 3; ICC Rules Article 4; AAA International Rules Article 2; AAA
Commercial Rules Article 6(a).
69) Belgian Judicial Code, Article 1683; UNCITRAL Model Law Article 21.
70) Generally, a party need only attach the principal contract from which the parties' dispute
arises and in which the arbitration agreement appears (together with any amendments).
Correspondence or other documents demonstrating the existence of a dispute is also
advisable. Of course, parties may choose to attach considerable quantities of
documentation, usually in the hope that this will impress the tribunal and the
respondent. That tactic usually is not particularly effective, and can lead to premature
disclosure of facts or legal theories.
71) ICC Rules Article 4.
72) Article 5 of the ICC Rules provides that the ICC Secretariat may extend the time for filing
an answer, but requires the respondent's request for an extension to nominate a party-
appointed arbitrator and/or provide comments on the means of selecting the tribunal.
Note that at the time of the respondent's answer, no arbitral tribunal will yet have been
constituted, and that the only “authority” capable of granting an extension of time is the
ICC Secretariat; note also that the Secretariat has little power to enforce the time limits
concerning an answer, and that the tribunal that will receive the answer will usually not
exist for several more months.
73) AAA International Rules Article 3; LCIA Rules Articles 2 and 15.3; ICC Rules Article 5.
74) AAA International Rules Article 3(1); ICC Rules Article 5(6).
75) The selection of arbitrators in international arbitrations is discussed in detail below, see
infra pp. 615-29.
76) For further commentary on the number of arbitrators, see G. Born, International Arbitration
and Forum Selection Agreements 64 (1999).
77) ICC Rules Article 8; LCIA Rules Article 5; AAA International Rules Article 5.
78) See supra pp. 447-48.
79) ICC Rules Article 8(4); LCIA Rules Article 7; AAA International Rules Article 6; AAA
Commercial Rules Article 14. See infra pp. 622-25.
80) See UNCITRAL Rules Article 7; ICC Rules Articles 8-10; AAA International Rules Article 6; AAA
Commercial Rules Article 12-19; LCIA Rules Articles 5-8. The default appointing authority
under the UNCITRAL Rules is the Secretary-General of the Permanent Court of Arbitration.
UNCITRAL Rules Article 6(2).
81) ICC Rules Article 9(5) (“The sole arbitrator or the chairman of the Arbitral Tribunal shall be
of a nationality other than those of the parties. However, in suitable circumstances and
provided that neither of the parties objects within the time limit fixed by the Court, the
sole arbitrator or the chairman of the Arbitral Tribunal may be chosen from a country of
which any of the parties is a national.”); UNCITRAL Rules 6(4); AAA International Rules 6(4);
LCIA Rules 6.1 (“where the parties are of different nationalities, a sole arbitrator or
chairman of the Arbitral Tribunal shall not have the same nationality as any party unless
the parties who are not of the same nationality as the proposed appointee all agree in
writing otherwise”).
82) Art. Challenge of Arbitrators: Is an Institutional Decision Final?, 2 Arb. Int'l 261 (1986);
Alvarez, The Challenge of Arbitrators, 6 Arb. Int'l 203 (1990); Paulsson, Securing the Integrity,
Impartiality and Independence of Arbitrators: Judicial Intervention, 1993 Y. B. Arb. Inst.
Stockholm Cham. Comm. 91, 93; Tupman, Challenge and Disqualification of Arbitrators in
International Commercial Arbitration, 38 Int'l & Comp. L. Q. 26 (1989); Bond, The Selection
of ICC Arbitrators and the Requirements of Independence, 4 Arb. Int'l 300 (1988).
83) The challenge of arbitrators in international arbitrations is discussed in detail below, see
infra pp. 638-51.
84) In some countries, including the United States, sitting judges cannot act as arbitrators. In
other countries, bankrupts may not serve as arbitrators.
85) See AAA/ABA, Code of Ethics Canon I(c) (“Persons should accept appointment as
arbitrators only if they believe that they can be available to conduct the arbitration
promptly.”).
86) ICC Rules Article 11; AAA International Rules Article 7, 8, and 9; AAA Commercial Rules
Article 19; LCIA Rules Article 10.
87) ICC Rules Article 11(2); UNCITRAL Rules Article 10(2) & 11(1); LCIA Rules Article 10.4.
88) That is true in the United States, see infra pp. 877-78. For a suggestion that, under the
UNCITRAL Model Law, challenges based on partiality or dependence are mandatory and
non-waivable, see Holtzmann & Neuhaus, A Guide to the UNCITRAL Model Law on
International Commercial Arbitration 409 (1989).
89) The allocation of competence to resolve jurisdictional issues between national courts and
arbitrators is discussed in detail above, see supra pp. 74-95.
90) ICC Rules Article 6(2); AAA International Rules Article 15(1); UNCITRAL Arbitration Rules
Article 21(1). See supra p. 84-85, 313.
As discussed elsewhere, many nations permit parties to agree to vest arbitral tribunals
with the jurisdiction to determine their own jurisdiction. The tribunal's decision will be
subject, depending on national law, to either interlocutory or eventual judicial review of
the tribunal's award. See supra pp. 85-93. That is generally true in the United States,
where courts have upheld institutional rules provisions an arbitrator's power to make
jurisdictional determinations. See supra pp. 89-93, 313. It is also true in some (but by no
means all) other countries. See Dalmia Dairy Indus. Ltd v. National Bank of Pakistan [1978]
2 Lloyd's Rep. 223 (indicating that English law would, but Indian law would not, give effect
to ICC Rules Article 8(3) and 8(5)); Swiss Law on Private International Law Article 178 and
186; UNCITRAL Model Law Article 16.
91) UNCITRAL Rules Article 21(3) and 21(4); AAA International Rules Article 15(3); LCIA Rules
Article 23.2. In addition, a party's participation in arbitration on the merits, without
raising a jurisdictional challenge, would in many nations constitute a waiver of
jurisdictional objections. See infra pp. 831, 855.
92) For a detailed discussion of the types of challenges that can be raised against arbitration
agreements, see supra pp. 155-295. In general, the New York Convention and developed
arbitration laws recognize the basic enforceability of arbitration agreements, subject only
to limited exceptions.
93) For a discussion of the types of issues that can arise in disputes over interpretation of
arbitration agreements, see supra pp. 297-330.
94) See, e.g., IX Y.B. Comm. Arb. 138 (1984).
95) See infra pp. 744-63. In some cases, as in Switzerland and under the UNCITRAL Model Law,
interlocutory judicial review of an interim award on jurisdiction is possible; that is
generally not the case under the FAA in the United States, although extraordinary
injunctive relief may be possible. See supra pp. 93-94.
96) See infra pp. 704-08.
97) The selection of the arbitral situs in international arbitration is discussed in detail below.
See infra pp. 571-613.
98) The location of the arbitral situs usually determines the national law applicable to the
procedural aspects of the arbitration, to actions to vacate arbitral awards, to the
availability of the New York Convention's enforcement provisions, and, arguably, to the
choice of substantive law. It also affects more mundane matters, including the logistical
functioning of the arbitration. See Iwasaki, Selection of Situs: Criteria and Priorities, 2 Arb.
Int'l 57 (1986); Holtzmann, The Importance of Choosing the Right Place to Arbitrate an
International Case, in Private Investors Abroad – Problems and Solutions in International
Business (1988). These issues are examined in greater detail below. See infra pp. 573-614.
99) See infra pp. 573-80.
100) It may be possible to challenge an arbitral institution's or tribunal's selection of an
arbitral situs in national courts. Under U.S. law, there is generally little likelihood of a
successful challenge to the selection of a situs by a tribunal or appointing authority. See
infra pp. 580-614; Aerojet-General Corp. v. American Arbitration Ass'n, 478 F.2d 248, 251 (9th
Cir. 1973); Joseph Muller Corp. v. Societe Anonyme de Gerance et d'Armement, 314 F.Supp.
439, 441-42 (S.D.N.Y. 1970), aff'd in part, 451 F.2d 727 (2d Cir. 1971), cert. denied, 406 U.S. 906
(1972).
101) ICC Rules Article 14(1). The LCIA Rules are similar. LCIA Rules Article 16.1.
102) AAA International Rules Article 13.
103) See UNCITRAL Rules Article 16.
104) See supra p. 429. See generally A. Redfern & M. Hunter, International Commercial
Arbitration 304 (2d ed. 1991).
105) UNCITRAL Rules Article 16(2) (“[The tribunal] may hear witnesses and hold meetings for
consultation among its members at any place it deems appropriate, having regard to the
circumstances of the arbitration.”); ICC Rules Article 14(2); AAA International Rules Article
13(2); LCIA Rules Article 16.2.
106) E.g., ICC Rules Article 18.
107) See UNCITRAL Notes on Organizing Arbitral Proceedings, reproduced in Appendix Q.
108) See UNCITRAL Notes on Organizing Arbitral Proceedings, reproduced in Appendix Q.
109) Issues of disclosure, discovery, and evidence-taking in international arbitration are
discussed in detail below, see infra pp. 469-514.
110) See infra pp. 469-90.
111) See infra pp. 476-78.
112) UNCITRAL Arbitration Rules Articles 18-19; LCIA Arbitration Rules Article 15; ICC Rules
Articles 4.5 & 20.
113) For commentary, see Goldman, The Complementary Roles of Judges and Arbitrators in
Ensuring that International Commercial Arbitration is Effective, reprinted in International
Arbitration, 60 Years of ICC Arbitration 255; Holtzmann, Fact-Finding by the Iran-United
States Claims Tribunal, in Fact-Finding Before International Tribunals, at 108-09 (1988);
ICC, Taking Evidence in International Arbitral Proceedings (1990); Lowenfeld, The Two-Way
Mirror: International Arbitration as Comparative Procedure, VII Mich. Y. B. of Int'l Legal
Stud. 187 (1985); Robert, Administration of Evidence in International Commercial Arbitration,
I Y. B. Comm. Arb. 221 (1976); Shenton, An Introduction to the IBA Rules of Evidence, 1 Arb.
Int'l 118 (1985); Triebel, An Outline of the Swiss/German Rules of Civil Procedure and
Practice Relating to Evidence, 47 Arbitration 221 (1982).
114) UNCITRAL Rules Article 15(2); ICC Rules Article 20(2); LCIA Rules Article 19.1.
115) See supra pp. 446-49.
116) LCIA Rules Articles 20.2 & 22.1(f); UNCITRAL Arbitration Rules Article 25(6); AAA
International Rules Article 21(6). See supra pp. 448-49 & infra pp. 841-43.
117) UNCITRAL Arbitration Rules Articles 31-36; ICC Rules Articles 24-28; LCIA Rules Articles 26-
27.
118) UNCITRAL Model Law Articles 31-33; Belgian Judicial Code Articles 1699-1701.
119) See infra pp. 744-63. Some states' courts (e.g., India, United States) have on occasion
purported to issue decisions or orders with respect to arbitrations sited in other states.
Such orders are unusual.
120) See infra pp. 761-62.
121) See UNCITRAL Model Law Articles 11, 13, 14, 16 & 34.
122) See infra pp. 465-68.
123) 685 F.Supp. 1241 (S.D. Fla. 1988).
124) 392 N.Y.S.2d 614 (1977), rev'd on other grounds, 401 N.Y.S.2d 186 (1977).
125) UNCITRAL Model Law Article 16; Swiss Law on Private International Law Article 190.
126) See M. Mustill & S. Boyd, Commercial Arbitration, 449-58 (2d ed. 1989).
127) For commentary, see Brower, Evidence Before International Tribunals: The Need for Some
Standard Rules, 28 Int'l Law. 47 (1994); Buehler & Dorgan, Witness Testimony Pursuant to
the 1999 IBA Rules of Evidence in International Commercial Arbitration – Novel or Tested
Standards?, 17 J. Int'l Arb. 3 (2000); Coulson, Appropriate Procedure for Receiving Proof in
Commercial Arbitration, 71 Dick. L. Rev. 63 (1966); Croal, Misconceptions About Discovery in
English Arbitration, 51 Arbitration 532 (1985); Goldman, The Complementary Roles of Judges
and Arbitrators in Ensuring That International Commercial Arbitration is Effective, reprinted
in, International Arbitration: 60 Years of ICC Arbitration 255; IBA Working Party, Commentary
on the New IBA Rules of Evidence in International Commercial Arbitration, 2 Bus. Law Int'l 14
(2000); ICC, Taking of Evidence in International Arbitral Proceedings (1990); Lowenfeld, The
Two-Way Mirror: International Arbitration as Comparative Procedure, VII Mich. Y.B. of Int'l
Legal Stud. 187 (1985); McCabe, Arbitral Discovery and the Iran-United States Claims
Experience, 20 Int'l Law. 499 (1986); Morgan, Discovery in Arbitration, 3 J. Int'l Arb. 9 (1986);
Patocchi & Meakin, Procedure and Taking of Evidence in International Commercial
Arbitration: The Interaction of Civil Law and Common Law Procedures, 7 Int'l Bus. L. J. 884
(1996); Paulsson, Overview of Methods of Presenting Evidence in Different Legal Systems,
ICCA Congress Series No. 7 at 112 (Kluwer 1996); Robert, Administration of Evidence in
International Commercial Arbitration, I Y.B. Comm. Arb. 221 (1976); Shenton, An Introduction
to the IBA Rules of Evidence, 1 Arb. Int'l 118 (1985); Rubino-Sammartano, Rules of Evidence
in International Arbitration, 53 J. Int'l Arb. 87 (1987); Saleh, Reflections on Admissibility of
Evidence: Interrelation Between Domestic Law and International Arbitration, 15 Arb. Int'l 141
(1999); Smit, Roles of the Arbitral Tribunal in Civil Law and Common Law Systems With
Respect to Presentation of Evidence, ICCA Congress Series No. 7, at 160 (1996); Stein, Pre-
Hearing Discovery in International Arbitration in the United States, 1 Forum New York (1985);
Straus, The Practice of the Iran-US Claims Tribunal in Receiving Evidence From Parties and
From Experts, 3 J. Int'l Arb. 57 (1986); Triebel, An Outline of the Swiss/German Rules of Civil
Procedure and Practice Relating to Evidence, 47 Arbitration 221 (1982); Wetter, The Conduct
of the Arbitration, 2 J. Int'l Arb. 7 (1985); Willenken, The Often Overlooked Use of Discovery in
Aid of Arbitration and the Spread of the New York Rule to Federal Common Law, 35 Bus. Law
173 (1979); Willenken, Discovery in Aid of Arbitration, 6 J. Sect. Litig. ABA 16 (1979);
Annotation, Discovery in Aid of Arbitration Proceedings, 98 A.L.R.2d 1247.
128) See infra p. 475.
129) Burton v. Bush, 614 F.2d 389, 390 (4th Cir. 1980).
130) At common law, arbitrators apparently lacked the power to compel disclosure of
documents or other materials. Tobey v. Bristol County, 3 Story 800 (C.C. Mass. 1845)
(“Arbitrators, at the common law, possess no authority whatsoever ... to compel the
attendance of witnesses. They cannot compel the production of documents, and papers
and books of account, or insist upon a discovery of facts from the parties under oath.”).
131) Complaint of Koala Shipping & Trading Inc., 587 F.Supp. 140 (S.D.N.Y. 1984) (tribunal held
that it was “unsure” of its power to order discovery and instructed party to present its
requested discovery orders to district court under §7; court held that requested
information was “material” under §7 and ordered depositions and document production).
132) See supra p. 11.
133) See supra pp. 447-48.
134) See supra pp. 447-48.
135) See Rubino-Sammartano, Rules of Evidence in International Arbitration, 53 J. Int'l Arb. 87
(1987); Triebel, An Outline of the Swiss/German Rules of Civil Procedure and Practice
Relating to Evidence, 47 Arbitration 221 (1982); G. Born, International Civil Litigation in
United States Courts 843-48 (3d ed. 1996).
136) See Hoellering, Scope of Documentary Discovery in U.S. and International Arbitration, 3
World Arb. & Med. Rep. 46, 49 (1992).
137) Several sets of self-avowedly “international” procedural rules, suitable for use in
international arbitrations, exist. E.g., IBA, Supplementary Rules Governing the
Presentation and Reception of Evidence in International Commercial Arbitration,
reprinted in Appendix N; Draft Transnational Rules of Civil Procedure, reprinted in 30
Cornell Int'l L.J. 493 (1997).
138) See supra pp. 7-11.
©) International Council Commercial Arbitration.
©) International Council Commercial Arbitration.
139) For commentary, see Bomstein & Levitt, Much Ado About 1782: A Look at Recent Problems
With Discovery in the United States for Use in Foreign Litigation Under 28 U.S.C. §1782, 20 U.
Miami Inter-Am. L. Rev. 429 (1989); Burns & Samy, The International Litigant's Discovery
Weapon of Choice: Section 1782, 12-SPG Int'l L. Practicum 14 (1999); Haygood, Euromepa v.
Emerian: The Scope of the Inquiry into Foreign Law When Evaluating Discovery Requests
Under 28 U.S.C. Sec. 1782, 21 N.C. J. Int'l L. & Com. Reg. 491 (1996); Lurie & Howard,
Limitations on the Ability to Obtain Discovery in International Arbitration From Non-Parties
Located in the United States, 17 J. Int'l Arb. 55 (2000); Metis, International Judicial
Assistance: Does 28 U.S.C. §1782 Contain an Implicit Discoverability Requirement?, 18
Fordham Int'l L.J. 332 (1994); Ramy, Federal Civil Procedure-Discovery – Discovery of Material
in the United States for Use in Foreign Proceedings, In Re Malev Hungarian Airlines, 17
Suffolk Transnat'l L. Rev. 230 (1994); Sanzone, Extra-Statutory Discovery Requirements:
Violating the Twin Purposes of 28 U.S.C. Section 1782, 29 Vand. J. Transnat'l L. 117 (1996);
Saraisky, How to Construe Section 1782: A Textual Prescription to Restore the Judge's
Discretion, 61 U. Chi. L. Rev. 1127 (1994); Smit, American Assistance to Litigation in Foreign
and International Tribunals: Section 1782 of Title 28 of the U.S.C. Revisited, 25 Syracuse J.
Int'l L. & Com. 1 (1998); Wortman, In Search of Discovery: The Split Between the Circuits
Surrounding a Threshold Discoverability Requirement to Provide Assistance Under 28 U.S.C.
§1782, 30 Tex. Int'l L.J. 583 (1995).
140) Commercial Solvents Corp. v. Louisiana Liquid Fertilizer Co., 20 F.R.D. 359 (S.D.N.Y. 1957);
infra pp. 498-501.
141) Koch Fuel Int'l Inc. v. M/V South Star, 118 F.R.D. 318 (E.D.N.Y. 1987); infra pp. 501-03.
142) See infra p. 508.
143) 165 F.3d 184 (2d Cir. 1999).
144) The order recites:
“Ordered that the Clerk of this Court be and he hereby is directed to accept for filing
notices for the taking of depositions herein on behalf of Louisiana Liquid Fertilizer
Company, Inc.”
145) The arbitration provision in the contract reads:
“19. Any controversy of claim arising out of or relating to this agreement, or a breach
thereof, shall be settled by arbitration in New York, New York, in accordance with the
Commercial Arbitration Rules, then obtaining, of the American Arbitration Association,
and judgement upon the award rendered may be entered in any court having jurisdiction
thereof.”
146) Insofar as here material Rule 81(a)(3) provides as follows: “In proceedings under Title 9,
U.S.C., relating to arbitration ... these rules apply ... to the extent that matters of
procedure are not provided for in [that statute] ...”
147) Overenthusiastic sponsors of the method, however, have had ample warning that it should
be resorted to with care: “The more enthusiastic of those sponsors have thought of
arbitration as a universal panacea. We doubt whether it will cure corns or bring general
beatitude. Few panaceas work as well as advertised.”Kulukundis Shipping Co. v. Amtorg
Trading Corp., 126 F.2d 978, 987 n.32 (2d Cir. 1942). “Arbitration sometimes involves perils
that even surpass the ‘perils of the seas.’”In re Canadian Gulf Line, Ltd, 2 Cir., 1938, 98 F.2d
711, 714. See also Phillips, A Lawyer's Approach to Commercial Arbitration, 44 Yale L.J. 31
(1934).
148) We acknowledge that because §1782 does not apply to proceedings before private
arbitrators, those who do not sit within the United States may face some difficulty in
compelling evidence located here. See 9 U.S.C. §7 (providing for compulsion of evidence
by district where arbitrators are sitting). Nevertheless, we consider this inconsistency to
be less significant than that which would obtain from the contrary result.
149) ICC Rules Article 22(4); LCIA Rules Article 18; UNCITRAL Rules Article 4.
150) Australian International Arbitration Amendment Act (1989), §29.
151) Ragan, Arbitration in Japan: Caveat Foreign Drafter and Other Lessons, 7 Arb. Int'l 93 (1991).
152) Builders Federal (Hong Kong) Ltd v. Turner (East Asia) Pte Ltd, March 30, 1988.
153) Polkinghorne, The Right of Representation in a Foreign Venue, 4 Arb. Int'l 333, 334-37 (1988).
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part Two : Chapter 7. Choice
of Substantive Law in
International Arbitration', in
Gary B. Born , International
Commercial Arbitration:
Commentary and Materials
(Second Edition), 2nd edition
(© Kluwer Law International;
Kluwer Law International
2001) pp. 523 - 572
KluwerArbitration
Part Two : Chapter 7. Choice of Substantive Law in
International Arbitration
7 Choice of Substantive Law in International Arbitration (1)
Choice of law issues are critical in many international disputes. This Chapter examines the
choice of substantive law applicable to the merits of the parties' dispute in an international
arbitration. It first considers the choice of substantive law by international arbitrators in the
absence of any express agreement by the parties as to the governing law. Second, the Chapter
considers the choice of substantive law where the parties have agreed upon an applicable law.
In both situations, the Chapter examines what conflict of law principles apply – both to
selecting the applicable substantive law and to determining the enforceability and meaning of
a governing law clause. (2)
P "523"
P "524"
A. Introduction
1. Different Choice of Law Issues in International Arbitration
As we have seen, it is necessary to distinguish between several different conflict of laws issues
that arise in arbitration. In international arbitration, questions can arise about any or all of the
following applicable laws: (1) the substantive law applicable to the merits of the parties'
dispute, including the validity, enforceability, and interpretation of any underlying contract;
(2) the substantive law applicable to the parties' arbitration agreement, as distinguished from
the parties' underlying contract, including its validity, enforceability, and interpretation; (3)
the law applicable to the arbitration proceeding itself, including its procedural conduct (i.e.,
the “procedural law,” “curial law” or “lex arbitri”); and (4) the conflict of laws rules that are to be
applied in selecting each of the foregoing laws. (3)
It is entirely possible for each of these issues to be subject to the laws of a different nation. (4)
The possibility of applying different national laws to different substantive and procedural
issues raised in an arbitration can be seen as a peculiarly complex example of depecage. (5)
P "524"
P "525"
2. Predictability of Choice of Substantive Law
Parties often choose international arbitration to resolve their disputes because they desire
certainty and predictability concerning their legal rights. Among other things, private parties
want a stable substantive legal regime and a single, neutral procedural framework. These
objectives are particularly important in international disputes, where differences between
national laws and procedures can be great.
International arbitration seeks to provide comparative predictability with respect to both
substantive and procedural law. As explained by the U.S. Supreme Court in Scherk v. Alberto-
Culver Company:
[U]ncertainty will almost inevitably exist with respect to any contract touching two or more
countries, each with its own substantive laws and conflict-of-laws rules. A contractual provision
specifying in advance the forum in which disputes shall be litigated and the law to be applied
is, therefore, an almost indispensable precondition to achievement of the orderliness and
predictability essential to any international business transaction. [Absent such agreements,
one enters] the dicey atmosphere of ... a legal no-man's-land [which] would surely damage the
fabric of international commerce and trade, and imperil the willingness and ability of
businessmen to enter into international commercial agreements.
(6) There is considerable force to this analysis. Nevertheless, while arbitrating international
disputes offers advantages over litigation in national courts, it also can generate choice of law
questions that are at least as complex as those in litigation.
The choice of law complexities which arise in international arbitration do not comport with the
ideals of predictability and efficiency that arbitration promises. (7) The significance of choice
of law issues can, of course, be exaggerated: many arbitrations turn on issues of fact,
credibility, trade usage, or equity, rather than subtle conflict of laws arguments. Nevertheless,
choice of law issues are often important and, in the absence of a more developed, uniform
international legal regime, must be mastered.
P "525" The choice of applicable substantive law in an international arbitration is significantly
P "526" influenced by the existence of an agreement selecting the applicable law (i.e., a choice-of-
law clause). Where such an agreement exists, most arbitral tribunals and many national courts
will enforce it, subject only to narrow exceptions. Where no choice of law agreement exists,
both arbitrators and national courts must select an applicable substantive law. In both cases,
reference to some system of conflict of laws rules must be applied. The remainder of this
Chapter considers these choice of law issues in international commercial arbitration
proceedings.
 B. Choice of Law Governing the Merits of the Parties' Dispute in the Absence of
Agreement on Applicable Law
In a substantial number of cases, the parties to an international dispute will not have agreed,
either in their underlying contract or otherwise, (8) upon the substantive law governing their
relations. In these circumstances, an arbitral tribunal will be required to select the applicable
substantive law, ordinarily applying some set of conflict of laws or private international law
rules. (9)
1. Arbitrators' Power to Select Applicable Conflict of Laws Rules
Many developed nations grant international arbitrators substantial discretion to select an
appropriate set of conflict of laws rules and, applying these rules, to choose an applicable
substantive law. Article 28(2) of the UNCITRAL Model Law provides that “failing any designation
by the parties, the arbitral tribunal shall apply the law determined by the conflict of laws rules
which it considers applicable.” (10) Similarly, except where statutory protections or public
policy issues are involved, (11) national courts in most developed jurisdictions seldom disturb
an arbitral tribunal's selection of conflicts rules or applicable substantive law. (12)
2. Sources of Authority Relevant to Arbitrators' Choice of Substantive Law
P "526" In order for the arbitral tribunal to select a substantive law, it must first (at least in principle)
P "527" select a choice of law rule that will enable it to make this selection of substantive law. (13) A
variety of authorities bear on what conflict of laws rules the tribunal will apply to determine
the substantive law governing the merits of the parties' dispute. As discussed below, these
include any applicable international treaty, the conflicts rules of the arbitral situs, the
conflicts rules of other interested states, (14) and the institutional arbitration rules selected by
the parties.
a. Conflict of Laws Rules Established by International Treaty
The subject of conflict of laws rules in arbitration can, at least in theory, be addressed by
international convention or treaty. In practice, however, the New York Convention and most
other multilateral agreements seldom address the conflicts rules applicable to the substantive
law governing the merits of arbitrable disputes. (15)
One exception to this is the 1961 European Convention on International Commercial
Arbitration, which provides in Article VII that the parties “shall be free to determine, by
agreement, the law to be applied by the arbitrators to the substance of the dispute,” and
failing any agreement, that the dispute will be governed by the “proper law under the rule of
conflict that the arbitrators deem applicable.” (16) Another exception is the International
Convention for the Settlement of Investment Disputes, Article 42 of which provides for the
application of international law and the law of the host state. (17)
Finally, treaties or conventions dealing with specialized subjects can also provide choice of law
rules or substantive rules of decision that apply in arbitration. The European Convention on the
Law Applicable to Contractual Obligations (the Rome Convention) (18) and the United Nations
Convention on Contracts for the International Sale of Goods (19) are leading examples. Where
such a treaty applies, arbitrators will generally give effect to its terms, in much the same
fashion as a national court.
b. Conflict of Laws Rules Established by the Law of the Arbitral Situs
P "527" In some cases, the law of the nation in which an international arbitration has its seat may
P "528" purport to require arbitrators to apply a particular conflict of laws rule. Most commonly, the
law of the arbitral situs may require arbitrators to apply local conflict of laws rules. (20) For
example, in England, prior to the 1996 English Arbitration Act, arbitrators were said to be
required to apply the conflict of laws rules applicable in English courts. (21)
Other nations may impose special conflicts rules on arbitrators. In Switzerland, for example,
Article 187(1) of the Swiss Law on Private International Law contains a conflicts rule which, at
least absent contrary agreement, requires arbitrators to apply “the rules of law with which the
case has its closest connection.” (22) And in some states, either law, practice or institutional
rules require the application of local substantive law by arbitrators. (23)
In a related vein, a nation's law may dictate that particular defenses or claims must be heard
by the arbitrator under national law. For example, where statutory protections – like the U.S.
antitrust and securities laws – are involved, U.S. courts have held that the arbitrators are
required to consider claims based on those laws. (24) European courts have also held that
arbitral tribunals must consider claims and defenses based on the competition provisions of
the Treaty of Rome. (25) We discuss these and related issues in detail below. (26)
c. Conflict of Laws Rules Established By Institutional Arbitration Rules
The rules of all leading arbitration institutions contemplate choice of law decisions by the
arbitrators. In general, except where a choice-of-law agreement exists, these rules endeavor to
grant the arbitrators maximum freedom and flexibility in selecting an applicable substantive
law. For example, Article 33 of the UNCITRAL Rules provides that, failing agreement by the
parties, “the arbitral tribunal shall apply the law determined by the conflict of laws rules which
it considers applicable.” (27) Alternatively, as we discuss below, other institutional rules permit
the arbitral tribunal to apply directly the substantive law it considers “appropriate,” without
express reference to any formal conflict of laws principles. (28)
P "528"
P "529"
P "529"
3. Conflict of Laws Rules Applied by International Arbitrators in Practice
a. Traditional Rule That Arbitrators Must Apply Substantive or Conflict of Laws Rules of Arbitral
Situs
There is considerable debate and similar uncertainty, as to what conflict of laws rules
arbitrators should (and actually do) apply in choosing the substantive law governing the
parties' dispute. The historic view in many civil and common law states was that the arbitral
situs's conflict of laws rules would be applied by the arbitrators. (29) A variation of this rule was
the view that the arbitral situs's substantive laws were applicable to the merits of the parties'
dispute. (30) In both cases, the leading theory was that the parties' selection of the arbitral
situs constituted an implied choice of law. As discussed below, many national courts and
commentators have more recently abandoned or moderated the traditional situs rule,
particularly in international matters. (31)
U.S. courts and commentators have devoted comparatively less attention to the issue than
their European counterparts. (32) In the United States, the traditional view was that, in the
absence of a choice-of-law clause, the arbitrators should ordinarily apply the substantive law
of the state in which the arbitration is sited. (33) Little reference was made to what conflict of
laws rules dictated this result, or were to be applied by the arbitrator. Rather, the parties'
selection of the arbitral situs was deemed to be an implied choice by the parties of the situs's
substantive law. (34)
b. Erosion of Rule That Arbitral Situs's Conflict of Laws Rules or Substantive Law Must Be
Applied
The traditional rule that the arbitral situs's conflicts or substantive rules must be applied by
arbitrators has been eroded substantially in recent years. Contemporary commentators,
P "529" courts, arbitrators, arbitral institutions, and other authorities have rejected the rule in favor of
P "530" a less mechanical approach. According to one European critic of the historic view, there has
been an “almost total abandonment of the application of the rules of conflict of the so-called
arbitral forum.” (35)
The same development has occurred in the United States, with a trend away from automatic
application of the situs's substantive or conflicts rules. (36) Nevertheless, while there clearly
has been an erosion of the traditional arbitral situs rule, it is an overstatement to conclude
that the rule has been wholly abandoned in international arbitration. Moreover, it is unclear
what rule or rules have replaced the traditional situs rule. The materials excerpted below
illustrate these developments. (37)
c. Other Conflict of Laws Rules Applied by International Arbitrators
Conflict of laws rules other than those of the arbitral situs are frequently applied in
contemporary arbitral awards selecting the applicable substantive law. Unfortunately, while
several alternatives to the traditional situs rule can be identified, there is no consensus
regarding any of these alternatives (nor even a clear trend towards any solution). As a result,
substantial uncertainty often surrounds the selection of applicable law by international
arbitral tribunals.
Three main alternatives to the situs rule have emerged in international practice and
commentary. First, arbitral decisions often rely on a purported “cumulative” application of the
conflict of laws rules of all states having a connection with the parties' dispute. (38) Second,
some arbitral decisions derive conflict of laws rules from non-national sources – either
perceived “general” principles of law or “international” conflict of laws rules reflected (among
other things) in international conventions. (39) Third, references are occasionally seen to other
conceivable alternatives, including the conflict of laws rules of the arbitrator's nationality, the
state whose courts would have had jurisdiction but for the agreement to arbitrate, the conflicts
rules of the state with the most significant contacts to the dispute, and the state where
enforcement of the award is likely.
P "530"
P "531"
d. “Direct” Application of Substantive Rules Without Conflict of Laws Analysis
Some authorities conclude that international arbitrators are free “directly” to apply
substantive law rules, without first engaging in any conflict of laws analysis. Recent
amendments to leading institutional rules leave open the possibility of direct application of
substantive law. (40) Article 17(1) of the 1998 ICC Rules provides that, “[i]n the absence of any
such agreement [by the parties as to applicable law], the Arbitral Tribunal shall apply the rules
of law which it determines to be appropriate.” The AAA International Rules also permit the
tribunal directly to select the substantive law it deems “appropriate,” without reference to
conflicts rules. (41)
Although frustration with contemporary conflict of laws rules is understandable, it is doubtful
that “direct” application of national law is an appropriate response. One purpose of conflict of
laws rules is to provide parties with a measure of certainty about the substantive law governing
their conduct. “Directly” applying a substantive law without conflict of laws analysis leaves the
parties' substantive rights to turn on subjective, unarticulated instincts of individual
arbitrators and does little to further interests of predictability or fairness. The better (albeit
difficult) course is to develop conflict of laws rules which can be predictably and transparently
consulted and applied in reasoned awards.
e. Application of Conflict of Law Rules by Contemporary International Arbitral Tribunals in
 Practice
Excerpted below are materials relevant to conflict of laws determinations by international
arbitral tribunals where no choice-of-law agreement exists. First, consider the conflict of laws
provisions of the Swiss Law on Private International Law and the UNCITRAL Model Law, as well
as provisions in the ICC and UNCITRAL Rules dealing with the topic. Then consider the following
three international arbitration awards, reflecting different approaches to selecting the
substantive law governing the parties' dispute.
The first arbitral decision – Final Award in ICC Case No. 5460 of 1987 – applies the conflict of laws
rules of the arbitral forum, apparently taking the view that this was a mandatory requirement
of the forum state. The second decision – Award in ICC Case No. 4237 of February 17, 1984 –
concludes that the ICC's institutional rules grant an arbitrator discretion to select appropriate
conflicts rules and that “international” conflicts rules exist and should be applied. The third
excerpt, Award in ICC Case No. 2930 of 1982, adopts the “cumulative” approach to the choice of
P "531" law issue, looking successively to the conflict of laws rules of all interested states. Finally, also
P "532" consider the Award in ICC Case No. 4491, indicating both an arbitrator's selection of
applicable law and the distinction between “substantive” and “procedural” issues.
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 187
[excerpted below at p. 1034]
UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION
Article 28
[excerpted below at p. 1018]
INTERNATIONAL CHAMBER OF COMMERCE ARBITRATION RULES (1988 VERSION)
Article 13(3)
The parties shall be free to determine the law to be applied by the arbitrator to the merits of
the dispute. In the absence of any indication by the parties as to the applicable law, the
arbitrator shall apply the law designated as the proper law by the rule of conflict which he
deems appropriate.
INTERNATIONAL CHAMBER OF COMMERCE ARBITRATION RULES (1998 VERSION)
Article 17(1)
[excerpted below at p. 1064]
UNCITRAL ARBITRATION RULES
Article 33
[excerpted below at pp. 1029-30]
FINAL AWARD IN ICC CASE NO. 5460 OF 1987
XIII Y.B. Comm. Arb. 104 (1988) (©)
ARBITRATOR, PAUL SIEGHART. [The arbitration was between an Austrian franchisor of certain
P "532" equipment and a South African franchisee. The dispute arose out of a franchise agreement,
P "533" which included a clause submitting the parties “to the jurisdiction of the International
Chamber of Commerce, as the arbitration court.” The franchise agreement did not select an
arbitral situs. The ICC Court of Arbitration selected London as the arbitral situs and appointed
the arbitrator. Excerpts of his default award follow.] ...
The place of this arbitration is London, and on any question of choice of law I must therefore
apply the relevant rules of the private international law of England. Under those rules,
questions of performance or breach of a contract fall to be determined in accordance with
what we call the “proper law” of the contract. Unlike the laws of some other countries, the
principal consideration here is not the lex loci contractus, but rather the law of the place with
which the contract has its closest connection – which, in practice, means the place in which the
principal obligations under the contract are to be performed.
In the present case, virtually all the obligations of both parties fell to be performed in South
Africa. It was there that the claimant's drawings and other documents were to be delivered; it
was there that the defendants had to obtain the appropriate exchange control consent before
dispatching the royalties to claimant; above all, it was there that the equipment was to be
made and sold. On any commercial view, the principal place of performance of this Contract,
and the place with which it had its closest connection, was South Africa. Insofar as it may be
necessary for the purposes of this award, I therefore hold that the proper law of the Contract
was South African law.
Under the rules of English private international law, foreign law is a question of fact, to be
established by expert evidence; failing evidence to the contrary, English private international
law compels me to assume that any foreign law is the same as English domestic law. Neither
party has furnished me with any evidence about the South African substantive law of contract.
Accordingly, I am bound to assume that it does not differ from the law of England....
AWARD OF FEBRUARY 17, 1984 IN ICC CASE NO. 4237
X Y.B. Comm. Arb. 52 (1985) (©)
 ARBITRATOR, L. MALMBERG. [The claimant was a Syrian state entity; the respondent was a
Ghanaian state entity. The claimant contracted to purchase various wood products from the
respondent. The products were not shipped according to schedule and the claimant sought
damages, first in a Syrian court and then in an ICC arbitration. The parties signed a Terms of
Reference selecting Paris as the arbitral situs and “French International Arbitration Law” as the
procedural law. They disagreed as to the applicable substantive law.] ...
P "533" The question of the law applicable to the substance of the dispute poses the preliminary
P "534" question which conflict of laws rules are to be applied in order to determine this law.
Claimants relied on Syrian conflict of laws rules ... (i.e., application of Syrian law because
contract was signed in Syria). However, Claimants overlook the fact that this arbitration is
expressly subjected to French International Arbitration Law, which Law, as rightly pointed out
by Defendants, contains conflict rules for determining the law applicable to the substance of
the dispute. The Arbitrator notes that it is controverted in literature whether an international
arbitrator should apply the conflict rules of the law applicable to the arbitration, but since the
new French law itself contains conflicts rules the Arbitrator feels himself obliged to follow
these rules. Article 1496 of the Law provides:
“The arbitrator shall decide the dispute according to the rules of law chosen by the parties; in
the absence of such a choice, he shall decide according to such rules as he deems
appropriate.”
As no documents submitted by the parties ... point to “rules of law chosen by the parties,” the
Arbitrator shall, in virtue of Article 1496, have to determine which are the appropriate rules
governing the substance of the dispute. This poses the question which rules of law are
appropriate. It is argued in literature that international arbitrators should, to the extent
possible, apply the lex mercatoria. Leaving aside that its contents are not easy to determine,
neither party has argued that a lex mercatoria should be applied. Rather, each party
strenuously argued on the basis of a national law, i.e., Syrian and Ghanaian/English law
respectively. Accordingly, the Arbitrator shall follow the implied desire of the parties to apply
a national law.
Within the framework of the conflict rules contained in Article 1496 of the new French
International Arbitration Law, Article 13(3) of the ICC Rules constitutes a contractual
elaboration of the conflicts rules contained in Article 1496 of that Law. In other words, Article
13(3) of the ICC Rules specifies how the Arbitrator has to determine the appropriate rules.
Consequently, and admittedly this is rather complicated, the Arbitrator is, [by] virtue of Article
13(3) of the ICC Rules, again obliged to determine conflict rules in order to arrive at the law
governing the substance of the dispute. But this time the Arbitrator is not bound to follow
conflict rules of a national system of law as Article 13(3) constitutes contractual conflict rules
contained in international arbitration rules.
In view of the international character of the present arbitration, the Arbitrator deems it
appropriate to apply those conflict rules which are generally followed in international
arbitrations of the kind under consideration. The decided international awards published so
far show a preference for the conflict rule according to which the contract is governed by the
law of the country with which it has the closest connection. The country with which it has the
closest connection is the country where the party who has to carry out the most characteristic
performance has its head office. In the case of a contract for the sale of goods on C & F
conditions, the most characteristic performance has to be carried out by the seller.
P "534" Accordingly, Ghanaian law would in principle be applicable. However, Defendants argued that
P "535" English law should be applied. As Defendants' arguments are convincing and English law is
not different from Ghanaian law, especially since Ghana has enacted the English Sale of Goods
Act, the Arbitrator accepts that the dispute is to be resolved on the basis of English law....
AWARD IN ICC CASE NO. 2930 OF 1982
IX Y.B. Comm. Arb. 105 (1982) (©)
ARBITRATORS, PLAISANT, BESAROVIC & DE COULON. [After citing Article 13(3) of the ICC Rules, for
the proposition that it was free to select the appropriate conflicts rules, the tribunal reasoned
as follows.] ... [T]he most authoritative present-day doctrine and international arbitration
jurisprudence admit that in determining the substantive law, the arbitrator may leave aside
the application of the conflict rules of the forum. The arbitral tribunal thus enjoys wide, and
even discretionary, powers in the choice of the applicable law.... [I]t is authorized to refer to
the different systems of conflict of laws at its disposal, it is by no means obliged to give
preference to one of them above another. In the choice of the applicable law, the arbitral
tribunal will also take into consideration the results of the work of the Commission on
International Commercial Practice of the ICC which were presented at the Congress in
Stockholm on October 9, 1981, in the form of draft rules on the law applicable to international
contracts.
The arbitral tribunal will also take into account the Convention on the Law Applicable to the
International Sale of Goods, concluded in The Hague on June 15, 1955, and ratified on the same
date by France and Switzerland.... Article 3 of the Convention [provides] that the sale shall be
governed by the domestic law of the country in which the seller has his habitual residence at
the time when he receives the order, but, nevertheless, the sale shall be governed by the
domestic law of the country in which the buyer has his habitual residence, if it is in that
country that the order was received by the seller.
The private international law provisions of Switzerland, France, and Yugoslavia at the present
time all refer to similar criteria in looking for the law applicable to contractual obligations. The
first task should be the determination of the most characteristic performance of the contract(s)
 under examination. The second task is to determine with which territory is the performance
most closely connected, or to use a very meaningful phrase of the Swiss Federal Tribunal, to
locate the “centre of gravity” of the contract. This solution was also relied upon by the
European Convention on the Law Applicable to Contractual Obligations ...
[T]he arbitral tribunal observes that the aggregate of contracts which it has to examine is
indisputably closely connected, and even very closely connected, with Yugoslavia and as one
P "535" single law should be applicable to the entirety of the contractual obligations of the parties, the
P "536" connection with Yugoslav law prevails without any doubt. [In addition,] any contract
concerning import into Yugoslavia or export from Yugoslavia is subject to the mandatory
provisions of [Yugoslav Law of 1972 Controlling Imports and Exports.] ...
AWARD IN ICC CASE NO. 4491
The Plaintiff submits that the Defendant cannot [raise statute of limitations defense] because
Finnish law is the relevant law, and that, as there is no Limitation Act under Finnish law, no
question of the claim being barred arises. However, the arbitration is taking place in London,
and English law is the lex fori. In questions of limitation the provisions of the lex fori must be
taken into account – see for example British Linen Co. v. Drummond, 10 B. & C. 903, 912. The
Limitation Act 1980 applies the Act and any other limitation enactment to English arbitrations.
I must apply the Limitation Act 1980 even though Finnish law has no enactment – assuming for
this purpose, that Finnish law is the proper law of the licensing agreement. The relevant period
for a contractual claim or for an account is six years from the date on which the cause of action
accrued: sections 5 and 23 of the Limitation Act 1980. The arbitration must therefore have been
commenced within six years of the date when the cause of action accrued.
Notes on Choice of Law in Absence of Choice-of-Law Clause
1. Arbitrators' selection of substantive law applicable to merits of parties' dispute. As the
foregoing materials illustrate, arbitral tribunals frequently are required to select the
substantive law applicable to the parties' dispute. Note that Article 28(2) of the UNCITRAL
Model Law, Article 187 of the Swiss Law on Private International Law, Article 17 of the 1998 ICC
Rules, and Article 33 of the UNCITRAL Arbitration Rules all provide for the arbitral tribunal to
select the substantive law applicable in an arbitration. Is this necessary? What alternatives
exist and how would they work?
2. Application of substantive laws of arbitral situs. As noted above, a number of arbitral awards
(particularly older ones) directly apply the substantive law of the arbitral situs. See Award in
ICC Case No. 2735 of 1976, 1977 Journal du droit international 947; Award in ICC Case No. 2391 of
1977, 1977 Journal du droit international 949.
Application of the situs's substantive law was a particularly common approach in the United
States. A. Ehrenzweig, Conflict of Laws 540 (1962) (“It is widely held that the parties who have
chosen a place of arbitration have thus impliedly agreed on the applicability of both the
procedural and substantive law of that place.”); Splosna Plovba of Piran v. Agrelak Steamship
Corp., 381 F.Supp. 1368, 1370 (S.D.N.Y. 1974); In re Application of Doughboy Indus. Inc., 233
N.Y.S.2d 488 (1962). Likewise, English courts historically held that designation of England as
arbitral forum also constituted agreement on English substantive law. Tzortizis and Sykias v.
Monark Lines A/B [1968] 1 Lloyd's L.R. 337 (C.A.); Norske Atlas Co., Ltd v. London General Ins. Co.,
Ltd [1927] 2 Lloyd's L.R. 104.
Is the Award in ICC Case No. 4491 an example of a tribunal's application of the substantive law
of the arbitral situs?
3. Rationale for application of arbitral situs's substantive law. Consider the following quotation
from the Restatement (Second) Conflict of Laws §218 comment b (1971), explaining the rationale
for applying the arbitral situs's substantive laws:
Provision by the parties in a contract that arbitration shall take place in a certain state may
provide some evidence of an intention on their part that the local law of this state should
P "536" govern the contract as a whole. This is true not only because the provision shows that the
P "537" parties had this particular state in mind; it is also true because the parties must presumably
have recognized that arbitrators sitting in that state would have a natural tendency to apply its
local law.
In some European jurisdictions these results were explained on the grounds of qui elegit
arbitrum elegit ius – as in the United States, the parties were presumed to have intended
application of the situs's conflicts or substantive rules.
Is the foregoing rationale persuasive? Perhaps it was (and still is) where the parties to a
straightforward, two-party contract agree to arbitrate in one party's home state. As described
above, however, in contemporary international arbitration it is very common for arbitrations to
be conducted in a neutral state and for the law of a different state from either the arbitral situs
or the parties' domiciles to provide the substantive law. A nation is usually selected as the
arbitral seat because of its arbitration law, its convenience, and its neutrality – and not its
substantive law.
Do these considerations significantly undermine explanations of the traditional situs rule
based on the parties' implied choice? If the parties have selected a “neutral” state as their
arbitral situs, and have not selected the applicable law, is it reasonable to conclude that they
also desired or expected the “neutral” substantive law of the arbitral seat to apply? Wouldn't
this conclusion make particular sense in light of the complexities and uncertainties of
contemporary conflict of laws analysis and the desire of most businesses for an efficient,
predictable, and neutral resolution of their international disputes? How would this analysis
 apply where the parties have agreed to arbitrate in one party's domicile, without selecting an
applicable substantive law?
4. Erosion of support for automatic application of situs's substantive law. Automatic
application of the arbitral situs's substantive laws is no longer common in contemporary
international arbitrations. For the reasons described above, many contemporary arbitrators
attribute little significance to the situs's laws: “It is appropriate to eliminate forthwith the law
of the forum, whose connection with the case is purely fortuitous.”Award in ICC Case No. 1422 of
1966, 1974 Journal du droit international 884. See also supra pp. 529-30.
Note that in ICC Award No. 5460, the ICC International Court of Arbitration – not the parties –
selected the arbitral situs. What force does the theory of an implied choice of law have in such
cases? Particularly where the arbitral situs is selected by the arbitral institution, the parties
may have had no conceivable reason to contemplate the application of its substantive (or
choice of law) rules. This can produce anomolous results. An oft-repeated example involves a
German and an English company arbitrating in Switzerland, in a dispute where both German
and English conflicts rules would have selected English law, but Swiss conflicts rules selected
German law. Cohn, The Rules of Arbitration of the International Chamber of Commerce, 14 Int'l &
Comp. L.Q. 132, 162 (1965).
National courts have been much less willing in recent years to conclude that the parties'
selection of an arbitral situs indicates an intention also to choose the substantive law of that
place. Compagnie Tunisienne de Navigation SA v. Compagnie d'Armement Maritime SA [1971] A.C.
572, 600; Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 n.13 (1974) (“Under some circumstances,
the designation of arbitration in a certain place might also be viewed as implicitly selecting
the law of that place to apply to that transaction.”) (emphasis added); Konkar Indomitable
Corp. v. Fritzen Schiffsagentur und Bereederungs GmbH, No. 80 Civ. 3230 (S.D.N.Y. 1981)
(“selection of an arbitration forum may also be viewed as but one factor in determining a
contract's ‘center of gravity’ for choice of law purposes”).
Contemporary commentators largely reject the automatic application of the substantive laws
of the arbitral situs. See Collins, Arbitration Clauses and Forum Selection Clauses in the Conflict
of Laws: Some Recent Developments in England, 2 J. Mar. L. & Com. 363 (1971); Kopelmaans, The
Settlement of Disputes in International Trade, 51 Colum. L. Rev. 384 (1961); J. Lew, Applicable Law
in International Commercial Arbitration 190, 204 (1978) (“Of course it may be that the parties will
choose the arbitration forum and intend its law to apply; but then again that intention might
equally not exist.”); M. Rubino-Sammartino, International Arbitration Law 256 (1990).
5. Mandatory application of conflict of laws rules of arbitral situs. The arbitrators in ICC Case
No. 5460 stated, without analysis, that in an arbitration sited in England he was required by
English law to apply English private international law rules to select the applicable
substantive law. Compare the conclusion of the arbitrators in ICC Case No. 2930, who
specifically reject the suggestion that they are bound to apply the conflicts rules of the arbitral
situs. Compare also the approach in ICC Case No. 4491.
The extent to which the arbitral situs's choice of law rules are binding on arbitrators depends,
P "537" of course, in the first instance, on the forum's law. In this respect, national laws vary. Prior to
P "538" the 1996 English Arbitration Act, some English authorities took the view (like the arbitrator in
ICC Case No. 5460) that English private international law rules were binding on arbitrators
sitting in England. “Nor can an English arbitrator apply any conflict of laws rules other than
English rules.” Dicey and Morris, The Conflict of Laws 543 (11th ed. 1987); Mann, Lex Facit
Arbitrum, reprinted in, 2 Arb. Int'l 241, 251 (1986). Article 187 of the Swiss Law on Private
International Law also appears to impose a mandatory (albeit flexible) conflicts rule. See also
USSR Maritime Arbitration Commission Award No. 82/1981 of 14 February 1984, XIV Y.B. Comm.
Arb. 201 (1989) (applying Soviet conflict of laws rules to arbitration sited in USSR).
For an example of a broader rule that the arbitral situs's conflicts rules must always be
applied, consider the 1957 Resolution of the Institute of International Law (“The rules of choice
of law in the state of the seat of the arbitral tribunal must be followed to settle the law
applicable to the substance of the dispute.”). Is there any reason to think that some sort of
international standard would require nations to impose their own conflicts rules on arbitrators?
What if that is what the parties (albeit by implication) intended in making their arbitration
agreement? Consider Article II(1) and II(3) of the New York Convention. See supra pp. 157-59.
Note that many national arbitration laws do not require international arbitrators in
arbitrations sited locally to apply local conflict of laws rules. Consider in this regard Article
28(2) of the UNCITRAL Model Law. Note that the FAA does not impose particular conflicts rules
on arbitrators sitting in the United States (except in limited instances involving public policy).
Is there any international standard that forbids a requirement that arbitrators apply the
conflicts rules of the arbitral situs? What if the parties agree otherwise?
6. Rationale for arbitrator's application of situs's conflict of laws rules. As a matter of policy,
should the conflict of laws rules of the arbitral situs be mandatorily applicable by the
arbitrators? Is that likely to be what the parties intended? Consider the discussion above
concerning the parties' implied choice of the arbitral situs's substantive law, See supra pp. 536-
37. Is there any reason to think that the parties might have intended the conflicts rules of the
arbitral situs to apply to their dispute? Is it likely that the parties in most commercial
transactions give the slightest thought to conflicts rules in some future arbitration? What
conflict of laws rules other than those of the arbitral situs might the parties think applicable?
Some traditional authorities reasoned that the conflicts rules of the arbitral situs were binding
because they provided the procedural law (or “lex fori”) for the arbitral proceedings. This was
 the theory of the 1957 Resolution of the Institute of International Law, quoted above. Consider
the following:
In the legal sense, no international commercial arbitration exists. Just as, notwithstanding its
notoriously misleading name, every system of private international law is a system of national
law, every arbitration is a national arbitration, that is to say, subject to a specific system of
national law.... No one has ever or anywhere been able to point to any provision or legal
principle which would permit individuals to act outside the confines of a system of municipal
law ... [E]very arbitration is necessarily subject to the law of a given state.... The law of the
arbitration tribunal's seat initially governs the whole of the tribunal's life and work. In
particular, it governs the validity of the submission, the creation and composition of the
tribunal, the rules of the conflict of laws to be followed by it, its procedure, the making and
publication of its award.
Mann, Lex Facit Arbitrum, reprinted in, 2 Arb. Int'l 241, 244, 245, 248 (1986) (emphasis added).
Similarly, many commentators concluded that the arbitral tribunal is not equivalent to a
national court, and is not bound by the “lex fori.” In the words of one significant arbitral award,
“[t]he arbitral Tribunal has no lex fori.”Saudi Arabia v. Arabian American Oil Co. (Aug. 23, 1958). A
leading commentary reasons that
“[t]he modern trend is to recognize that any perceived obligation to apply the choice of law
rules of the seat stems from a false comparison of the seat of an arbitral tribunal with a judicial
forum. A national court judge must apply the conflicts rules of the forum.... The international
arbitrator's powers, on the other hand, are derived from an arbitration agreement, and an
arbitrator does not exercise public or institutional power in the name of the State.”
W. Craig, W. Park & J. Paulsson, International Chamber of Commerce Arbitration 285 (2d ed. 1990).
Is this persuasive? If the arbitral situs's conflicts rules do not apply, what rules do?
P "538"
P "539"
Consider the following:
The arbitrator exercises a private mission, conferred contractually, and it is only by a rather
artificial interpretation that one can say that his powers arise from – and even then very
indirectly – a tolerance of the State of the place of arbitration, or rather of the various States
involved (States of the parties, of the siège, of the probable places of execution of the award),
which accept the institution of arbitration, or of the community of nations, notably those which
have ratified international treaties in the matter. Would it not be to force the bed if he were
assimilated to a State judge, who is imperatively bound to the system of private international
law of the country where he sits and from which he derives his power of decision?
Pierre Lalive, Les règles de conflits de lois appliquèes au fond du l'arbitre international siégeant
en Suisse, 1976 Rev. Arb.
7. Erosion of support for requirement that arbitrators apply conflict of laws rules of arbitral
situs. As the decisions in ICC Case No. 2930 and (arguably) ICC Case No. 4237 illustrate, many
arbitrators do not regard themselves as bound by the conflict of laws rules of the arbitral situs.
See also Final Award in ICC Case No. 6527 of 1991, XVIII Y.B. Comm. Arb. 44 (1993) (refusing to
apply conflict of laws rules of arbitral situs).
8. Voluntary application of conflict of laws rules of arbitral situs. Even if an arbitrator is not
bound to apply the conflict of laws rules of the arbitral situs, he may nonetheless decide that,
in the circumstances of a particular case, it is appropriate to do so. Thus, arbitral tribunals not
infrequently conclude that an agreement on an arbitral situs, coupled with the lack of strong
connecting factors to other nations, warrants application of the situs's conflicts rules. See
Restatement (Second) Conflict of Laws §218 comment b (1971); Scherk v. Alberto-Culver Co., 417
U.S. 506, 519 n. 13 (1974); Westinghouse Int'l Property Co. v. National Power Corp., ICC Case No.
6401 (Dec. 19, 1991), 7 Mealey's Int'l Arb. Rep. Bl (Jan. 1992) (applying conflict rules of arbitral
situs).
9. Interaction between arbitral situs's conflict of laws rules and institutional arbitration rules
granting arbitrators discretion to select conflicts rules. Article 33 of the UNCITRAL Arbitration
Rules provides arbitrators with the power (where the parties have not agreed upon an
applicable law) to “apply the law determined by the conflicts of laws rules which it considers
appropriate.” As discussed above, other institutional rules (including ICC, AAA, and LCIA Rules)
also grant arbitrators broad authority to select the applicable law as they deem appropriate.
See supra pp. 528-29. Article 13(3) of the 1988 ICC Rules was to the same effect.
What effect do these institutional rules to which the parties have agreed, have upon conflict of
laws decisions by arbitrators? The arbitrator in ICC Award No. 4237 concludes that Article 13(3)
of the 1988 ICC Rules constitutes a choice-of-law agreement authorizing the arbitrator to select
an “appropriate” choice of law rule. As discussed below, most nations permit parties to agree
on the substantive law governing their dispute. See infra pp. 542-45, 551-53. Thus, few states
would categorically forbid parties from agreeing on the applicable conflicts rules for their
dispute, nor from agreeing to leave that choice to the arbitrator. Nevertheless, this is a
question of national law and some nations mandatorily require that their conflicts rules be
applied in any arbitration conducted within national territory. For example, can an ICC
arbitrator in an arbitration in Switzerland (without an express choice-of-law clause) apply a
conflict of laws rule other than the “closest connection” formula in Article 187(1) of the Swiss
Law on Private International Law (excerpted above)? See P. Karrer, Kommentar zum
Schweizerischen Privatrecht, Internationales Privatrecht, at Article 187 PILA, notes 92 & 118 (1996)
(concluding the agreement to ICC Rules supersedes Article 187's “closest connection” formula).
 And, in any event, an arbitrator must apply conflict of laws rules to determine what rules
govern the meaning and effect of the choice-of-law agreement contained in Article 17 of the ICC
Rules and Article 33 of the UNCITRAL Arbitration Rules. What conflicts rules should he apply
with respect to this issue?
10. “International” conflict of laws rules. The arbitrators in ICC Case No. 2930 applied what were
characterized as “international” conflict of laws rules. Other authorities have also adopted this
approach. J. Lew, Applicable Law in International Commercial Arbitration 285-347 (1978)
(discussing precedents).
What is likely contemplated by the parties to an international contract who select
international arbitration as a means of resolving their disputes (principally for reasons of
P "539" neutrality, efficiency, and effective international enforcement)? Is it likely that they bargained
P "540" for the specific conflict of laws rules of the arbitral situs or intended to engage lengthy future
debate about the intricacies of conflicts rules in numerous different jurisdictions? Do
“international” conflicts rules provide a uniform, neutral formula that satisfies the parties'
expectations?
11. Content of “international” conflict of laws rules. What content does an “international”
conflict of laws rule have? What sources should one consult in answering this question?
Do developed nations share certain basic principles relating to choice of law? How does the
tribunal in ICC Case No. 2930 suggest that such international principles are to be ascertained?
Are the difficulties in ascertaining the content of “international” conflict of laws principles any
greater than those of ascertaining the content of domestic conflicts principles?
In practice, arbitrators have looked to various international agreements bearing on choice of
law issues, even when those agreements are not, by their terms, directly applicable. In
particular, arbitral tribunals have frequently relied on the International Sale of Goods
Convention (cited in ICC Case No. 2930) and the European Convention on the Law Applicable to
Contractual Obligations (cited in ICC Case No. 6379, excerpted below). Compare the
development of so-called lex mercatoria and “general principles of law,” discussed below. See
infra pp. 555-57.
12. Cumulative application of national conflict of law rules. As the award in ICC Case No. 2930
suggests, arbitrators sometimes purport to apply the conflicts rules of each of the states with a
connection to the dispute. See Award in ICC Case No. 2879 of 1978, 1979 Journal du droit
international 990; Award in ICC Case No. 4434 of 1983, 1983 Journal du droit international 893.
As a practical matter, this “cumulative” approach often concludes that all the relevant
conflicts rules select the same national law. When this occurs, it demonstrates a particular
type of “false conflict.” See Derains, L'Application Cumulative par l'Arbitre des Systèmes de
Conflit de Lois Interesses au Litige, 1972 Rev. Arb. 99. On a practical level, the cumulative
approach also provides some insulation against a challenge for failure to apply the proper
conflict of laws rules. Compare W. Craig, W. Park & J. Paulsson, International Chamber of
Commerce Arbitration 290-91 (2d ed. 1990) (“The cumulative method is particularly apt for use
in the arbitral process.... [T]he arbitrators are able to infuse an international element into the
proceedings and assure both parties that the issue has not been determined by the narrow
application of the system of a single State, whose relationship to the dispute is not necessarily
predominant.”).
However, the cumulative approach provides an arbitrator little guidance if different conflict of
laws rules point towards two or more different national substantive laws. In that case, some
other conflicts principle must be applied to choose between the competing alternatives. The
cumulative approach provides no guidance in this respect.
13. Distinction between matters of “substance” and “procedure.” What issues are subject to (a)
the “substantive” law selected by the arbitrators' choice of law analysis, and (b) the
“procedural” law governing the arbitral proceedings? For example, what law applies to issues
such as burden of proof, evidentiary matters, type and timing of submissions, and conduct of
hearings? Are these matters of “substance” or “procedure”? Why does the distinction matter?
Consider the award in ICC Case No. 4491. How is the statute of limitations issues categorized?
What law would have applied to the issue if it were “substantive”?
The distinction between substantive and procedural issues is elusive even within national legal
systems. In the international context, where multiple characterizations exist, the distinction is
even more complex. Suppose, in ICC Case No. 4491, that Finnish law characterized the statute of
limitations issue as substantive. Suppose that the parties' underlying contract in ICC Case No.
4491 contained a choice of law clause selecting Finnish law. Would that clause have covered
the statute of limitations issue? What law would apply to answering this question?
14. Statutes of limitations. Most nations impose limitations periods within which civil claims
must be brought. Of course, statutes of limitations differ from country to country. Choosing
between various potentially applicable statutes of limitations in international arbitration
raises significant choice-of-law questions.
Differences between national laws are aggravated by differences between conflict of laws
rules. In most U.S. jurisdictions, statutes of limitations are generally “procedural,” and
therefore governed by the law of the forum. Restatement (Second) Conflict of Laws §§142-3
(1971); Ailes, Limitation of Actions and the Conflict of Laws, 31 Mich. L. Rev. 474 (1933). In contrast,
P "540" civil law states generally regard statutes of limitations as “substantive,” and governed by the
P "541" law applicable to the merits of the parties' claims. Introductory Law to the German Civil
Code Article 32(1) No. 4; Swiss Obligations Law Article 135(2). The potential for inconsistent
 results under these various rules is obvious.
Conflict of laws issues also arise as to the date that the statute of limitations period is tolled.
The issue can be addressed by institutional arbitration rules, as well as by national law. E.g.,
UNCITRAL Rules Article 21 (arbitral proceedings “commence on the date on which a request for
that dispute to be referred to arbitration is received by the respondent”); ICC Rules Article 4(2)
(“The date on which the Request is received by the Secretariat shall, for all purposes, be
deemed to be the date of commencement of the arbitral proceedings.”); Swiss Law on Private
International Law Article 181 (date arbitrator is named); UNCITRAL Model Law Article 13(2) (date
request served). Again, inconsistencies can arise between institutional rules and one or more
potentially applicable national laws. The only safe course, of course, is to satisfy the shortest
potentially applicable period.
15. Uncertainty about choice of applicable substantive law. As the foregoing materials and
notes suggest, the choice of applicable substantive law in international arbitration is often
surrounded by uncertainty. That is not consistent with the ideal of predictability, particularly
as concerns applicable law, that international arbitration promises. Scherk v. Alberto-Culver
Co., 417 U.S. 506, 516-17 (1974); supra pp. 525-26. Consider the following:
The freedom [that international arbitral tribunals possess in selecting the governing law] has
been useful in some cases. However, it has also led to some unpredictability. With the growing
use of international arbitration this uncertainty has become a matter of concern to parties.
They see no attraction in unpredictable conflict-of-laws rules. They need some degree of
certainty as to the law applicable, when drafting their contracts, when seeking a friendly
settlement of their dispute, and when resorting to arbitration.
Lando, Conflict of Law Rules for Arbitrators, in Festschrift Zweigert, at 159 (1981). What
alternatives are available?
16. “Direct” application of substantive law. Consider Article 17(1) of the 1998 ICC Rules, which
permits “direct” application by the arbitral tribunal of the substantive rules of law that it
determines to be “appropriate.” How is a tribunal to determine what substantive rules are
“appropriate”? Can a tribunal do so without applying conflict of laws rules? If so, what defines
what law is “appropriate”? Does Article 17(1) contribute to the predictable, efficient resolution
of international business disputes?
17. What conflict of laws rule should an arbitrator apply? Consider the alternatives set forth
above that are available to an arbitrator who must select the substantive law governing the
parties' dispute. Assuming that the arbitrator is not required by some mandatory rule to choose
one alternative, which of these various options should he use?
Consider what the parties to an international arbitration agreement likely desired with respect
to choice of law issues. First, they wanted a neutral legal regime; second, although individual
facts are relevant, the parties probably did not intend to accord overriding importance to the
conflicts rules of the arbitral situs; third, they likely wanted conflicts rules that would uphold
both their contract and any choice-of-law agreement; and finally, they wanted a comparatively
simple, expeditious procedure that would not involve the complexities of litigation. What do
these considerations suggest about a conflicts rule? Assuming it could be practicably and
reliably ascertained, would not a single international standard best satisfy these objectives?
18. National court decisions refusing to review arbitrators' choice-of-law decisions. Neither the
New York Convention nor most developed national arbitration legislation expressly permit
non-recognition of an arbitral award because the arbitrators erred in their choice of law
analysis. See infra p. 814. Thus, judicial review of arbitrators' choice of law decisions concerning
the substantive law applicable to the merits of the parties' dispute by developed national
courts is usually minimal. See ATSA of California, Inc. v. Continental Ins. Co., 754 F.2d 1394, 1396
(9th Cir. 1985) (reversing district court's holding that Egyptian law should apply, on grounds that
arbitrator had authority to determine applicable law); Buques Centroamericanos, SA v.
Reinadora Costarricense de Petroleos SA, 1989 U.S. Dist. Lexis 5429 (S.D.N.Y. 1989) (refusing to
disturb arbitrator's conclusion that New York law governed parties' agreement); Konkar
Indomitable Corp. v. Fritzen Schiffsagentur und Bereederungs GmbH, No. 80 Civ. 3230 (S.D.N.Y.
1981) (“It cannot be said, therefore, that the panel was in ‘manifest disregard’ of the law in
P "541" holding that neither New York nor the United States was so clearly the center of gravity as to
P "542" require application of United States law.”); American Construction Machinery & Equipment Corp
v. Mechanised Construction of Pakistan Ltd, 659 F.Supp. 426 (S.D.N.Y.), aff'd, 828 F.2d 117 (2d Cir.
1987), cert. denied, 484 U.S. 1064 (1988); Mobil Oil Indonesia, Inc. v. Asamera Oil Ltd, 392 N.Y.S.2d
614 (App. Div. 1977) (dicta that award would not be vacated because arbitrators applied
“wrong” substantive law).
19. National court decisions requiring arbitral tribunal to apply a particular law. There are
grounds under the New York Convention and many national arbitration statutes for non-
recognition of arbitral awards that could permit a national court to reject an arbitrator's
choice of law. In particular, awards that either violate applicable public policy by refusing to
apply a mandatory national law arguably need not be recognized under Article V(2), while
awards that plainly misapply applicable conflicts rules may be liable to setting aside in the
arbitral situs. These exceptions, discussed in detail below, infra pp. 815-32, could apply to the
choice of law decisions of arbitral tribunals.
A few U.S. decisions have held, usually in actions to compel arbitration under §4 of the FAA,
that the arbitral tribunal must apply a particular law. This is most common where the case
involves claims under a U.S. federal statute, like the antitrust laws, which U.S. courts have held
incapable of prospective waiver. See supra pp. 293-95.
 C. Interpretation and Enforcement of Choice-of-Law Agreements in International
Arbitration
1. Introduction
International arbitration agreements often include, or accompany, an express choice-of-law
provision addressing the substantive law applicable to the parties' contract and relationship.
(42) Prior agreement on the governing substantive law increases the predictability of the
parties' relationship and, in some cases, selection of a particular nation's law may provide
important advantages to one or the other party. (43)
Parties to an international transaction will often instinctively wish for their own national law to
apply, in particular because local law will be most familiar to them. This view is, however,
often uninformed by the consequences in a particular case of the application of local law to
the types of disputes most likely to arise between the parties. Failing selection of their home
country's law, most parties will wish to have their agreement governed by a well-developed
body of law (such as that of England, New York, or Switzerland) that will provide a degree of
predictability, certainty, and neutrality.
Where a choice-of-law clause exists, three significant issues arise: (a) is the choice-of-law
agreement enforceable; (b) if so, subject to what exceptions; and (c) how is the choice-of-law
P "542" clause to be interpreted? These questions can arise both in the course of the arbitration and in
P "543" any related judicial enforcement proceedings. These types of choice of law issues will often
be decided, in the first instance, by the arbitrators (as opposed to a court); the principal
exception is where challenges based on non-arbitrability of particular types of claims or
disputes are made in a national court. (44)
2. General Enforceability of Parties' Choice of Substantive Law in International Arbitration
As a general proposition, international arbitration conventions, national laws, (45) and the
rules of international arbitral institutions vigorously affirm the parties' freedom to select the
substantive law applicable to their dispute. Decisions by international arbitrators are to the
same effect: in most arbitral awards, the dominant feature is respect for party autonomy. (46)
a. Enforceability of Parties' Choice of Substantive Law under International Arbitration
Conventions
The freedom of parties to choose the law governing their relations is reflected in a wide range
of international conventions. In some cases, one or more of these international agreements will
be directly applicable and will supply the rule of decision for the arbitral tribunal. In other
cases, no international instrument will directly apply, but the respect for party autonomy
recognized in such instruments will be drawn upon by a tribunal by analogy.
Various multilateral treaties provide that private choices of law will generally be enforced. (47)
Article VII(1) of the 1961 European Convention on International Commercial Arbitration
provides: “The parties shall be free to determine, by agreement, the law to be applied by the
arbitrators to the substance of the dispute.” (48) The Rome Convention (49) and the Vienna
Convention on the International Sale of Goods (50) also contain provisions recognizing the
parties' freedom to select the governing law.
P "543"
P "544"
b. The Enforceability of Parties' Choice of Substantive Law in International Arbitration Under
National Laws
The laws of most developed states enforce choice-of-law agreements, subject only to limited
exceptions. (51) The United States is a prime example. Under the laws of most U.S. states, (52)
choice-of-law agreements historically were not enforceable. (53)
During this century, however, the principle of party autonomy gained essentially uniform
acceptance in U.S. courts. (54)
Section 187 of the Restatement (Second) Conflict of Laws illustrates the general enforceability of
choice-of-law agreements in the United States. The section provides that “[t]he law of the state
chosen by the parties to govern their contractual rights and duties will be applied,” provided
that there is a reasonable basis for the parties' choice and that it violates no applicable public
policy. (55)
The Uniform Commercial Code is to the same effect as §187 of the Restatement (Second).
Section 1-105(1) provides that “when a transaction bears a reasonable relationship to this state
and also to another state or nation the parties may agree that the law of either this state or of
such other state or nation shall govern their rights and duties.” Likewise, the common law in
most U.S. states also enforces choice-of-law agreements, particularly in international
transactions. (56)
P "544" Choice-of-law agreements are also enforceable under the laws of most other leading trading
P "545" nations. As we have seen, the principle of party autonomy is expressly recognized under the
Rome Convention. (57) Likewise under English common law, “[w]hen the intention of the parties
to a contract, as to the law governing the contract, is expressed in words, this expressed
intention, in general determines the proper law of the contract.” (58) Similar rules apply in
Germany (59) and Switzerland. (60)
Despite the foregoing trend, a few nations (typically those without a history of significant
trading activities) will not enforce choice-of-law agreements. Alternatively, some states take
 expansive views of the areas in which public policy will not give effect to choice of law
agreements.
c. The Enforceability of Parties' Choice of Substantive Law Under Institutional Arbitration Rules
Recognition of party autonomy in the choice of substantive law is also the unanimous approach
of virtually all institutional arbitration rules. For example, the UNCITRAL Arbitration Rules
provide, in Article 33(1), that “[t]he arbitral tribunal shall apply the law designated by the
parties as applicable to the substance of the dispute.” Similarly, Article 17(1) of the 1998 ICC
Rules provides “[t]he parties shall be free to determine the rules of law to be applied by the
Arbitral Tribunal to the merits of the dispute.” Most other leading institutional rules are to the
same effect. (61) Arbitral awards consistently give effect to such provisions. (62)
3. “Reasonable Relationship” Requirement for Enforceability of Parties' Choice of Substantive
Law in International Arbitration
P "545" Despite this general recognition of party autonomy in the selection of substantive law, some
P "546" national laws impose limits on the enforceability of private choice-of-law agreements. In
particular, some nations will not enforce choice-of-law agreements if either: (a) the chosen law
lacks a reasonable relationship to the parties' transaction; or (b) the chosen law is contrary to
some fundamental public policy of the forum, or, less clearly, to that of another nation. In
addition, under any national law, a choice-of-law clause must be construed, among other
things, in order to determine what issues fall within its scope.
This section examines the reasonable relationship requirement, as well as issues of
interpretation of choice-of-law agreements. (63) As noted above, some nations' conflict of laws
rules impose requirements that the substantive law chosen by the parties bear some
“reasonable relationship” to their transaction. For example, as the preceding discussions of the
party autonomy principle in the United States and England suggest, both nations' courts apply
some form of reasonable relationship limitation.
Under §187 of the Restatement (Second) Conflict of Laws, the parties' chosen law must be
applied unless, among other things, “the chosen state has no substantial relationship to the
parties or the transaction and there is no other reasonable basis for the parties' choice.” (64)
Section 1-105(1) imposes a similar sort of “reasonable relation” requirement. (65) At common
law, some New York courts applied a reasonable relationship requirement fairly strictly, (66)
and English law contains a broadly similar restriction. (67)
On the other hand, some U.S. jurisdictions and many foreign nations do not impose any
reasonable relationship requirement. During the 1980s, New York enacted a choice of law
P "546" statute specifically to eliminate such a requirement in certain cases where the parties'
P "547" agreement selects New York law. (68) The Rome Convention goes further and contains no
reasonable relationship requirement whatsoever. (69) Switzerland also does not impose any
reasonable relationship requirement. (70) Similarly, contemporary commentary is generally
critical of the rule. (71)
As a practical matter, international arbitrators seldom refuse to apply the law chosen by the
parties on the ground that the transaction lacks a sufficient connection to that state. The
following awards are illustrative of the treatment of reasonable relationship requirements for
choice-of-law agreements in international arbitration. They also introduce some of the issues
that arise in interpreting choice-of-law agreements.
SECOND INTERIM AWARD IN ICC CASE NO. 4145 OF 1984
XII Y.B. Comm. Arb. 97 (1987) (©)
ARBITRATORS, FIVAZ, REISMAN, AND MATSCHER. [The claimant was a Middle East public entity.
The respondent was a South Asian construction company. The respondent contracted to
construct various buildings for the claimant. The parties' agreement contained an ICC
arbitration clause and the following choice-of-law clause: “The validity and construction of this
Agreement shall be governed by the laws of the Canton of Geneva or country X, or both.”
Disputes arose and arbitration was requested. The claimant contended that Swiss law
governed the parties' dispute, while the defendant asserted it to be the law of country X.] ...
The principle of autonomy – widely recognized – allows the parties to choose any law to rule
their contract, even if not obviously related with [it]. This is what the parties have done in
mentioning Swiss law, although at first sight less related with the Agreement than the law of
country X. Such mention of Swiss law in the first place (before the law of country X) is in this
P "547" respect an important indication. Moreover, Swiss law constitutes a highly sophisticated system
P "548" of law, which answers all the questions that may arise from the interpretation or fulfillment
of an agreement of the kind of the one entered into.
On the other hand, the law of country X, might partially or totally affect the validity of the
Agreement. It is then reasonable to assume that from two possible laws, the parties would
choose the law which would uphold the validity of the Agreement. It is also a general and
widely recognized principle that from two legal solutions, the judge will choose the one which
favors the validity of an agreement (favor negotii).
In these circumstances, the arbitrators definitely decided to choose Swiss law as the
applicable law, assuming that this choice corresponds to what the parties had in mind by
inserting the above mentioned provision in Article 11 of the Agreement. (There is no reason to
envisage the cumulative application of both Swiss law and the law of country X to the
Agreement, such solution being rejected by most of the authors)....
 PRELIMINARY AWARD IN ICC CASE NO. 5505 OF 1987
XIII Y.B. Comm. Arb. 110 (1988) (©)
ARBITRATOR, G. MULLER. [The claimant was a Mozambique purchaser; the respondent was a
Netherlands seller. The parties entered into a contract for the sale of seed potatoes, which
contained the following provision: “[the parties] must finally undertake to submit the matter
according to the regulation for agreement and arbitration of the International Chamber of
Commerce to one or more arbitrators as per the said laws. The arbitration will take place in
Switzerland, the law applicable is that known in England.” Disputes arose under the contract
and arbitration ensued. The parties disagreed about the meaning of the words “the law
applicable is that known in England.”] ...
The parties to an agreement are free, under the [1988] ICC Rules [Article 13(3)], to adopt the
substantive law which should govern their agreement and an arbitral tribunal has to apply the
law so adopted. It is only if there is no designation by the parties of the applicable law that the
arbitral tribunal shall resort to a rule of conflict of laws. An arbitral tribunal should probably
also deviate from the law chosen by the parties if it would appear that such a choice, if
applied by the arbitral tribunal, could prevent that the award be implemented (Article 26 of
the ICC Rules.)
In making [the] decision [as to applicable law], one has first to select which system or
principles of law one has to apply. One could construe the disputed sentence by applying
English law as being the law presumably chosen by the parties, or by applying Swiss law as the
“lex fori,” or by resorting to principles of law generally admitted. It does not seem adequate to
apply English law to determine the issue as it could lead to preempting the solution. Therefore,
P "548" the arbitrator will be guided by Swiss law and general principles of law. It has to be noted that
P "549" in the present instance there is no absolute need to resort to a specific system of law to
construe the said sentence. Under Swiss law, the wording of contracts forms the basis of their
construction, but Swiss judges also look at all the circumstances which seem appropriate to
establish the common intention of the parties [and various other rules of construction]....
The arbitrator is of the opinion that the parties to the contract did not include inadvertently
the said sentence ... In the said context, one may elaborate four possible meanings, that is [a] a
choice of substantive law; [b] a choice of procedural law; [c] a choice of a rule of conflict of
laws; and [d] a choice of a law to determine the validity and effect of the arbitration clause....
In reviewing the possible meanings of the disputed sentence, the arbitrator will apply the
following test: How could that sentence be understood in good faith by a reasonable man
active in the international trade? Beforehand, the arbitrator notes that the word “law” appears
twice in the arbitration clause.... The first reference is to “as per said laws.” The “said laws”
obviously refer to the Rules of Conciliation and Arbitration of the ICC.... The second reference to
the word “law” appears in the disputed sentence, in connection with the word “applicable.” The
defendants allege that “the law applicable” could refer to “as per said laws.” This does not
seem, however, to be a valid construction of these words....
It is quite uncommon to find in an arbitration clause an indication of the law which shall govern
the procedure under which the arbitration shall take place. Parties adopting an arbitration
clause expect mostly to escape procedural particularities of local courts; the designation of a
municipal law is most often contrary to the advantages sought in an arbitration clause.
In this case, the choice of the ICC Rules was well sufficient to settle the problems of procedure
(Article 11 of the Rules for the ICC Court of Arbitration). The choice of Switzerland as the place of
arbitration implied in any case the application of the Swiss mandatory provisions. Nothing
indicates that the parties could have reason to avoid the application of Swiss procedural law
and to choose specifically English procedural law. Moreover, such a choice could bring with it
numerous difficulties. Therefore, quite clearly, if the parties intended a reference to
procedural law, they would have made it plain and would not have used the words “the law
applicable” which designate ordinarily the substantive law (see hereafter). Further, one cannot
understand why the parties would have chosen such an extraordinary law of procedure under
the circumstances, but not a substantive law....
It seems unlikely that parties to an international contract choose a rule of conflict of laws, but
not the substantive law: it is hard to understand how the parties cannot agree to a proper law,
but can agree to the rules of conflict that determine the proper law. This may sometimes
happen, but for certain reasons. In this case, there is no evidence of any reason of that kind.
Further, one may assume that, if the parties had in mind to refer to a rule of conflict of laws, as
opposed to a substantive law, they would have made it clear. Finally, it would have been
contradictory and therefore unreasonable to choose at the same time a rule of conflict of laws
and a substantive law, as this is assumed by the defendants....
P "549"
P "550"
Parties may submit an arbitration agreement to a law which is not the substantive law of the
main contract. But in that case, they almost always designate the law governing the arbitration
agreement and the law applying to the contract. If not, they indicate that the selected law
applies specifically to the arbitration agreement. Obviously, the parties to an international
contract are likely to have in mind the problems of jurisdiction or arbitration, possibly of
substantive law, but not of the law governing the arbitration clause itself, which is mostly
thought to be governed either by the selected law or by the “lex fori” (the law of the place of
arbitration). In this case, there is no evidence that the parties might have intended or at least
had reasons to submit the arbitration clause to a specific law....
Universally, the words “the law applicable” or “the law which applies” are used in the context
 of the determination of the substantive law governing private international relationships
(example: Article 13(3) of the [1988] Rules of the ICC Court of Arbitration.) In contracts
containing no arbitration clause, the choice of the “applicable law” unambiguously refers to
the substantive law, the procedure being in any case governed by the “lex fori.” The word
“substantive” therefore never or very rarely appears in connection with the expression “the law
applicable,” although always implied. This usage certainly extends to contracts containing an
arbitration clause....
The parties had valid reasons to refer to the substantive law known in England. English law is
neutral; its provisions are adapted to the needs of international commerce; it is fairly well
accessible and known to lawyers of other countries, such as Switzerland, Mozambique, and the
Netherlands; English is far more common than Dutch, Portuguese, or even French. The
arbitrator is therefore of the opinion that a reasonable man active in the international trade
should have understood the disputed sentence as a reference to a substantive law. Although
somewhat unusual, the expression “the law known in England” is not ambiguous. It is wide
enough to include, as appropriate, international rules and usages recognized in England....
The argument has been made by the defendants that a clause of choice of substantive law
should be clear and unambiguous. Under Swiss law, the choice of the applicable law is
considered as the result of a contract between the parties, which is separate from the main
contract. This “choice of law” is not subject to any formality and can be express or implied.... In
this case, the arbitrator [also] finds that the express election in favor of English law is
sufficiently clear to be regarded....
The defendants allege that the parties were not free to choose English law as the law
applicable to their contract, for there being no connection between the matter and English
law. Whether English law is a valid choice of law has to be scrutinized both under Swiss law and
English law. Under Swiss law, the freedom of the parties as to their choice of the applicable law
has not been finally settled. Swiss courts do not require the existence of a “natural connection
between the matter and the chosen law” and recognize the validity of a choice of law in each
case where the parties have a reasonable interest in the application of the chosen law. Such an
interest exists for example when the chosen law contains a regulation of the matter which
P "550" seems appropriate, when the parties are willing to submit their relationship to certain usages
P "551" assuming the application of the chosen law or when the contract is in connection with
another business submitted on the chosen law. It does not seem that any decision of a Swiss
court has ever denied the existence of a reasonable interest of the parties in the application of
a chosen law....
Under English law, the question of the connection between the matter and the chosen law
seems to be somewhat controversial. There seems to be no reported case in which an English
court refused to give effect to an express choice of law because of the deficient connection
between the contract and the chosen law. In Vita Food Products Inc. v. Unus Shipping Co. Ltd.
(1939), AC 277 (PC), it was stated that “a connection with English law is not, as a matter of
principle, essential.” In this decision, the judge mentioned in particular the importance of
English law in international commercial relationships, even unconnected with England. He
considered it reasonable for the parties to commercial contracts to submit their transaction to
English law, although that law might have nothing to do with the facts of the particular case.
Swiss and English laws largely reflect the international practice.
“In most countries, the parties to transnational contracts enjoy a large degree of autonomy in
selecting the proper law of their contract. Except in those situations in which compliance with
mandatory rules is required, the parties are generally free to choose by way of express
stipulation the law applicable to their relationship. In the overwhelming majority of cases, the
law stipulated applicable is the domestic law of a specific country to which the contracts bears
some connection or the law of a ‘third’ country selected for reason of expertise (such as English
law in regard to maritime matters) or of neutrality (such as Swedish, Swiss, or French law)....”
G. Delaume, Transnational Contracts Chapter VII, p.2. In this case, the arbitrator finds that the
parties have a reasonable interest in the application of English law. The choice of English
substantive law cannot be held invalid for there being no connection between the matter and
English law.
There is further no indication that the choice of English substantive law was made to escape
some mandatory provisions of the laws of the Netherlands or Mozambique. Nor is there any
indication that an award which would be based on English substantive law would not be
enforceable in the Netherlands or in the Mozambique. Therefore, the arbitrator considers that
the parties have made a valid choice in favor of English substantive law. In accordance with
Article 13(3) of the [1988 ICC] Rules, the arbitrator shall apply English substantive law.
Notes on Application of Choice-of-Law Clauses in International Arbitration
1. Need to select and apply conflict of laws rules even where a choice-of-law provision exists.
The interpretation and enforcement of choice-of-law provisions rests, in the first instance, with
the arbitrators. Determining what substantive contract law to apply to interpret and give effect
P "551" to a choice-of-law clause necessarily requires resort to some set of rules of construction and
P "552" enforceability, just as with other types of agreement. In turn, that requires application of
some set of conflict of laws rules. Thus, even where the parties have agreed upon a choice-of-
law clause, arbitrators will be required to select and apply some set of conflict of laws rules.
What conflict of laws rules are applied to the choice-of-law clauses in the above awards? Is the
method of selecting conflict of laws rules any different where a choice-of-law clause exists than
where it does not? Should it be?
 2. Possible applicability of conflicts rules of state whose substantive law is selected by parties'
choice-of-law agreement. If the parties' underlying contract provides that it shall be governed
by State X's law, it can be argued that State X's law should also supply the conflicts rules to
determine the validity and meaning of the choice-of-law clause. This argument rests in part on
presumptions about the parties' intent and in part on the notion that a single legal system
should apply to all aspects of the parties' dispute. For criticism of the view, see Mann, Lex Facit
Arbitrum, reprinted in, 2 Arb. Int'l 241, 252-53 (1986).
3. Deference to party autonomy by international arbitrators. The freedom of the parties to agree
upon the substantive law governing their relations is one of the foundations of international
commercial arbitration. See authorities cited supra pp. 1-3, 525-26; Final Award of 28 September
1992, Arbitration Court of the German Coffee Association, XIX Y.B. Comm. Arb. 48 (1994)
(applying substantive law of arbitral situs, based on the choice-of-law clause in an institutional
arbitration regime selecting law of arbitral situs).
As the above awards illustrate, international arbitrators virtually always give effect to
contractual choice-of-law provisions. According to one practitioner,
[p]arty autonomy in arbitration is quite unlimited. Whatever restrictions different legal
systems may place on the right of the parties to choose the law to govern their relations, those
limitations can only bind the courts of that legal system.
J. Lew, Applicable Law in International Commercial Arbitration 126 (1978).
This statement suggests the predisposition towards party autonomy in arbitral practice. Most
arbitrators are mindful that one of the basic purposes of international arbitration is to avoid
subjecting either party to the laws and judicial processes of the home state of the other party.
An inevitable consequence of this is that the parties will often deliberately select a national
law precisely because it lacks any connection to their transaction. In particular, the laws of
England, New York, and Switzerland are frequently chosen as neutral, well-developed
commercial legal regimes. Alternatively, a material element in the negotiation of a
commercial agreement will often be the applicable substantive law, and a party may forego
tangible financial or commercial consideration in order to obtain application of the law of “its”
home jurisdiction. In both instances, international arbitrators virtually always uphold the
parties' choices of law (subject to the public policy objections discussed below).
Is it appropriate for arbitrators to give private parties such substantial freedom to specify the
law applicable to their relations? Are there societal interests implicated, beyond those of the
supposedly autonomous “parties”? What about the employees, shareholders, lenders,
suppliers, taxing authorities, and communities surrounding the “party”? Are not the interests
and expectations of such entities directly affected by purported choices of law made by
corporate managers? Does the lack of any meaningful judicial (or other) review of arbitral
awards heighten these concerns about party autonomy?
Is it in fact correct that contracting parties obtain vital certainty from a choice-of-law clause?
Consider how poorly-drafted the choice-of-law clauses in some of the foregoing awards are. Is
it even remotely possible that the parties had any idea what the scope of these clauses was,
whether the clauses were enforceable, or what the content of the law they might have thought
they picked was? If in fact choice-of-law agreements do not provide much certainty, why
enforce them?
4. Validation principle. The tribunal in ICC Case No. 4145 refers to the validation principle, which
selects the law of the state that will enforce the parties' agreement. Similar approaches exists
under various developed national laws. See Restatement (Second) Conflict of Laws §200
comment c (1971); Dicey & Morris, The Conflict of Laws Rule 179 (12th ed. 1993); Konkar
Indomitable Corp. v. Fritzen Schiffsagentur und Bereederungs GmbH, No. 80 Civ. 3230 (S.D.N.Y.
1981) (“appropriate to disregard the parties' choice if the chosen law would render any portion
of the contract invalid”).
5. National laws invalidating or disfavoring choice-of-law agreements. Although most
developed national legal systems give effect to choice-of-law agreements, some national laws
do not. This is particularly true in states without a history of market economics.
P "552"
P "553"
Suppose that an arbitration is sited in a state whose law does not give effect to choice-of-law
agreements. Must or should the arbitral tribunal give effect to the local law invalidating
choice-of-law clauses? Suppose that the arbitration is sited in a state that gives effect to
choice-of-law clauses, but that the parties' transaction occurred principally in a state that
does not permit choice-of-law agreements. Would this restriction apply?
Why might a state refuse to give effect to choice-of-law clauses? Compare the reasons that a
state might refuse to give effect to international arbitration agreements. See supra pp. 164-65,
194-95.
6. “Reasonable relation” requirements in international arbitration. As discussed above, some
national laws condition the enforceability of choice-of-law provisions on the existence of a
“reasonable relationship” between the parties' transaction and their chosen law. See supra pp.
545-46.
 (a) Arbitrators generally do not apply reasonable relation requirements. As the award in ICC
Case No. 5505 illustrates, it is not infrequently argued that the parties' choice-of-law
agreement should not be enforced because the chosen law is not “related” to the parties'
dispute. Such arguments almost inevitably meet the fate of that in ICC Case No. 5505. See
A. Redfern & M. Hunter, International Commercial Arbitration 97-101 (2d ed. 1991);
Lowenfeld, International Litigation and Arbitration 338 (1993); Croff, The Applicable Law In
an International Commercial Arbitration: Is It Still a Conflict of Laws Problem?, 16 Int'l Law.
613, 615 (1982).
(b) Reasonable relationship requirement of state whose substantive law applies. If an arbitrator
decides to apply the conflict of laws rules of some state that requires a reasonable
relationship, can be ignore that requirement? Is there any basis for an arbitrator to apply
national conflicts rules differently from a national court? Recall the basic aims of
arbitration – neutrality, efficiency, and international enforceability, detached as much as
possible from the parochial features of any particular legal system. Are they relevant to
the foregoing question?
(c) Reasonable relationship requirement of arbitral forum. Suppose an international arbitrator
sitting in England is asked to enforce a choice-of-law clause choosing New York law in a
contract having nothing to do with New York. Should the arbitrator apply English conflicts
rules? If he applies English conflicts rules, should he also apply the reasonable
relationship requirement? Must he?
7. Interpreting choice-of-law agreements. Assuming that a choice-of-law clause is enforceable,
it also must be interpreted. Several interpretive issues frequently arise from choice-of-law
agreements.
(a) What conflict of laws question does a choice-of-law agreement answer? As the award in ICC
Case No. 5505 demonstrates, it can be unclear whether a choice-of-law provision was
meant to select the substantive law governing the parties' contract, the substantive law
governing the parties' arbitration agreement, the procedural (or curial) law governing the
arbitration proceedings, or the conflict of laws rules to be applied by the tribunal. See
supra p. 432. The arbitrator in ICC Case No. 5505 analyzes each of these possibilities with
some insight into the practical realities of commercial contracting. In general, the result
he reaches – when parties choose a law, they usually mean to choose the substantive law
governing the merits of their dispute – is sound. For commentary, see Dicey & Morris, The
Conflict of Laws 573-86 (12th ed. 1993).
(b) Choice-of-law clause does not ordinarily include conflict of laws rules of designated legal
system. Does a choice-of-law clause selecting the law of State A refer merely to the
substantive law of State A, or also to the choice-of-law rules of State A? If the latter, then
choice-of-law clauses would lead parties to a renewed conflict of laws debate. In general,
U.S. and other authorities will interpret choice-of-law clauses as not referring to the
conflict of laws rules of the designated legal system. Restatement (Second) Conflict of
Laws §186 comment b (1971); Engis Corp. v. Engis Ltd, 800 F.Supp. 627 (N.D. Ill. 1992).
(c) Scope of choice-of-law clauses. Parties not infrequently dispute the scope of particular
choice-of-law provisions. Specifically, it is commonly argued that a chosen law applies
only to issues or claims based directly on the parties' contract, and not to
“extracontractual” issues (like tort claims, unfair competition claims, and related
statutory claims). Compare the discussion above concerning the scope of arbitration
clauses and their application to extracontractual claims, supra pp. 319-24.
The scope of a choice-of-law clause is determined in the first instance by reference to the
parties' intent, viewed in light of the conflict of laws rules applicable to the choice-of-law
clause. At least in the United States, it is not clear whether a choice-of-law clause should
be interpreted under the law that it selects or under the conflicts rules of the forum. See
Yntema, “Autonomy” in Choice-of-Law, 1 Am. J. Comp. L. 341, 356 (1952); Gruson, Governing
Law Clauses in Commercial Agreements – New York's Approach, 18 Colum. J. Trans. L. 323,
364 n.115 (1979); AVC Nederland BV v. Atrium Investment Partnership, 740 F.2d 148 (applying
Dutch law to interpret Dutch choice-of-law clause).
P "553"
P "554"
In general, international arbitrators tend to err on the side of expansiveness in
interpreting the scope of choice-of-law provisions. While nice points concerning the
precise meaning of particular choice-of-law clauses can be diverting, most tribunals take
the practical view that, in selecting a particular law to govern their contract, the parties
intended that law to govern all of their dealings relating to the contract. Is this a valid
appropriate approach?
 (d) U.S. judicial decisions interpreting scope of choice-of-law clauses. Lower U.S. courts have
decided surprisingly few cases involving the interpretation of choice-of-law clauses, and
there is little commentary on the subject. See Consolidated Data Terminals v. Applied
Digital Data Systems, Inc., 708 F.2d 385 (9th Cir. 1983) (applying parties' chosen law to
contract, but not tort, issues); First Commodity Traders, Inc. v. Heinold Commodities, Inc.,
591 F.Supp. 812 (N.D. Ill. 1984) (holding that parties' chosen law could apply to both
contract and tort claims, and was so intended); Knieriemen v. Bache Halsey Stuart Shields,
427 N.Y.S.2d 10, 12-13 (App. Div.), appeal dismissed, 435 N.Y.S.2d 720 (1980) (suggesting that
New York law only permits choice-of-law as to contract, not tort, claims); Richie
Enterprises v. Honeywell Bull, Inc., 730 F.Supp. 1041 (D. Kan. 1990) (applying parties' chosen
law only to contract claims, because there was no “express and unambiguous” agreement
as to tort claims).
(e) Exclusivity of choice-of-law clause. Suppose that the parties' choice-of-law clause
provides, as commonly occurs, that disputes between them “shall be governed by the law
of State X.” Does this choice-of-law provision exclude claims based on some other state's
laws? That is, if the parties agree that Swiss law governs their relations, do they thereby
intend to forbid a U.S. tort, a German securities or a European Community competition
law claim from being asserted? Would the result be any different if the parties' choice-of-
law clause provided that all disputes “arising out of or in connection with the Agreement
shall be governed exclusively by the law of State X”? Is the analysis affected if some other
state recognizes claims that are not recognized by the law of State X?
For example, suppose that a U.S. and an English company enter into an agreement, to be
performed largely in the United States, providing that all disputes between them shall be
resolved under English law. Suppose that various U.S. state and federal laws recognize
claims that either do not exist under English law or that are different under English law
(e.g., federal and state statutory securities claims and state common law fraud claims).
What is the effect of the parties' choice-of-law clause selecting a non-U.S. law if one party
attempts to bring claims in an arbitration based on the application of mandatory U.S. law
to conduct occurring in the United States? For one judicial treatment of this issue in the
United States, see Roby v. Lloyds Corporation, 996 F.2d 1353 (2d Cir. 1993), excerpted above
at supra pp. 283-88.
The foregoing hypothetical raises, in the first instance, issues of interpretation: does the
choice-of-law clause extend to the conduct/claims/disputes in question? if so, was the
parties' choice-of-law meant to be exclusive (i.e., that only claims under the parties'
chosen law could be asserted)? These questions require interpretation of the particular
language of the parties' choice-of-law provision. But, assuming that no clear answer is
apparent from the provision's specific wording, are there any more general expectations
or interests, which might give rise to presumptions regarding the parties' intent? Would
parties generally want to exclude claims recognized under the law of the place where the
conduct occurred? Would they generally want a single law to apply to all their disputes?

(f) Choice-of-law clause generally limited to matters of “substance,” not “procedure.” Some
U.S. courts have held that a “contractual” choice-of-law provision is “deemed to import
only substantive law, ... not procedural law.”Woodling v. Garrett Corp., 813 F.2d 543, 551 (2d
Cir. 1987). See Sears, Roebuck & Co. v. Enco Assoc., Inc., 401 N.Y.S.2d 767, 772 (1977); Gambar
Enterprises, Inc. v. Kelly Services, Inc., 418 N.Y.S.2d 818, 822 (App. Div. 1979). For example,
questions of burden of proof, Woodling, 813 F.2d at 552; Lobel v. American Airlines, Inc., 192
F.2d 217, 219 (2d Cir. 1951), cert. denied, 342 U.S. 945 (1952), and pleading requirements,
Gambar Enterprises, 418 N.Y.S.2d at 822, are typically held not to fall within the scope of
choice-of-law clauses. Compare this to the analysis in ICC Award No. 5505.
(g) Hypotheticals relating to scope of choice-of-law clauses. Suppose that A and B enter into a
distribution agreement providing that B will distribute A's products in State Y. In due
course, A claims that B has failed to fulfill its obligations to act as a loyal and competent
distributor. A asserts claims against B based on: (a) breach of contract; (b) breach of
common law fiduciary and agency principles under the law of State Y, based upon the
parties' contractual relation, but imposed by common law tort and agency law; and (c)
violation of a statutory protection provided by the law of State Y against unfair
P "554" competition. B defends on the grounds that the law of State X governs the dispute. What
P "555" result under the following choice-of-law clauses?
“This agreement shall be construed according to the laws of State X.”
“This agreement shall be governed by the laws of State X.”
“This agreement shall be deemed to have been made and performed in State X and all
disputes arising under this agreement shall be governed by the laws of State X (excluding
the conflict of laws rules of State X).”
“All disputes arising out of or relating to this agreement (including its formation,
performance, breach and termination) shall be governed exclusively by the laws of State
X.”

8. Requirements that choice-of-law clause be express or conspicuous. As ICC Case No. 5505
suggests, parties sometimes contest the validity of choice-of-law agreements in arbitration on
the grounds that they fail to comply with local law requirements that such agreements be
express, specific, conspicuous, or otherwise specially identified. See generally Ehrenzweig,
 Adhesion Contracts in the Conflict of Laws, 53 Colum. L. Rev. 1072 (1953).
In ICC Case No. 5505, the tribunal concluded that Swiss law did not in fact contain any
requirement that choice-of-law clauses be explicit. Suppose, however, that Swiss law did
contain such a requirement. Would arbitrators in a Swiss arbitration have been obliged to
apply it? What if, under the law selected by the choice-of-law clause, no such requirement
existed? Compare Croff, The Applicable Law in an International Commercial Arbitration: Is it Still
a Conflicts of Law Problem?, 16 Int'l Law. 613, 614-15 (1982).
9. “Internationalized” contracts between private parties and foreign states. Private parties
frequently enter into commercial agreements with sovereign states. The most significant
categories include concession agreements (where a private firm develops and exploits natural
resources or an infrastructure project in a foreign state) and construction or engineering
contracts.
Private parties are often reluctant to submit to the laws of a host state where major
investments within that state are concerned. In those circumstances, the host state's laws can
become potential sources of unilateral legal and commercial advantage, rather than a neutral
legal framework. As a consequence, private parties very often require choice-of-law
agreements selecting the law of a neutral state, which the host state cannot unilaterally alter
to suit its commercial purposes. See Note, General Principles of Law in International Commercial
Arbitration, 101 Harv. L. Rev. 1816 (1988); Mustill, The New Lex Mercatoria, 4 Arb. Int'l 86 (1988).
Conversely, many nations (both developed and developing) usually prefer not to submit
themselves to foreign law. That is true both for obvious commercial reasons and for reasons of
ideology or nationalism.
As a result, contracts between private investors and foreign sovereigns often contain choice-of-
law provisions that select either “international law,” “general principles of law,” or some
combination of local national law and international/general law. See von Mehren & Kourides,
International Arbitrations Between States and Foreign Private Parties: The Libyan Nationalization
Cases, 75 Am. J. Int'l L. 476 (1981); Greenwood, State Contracts in International Law – The Libyan
Oil Arbitration, 53 Brit. Y.B. Int'l L. 27 (1982); Note, General Principles of Law in International
Commercial Arbitration, 101 Harv. L. Rev. 1816, 1821-22 (1988).
Arbitral tribunals have fairly regularly interpreted these sorts of choice-of-law agreements as
ldquo;internationalizing” the parties' relations. See Libyan American Oil Co. v. Libyan Arab
Republic, 20 Int'l Legal Materials 1 (1982); Kuwait v. American Independent Oil Co., 21 Int'l Legal
Materials 976 (1982); BP Exploration Co. v. Libyan Arab Republic, 53 Int'l L. Rep. 297 (1979); Texas
Overseas Petroleum Co. v. Libyan Arab Republic, 17 Int'l Legal Materials 1 (1978); Revere Cooper &
Brass, Inc. v. OPIC, 56 Int'l L. Rep. 258 (1980).
The consequences of this are important. In particular, international law prohibitions against
expropriatory and arbitrary state actions become applicable, notwithstanding changes in local
law.
10. New International Economic Order. During the 1970's, various developing states urged the
establishment of a “new international economic order.” Their efforts were focussed principally
on the General Assembly of the United Nations, which eventually adopted several resolutions
on the subject. See Declaration on the Establishment of a New International Economic Order,
UN Doc. A/Res/3201 (S-VI) (May 9, 1974); Programme of Action on the Establishment of a New
International Economic Order, UN Doc. A/Res/3202 (S-VI) (May 16, 1974); Charter of Economic
Rights and Duties of States, U.N. Doc. A/Res/3281 (XXIX) (Dec. 12, 1974). See Rothstein, Global
Bargaining – UNCTAD and the Quest for a New International Economic Order (1979); Brower &
Tepe, The Charter of Economic Rights and Duties of States: A Reflection or Rejection of
International Law?, 9 Int'l Law. 295 (1975).
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P "556"
In broad outline, these various resolutions vigorously proclaim the sovereignty of nation states
over natural resources and local economic activities, including the activities of multinational
companies. Most directly relevant here, the Charter of Economic Rights and Duties was
interpreted by some to confer broad discretion on nation states to expropriate property and
regulate economic activity within their borders and to resolve disputes relating to such issues
in local courts (notwithstanding contrary arbitration agreements). More recently, however,
enthusiasm for the New International Economic Order has waned, and its continuing role in
international legal issues is very doubtful.
11. Lex mercatoria. The tribunal in ICC Case No. 4237 considers (but rejects) the possibility of
applying lex mercatoria, or “merchants' law,” to resolve the parties' dispute.
(a) Definitions of lex mercatoria. Lex mercatoria is defined in a variety of ways. Most
ambitiously, it is a category of international law, separate from any national legal order,
derived from and applicable to international commercial dealings. Less sweeping
definitions characterize lex mercatoria as a body of substantive rules concerning
international trade, derived principally from arbitral awards and international
conventions. See B. Goldman, The Applicable Law: General Principles of Law – The Lex
Mercatoria, in Contemporary Problems in International Arbitration 113 (J. Lew ed. 1986);
Mustill, The New Lex Mercatoria, 4 Arb. Int'l 86 (1988); Lando, The Lex Mercatoria in
International Commercial Arbitration, 34 Int'l & Comp. L. Q. 747 (1985); Lowenfeld, Lex
Mercatoria: An Arbitrator's View, 6 Arb. Int'l 133 (1990).
 (b) Content of lex mercatoria. There is substantial debate about the content of any body of
“law” termed lex mercatoria. Consider the following:
The proponents of the lex mercatoria claim it to be the law of the international business
community: which must mean the law unanimously adopted by all countries engaged
upon international commerce. Such a claim would have been sustainable two centuries
ago. But the international business community is now immeasurably enlarged. What
principles of trade law, apart from those which are so general as to be useless, are
common to the legal systems of the members of such a community? How could the
arbitrators ... amass the necessary materials on the laws of, say, Brazil, China, the Soviet
Union, Australia, Nigeria, and Iraq?
Mustill, The New Lex Mercatoria, 4 Int'l Arb. 86, 89, 92-93 (1988). What response is there? In
a dispute between U.S. and European companies, who cares what Nigerian or Iraqi law
says?
The development of lex mercatoria has been fuelled by the desire of international
businesses to avoid unpredictable quirks of local law, as well as the uncertainties of
esoteric choice-of-law debates. “Application of ideosyncratic [sic] provisions of foreign
law, or of foreign law provisions addressed to purely domestic conditions, does not serve
the purposes of international business.” Smit, Substance and Procedure in International
Arbitration: The Development of a New Legal Order, 65 Tulane L. Rev. 1309, 1312 (1991).
There is substantial academic debate over the consequences of choice-of-law
agreements selecting lex mercatoria. Some have regarded lex mercatoria as a legal
regime with defined legal rules like those of any national law. See Lando, Lex Mercatoria
in International Commercial Arbitration, 34 Int'l & Comp. L. Q. 747, 750 (1985); Lowenfeld,
Lex Mercatoria: An Arbitrator's View, 6 Arb. Int'l 133, 145 (1990). Others have equated lex
mercatoria with ex aequo et bono or amiable compositeur – a non-legal regime where the
arbitrator has discretion to reach a just and fair result. J. Lew, Applicable Law in
International Commercial Arbitration 120 (1978). Arbitration ex aequo et bono and amiable
compositeur are discussed below. See infra pp. 557-58.

(c) Enforceability of arbitral awards based on lex mercatoria. Despite the academic attention
it has attracted, very few arbitral awards have been based on lex mercatoria. Indeed,
there is substantial controversy as to the enforceability of such awards in some
jurisdictions. In England, for example, the traditional view was apparently that awards
based on lex mercatoria were unenforceable. Mustill, Contemporary Problems in
International Commercial Arbitration: A Response, 17 Int'l Bus. Law. 161, 161-62 (1989). More
recently, however, judicial decisions have strongly suggested that most courts would
enforce foreign arbitral awards based on lex mercatoria. Deutsche Schachtbau-und
Tiefbohrgesellschaft mbH v. Ras Al Khaimah National Oil Co. [1987] 2 Lloyd's Rep. 246
(giving effect to award based on “internationally accepted principles of law governing
contractual relations”); Ministry of Defense v. Gould, Inc., 887 F.2d 1357 (9th Cir. 1989).
12. Amiable compositeur/ex aequo et bono. Some arbitration agreements provide for, or parties
subsequently consent to, arbitration “ex aequo et bono” or for an arbitrator to act as “amiable
P "556" compositeur.” The essential principle of each term is that arbitrators are not obliged ultimately
P "557" to decide the parties' dispute in accordance with a strict application of legal rules; rather,
the arbitrators are expected to decide in light of general notions of fairness, equity, and
justice. (Definition of the two terms vary, with some authorities concluding that amiable
compositeurs are obliged first to reach a “legal” result, and then adjust it (if necessary) in light
of equitable considerations). Rubino-Sammartano, Amicable Compositeur (Joint Mandate to
Settle) and Ex Bono et Aequo (Discretional Authority to Mitigate Strict Law), 9 J. Int. Arb. 5 (1992);
Kerr, Equity Arbitration in England, 2 Am. Rev. Int'l Arb. 377 (1993).
Most institutional rules authorize arbitrators to act as amiable compositeurs, or to decide ex
aequo et bono, but only if the parties specifically agree to such provisions. See UNCITRAL Rules
Article 33(2) (“The arbitral tribunal shall decide as ‘amiable compositeur’ or ‘ex aequo et bono’
only if the parties have expressly authorized the arbitral tribunal to do so and if the law
applicable to the arbitral procedure permits such arbitration.”); 1998 ICC Rules Article 17(3)
(“The Arbitral Tribunal shall assume the powers of an amiable compositeur or decide ex aequo
et bono only if the parties have agreed to give it such powers.”).
Amiable composition was a concept developed, and is a type of arbitration still most widely
practiced, in France and other civil law states. The enforceability of agreements calling for an
arbitrator to act as amiable compositeur, or ex aequo et bono, in common law jurisdictions is
less established; the same doubts exist as to the enforcement of awards rendered on that basis
as for awards based on lex mercatoria. English authorities have long been particularly skeptical
of such practices. See Orion Compania Espanola de Seguros v. Belfort Maatschappij Voor
Algemene Verzekeringen [1962] 2 Lloyd's Rep. 257, 264 (“it is the policy of law in this country that
... arbitrators must in general apply a fixed and recognizable system of law ... and that they
cannot be allowed to apply some different criterion such as the view of the individual
arbitrator or umpire on abstract justice or equitable principles.”) Compare Eagle Star Insurance
Co. Ltd v. Yuval Insurance Co. Ltd [1978] Lloyd's L. Rep. 357 (upholding agreement for amiable
compositeur). See A. Redfern & M. Hunter, International Commercial Arbitration 35-38 (2d ed.
1991).
As a practical matter, parties considering resort to an amiable compositeur, or arbitration ex
aequo et bono, must ascertain whether such agreements (and resulting awards) will be
enforceable under the laws of states connected with the dispute. Assuming that they are,
 parties should also consider whether the promise of “fairness” will in fact produce a
satisfactory solution. Some authorities perceive significant benefits from such resolution in
long-term agreements. Others are more skeptical as to the ultimate efficiency and fairness of a
system that may encourage compromise verdicts, or permit entirely arbitrary awards.
13. Resemblance between commercial arbitration in United States and amiable composition or
arbitration ex aequo et bono. Historically, arbitration in the United States bore many
resemblances to arbitration ex aequo et bono or amiable compositeur. Arbitrators were not
required to give reasoned awards, nor to apply statutory protections, and their decisions were
not reviewable for errors of law (or fact). See the excerpt above of Joseph Story's description of
arbitration, see supra pp. 164-65, and G. Wilner, Domke on Commercial Arbitration §§1.01-.03
(1993 Supp.).
In some contemporary commercial contexts, domestic U.S. arbitration retains many of these
features. See J.B. Harris Inc. v. Razei Bar Indus Ltd, 181 F.3d 82 (2d Cir. 1999) (rejecting public
policy objection to clause providing that “the arbitrator will not be bound by the substantive
law and laws of procedure”: “this particular provision ...” is completely unremarkable in the
arbitration context.” Arbitrators are presumptively free from “principles of substantive law or
rules of evidence”).
14. When have parties agreed to amiable compositeur/ex aequo et bono? A number of lower
courts have concluded that the parties' inclusion of a choice-of-law provision in their contract
is inconsistent with an intention to grant the arbitrator powers as an amiable compositeur or ex
aequo et bono. Wilko v. Swan, 201 F.2d 439, 444 (2d Cir. 1953), rev'd on other grounds, 346 U.S. 427
(1953); Fudickar v. Guardian Mutual Life Ins. Co., 62 N.Y. 392, 401 (1875). See also Award in ICC Case
No. 4237, excerpted supra at pp. 533-35.
Suppose that the parties' agreement contains no choice-of-law provision. Does that indicate
that they are willing to have their dispute decided ex aequo et bono? Note that some of the
institutional rules discussed above require an express agreement on ex aequo et bono
arbitration. Why is this wise?
P "557"
P "558"
4. Public Policy Limitations on Parties' Choice of Law in International Arbitration
Issues of “public policy” or “mandatory law” play several significant roles in international
commercial arbitration. As discussed elsewhere, the New York, Inter-American, and other
international arbitration conventions permit the non-recognition of arbitral awards when they
conflict with the “public policy” of the enforcing state. (72) Closely related are provisions of
these conventions permitting non-enforcement of arbitration agreements or awards that
concern matters not capable of settlement by arbitration. (73) In both of these contexts, issues
of public policy are considered by national courts in deciding whether to recognize and
enforce an arbitration agreement or award. (74)
Issues of public policy can also arise within the arbitral proceedings themselves. This occurs
when, under applicable conflict of laws rules, the arbitrators must consider applying a
mandatory rule of national law that supplements or overrides the parties' agreement.
Many national conflict of laws systems recognize that mandatory rules of public policy or
statutory law will in some circumstances override a private choice-of-law agreement or
otherwise applicable national law. (75) The Restatement (Second) Conflict of Laws §187 (1971) is
illustrative:
(2) The law of the state chosen by the parties to govern their contractual rights and duties will
be applied, even if the particular issue is one which the parties could not have resolved by an
explicit provision in their agreement directed to that issue, unless either
(a) the chosen state has no substantial relationship to the parties or the transaction and
there is no other reasonable basis for the parties' choice, or
(b) application of the law of the chosen state would be contrary to a fundamental policy of a
state which has a materially greater interest than the chosen state in the determination
of the particular issue and which, under the [general choice-of-law] rule of §188, would be
the state of the applicable law in the absence of an effective choice-of-law by the
parties.
P "558"
P "559"
Similar rules prevail in most U.S. jurisdictions. (76) The same is true under the Rome
Convention (77) and in most European jurisdictions. (78) It is well-settled in most developed
jurisdictions that a private choice-of-law agreement will be overridden only if it contravenes a
“fundamental policy” (79) or “offend[s] our sense of justice or menace[s] the public welfare.”
(80) Public policies that have been found capable of invalidating choice-of-law agreements
include discrimination prohibitions, (81) usury restrictions, (82) fair competition protections,
(83) constitutional guarantees, (84) and protections for economically inferior parties. (85)
In most cases, it is the forum's public policy that will apply to invalidate a private choice-of-
law agreement. As discussed below, however, there are also cases where the public policy of
another jurisdiction will be given effect by the forum court. (86)
Public policy can play both a defensive and an offensive role in international arbitration. First,
mandatory national law or public policy can render part or all of the parties' substantive
agreement unenforceable. For example, contractual restrictions can be void under
competition laws (87) or contractual waivers can be unenforceable under statutory or common
 law provisions. (88) Similarly, public policy or mandatory national law can render particular
claims or disputes “non-arbitrable,” effectively invalidating all or part of the parties'
arbitration agreement. (89) Second, “public policy” is also important in international
arbitration because it can provide the basis for an affirmative claim. Examples include
antitrust, securities, and similar “public law” claims based on statutory protections. (90)
Issues of public policy have arisen with increasing frequency in international arbitration in
P "559" recent years. That is in part due to expanding notions of arbitrability, (91) which have resulted
P "560" in more frequent consideration of tort, statutory, and other public policy defenses and
claims by international arbitral tribunals. It is also due to the increasing tendency of national
legislatures to enact broad remedial statutes capable of private enforcement.
Public policy can be a difficult subject even in domestic litigation before a national court.
Determining the existence and contours of a public policy capable of overriding private
agreements is often a controversial and difficult undertaking. As is commonly observed, public
policy is an unruly horse that carries courts to unforeseen destinations. (92)
Resolving public policy claims in an international arbitration involves even greater difficulties
than in domestic litigation. First, the authority of an arbitrator is derived primarily from the
parties' consensual agreement; when a tribunal applies public policy or mandatory statutory
law, legitimate questions arise as to the tribunal's jurisdiction and authority to deviate from
the parties' agreement. That is particularly true when the parties' contract is expressly made
subject to the law of one jurisdiction, and an arbitrator applies mandatory rules from a
different jurisdiction.
Second, international arbitrators must decide what nation's public policies (including nations
other than the arbitral situs) they should apply. This gives rise to further questions as to the
tribunal's power to give effect to “foreign” public policy. (93)
Finally, in international disputes, there is often a question whether domestic public policies or
mandatory laws were intended by a national legislature to apply to a non-domestic issue or
set of facts. In effect, a “choice of public policy” issue is presented.
The following excerpts from several international arbitration awards illustrate the foregoing
questions. They also examine the prevailing approach of contemporary arbitrators to
affirmative claims based on public policy.
FINAL AWARD IN ICC CASE NO. 6379 OF 1990
XVII Y.B. Comm. Arb. 212 (1992) (©)
[THE ARBITRATOR IS NOT NAMED.] [The arbitration involved an Italian manufacturer and a
Belgian distributor who had entered into a distribution agreement that provided for ICC
arbitration and that selected Italian law as the governing law. The arbitral situs was Cologne,
P "560" Germany. The parties' dispute arose from the manufacturers' termination of the distributor,
P "561" who then commenced arbitration asserting, among other things, that it had not received the
notice required by Belgian law.] ...
In general, arbitrators are more cautious than national courts in relying on public policy
notions to override a bargained-for choice-of-law agreement. That is in part because
arbitrators derive their authority from private contractual relations and in part because
tribunals are aware that parties select arbitration to ensure an internationally neutral,
consensual means to resolve their disputes. Over-anxious application of national public
policies would be inconsistent with this.
The common intention of the parties, expressed in Clause 27 of the Contract, was to choose
Italian law as the law applicable to the substance of any dispute; it cannot be disregarded in
the present case. Defendant [the Belgian distributor] maintains that claimant, which was in a
stronger bargaining position, forced it to accept these contractual provisions. However,
defendant does not show in which way these provisions bring about an imbalance.... At the
moment of entering into the Contract, the parties were free to decide as they did.
We hold that the Contract is governed by Italian law. Hence, the validity of the arbitral clause
must be ascertained according to Italian law. According to the Italian Supreme Court, the
provisions on jurisdiction of the New York Convention of 1958 prevail over national law in the
Italian legal system. Hence, the validity of a clause for foreign arbitration must be ascertained
according to Article II of the New York Convention [and under Article II the clause is
enforceable]....
Defendant recognizes in principle that the parties have chosen Italian law to apply to their
contract. However, it invokes [Articles 4 and 6 of the Belgian Law of 27 July 1961, as modified by
the Belgian Law of 13 April 1971], contending that these provisions are “provisions of mandatory
application” and relying on the mandatory nature of provisions concerning the modalities and
consequences of the termination of a distributorship contract for reasons other than gross
negligence. [Article 4 provides that an agent “who has suffered damages as a result of the
termination of a distributorship contract having effect in the whole or part of the Belgian
territory, may always initiate court proceedings in Belgium [under Belgian substantive law,]”
while Article 6 provides that these protections “apply notwithstanding any agreement to the
contrary.”]
Defendant mentions in this context Article 7 of the Rome Convention of 19 June 1980 on the Law
Applicable to Contractual Obligations. Article 7 provides that
When applying under this Convention the law of a country, effect may be given to the
mandatory rules of the law of another country with which the situation has a close connection,
 if and in so far as, under the law of the latter country, those rules must be applied whatever the
law applicable to the contract. In considering whether to give effect to these mandatory rules,
regard shall be had to their nature and purpose and to the consequences of their application
or non-application.
P "561"
P "562"
Defendant alleges that, under Article 7 above-mentioned, Clause 29 of the Contract is null and
void, inoperative or incapable of being performed, in the sense of Article II(3) of the New York
Convention.... The Rome Convention of 19 June 1980 has not entered into force. Arbitral clauses
are expressly excluded from its scope of application (Article I(2)(d)). Hence, the Rome
Convention cannot be applied....
The Geneva Convention of 1961, which has become part of the Italian legal system and which
prevails over internal provisions, allows the parties to agree on the law applicable to their
contract (Article VII). It provides that the validity of the arbitral clause must be ascertained
according to the law chosen by the parties (Article 6(2)), i.e., in the present case, according to
Italian law. The Geneva Convention makes no exception for foreign provisions of mandatory
application.
According to Italian law, the Belgian law of 1961/1971 [concerning distribution agreements]
does not prevail over Italian law and, therefore, does not prevail either on the contractual
provisions freely agreed upon by the parties.... Further considerations confirm this outcome. In
international arbitration, an Arbitral Tribunal is not an institution under the legal system of a
State.... [The arbitrator also questioned whether the Belgian law was in fact meant to apply in
cases of arbitrations involving agreements to apply foreign law.]
[After concluding that the arbitration agreement was enforceable, the Tribunal proceeded to
apply Italian law, again rejecting the argument that mandatory provisions of Belgian law
should apply.] As the Rome Convention is not yet in force and the theory according to which a
foreign mandatory law is to be respected is not recognized in Italian law as applicable to the
present case which concerns an exclusive distributorship, there is no mandatory provision or
public policy provision in Italian law that imposes a longer notification period between the
producer and the distributor. On the contrary, the contractually agreed upon period should be
respected ... Consequently, the provisions of Belgian law providing for a longer notification
period for the distributor shall not be applied by the arbitrator.
PRELIMINARY AWARD IN ICC CASE NO. 4132 OF SEPTEMBER 22, 1983
X Y.B. Comm. Arb. 49 (1985) (©)
ARBITRATOR, B.H. TER KUILE.... [The dispute arose out of a Supply and Purchase Agreement
between the Claimant, an Italian supplier, and the Defendant, a South Korean buyer. The
agreement provided for ICC arbitration, and did not contain a governing law clause. The
Claimant alleged a variety of breaches of contract by the Defendant, who responded by
invoking statutory protections of Korean law, including Korean antitrust, unfair competition,
P "562" and price control statutes. The Defendant also apparently relied upon the European
P "563" Communities' competition law protections of the Treaty of Rome. The Tribunal considered
the applicability of these statutory provisions in a preliminary award.]
The Agreement has been executed and performed partly in Italy and partly in Korea. At the
time the Agreement was made the parties did not express themselves as to the law that would
govern their contractual relationship. Lacking such choice-of-law by the parties and all further
direct points of contact which could be decisive for the determination of the governing law, the
Centre of Gravity test, as proposed by the defendant, could indeed be relevant in order to
decide this question....
Claimant has granted to defendant the right to use their technical know-how relating to the
manufacture of [the product], on an exclusive basis in the Republic of Korea. Defendant
purchased from Claimant the raw materials required for the production of [the product] in
Korea. Taking these special elements of the Agreement into account this Tribunal is satisfied
that the Agreement is for a larger part to be performed in Korea and that for that reason
Korean private law should prevail as the law governing the Agreement....
[W]hatever national private law may govern the Agreement, the latter is likely to affect the
domain of Korean (public) law, so that this Tribunal must determine whether Korean law as
invoked by the Defendant is applicable to the Agreement, even if it does not govern it.
However, the national public law as invoked by the Defendant in this case (antitrust law, price
law, fair trade law) is by nature of public order. Usually, the very application of these public
laws is based upon considerations of national public policy. It is for this reason that this
Arbitral Tribunal is not free directly to apply the Korean public law as invoked by the
Defendant when such considerations of public policy would be involved to an appreciable
extent.
On the other hand, the tribunal is empowered to apply national public law insofar as the
Tribunal is satisfied that in the circumstances of the case pursuant to published jurisprudence
of the competent national courts and/or the published and stated policy of the competent
national authorities the acts under consideration of the Arbitral Tribunal are deemed null and
void and unenforceable as prohibited by any relevant national public law. As a consequence of
this, the party which in arbitral proceedings appeals to any national public law must prove
that this law, indeed, is applicable in the case, and to what extent.... Since the Defendant did
not provide sufficient evidence as to the [elements of a Korean statutory claim] the Tribunal is
of the opinion that the Defendant did not sufficiently prove his case....
 As set out hereabove ..., with respect to national public laws also the rules on competition
(Article 85 et seq.) of the Treaty [of Rome] are of public order and part of the public policy of
the Community. As far as the possible application of those rules on competition of the Treaty in
this arbitral case is concerned, the Tribunal refers, mutatis mutandis, to its considerations
hereabove.... Pursuant to Article 85(2) of the Treaty ... all agreements between undertakings,
decisions by associations of undertakings, and concerted practices in violation of Article 85 of
the Treaty are prohibited and shall be automatically void. If this Tribunal will find that the
P "563" Agreement in whole or in part contravenes Article 85 of the Treaty, the consequence thereof is
P "564" likely to be that the relevant clauses, if not the Agreement in toto, are deemed void, and
unenforceable. With reference to its considerations hereabove, the Tribunal must, therefore, on
its own initiative investigate whether the Agreement comes under the prohibition of Article
85(1) of the Treaty.
According to pertinent decisions of the [European Court of Justice] pertaining of Article 85 of
the Treaty the prohibition, as contained in the first paragraph of this Article, is applicable only
in so far as the relevant agreements, decisions by associations of undertakings, and concerted
practices have as their object or effect the prevention, restriction, or distortion of competition
within the common market of the Community and may affect trade between Member States, to
an appreciable extent. Since the Agreement is a contract between an Italian and a Korean
undertaking and was for larger part performed in Korea, this Tribunal is not satisfied that the
Agreement may affect trade between Member States and that the Agreement, particularly its
clause 2, has as its object or effect a prevention, restriction or distortion of competition within
the common market of the Community, to any appreciable extent. Therefore, the Tribunal ...
does not accept the applicability of Article 85 of the Treaty to the Agreement.
FINAL AWARD IN ICC CASE NO. 5946 OF 1990
XVI Y.B. Comm. Arb. 97 (1991) (©)
[THE ARBITRATOR IS NOT NAMED.] [The dispute involved a French company, which bottled and
supplied wine, and a U.S. company, which distributed wine. The two parties entered into an
exclusive agency agreement appointing the U.S. company as distributor in the United States
for certain brands of wine supplied by the French company. The Agreement contained a
choice-of-law clause that provided: “This Agreement is made in New York, New York, and shall
be construed in accordance with the laws of New York.”]
[The U.S. company] claims exemplary damages of U.S.$ 100,000 for claimant's alleged
unilateral and unprovoked termination of the Agreement, its commencement of litigation
instead of arbitration, and its refusal to resolve this dispute. To the extent that respondent has
sustained and proven legal expenses in connection with claimant's unjustified bringing suit
before the Federal Court in New York, respondent is already compensated [by a separate
award of compensatory damages]. Damages that go beyond compensatory damages to
constitute a punishment of the wrongdoer (punitive or exemplary damages) are considered
contrary to Swiss public policy, which must be respected by an arbitral tribunal sitting in
Switzerland even if the arbitral tribunal must decide a dispute according to a law that may
allow punitive or exemplary damages as such (see Article 135(2) Swiss Private International Law
P "564" Statute, which refuses to allow enforcement of a judgment awarding damages that cannot be
P "565" awarded in Switzerland....) In addition, it must also be emphasized that even if an award of
punitive damages were not found inconsistent with Swiss public policy, respondent has not
proven that under New York law a claim for such punitive or exemplary damages would lie ...
Notes on Application of Public Policies in International Arbitration
1. Increasing significance of public policy in international arbitration. As the foregoing awards
illustrate, it takes a pedestrian lawyer to fail to find some basis for invoking “public policy” or
statutory claims in most moderately complex commercial disputes. Contemporary legislative
protections in many countries are sufficiently open-textured that competent lawyers can often
legitimately (and effectively) introduce them into a contractual dispute. See ICC, Competition
and Arbitration Law 39-67 (1993) (reporting on public policy rules in different nations); Park,
Private Adjudicators and the Public Interest: The Expanding Scope of International Arbitration, 12
Brook. J. Int'l L. 629 (1986). The broad terms of the European Community competition laws and
the federal antitrust and securities laws of the United States are good examples of this. See
supra pp. 257-82.
2. Source of arbitrators' authority to apply public policy. Arbitrators derive their authority, at
least in large part, from the parties' agreement. See supra pp. 55-56, 155-67. What is it that
permits an arbitrator to resolve a non-contractual defense or claim based on a “mandatory”
public policy or statutory duty?
 (a) Traditional view that arbitrators could not consider claims or defenses based on public
policy or statutory protections. As discussed in greater detail above, see supra pp. 255-56,
during the early part of this century, many national courts held that arbitrators were
forbidden from considering non-contractual claims based on public policy. The following
passage from a U.S. decision is illustrative:
As the proctor of the bargain, the arbitrator's task is to effectuate the intent of the
parties.... The arbitrator ... has no general authority to invoke public laws that conflict
with the bargain between the parties:
“An arbitrator is confined to interpretation and application of the ... agreement; he does
not sit to dispense his own brand of ... justice. He may of course look for guidance from
many sources, yet his award is legitimate only so long as it draws its essence from the ...
agreement. When the arbitrator's words manifest an infidelity to this obligation, courts
have no choice but to refuse enforcement of the award.” United Steelworkers of America v.
Enterprise Wheel & Car Corp., 363 U.S. 593, 597 (1960).
If an arbitral decision is based “solely upon the arbitrator's view of the requirements of
enacted legislation,” rather than on an interpretation of the collective-bargaining
agreement, the arbitrator has “exceeded the scope of the submission,” and the award will
not be enforced. Thus, the arbitrator has authority to resolve only questions of
contractual rights, and this authority remains regardless of whether certain contractual
rights are similar to, or duplicative of, the substantive rights secured by [a federal
statute]. Alexander v. Gardner-Denver Co., 415 U.S. 36, 56-57 (1974).
Is this a persuasive analysis? Why does the Court believe that an arbitration agreement
encompasses only the parties' contractual rights, and not their other legal rights
(including their statutory rights)?

(b) Contemporary view that arbitrators can consider claims and defenses based on public
policy or statutory protections. During the last two decades, national courts in most
developed jurisdictions have abandoned traditional restrictions on the power of
arbitrators to consider public policy and statutory claims. For example, in a series of
important decisions, described in detail above, see supra pp. 257-82, the U.S. Supreme
Court held that arbitrators could properly consider federal antitrust, federal securities,
RICO, and other statutory claims. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth
Inc., 473 U.S. 614 (1985); Shearson/American Express, Inc. v. McMahon, 482 U.S. 220 (1987);
P "565" Rodriguez de Quijas v. Shearson/American Express, Inc., 490 U.S. 477 (1989). Moreover,
P "566" these decisions require courts to permit arbitrators to initially consider public policy
claims. Id.; National R.R. Passenger Corp. v. Consolidated Rail Corp., 892 F.2d 1066 (D.C. Cir.
1990).
Arbitral tribunals sitting in the United States routinely consider claims and defenses
based on statutory protections and public policies. Substantial awards have been made
based on statutory rights. E.g., In the Matter of the Arbitration Between Trade & Transport,
Inc. v. Valero Refining Co., 5 Int'l Arb. Rep. 7 (Sept. 1990 Soc'y of Maritime Arbitrators)
(arbitral award in excess of $500,000 for violations of RICO).
The trend in other developed jurisdictions has also been in the direction of increasingly
broad views of the arbitrability of statutory claims and defenses. See supra p. 257-82. As
discussed above, the European Court of Justice has acknowledged that issues of European
community competition law may be subject to arbitration. See supra pp. 274-75; Eco Swiss
China Time Ltd v. Benetton Int'l, 1999 E.C.J. C/126/1997. Similarly, in cases involving
conduct in the European Union, Swiss courts have held that arbitrators can (and must)
consider defenses based on the competition laws protections of Article 85 of the Treaty of
Rome. BGE/ATF 118 II (1992) 193, 198 (“The arbitrators must determine whether the
contracts sued upon in arbitration proceedings are in accordance with EC law ...”). See
also P. Karrer, Kommentar zum Schwizerischen Privatrecht, Internationales Privatrecht, at
Article 187 PILA, note 131 (1996) (noting that Swiss courts ordinarily interpret choice-of-law
clause as incorporating public policy, and that BGE/ATF 118 II (1992) 193 involved choice-
of-law clause selecting Belgian law (and, hence, EC competition law)). French courts have
also held that competition law claims are arbitrable, at least in international disputes.
Ste Labinal v. Ste Mars et Ste Westland Aerospace (May 19, 1983 Paris Court of Appeal).
Why should the foregoing conclusions be accepted? Why should private arbitrators be
empowered to decide important issues of public policy?
 (c) Continuing non-arbitrability of some claims or defenses based on public policy or statutory
protections. The fact that some statutory or public policy claims are arbitrable (under a
particular national law) does not mean that all such claims are arbitrable. Rather, as
discussed in detail below, virtually all nations (including the United States) treat certain
categories of claims or disputes as “non-arbitrable” – inherently incapable of being
arbitrated. See supra pp. 243-57. Articles II(3) and V(2)(b) of the New York Convention may
permit signatory states to refuse recognition of agreements and awards in these
circumstances. See Id.
Disputes about “non-arbitrability” can arise in arbitration: the arbitrator may be
presented with arguments that he may not properly resolve certain disputes because,
under applicable law, they are either not properly decided by arbitrators or are reserved
for judicial decision. Consider, for example, ICC Award No. 5946, concluding that under
Swiss law an arbitrator in Switzerland could not award punitive damages available under
New York law (which applied to the merits of the parties' dispute). Consider also ICC Case
No. 4132, where the arbitrator decided whether to apply statutory protections of both
Korea and the European Economic Community. Although finding those protections
inapplicable, for various reasons, the arbitrator also suggested that it would be
inappropriate for him to entertain those claims – that is, that they were non-arbitrable.
Determining whether a particular claim is non-arbitrable raises complex choice-of-law
questions, which are considered above. See supra pp. 273-95. Even after an arbitral
tribunal selects an applicable law, deciding whether a particular claim is non-arbitrable
remains challenging. For some of the considerations, see supra pp. 257-95.

3. Rationales for arbitrators' consideration of public policy and statutory claims or defenses.
What justifies the trend in most developed jurisdictions favoring the arbitrability of statutory
public and policy claims? What grants arbitrators authority in international arbitration to
consider public policy claims?
(a) Parties' arbitration agreement as source of authority to consider public policy. The most
important source of an arbitrator's authority to consider public law claims is the parties'
private arbitration agreement. An arbitration agreement typically grants the arbitrator
the power to resolve “all disputes” relating to the parties' contract; as a matter of intent
and interpretation, that formulation usually encompasses disputes based on common
law tort claims or statutory claims, provided that they have a sufficient factual nexus to
the parties' contract. See supra pp. 319-24, for authorities holding that such non-
contractual claims fall within the scope of an arbitration clause; Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth Inc., 473 U.S. 614, 636-37 (1985), excerpted supra pp. 303-07. Only
if one implies an exclusion – “all disputes except disputes based on tort or non-
P "566" contractual claims” – would most arbitration agreements fail as a matter of
P "567" interpretation to grant the arbitrators the power to resolve such claims.
Many commentators have concluded that, if the parties' arbitration agreement
encompasses tort, statutory, or public law claims, that agreement will ordinarily be a
sufficient justification for the arbitrators' power to resolve such claims. Under this view,
the parties will have granted the arbitrator the authority to resolve all disputes, including
public law disputes, and unless some legislative instrument forbids that grant, it should
be enforced. See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 636-
37 & n.19 (1985); Jarvin, Competition and Arbitration Law 148-49 (1993). As the Mitsubishi
Court reasoned:
[T]he international arbitral tribunal owes no prior allegiance to the legal norms of
particular states [and] has no direct obligation to indicate their statutory dictates. The
tribunal, however, is bound to effectuate the intentions of the parties. Where the parties
have agreed that the arbitral body is to decide a defined set of claims which includes, as
in these cases, those arising from the application of American antitrust law, the tribunal
therefore should be bound to decide that dispute in accord with the national law giving
rise to the claim. 473 U.S. at 636-37.
Is this analysis persuasive?
Conversely, if the parties' arbitration agreement does not encompass particular
statutory, public policy, or other claims, then the arbitrators cannot consider these
claims. As discussed above, it is a fundamental rule in the United States and elsewhere
that international commercial arbitration is consensual: the parties can only be required
to arbitrate that which they have agreed to arbitrate. See supra pp. 55-56, 297-99.
 (b) Consequences of parties' choice-of-law agreement. As we have seen, however, parties often
include choice-of-law provisions in their arbitration agreements; where such provisions
select only the law of one nation, what justifies the arbitrators' application of the public
policy of another nation? Whatever the justification, most authorities agree that
arbitrators are permitted (and perhaps required) to apply mandatory national laws and
public policies notwithstanding choice-of-law clauses selecting a different nation's laws.
See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614, 637 n.19 (1985)
(arbitral tribunal must apply U.S. antitrust laws, notwithstanding Swiss choice of law
clause); Mayer, Mandatory Rules of Law in International Arbitration, 2 Arb. Int'l 274 (1986);
Maniruzzaman, International Arbitrator and Mandatory Public Law Rules in the Context of
State Contracts: An Overview, 7 J. Int'l Arb. 53, 55-58 (1990); Lowenfeld, The Mitsubishi Case:
Another View, 2 Arb. Int'l 178, 186-89 (1986); Lando, The Law Applicable to the Merits of the
Dispute, in Essays on International Commercial Arbitration 128 (1989).
Consider the two following alternatives proposed as Draft Recommendations on the Law
Applicable to International Contracts of the Working Group of the ICC's Commission on
Law and Commercial Practices in 1980:
Alternative 1:
Even when the arbitrator does not apply the law of a certain country as the law governing
the contract he may nevertheless give effect to mandatory rules of the law of that country
if the contract or the parties have a close contact to that country and if and in so far as
under its law those rules must be applied whatever may be the law applicable to the
contract. On considering whether to give effect to these mandatory rules, regard shall be
had to their nature and purpose and to the consequences of their application or non-
application.
Alternative 2:
Even when the arbitrator does not apply the law of a certain country as the law
applicable to the contract he may nevertheless give effect to the mandatory rules of the
law of that country if the contract or parties have a close contact to the country in
question especially when the arbitral award is likely to be enforced there, and if and in so
far as under the law of that country those rules must be applied whatever be the law
applicable to the contract.
As we have seen, if the parties' arbitration clause excludes a public law claim, the
arbitrators cannot consider it. Why, then, can the arbitrators consider public law claims
excluded by the parties' choice-of-law clause? Is it because the parties are presumed to
P "567" have had an overriding intention to arbitrate all the disputes within the scope of the
P "568" arbitration clause, even if some of those disputes will be governed by a law that
overrides parts of the parties' agreement? Would an arbitrator have authority to consider
an antitrust claim if the parties' arbitration clause provided: “Under no circumstances,
shall the arbitral tribunal consider or make any award based upon the antitrust laws of
the United States.”

(c) Arbitrators' contractual obligation to render an enforceable award. Consider the argument
referred to by the arbitrator in ICC Award No. 4132, supra pp. 562-64, that his overriding
duty was to render an enforceable award, and impliedly that this required consideration
of public policy defenses and claims:
Although arbitrators are neither guardians of the public order nor invested by the State
with the mission of applying its mandatory rules, they ought nevertheless have an
incentive to do so out of a sense of duty to the survival of international arbitration as an
institution.... [A]rbitrators should pay heed to the future of their award. They should
consider that if they do not apply a mandatory rule of law, the award will in all likelihood
be refused enforcement in the country which promulgated that rule. It often turns out
that that country is the one, or at least one of several, exercising a de facto control over
the situation; it is not reasonable to disregard its attitude. Mayer, Mandatory Rules of Law
in International Arbitration, 2 Arb. Int'l 274, 284-86 (1986).
Is this persuasive? First, should the parties' rights turn upon an arbitrator's “sense of duty
to the survival of international arbitration as an institution”? Second, how persuasive is
the argument that public policies and mandatory laws must be considered in order to
ensure an enforceable award? Article 35 of the 1998 ICC Arbitration Rules requires the
arbitrator to “make every effort” to render an enforceable award. If the parties have not
agreed to institutional rules containing such a provision, is there nonetheless an implied
expectation or duty to do so? Should this general duty override a specific choice-of-law
clause? Should the arbitrator's primary duty be to render an award in accordance with
the parties' arbitration agreement, even if it proves unenforceable in some places, rather
than a universally enforceable award that disregards the parties' agreement? What if the
parties' arbitration agreement expressly denies the arbitral tribunal authority to make
an award based upon a particular statute (or statutes)?

4. Possible obligation of arbitrators to consider public policy and statutory claims and defenses.
Some commentators have concluded that, when arbitrable public law claims fall within the
parties' arbitration agreement, arbitrators not only can but must resolve such claims. Rivkin,
The U.S. Situation, in ICC, Competition and Arbitration Law 140 (1993) (“The tribunal must
consider all issues falling within the scope of the arbitration clause in the agreement including
an antitrust counterclaim if it falls within the scope of the arbitration clause.”). Is this
 persuasive? Why?
5. Choice-of-law governing public policy and statutory claims and defenses. An international
transaction generally has contacts with several different nations; the public policies and
mandatory laws of any or all of these states are potentially applicable to the transaction. How
does an arbitrator determine which nation's (or nations') policies and law he should apply?
(a) Limitations imposed by applicable conflict of laws rules on parties' choice-of-law. As
discussed above, the parties' choice-of-law agreement is enforceable only pursuant to
some set of conflict of laws rules. See supra pp. 551-52. Under most conflict of laws
systems, private choice-of-law agreements are unenforceable when they result in
application of a rule that violates the forum's public policies. See supra pp. 558-60;
Restatement (Second) Conflict of Laws §187 (1971); G. Born, International Civil Litigation in
United States Courts 655-56, 661-63 (3d ed. 1996).
Consider ICC Award No. 5946, where the arbitrator held that the mandatory laws of the
arbitral situs forbid an award of punitive damages, even assuming that those damages
would be awardable under the substantive law agreed to by the parties. Is it appropriate
to apply the substantive public policy of the arbitral situs to override the parties' choice
of substantive law? Recall the discussion above of the traditional rule that the conflict of
laws system of the arbitral situs is applicable in the arbitration. If that is the case, based
upon the express or implied choice of the parties, then application of the forum's public
policies is arguably justified as a form of contract interpretation. By agreeing upon State
A as the arbitral situs, the parties may be said to have impliedly agreed upon the
application of its conflicts rules and public policies, even where inconsistent with the
parties' choice-of-law clause.
Note, however, that the arbitral situs may have nothing to do with the parties' underlying
dispute. For example, an arbitration involving contractual dealings in Thailand, Florida or
P "568" the Middle East may be conducted in England. In such cases, the substantive public
P "569" policies of the arbitral situs are irrelevant to the parties' dispute – while those of other
nations (where the dispute occurred) may be highly relevant. Moreover, by their own
terms, the public policies and mandatory laws of the arbitral situs may not be applicable
to the parties' dispute. Consider also the case where an arbitral institution or tribunal
(rather than the parties) designates the arbitral situs. When such a designation results in
a mandatory prohibition on the parties' chosen law is the designation consistent with the
parties' agreement?
What theories other than the parties' implied agreement might justify application of the
arbitral situs's mandatory rules?

(b) “Foreign” limitations incorporated by applicable conflict of laws rules on parties' choice-of-
law. Developed conflict of laws systems provide, in certain circumstances, for a forum
court's application of “foreign” public policies to supplement or override the parties'
agreement. For example, a U.S. court might apply European Community competition laws
to a dispute involving conduct in Europe, notwithstanding the parties' agreement that
New York law should govern their dispute. Section 187 of the Restatement (Second)
Conflict of Laws (1971) is again instructive. It provides that the parties' chosen law will
ordinarily be applied, unless:
(b) application of the law of the chosen state would be contrary to a fundamental policy
of a state which has a materially greater interest than the chosen state in the
determination of the particular issue and which, under the [general choice-of-law] rule of
§188, would be the state of the applicable law in the absence of an effective choice-of-
law by the parties.
In ICC Case No. 4132, excerpted above, the arbitrator considered whether public
policy/statutory rights of a country other than the arbitral situs or the parties' chosen
substantive law could be applied. What rules should an arbitrator use in determining
when to apply a “foreign” public policy? Should the arbitrator look to the conflict of laws
rules he initially concluded were applicable to select a substantive law? Should he look
to the relevant foreign state's definition of its public policies? Or is there some
“international” set of conflict of laws rules that he should consult? What might these rules
be
 (c) Relation between conflict of laws rules of arbitral situs and public policies of other states.
Recall that, at least in some nations, local choice-of-law rules may be regarded as
mandatorily binding on arbitrators sitting within national territory. See supra pp. 537-39.
Note also that other nations will, of course, have their own definitions of the applicability
of their public policies; the extraterritorial application of the U.S. antitrust and securities
laws is a prime example.
These two sources may not always agree. For example, English conflicts rules arguably
give effect to foreign public policies only as to conduct occurring on the territory of the
relevant foreign state. In contrast, U.S.tatutory protections often have extraterritorial
reach, extending to conduct that occurs outside the United States (provided it has
sufficient effects in or other connections with the United States). See G. Born,
International Civil Litigation in United States Courts 545-615 (3d ed. 1996).
Suppose an English arbitrator, sitting in London, is presented with a dispute as to which
the U.S. securities or antitrust laws are clearly (by their own terms) applicable, but which
involves conduct occurring principally (or entirely) outside the United States (and in
England). Suppose further that English conflicts rules would deny the extraterritorial
application of U.S. law to “English” conduct in such circumstances. What should the
arbitrator do? What should, respectively, English and U.S. courts do in reviewing his
award? Alternatively, assume the same extraterritorial application of U.S. law and a Swiss
arbitral tribunal (confronted with Article 177 of the Swiss Law on Private International
Law). Consider the ICC's Draft Recommendations, excerpted at supra p. 568. How do they
deal with these choice-of-law issues?

(d) Scope of mandatory law or public policy. A particular state's public policy or mandatory
law may not, by its terms, be applicable to an international dispute. For example,
suppose that an arbitration is sited in the United States between Saudi and Indian
companies, with no direct or indirect connection to the United States (other than as the
arbitral situs). Would the U.S. antitrust laws be applicable to the underlying dispute?
Alternatively, suppose that the same dispute were sited in Switzerland and that Swiss
domestic public policy forbids punitive damages. Would this Swiss public policy be
applicable to claims having no material connection to Switzerland? See P. Karrer,
Kommentar zum Schweizerischen Privatrect, Internationales Privatrecht, at Article 187 PILA,
notes 131 & 144 (1996) (suggesting that Swiss public policy against punitive damages
P "569" would not apply in arbitration, sited in Switzerland, of dispute having no other
P "570" connection to Switzerland). Consider the Final Award in ICC Case No 5946, which deals
with this issue. Is the arbitrator's reasoning persuasive?

(e) Need for choice of law analysis with respect to public policy issues. Some authorities have
suggested that mandatory laws or public policies must be applied, without regard to any
choice of law analysis, to determine whether they are applicable. See Mayer, Mandatory
Rules of Law in International Arbitration, 2 Arb. Int'l 274, 275-77 (1986) (“a mandatory rule
(loi de police in French) is an imperative provision of law which must be applied in an
international relationship irrespective of the law that governs that relationship. To put it
another way: mandatory rules of law are a matter of public policy (ordre public) and
moreover reflect a public policy so commanding that they must be applied even if the
general body of law to which they belong is not competent by application of the relevant
rule of conflict of laws.”)
The foregoing view is erroneous. It is necessary to determine whether, in fact, a public
policy or mandatory law was intended by the legislature that enacted it to apply to
particular circumstances (e.g., EC competition law to a domestic Zambian transaction)
and, if so, whether the conflicts rules applicable in the arbitration permit such an
application (e.g., even if U.S. antitrust laws purport to apply to a wholly foreign
transaction, will applicable national or international conflicts rules give effect to that).

(f) Enforcement issues. What result should obtain if the party who is denied an award of
exemplary damages, or an award of damages based upon a statutory claim, commences
litigation in its home forum on the theory that the tribunal manifestly disregarded the
parties' agreement and applicable law by refusing to award damages permitted under
applicable law? See supra p. 293, discussing the availability of treble damages in
arbitration of U.S. antitrust claims, and infra pp. 858-59, discussing the availability of
punitive damages in arbitration. What result should obtain if the arbitrator does award
such damages and the losing party challenges the award in the courts of the arbitral
forum which does not permit such damages? See Id.
6. Overriding effect of international treaties on public policy claims. The authority of a nation to
impose mandatory laws or public policies is subject to the express and implied limits of the
New York Convention and other international instruments to which the nation is a party (as well
as customary international law). Among other things, these limits include basic standards of
fair dealing, estoppel, nondiscrimination, and pacta sunt servanda. International arbitral
tribunals may be called upon to give effect to these international standards, in preference to
national law rules or public policies. See generally Mayer, Mandatory Rules of Law in
International Arbitration, 2 Arb. Int'l 274, 291 (1986) (arbitrators may refuse “in the name of what
they conceive to be international public policy, to apply a mandatory rule of law by reason of
its content”); Note, General Principles of Law in International Commercial Arbitration, 101 Harv. L.
Rev. 1816 (1988). What practical difficulties would this produce?
 7. Choice-of-law governing non-arbitrability. As discussed above, some public law claims are
“nonarbitrable.” See supra pp. 243-57. As the foregoing discussion suggests, the non-
arbitrability of public policy claims in international arbitration raises complex choice-of-law
questions. Indeed, “[a]greement on the conclusion that there is disagreement seems to be the
only common denominator that one can find between arbitrators, courts, and publicists
regarding the question which is the applicable law on arbitrability.” Boeckstiegel, Public Policy
and Arbitrability, in ICCA Congress Series No. 3, at 184 (Sanders, ed. 1987). In particular, should
an arbitrator apply the non-arbitrability rules of (a) the law creating the substantive right at
issue (i.e., U.S. law, if U.S. antitrust claims are at issue); (b) the substantive law selected by the
parties to govern their relationship; (c) the law of the arbitral forum; (d) the law governing the
arbitration agreement; or (e) the law of the place where the award will be enforced? These
issues are discussed above. See supra pp. 273-77.
8. Arbitral determinations that foreign public policy is not applicable. In ICC Case No. 4132, the
arbitrator concluded that the competition rules of Article 85 of the Treaty of Rome did not
apply to the parties' transaction, because it lacked sufficient contacts with the European
Economic Community. In ICC Case No. 6379, the arbitrator concluded that Belgian statutory
protections did not apply because of the parties' agreement to be bound by Italian law. These
determinations would be analogous to arbitral decisions that the U.S. antitrust laws were
inapplicable to particular conduct because the conduct did not satisfy the jurisdictional
requirements of U.S. law or because the parties had agreed to foreign law. See G. Born,
International Civil Litigation in United States Courts 576-607 (3d ed. 1996).
Any such arbitral decision has the potential to produce in subsequent litigation in national
P "570" courts, when a party commences litigation based on the unresolved claims or resists
P "571" enforcement of the arbitral award. What weight should be given in such litigation to an
arbitrator's determination that national public policy protections are not (or are) applicable
for jurisdictional reasons?
9. Purported “supervisory” role of national courts in arbitration of public policy disputes. As
described elsewhere, U.S. courts not infrequently entertain actions to compel arbitration and
issue orders directing compliance with an arbitration agreement. See supra pp. 380-95. U.S.
courts can issue such orders in cases involving arguably non-arbitrable statutory claims – such
as claims based on U.S. securities or antitrust laws. See Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth Inc., 473 U.S. 614 (1985); PPG Industries v. Pilkington plc, 825 F.Supp. 1465 (D.
Ariz. 1993); supra pp. 294-95. Because of the perceived public importance of such claims, and
because of arguably non-waivable statutory protections accompanying such claims, U.S. courts
have sometimes imposed conditions on the arbitration of these claims. For example, some U.S.
court orders have required the application of U.S. law, the imposition of multiple statutory
damages, and the submission of periodic reports on the arbitration to the U.S. court. See PPG
Industries v. Pilkington plc, 825 F.Supp. 1465 (D. Ariz. 1993).
When courts issue such orders, complex questions can arise relating to the interaction between
the court's order, the parties' arbitration agreement, and the laws of the arbitral situs and the
United States. Consider, for example, the excerpt below from the court's opinion compelling
arbitration in PPG Industries v. Pilkington plc, 825 F.Supp. 1465 (D. Ariz. 1993):
the Court may, and certainly will, withdraw the reference to arbitration if U.S. antitrust law
does not govern the substantive resolution of [the plaintiff's claims.] In addition, the Court
directs that any damages determination, or arbitral award, made by the arbitrators shall be
determined according to U.S. antitrust law irrespective of any conflict that may exist between
those laws and the laws of England. Finally, the Court will retain jurisdiction over this matter in
order to ensure that the arbitration directed by this Order is conducted in accordance with the
Order.
How should a foreign arbitral tribunal respond to such orders?
P "571"

References
1) For commentary, see Branson & Wallace, Choosing the Substantive Law to Apply in
International Commercial Arbitration, 27 Va. J. Int'l L. 39 (1986); Croff, The Applicable Law in
an International Commercial Arbitration: Is it Still a Conflict of Laws Problem?, 16 Int'l Law.
613 (1982); Crook, Applicable Law in International Arbitration: The Iran-U.S. Claims Tribunal
Experience, 83 Am. J. Int'l L. 278 (1989); Danilowicz, The Choice of Applicable Law in
International Arbitration, 9 Hastings Int'l & Comp. L. Rev. 235 (1986); Foerster, Arbitration
Agreements and the Conflict of Laws, 21 Arb. J. 129 (1966); Goldman, Les Conflits de Lois dans
l'Arbitrage International de Droit Prive, 109 Recueil Des Cours 347 (1963); Hanotiau, What Law
Governs the Issue of Arbitrability?, 17 Arb. Int'l 391 (1996); Heilman, Arbitration Agreements
and the Conflict of Laws, 43 Yale L.J. 617 (1928); Hirsh, The Place of Arbitration and the Lex
Arbitri, 34 Arb. J. 43 (1979); Lando, Conflict-of-Law Rules for Arbitrators, in Festschrift
Zweigert (1981); J. Lew, Applicable Law in International Commercial Arbitration (1978); Lando,
The Lex Mercatoria in International Commercial Arbitration, 34 Int'l Comp. L.Q. 747 (1985);
Mann, Lex Facit Arbitrum, reprinted in, 2 Arb. Int'l 241 (1986); Maniruzzaman, Conflict of Laws
in International Arbitration: Practice and Trends, 9 Arb. Int'l 371 (1993); Mayer, Mandatory
Rules of Law in International Arbitration, 2 Arb. Int'l 274 (1986); H. Naon, Choice of Law
Problems in International Commercial Arbitration (1992); Smedresman, Conflict of Law in
International Commercial Arbitration: A Survey of Recent Developments, 7 Calif. W. Int'l L. J.
263 (1977); Stern, The Conflict of Laws in Commercial Arbitration, 17 Law & Cont. Probs. 567
(1952); Wilner, Determining the Law Governing Performance in International Commercial
Arbitration: A Comparative Study, 19 Rutgers L. Rev. 646 (1965); Wortmann, Choice of Law by
Arbitrators: The Applicable Conflict of Laws System, 14 Arb. Int'l 97 (1998); Annotation,
Conflict of Laws as to Validity and Effect of Arbitration Provision, 95 A.L.R.3d 1145. See also
the bibliography in Lando, The Law Applicable to the Merits of the Dispute, 2 Arb. Int'l 104
(1986).
2) This Chapter does not consider the choice of law applicable to the arbitration agreement
or to the arbitration proceedings. These issues are dealt with, respectively, in Chapters 2, 3
and 6.
3) J. Lew, Applicable Law in International Commercial Arbitration (1978); H. Naon, Choice of Law
Problems in International Commercial Arbitration (1992). A leading English Court of Appeal
decision concisely summarizes the various choice of law issues in an international
arbitration:
“All contracts which provide for arbitration and contain a foreign element may involve
three potentially relevant systems of law. (1) The law governing the substantive contract.
(2) The law governing the agreement to arbitrate and the performance of that agreement.
(3) The law governing the conduct of the arbitration. In the majority of cases all three will
be the same. But (1) will often be different from (2) and (3). And occasionally, but rarely, (2)
may also differ from (3).”
Naviera Amazonica Peruana SA v. Compania Internacional de Seguros del Peru [1988] 1
Lloyd's Rep. 116, 118. See also James Miller & Partners Ltd. v. Whitworth Street Estates
(Manchester) Ltd. [1970] 1 Lloyd's Rep. 269; Black Clawson International Ltd. v. Papierwerke
Waldhof-Aschaffenburg AG [1981] 2 Lloyd's Rep. 446; Dicey & Morris, The Conflict of Laws
573-86 (12th ed. 1993). See supra pp. 41-45.
For U.S. authority recognizing the complexity of choice of law issues in international
arbitration, see Restatement (Second) Conflict of Laws §218 (1971); International Standard
Electric Corp. v. Bridas SA, 745 F.Supp. 172 (S.D.N.Y. 1990); Smit, A-National Arbitration, 63
Tulane L. Rev. 629 (1989); Wilner, Determining the Law Governing Performance in
International Commercial Arbitration: A Comparative Study, 19 Rutgers L. Rev. 646 (1965).
4) See J. Lew, Applicable Law in International Commercial Arbitration (1978); H. Naon, Choice of
Law Problems in International Commercial Arbitration (1992); Restatement (Second) Conflict
of Laws §218 (1971); Danilowicz, The Choice of Applicable Law in International Arbitration, 9
Hastings Int'l & Comp. L. Rev. 235, 238-58 (1986); Mann, Lex Facit Arbitrum, reprinted in, 2
Arb. Int'l 241 (1986); Dicey & Morris, The Conflict of Laws 573-86 (12th ed. 1993).
5) Depecage refers to the application of different national laws to different aspects of a
contractual or other legal relationship. See Restatement (Second) Conflict of Laws §218
comment b (1971); Reese, Depecage: A Common Phenomenon in Choice of Law, 73 Colum. L.
Rev. 58 (1973); E. Scoles & P. Hay, Conflict of Laws §2.15 (1982).
6) Scherk v. Alberto-Culver Co., 417 U.S. 506, 516-17 (1974). See also Restatement (Second)
Conflict of Laws §187 comment e (1971); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth,
Inc., 473 U.S. 614 (1985).
Although “too much fuss can sometimes be made about the role of certainty in business
choices,” Park, Judicial Controls in the Arbitral Process, 5 Arb. Int'l 230, 239 (1989), many
business decisions are taken only after a reasonably careful analysis of legal risks and
opportunities. That process inevitably rests on expectations about applicable laws and
dispute resolution procedures, even if it does not include detailed consideration of the
legal consequences of different scenarios under competing national laws.
7) See supra pp. 95-117, 358-80 & infra pp. 526-71.
8) Parties not infrequently agree during the course of an arbitration on the law governing
particular issues.
9) See infra pp. 526-42; J. Lew, Applicable Law in International Commercial Arbitration 229-369
(1978); Lando, The Law Applicable to the Merits of the Dispute, 2 Arb. Int'l 104, 110-12 (1986);
Wilner, Determining the Law Governing Performance in International Commercial Arbitration:
A Comparative Study, 19 Rutgers L. Rev. 646, 684-86 (1965).
10) UNCITRAL Model Law Article 28.
11) As discussed below, see infra p. 541, some U.S. courts have concluded that arbitrators are
obliged to apply federal statutory protections – notably the antitrust and securities laws –
in order to render an enforceable award.
12) See infra pp. 540-41; New French Code of Civil Procedure Article 1496; Netherlands Code of
Civil Procedure Article 1504.
13) As discussed below, some authorities hold that international arbitral tribunals may
“directly” apply a substantive law without engaging in any conflict of laws analysis. See
infra pp. 529, 539.
14) These include the state(s) where the underlying transaction occurred and the state(s)
where an award might be enforced. See infra pp. 538-39.
15) As discussed above, the New York Convention arguably does contain choice of law rules
dealing with other subjects, including the arbitration agreement and the curial law. See
supra pp. 113-14, 413-15, 426.
16) 484 U.N.T.S. 364 (No. 7042).
17) See supra p. 25.
18) 1980 Official Journal of the European Communities No. L266/1. The Rome Convention
specifically excludes “arbitration agreements” from its coverage. Article 1(2)(d). The
Convention does apply, however, to the underlying contractual dispute that is the subject
of the arbitration agreement.
19) 19 Int'l Legal Mat. 671 (1980).
20) See J. Lew, Applicable Law in International Commercial Arbitration 245-84 (1978); Mann, Lex
Facit Arbitrum, reprinted in, 2 Arb. Int'l 241, 248 (1986).
21) Dicey & Morris, The Conflict of Laws 543 (11th ed. 1987).
22) Swiss Law on Private International Law Article 187(1); A. Bucher & P. Tschanz, International
Arbitration in Switzerland 95-96 (1989).
23) S. Saleh, Commercial Arbitration in the Arab Middle East 54 (1984).
24) See supra pp. 243-94 & infra p. 542; Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc.,
473 U.S. 614 (1985); PPG Industries, Inc. v. Pilkington plc, 825 F.Supp. 1465 (D. Ariz. 1993).
25) See supra pp. 274-75.
26) See infra pp. 558-71.
27) See also LCIA Rules Article 22.3.
28) See infra pp. 539, 541.
29) See infra pp. 536-38.
30) See infra pp. 536-37.
31) See infra pp. 539-40.
32) There has been relatively little attention in the United States to choice of law issues in
arbitration, owing in significant part to the comparative similarity of different state laws,
to the existence of the FAA, and to the tradition of informal, non-technical approaches to
arbitration in the United States. See, for example, the treatment of choice of law issues in
a leading U.S. arbitration treatise, G. Wilner, Domke on Commercial Arbitration §25.01 (Rev.
ed. 1992).
33) See infra pp. 536-37; Restatement (Second) Conflict of Laws §218 comment b (1971); A.
Ehrenzweig, Conflict of Laws 540 (1962); Wilner, Determining the Law Governing Performance
in International Commercial Arbitration: A Comparative Study, 19 Rutgers L. Rev. 646, 676-77
(1965).
34) See Restatement (Second) Conflict of Laws §218 comment b (1971).
35) Goldman, La lex mercatoria dans les contrats et l'arbitrage internationaux: realité et
perspectives, 1979 Journal du Droit International 475, 492.
36) Restatement (Second) Conflict of Laws §218 comment b (1971); Wilner, Determining the Law
Governing Performance in International Commercial Arbitration: A Comparative Study, 19
Rutgers L. Rev. 646, 679-80 (1965).
37) See infra pp. 530-42.
38) See infra p. 540; J. Lew, Applicable Law in International Commercial Arbitration 335-41 (1978);
Derains, L'application cumulative par l'arbitre des systèmes de conflits de lois interesses au
litige, 1972 Rev. arb. 99.
39) See infra p. 540.
There are numerous variations of this approach. Some awards refer expressly to
“international” principles of private international law – derived from a perceived
consensus among relevant states on conflict of laws rules. See infra pp. 539-40. Other
awards derive conflicts rules from international agreements, which, while not strictly
applicable, are thought to embody commonly shared international principles.
40) ICC Rules Article 17(1).
41) See AAA International Rules Article 29 (“The tribunal shall apply the substantive law or laws
designated by the parties as applicable to the dispute. Failing such a designation by the
parties, the tribunal shall apply such law or laws as it determines to be appropriate.”).
©) International Council Commercial Arbitration.
©) International Council Commercial Arbitration.
©) International Council Commercial Arbitration.
42) In ICC arbitrations, the parties' contract reportedly contains choice-of-law clauses in
approximately 75% of all cases.
43) See Branson & Wallace, Choosing the Substantive Law to Apply in International Commercial
Arbitration, 27 Va. J. Int'l L. 39, 46 (1986); de Vries, International Commercial Arbitration: A
Contractual Substitute for National Courts, 57 Tulane L. Rev. 42, 74 (1982); Lowe, Choice of
Law Clauses in International Contracts: A Practical Approach, 12 Harv. Int'l L. J. 1 (1971);
Panel, Choice of Law Problems and International Contracts. 1960 Proc. Am. Soc. Int'l L. 48,
56.
44) See supra pp. 243-95.
45) The enforceability and interpretation of a choice-of-law agreement in international
arbitration necessarily depend on the application of substantive rules, which in turn
requires the choice (explicit or implicit) and application of a set of conflict of laws rules.
That requires selection of which conflict of laws rule it would be appropriate to apply. See
infra pp. 551-52.
46) See infra pp. 551-53.
47) The New York and Inter-American Conventions acknowledge the parties' freedom to select
the law governing the arbitration. New York Convention Article V(1)(d); Inter-American
Convention Article 5(1)(d).
48) Geneva Convention of 1961 Article VII(1).
49) Rome Convention Articles 1, 3 & 7. As noted above, the Rome Convention does not apply to
arbitration agreements, but does apply to underlying contractual disputes. See supra p.
527.
50) International Sales of Goods Convention Article 6.
51) See infra pp. 551-53.
52) There is no general federal legislation or treaty dealing with choice-of-law agreements in
commercial disputes. There are examples of choice-of-law provisions in specific
international conventions or treaties to which the United States is a signatory. Notable
examples include the Vienna Convention on International Sales and the Warsaw
Convention, but these are comparatively limited instances where federal law applies to
choice of law agreements. In the absence of federal enactments, state law (which varies
from jurisdiction to jurisdiction) is generally regarded as supplying applicable choice-of-
law rules in most commercial disputes. G. Born, International Civil Litigation in United
States Courts 491-92, 681-84 (3d ed. 1996); Klaxon v. Stentor Electric Manufacturing Co., 313
U.S. 487 (1941) (federal court sitting in diversity must apply state conflict of laws rules of
state where it is sitting); Day & Zimmerman, Inc. v. Challoner, 423 U.S. 3 (1975) (federal
district court in Texas must apply Texas choice of law rules, selecting law of Cambodia). For
commentary on the current diversity of state conflict of law rules, see Smith, Choice of Law
in the United States, 38 Hastings L. J. 1041 (1987); Kay, Theory Into Practice: Choice of Law in
the Courts, 34 Mercer L. Rev. 521 (1983); Kozyris & Symeonides, Choice of Law in the
American Courts in 1989: An Overview, 38 Am. J. Comp. L. 601 (1990).
53) The Restatement (First) Conflict of Laws regarded private choice-of-law agreements as
unacceptable exercises of legislative authority, and many state courts followed this rule.
G. Born, International Civil Litigation in United States Courts 654 (3d ed. 1996). The
Restatement (First) Conflict of Laws contained no reference to the parties' autonomy to
select the applicable law. Its primary author, Professor Beale, attacked the doctrine. 2
Beale, Treatise on the Conflicts of Laws §332.2 (1935). See generally Yntema, Contract and
Conflict of Laws: “Autonomy,” 1 N.Y.L.F. 46 (1955).
54) E. Scoles & P. Hay, Conflict of Laws 632-36 (1982); Restatement (Second) Conflict of Laws §187
(1971); G. Born, International Civil Litigation in United States Courts 654-56 (3d ed. 1996).
55) Restatement (Second) Conflict of Laws §187(2) (1971). The exceptions are discussed below.
See infra pp. 545-71.
56) See G. Born, International Civil Litigation in United States Courts 653-64 (3d ed. 1996); E.
Scoles & P. Hay, Conflict of Laws 632-36 (1982) (collecting cases).
57) Rome Convention Articles 1, 3 and 7.
58) Dicey & Morris, The Conflict of Laws 1168-80 (12th ed. 1993). According to a leading English
decision:
“Parties are entitled to agree what is to be the proper law of their contract ... There have
been from time to time suggestions that parties ought not to be so entitled, but in my view
there is no doubt that they are entitled to make such an agreement, and I see no good
reason why, subject it may be to some limitations, they should not be so entitled.”
Whitworth Street Estates (Manchester) Ltd v. James Miller and Partners Ltd [1970] A.C. 583,
603 (Lord Reid). See XL Insurance Ltd v. Owens Corning, 2 Lloyd's Law Rep. 500 (2000) (“It is
a general principle of English private international law that it is for the parties to choose
the law which is to govern their agreement to arbitrate and the arbitration proceedings,
and that English law will respect their choice”).
59) B. von Hoffmann, Internationale Handelsschiedsgerichtsbarbeit 67 (1970); G. Kegel,
Internationales Privatrecht §18 (6th ed. 1987).
60) Swiss Law on Private International Law Article 187(1); A. Bucher & P. Tschanz, International
Arbitration in Switzerland 99-100 (1989).
61) LCIA Rules Article 22.3; AAA International Rules Article 29.
62) See infra pp. 551-53.
63) In the following subsection, we consider the effect of public policy on the enforceability of
choice-of-law agreements (and revisit the subject of interpretation).
64) Comment f to §187 permits most choice-of-law provisions in sophisticated transactions. It
makes clear that §187's requirement for a “reasonable basis” can be satisfied by the choice
of a neutral, developed law:
“The parties to a multistate contract may have a reasonable basis for choosing a state with
which the contract has no substantial relationship. For example, when contracting in
countries whose legal systems are strange to them as well as relatively immature, the
parties should be able to choose a law on the ground that they know it well and that it is
sufficiently developed.”
Restatement (Second) Conflict of Laws §187 comment f (1971).
65) See UCC §1-105(1) (requiring “reasonable relationship to this state”).
66) See A.S. Rampell, Inc. v. Hyster Co., 165 N.Y.S.2d 475 (1957); Gruson, Governing Law Clauses in
Commercial Agreements – New York's Approach, 18 Colum. J. Trans. L. 323 (1980).
67) For English common law authorities, see Re Helbert Wagg & Co. Ltd [1956] Ch. 323, 341 (court
will not “necessarily” enforce choice-of-law clause selecting law with no connection to
transaction); Vita Food Products Inc. v. Unus Shipping Co. Ltd [1939] A.C. 277 (P.C.); Dicey &
Morris, The Conflict of Laws 1173-76 (11th ed. 1987).
68) See New York General Obligations Law §5-1401 (McKinney Supp. 1988):
1. The parties to any contract, agreement or undertaking, contingent or otherwise, in
consideration of, or relating to any obligation arising out of a transaction covering in the
aggregate not less than two hundred fifty thousand dollars, including a transaction
otherwise covered by subsection one of section 1-105 of the Uniform Commercial Code,
may agree that the law of this state shall govern their rights and duties in whole or in part,
whether or not such contract, agreement or undertaking bears a reasonable relation to this
state. This section shall not apply to any contract, agreement or undertaking (a) for labor
or personal services, (b) relating to any transaction for personal, family or household
services, or (c) to the extent provided to the contrary in subsection two of section 1-105 of
the Uniform Commercial Code.
2. Nothing contained in this section shall be construed to limit or deny the enforcement of
any provision respecting choice of law in any other contract, agreement, or undertaking.
The New York statute only applies when the parties have selected New York (not foreign)
law. Kibourn & Winn, The Rules of Construction in Choice-of-Law Cases in New York, 62 St.
John's L. Rev. 243 (1988).
69) Rome Convention Articles 1(1) and 3(1). See Dicey & Morris, The Conflict of Laws 1213-14 (12th
ed. 1993).
70) A. Bucher & P. Tschanz, International Arbitration in Switzerland 99-100 (1989).
71) See Gruson, Governing Law Clauses in Commercial Agreements – New York's Approach, 18
Colum. J. Trans. L. 323 (1980).
©) International Council Commercial Arbitration.
©) International Council Commercial Arbitration.
72) New York Convention Article V(2)(b); Inter-American Convention Article 5(2)(b). These
provisions are discussed in detail below, see infra pp. 815-32.
73) New York Convention Article II(1); Inter-American Convention Article 5(a). These provisions
are discussed in detail elsewhere, see supra pp. 243-95 & infra p. 880. A “non-arbitrable”
claim cannot be arbitrated; there are public law claims that can be arbitrated, but whose
disposition may be subject to particularly rigorous public policy scrutiny in actions to
vacate or enforce. See infra p. 880.
74) These issues are discussed in detail in Chapters 2 and 3 above and Chapter 12 below.
75) See Restatement (Second) Conflict of Laws §187 (1971); Dicey and Morris, The Conflict of Laws
1239-48 (12th ed. 1993); Hanotiau, What Law Governs the Issue of Arbitrability?, 17 Arb. Int'l
391 (1996); Mayer, Mandatory Rules of Law in International Arbitration, 2 Arb. Int'l 274, 277-80
(1986); Park, Private Adjudicators and the Public Interest: The Expanding Scope of
International Arbitration, 12 Brook, J. Int'l L. 629 (1986).
76) See E. Scoles & P. Hay, Conflict of Laws 637-43 (1982); G. Born, International Civil Litigation in
United States Courts 656-57 (3d ed. 1996).
77) Rome Convention Articles 3 & 7.
78) Dicey & Morris, The Conflict of Laws 1239-48 (12th ed. 1993);
79) Restatement (Second) Conflict of Laws §187(2)(b) (1971). See G. Born, International Civil
Litigation in United States Courts 655-56 (3d ed. 1996).
80) Loucks v. Standard Oil Co., 224 N.Y. 99, 110 (1918).
81) Muschany v. United States, 324 U.S. 49 (1945).
82) Whitaker v. Spiegel, Inc., 623 P.2d 1147 (Wash. 1981).
83) Davis v. Jointless Fire Brick Co., 300 F.2d 1 (9th Cir. 1924); Blalock v. Perfect Subscription Co.,
458 F.Supp. 123 (S.D. Ala. 1978).
84) Bachchan v. India Abroad Pub., Inc., 1992 WL 110403 (N.Y.S. Ct. April 13, 1992).
85) New York Life Ins. Co. v. Cravens, 178 U.S. 389 (1900).
86) See infra pp. 568-69; Rome Convention Article 7; Restatement (Second) Conflict of Laws §187
(1971); Dicey & Morris, The Conflict of Laws 1239-48 (12th ed. 1993).
87) See Treaty of Rome Article 85 (competition law).
88) See 16 U.S.C. §77v(a) (federal securities).
89) See supra pp. 243-95.
90) See Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614 (1985) (indicating
applicability of U.S. antitrust laws, notwithstanding Swiss choice-of-law clause); Jarvin,
Comments on U.S. Court Decisions in ICC, Competition and Arbitration Law 148-49 (1993);
Lowenfeld, The Mitsubishi Case: Another View, 2 Arb. Int'l 178 (1986).
91) See infra pp. 257-82.
92) Katzenbach, Conflicts on an Unruly Horse: Reciprocal Claims and Tolerances in Interstate
and International Law, 65 Yale L. J. 1087 (1956).
93) An arbitrator's public policy determinations will, of course, be subject to review in national
courts. We do not examine that subject here. As discussed in detail elsewhere, supra p. 279,
infra pp. 812, some national courts apply a more rigorous standard of review to arbitral
decisions on issues of public policy or mandatory statutory protections than to decisions
on other issues.
©) International Council Commercial Arbitration.
©) International Council Commercial Arbitration.
©) International Council Commercial Arbitration.
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part Two : Chapter 8.
Selection of Arbitral Situs in
International Arbitration', in
Gary B. Born , International
Commercial Arbitration:
Commentary and Materials
(Second Edition), 2nd edition
(© Kluwer Law International;
Kluwer Law International
2001) pp. 573 - 614
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KluwerArbitration
Part Two : Chapter 8. Selection of Arbitral Situs in
International Arbitration
8 Selection of Arbitral Situs in International Arbitration
A critical issue in any international commercial arbitration is the location of the arbitral situs
(or seat). This Chapter examines the selection of the arbitral situs in international arbitration.
First, the Chapter examines the selection of the arbitral situs by agreement of the parties,
including the enforceability of such agreements. Second, the Chapter examines the role of
national courts, and particularly U.S. courts, in selecting an arbitral situs.
A. Selection of Arbitral Situs by Parties' Agreement
1. Importance of the Arbitral Situs
The location of the arbitral situs is a critical issue in any international arbitration. The location
of the arbitral situs can have profound legal and tactical consequences, and can materially
alter the course of dispute resolution.
The significance of the arbitral situs includes relatively mundane issues of convenience and
cost. (1) Although such factors are often given undue weight, they can be important to the
conduct and outcome of an arbitration. An expensive arbitral forum can effectively preclude
some parties from pursuing their claims, while an inconvenient forum without a developed
local legal system or infrastructure can impact on the viability of the arbitration process.
Moreover, factors such as visa requirements, availability of air or other transportation, hotel
and meeting room accommodations, support staff (such as interpreters, stenographers,
secretaries), and the like can bear heavily on the smooth progress of an arbitration. (2)
Much more significant than convenience is the effect of the local law of the arbitral situs on the
arbitration. This requirement encompasses a number of distinct factors. (3)
First, national courts in the arbitral situs have the potential to interfere in the ongoing arbitral
proceedings. (4) Examples of such interference include mandatory requirements for
interlocutory judicial resolution of issues of law or possibilities for judicial intervention in
matters such as procedural rules or selection of arbitral situs. The possibility of judicial
interference may create an incentive for dilatory tactics and expensive, confusing procedural
disputes.
Second, some courts, while not interfering in arbitral proceedings, will nonetheless be
prepared to assist if necessary in local arbitral proceedings. Examples of desirable judicial
assistance can include enforcing discovery orders made by the tribunal and enforcing orders
for provisional relief, such as prejudgment attachment.
Third, the location of the arbitral situs affects the law applicable to the arbitration agreement.
Articles II(3) and V(1)(a) of the New York Convention contemplate that the validity of the
parties' arbitration agreement will be determined 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.” As discussed elsewhere, national law requirements on subjects such as
arbitrability, number or qualifications of arbitrators, contract formation, validity and illegality,
and the like vary significantly. (5)
Fourth, the national courts in the arbitral situs are usually competent (and exclusively
competent) to entertain actions to vacate or set aside the arbitral award. (6) The scope of
judicial review of an arbitral award is a matter of national law that varies from country to
country. Under many developed national laws, an arbitral award is subject to little or no
review of the merits of the tribunal's decision; (7) other states permit no review of the merits of
arbitral awards, and little or no review of the arbitral process. (8) Some nations, however,
permit more thorough-going review of the merits of arbitral awards, which can result in costly
appellate proceedings and duplicative litigation.
Fifth, some nations restrict the right of non-nationals to appear as counsel in international
arbitration proceedings conducted on local territory. (9) If a company wishes to have its regular
outside international arbitration counsel participate in the arbitral proceedings, selecting
such nations as an arbitral situs should be avoided. Other nations impose restrictions on the
nationality of arbitrators. (10)
Sixth, the arbitral situs is usually (but not always) the place where the arbitral award will be
“made” for purposes of the New York Convention. (11) This has significant legal consequences
for the enforceability of arbitral awards outside the country where they are rendered. The best
general indicator of the enforceability of a nation's arbitral awards is whether or not the
country is a party to the New York Convention or, to a lesser extent, certain other international
arbitration conventions. If a state is party to the New York Convention, awards made within its
 territory will generally be subject to the Convention's pro-enforcement rules in other
Convention parties; conversely, if a state is not party to the Convention, its awards often will
not enjoy the benefits of the Convention. (12) Before selecting an arbitral forum, counsel should
examine U.S. law (and the law of other forums where enforcement would likely be required) to
ensure that an award rendered in that forum can be enforced.
Finally, the location of the arbitral situs can both directly and indirectly affect the identity of
the arbitrators (absent other agreement by the parties). That is because many institutional
appointing authorities will be inclined to select an arbitrator qualified to practice law in the
arbitral situs. Moreover, local procedural rules and practices may influence the tribunal's
procedural decisions, (13) and local conflicts rules may be applied with respect to choice of
law issues. (14)
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2. Agreements Selecting the Arbitral Situs
For the reasons discussed above, it is both common (and very advisable) for international
arbitration agreements to designate the arbitral situs. (15) Alternatively, the parties may agree
upon institutional arbitration rules that permit either an appointing authority or the arbitral
tribunal to choose the arbitral situs. (16) As detailed below, most national arbitration statutes
and institutional arbitration rules permit parties to designate their arbitral situs by
agreement.
Excerpted below are provisions from leading national arbitration statutes relating to selection
of an arbitral situs. These include Article 20 of the UNCITRAL Model Law, Article 176(3) of the
Swiss Law on Private International Law, and §§4, 206, and 303 of the FAA. Also excerpted below
are provisions of leading institutional arbitration rules, including the ICC, LCIA, UNCITRAL, and
AAA International Arbitration Rules.
UNCITRAL MODEL LAW
Article 20(1)
[excerpted below at p. 1016]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
§176(3)
[excerpted below at p. 1033]
FEDERAL ARBITRATION ACT
9 U.S.C. §§4, 206, 303
[excerpted below at pp. 999-1000, 1003, 1004]
ICC RULES (1998 VERSION)
Article 14
[excerpted below at p. 1064]
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LCIA RULES (1998 VERSION)
Article 16[excerpted below at pp. 1080-81]
[excerpted below at p. 1064]
UNCITRAL ARBITRATION RULES
Article 16
[excerpted below at p. 1026]
AAA INTERNATIONAL ARBITRATION RULES
Article 13
[excerpted below at p. 1040]
Notes on Parties' Selection of Arbitral Situs
1. Selection of arbitral situs in arbitration agreement. As detailed elsewhere, arbitration
agreements frequently specify the arbitral situs. Why is this so? What considerations argue in
favor of attempting to reach agreement on an arbitral situs? Consider the following.
(a) Convenience, cost and accessibility of arbitral situs. Especially in larger cases, the physical
location and amenities of the arbitral situs can assume considerable practical
importance. Identify what sorts of facilities, resources, and personnel you would want to
present a complex case in a 10 day hearing with 8 witnesses and 400 documentary
exhibits. Consider what might go wrong, on a logistical level.
 (b) Relevance of arbitral situs to applicable law. As detailed above, the law of the arbitral
situs ordinarily governs a number of significant issues, potentially including procedural
questions, arbitrators' qualifications, legal representation, evidence-taking and
discovery, and conflict of laws rules. See supra pp. 573-75. In rare cases, the parties may
choose a law to govern these issues other than the law of the arbitral situs. See supra 426-
28. Even when the parties do so, there may be mandatory rules, applicable to the
conduct of the arbitral proceedings, imposed by the laws of the arbitral situs. See supra
p. 429.
(c) Relevance of arbitral situs to forum for actions to vacate arbitral award. In most cases, an
action to vacate an award can be brought in the arbitral situs, and only in the arbitral
situs. See infra pp. 757-58. In contrast to actions elsewhere, where enforcement of an
award can be resisted only on the grounds enumerated in Article V of the New York
Convention, see infra pp. 725-30, an action to vacate in an award's country of origin may
rest on non-Article V grounds. See infra pp. 725-30.
(d) Relevance of arbitral situs to forum for litigation relating the arbitration agreements. The
arbitral situs' courts will ordinarily be competent (indeed, usually exclusively competent)
to provide ancillary relief in aid of arbitration, potentially including court-ordered
provisional measures, appointment or removal of arbitrators, discovery, and similar
matters. See supra pp. 573-74. Moreover, litigation challenging on seeking to enforce an
arbitration agreement may well be brought in the arbitral situs.
(e) Applicability of New York Convention and other international agreements. The place where
the arbitral award is made will, in many cases, determine whether the award is subject to
the New York Convention. See infra pp. 744-63. The applicability of bilateral or other
international treaties relating to the enforcement of arbitral awards may also be
triggered by the place where the arbitral award is made. Care should be taken to ensure
that arbitration agreements select an arbitral situs which will lead to an award that
benefits from the New York Convention and/or other international regimes (such as
bilateral treaties).
(f) Identity and legal background of arbitrators. Suppose that a U.S. company and a French
company agree to arbitrate in Switzerland, with New York law governing their underlying
contract. What is the likely nationality of the co-arbitrators that the parties may
nominate? What is the likely nationality of the presiding arbitrator? Where will he likely
live? Be licensed to practice law?
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2. Effect of parties' agreement on arbitral situs under national arbitration statutes. What effect
is given to the parties' selection of an arbitral situs by the UNCITRAL Model Law and the Swiss
Law on Private International Law? What is the rationale for permitting parties to select their
arbitral situs by agreement? Should there be any limits on this freedom? Consider also §§4,
206, and 303 of the FAA. See also Ocean Products Inc. v. Molinos Rio De La Plata SA, 1999 WL
239692 (S.D.N.Y. 1999) (correspondence between parties constitutes enforceable agreement on
New York as arbitral situs). How do these provisions apply to the selection of an arbitral situs in
an arbitration agreement?
3. Effect of parties' agreement on arbitral situs under institutional arbitration rules. What effect
do the ICC, LCIA, and UNCITRAL Arbitration Rules give to the parties' designation of an arbitral
situs in their arbitration agreement? Suppose that an arbitral tribunal is appointed and, after
considering the dispute, decides that the parties have picked the “wrong” arbitral situs. What
power does the tribunal have under the ICC and UNCITRAL Rules to change the arbitral situs?
What power should a tribunal have?
4. What place(s) should be selected as an arbitral situs? Assume that you represent a U.S.
company considering whether to enter into four separate international contracts with,
respectively, a Russian, a Swiss, a Pakistani, and an English company. What place would you
wish to specify as an arbitral situs in each of the four agreements (assuming they all contain
arbitration clauses)? Would the same arbitral situs be appropriate in all four contracts? If you
could not obtain your first choice, what would your second choice be? Suppose that each of the
above counter-parties is state-related. Does that affect your analysis? If so, how?
Which of the following factors should be considered by a party in selecting an arbitral situs,
and in what order of priority? (a) the situs is a New York Convention signatory; (b) the situs has a
supportive international arbitration statute; (c) the situs has a well-developed legal system on
issues relating to the substance of the parties' dispute; (d) the situs courts will review arbitral
awards with a high degree of deference; (e) the situs will permit foreign lawyers to appear in
arbitrations conducted there; (f) the situs has good hotels, food, and weather; and (g) the situs
is located in your counter-party's principal place of business.
5. Selection of arbitral situs by arbitral institution. Suppose that parties are unable to agree
upon an arbitral situs in their arbitration agreement (or otherwise). One means for selecting
the arbitral situs in such cases is by an arbitral institution.
 (a) Institutional rules providing for selection of arbitral situs by arbitral institution. Where
institutional rules adopted by the parties so provide, a common means of selecting the
arbitral situs is by the arbitral institution. See ICC Rules Article 14(1); LCIA Rules Article 16.
What are the advantages of such an approach? What advantages might an arbitral
institution have over an arbitral tribunal in selecting an arbitral situs? over a national
court?
Consider the approach of Article 16.1 of the LCIA Rules. Note that, in the absence of
contrary agreement, Article 16.1 provides for London as the arbitral situs unless otherwise
decided by the LCIA Court. Is that wise or attractive to users?

(b) Effect of national law on selection of arbitral situs by arbitration institution. What effect do
the UNCITRAL Model Law and the Swiss Law on Private International Law give to
institutional arbitration rules which provide for selection of an arbitral situs by the
arbitral institution? What effect do §§4, 206, and 303 of the FAA give to such
arrangements?
(c) Deference by U.S. courts to arbitral institution's selection of arbitral situs. Selections of
arbitral situses by arbitration institutions are virtually always upheld by U.S. courts. See
infra pp. 609-14; Seguro de Servicio de Salud de Puerto Rico v. McAuto Systems Group, Inc.,
878 F.2d 5, 9 (1st Cir. 1989) (where district court did not find that the AAA's determination
of locale was rendered in bad faith or in manifest disregard of the law, there was no
justification for overturning decision); Imaging Technology Solutions, LLC v. Tech Data
Corp., 1999 WL 493075 (E.D. La. 1999) (compelling arbitration but refusing to fix arbitral
situs and stating situs would be determined by the AAA, which had the power under its
rules to do so); Modern Drop Forge Co. v. Eumuco Hasenclever GmbH, 1997 WL 323660 (N.D.
Ill. 1997) (refusing to fix situs of arbitration within or without judicial district under §4 of
the FAA and stating that the determination of situs would be left to the ICC); Prudential
Securities Inc. v. Thomas, 793 F.Supp. 764 (W.D. Tenn. 1992) (“I therefore conclude as a
matter of law that the agreement of the parties provides that the [AAA] is the proper
entity to determine whether the parties have agreed on a location for the arbitration
proceedings, and, if not, to determine that location under its Rule 11 [providing that
arbitral tribunal will fix locale in absence of agreement by parties].”); City of Naples v.
Prepakt Concrete Co., 490 F.2d 182 (5th Cir. 1974) (stating that by agreeing to allow the AAA
to determine the location of the arbitration in an arms-length contract, the party waived
P "578" its right to challenge AAA's decision in court); Aerojet-General Corp. v. American Arbitration
P "579" Ass'n, 478 F.2d 248 (9th Cir. 1978) (excerpted below); Reed & Martin, Inc. v. Westinghouse
Electric Corp., 439 F.2d 1268 (2d Cir. 1971) (rejecting argument that AAA lacked power, or
wrongly exercised discretion, to select arbitral situs); Dan River, Inc. v. Cal-Togs Inc., 451
F.Supp. 497 (S.D.N.Y. 1978). Such selections should also generally be subject to judicial
enforcement under §§4 and 206 (subject to lower court decisions concerning the limits of
judicial power under these sections). But see infra pp. 589-96 discussing Tolaram Fibers.
6. Selection of arbitral situs by arbitral tribunal. Again, suppose that parties have not agreed
upon an arbitral situs. Another means for selecting a situs is by the arbitral tribunal.
(a) Institutional rules providing for selection of arbitral situs by arbitral tribunal. Under some
institutional arbitration rules, the arbitral tribunal itself is authorized to select the
arbitral situs. See UNCITRAL Rules Article 16. This means, however, that the arbitral situs
is not selected until the arbitrators have been nominated. Consider the relevance of the
arbitral situs to the selection of both co-arbitrators and the presiding arbitrators. See
infra pp. 622-29. What difficulties might this cause?
(b) National law providing for selection of arbitral situs by arbitral tribunal. Article 20(1) of the
UNCITRAL Model Law and Article 176(3) of Swiss Law on Private International Law
specifically provide that the arbitral tribunal may select the arbitral situs (absent
contrary agreement, including an agreement permitting an arbitral institution to select
the arbitral situs). Why do these statues select the arbitral tribunal as a fall-back solution
when the parties have not agreed to either an arbitral situs or a means of selecting a
situs? What alternatives are there? What fall-back solution does the FAA provide?
(c) Deference by the U.S. courts to arbitral tribunal's selection of arbitral situs. Where the
parties have agreed to institutional rules, authorizing the arbitral tribunal to designate
the arbitral situs. U.S. courts will generally reject challenges to the tribunal's selection.
See infra pp. 589-96. Similarly, U.S. courts should be able to enforce such selections, by
issuing orders compelling arbitration, subject to the limits on judicial power under §§4
and 206. Alternatively a U.S. court can simply stay litigation (under FAA §3 or otherwise,
see supra pp. 395-98), and permit the arbitral tribunal to select the arbitral situs. Zenol,
Inc. v. Carblox, Ltd, 334 F.Supp. 866 (W.D. Pa. 1971). This is the approach contemplated by
the UNCITRAL Model Law and most foreign arbitration statutes. See supra pp. 75-76.
7. Selection of arbitral situs by national courts. It is also possible, if the parties have not agreed
to either an arbitral situs, or a means of selecting a situs, for a national court to designate the
situs. Consider §176(3) of the Swiss law on Private International Law and Article 20(1) of the
UNCITRAL Model Law. What do they provide regarding judicial selection of the arbitral situs?
Why don't the UNCITRAL Model Law or the Swiss Law on Private International Law provide for
judicial selection of an arbitral situs? The approach of U.S. courts under the FAA is examined
below. See infra pp. 580-614.
In some cases, parties may fail to agree on either the arbitral situs, the arbitrators, or the
appointing authority. See Oil Basin Ltd v. Broken Hill Proprietary Co., 618 F.Supp. 485 (S.D.N.Y.
 1985). When that occurs, the arbitral process will likely be entirely frustrated unless some
national court becomes involved. Judicial appointment of an arbitrator by a national court can
provide an alternative avenue to judicial selection of the arbitral situs. See infra pp. 580-609.
Following the arbitrators' appointment, the tribunal can then select the arbitral situs.
8. Factors determining location of arbitral situs where parties have failed to agree on situs. As
discussed above, parties fail to designate a situs. This means that arbitral institutions or
arbitrators must determine the situs. What factors should arbitral institutions consider in
determining the arbitral situs?
Consider the approach of the AAA, which sets forth several factors that determine the choice of
a specific arbitral “locale” in international cases:
1. Location of parties and attorneys.
2. Location of witness and documents.
3. Location of records.
4. If construction, location of site, place or materials and the necessity of an on-site
inspection.
5. Consideration of relative difficulty in traveling and cost to the parties.
6. Place of performance of contract.
7. Place of previous court actions.
8. Location of most appropriate panel.
9. Any other reasonable arguments that might affect the locale determination.
P "579"
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Various factual and legal factors influence the choice of the place of arbitration, and their
relative importance varies from case to case. Among the more prominent factors are: (a)
suitability of the law on arbitral procedure of the place of arbitration; (b) whether there is a
multilateral or bilateral treaty on enforcement of arbitral awards between the State where the
arbitration takes place and the State or States where the award may have to be enforced; (c)
convenience of the parties and the arbitrators, including the travel distances; (d) availability
and cost of support services needed; and (e) location of the subject-matter in dispute and
proximity of evidence.
Which of these AAA and UNCITRAL factors are most important? What other reasonable
arguments might affect the locale determination? Should the governing law be taken into
account? Should a neutral situs for the parties be considered? Why? Should an arbitral
institution apply the presumption that the claimant's choice of forum should be rarely
disturbed? How do these answers change if one of the parties is a sovereign entity? See Annex 1:
Decision Regarding the Place of Arbitration in the UNCITRAL/NAFTA case between Ethyl
Corporation and The Government of Canada, 16 J. Int'l Arb. 141-148 (1999).
Consider the approach of Article 16.1 of the LCIA Rules. Note that, in the absence of contrary
agreement, Article 16.1 provides for London as the arbitral situs unless otherwise decided by
the LCIA Court. Is that wise or attractive to users? Is it reasonably within their contemplation
when choosing an arbitral institution? Does a long list of factors really produce a better result?
9. Changing the arbitral situs by parties' agreement. Parties sometimes jointly reconsider an
earlier selection of the arbitral situs, and seek to substitute a new situs by agreement. If no
arbitrators have been selected, changing the situs by mutual agreement is usually non-
controversial.
Suppose that one arbitral tribunal has been selected, on the expectation that the arbitral situs
is State A, and the parties then agree to change the situs to State B. Suppose State B is
inconvenient to one or more arbitrators, or inhospitable (for example, requiring an Indian
arbitrator to sit in Pakistan). What if all three arbitrators refuse to accept the parties' new
situs? What if only one of the arbitrators refuses? What if the arbitrator(s) select an arbitral
situs and the parties then agree that the tribunal has selected an inappropriate situs, but
cannot agree upon an alternative?
10. Arbitral tribunal may hold hearings at places other than the arbitral situs. Consider Article
14(2) of the ICC Rules, Article 16 of the LCIA Rules, and Article 16(2) of the UNCITRAL Rules. What
power does each provision give to the arbitral tribunal and in what circumstances could this
power be used? Why would it not merely be simpler to provide that the tribunal can change
the place or seat of the arbitration? What are the differences in the legal consequences of
changing the arbitral situs and of changing the place where hearings and meetings are held?
Among other things, consider where an award is made, what court has power to vacate an
award, and what court has power to remove and appoint arbitrators, grant assistance in taking
evidence, and perform similar supportive functions. See supra pp. 573-75.

B. Selection of Arbitral Situs by National Courts

Despite the wisdom of selecting an arbitral situs, parties not infrequently fail to designate
either the arbitral situs or a means of selecting a situs in their arbitration agreement. Worse,
they may enter into agreements that are ambiguous or internally contradictory as to the situs
of the arbitration. (17)
If no unambiguous prior agreement exists regarding an arbitral situs, or its means of selection,
 parties will often be unable to settle on an arbitral forum after disputes have arisen.
Alternatively, even where an agreement as to arbitral situs exists, one party occasionally may
P "580" regret its decision and seek to arbitrate in a different place. In either case, national courts can
P "581" be drawn into disputes over the appropriate arbitral situs, with one or both parties seeking
injunctive or declaratory relief designating the arbitral situs.
1. Overview of Judicial Authority Under National Arbitration Statutes to Select Arbitral Situs
Many national arbitration statutes do not grant local courts the power to select an arbitral
situs. That is true, for example, under the UNCITRAL Model Law and the Swiss Law on Private
International Law. (18) Each statute provides for either the arbitral tribunal or an arbitration
institution to select the arbitral situs.
2. Overview of U.S. District Courts' Powers to Compel Arbitration Outside Their Judicial
Districts
Although approaches elsewhere differ, U.S. courts can play a significant role in the selection of
the arbitral situs in international arbitrations. Litigation in U.S. courts over the location of the
arbitral situs typically arises in actions to compel arbitration under §4, §206, or §303 of the
FAA. These actions raise several related issues.
First, what authority does a district court have under the FAA to order arbitration at a site
either outside its own judicial district or outside the United States? Second, assuming that a
district court would have the power to compel arbitration in the requested forum, under what
circumstances will it exercise that authority? Third, in what circumstances will U.S. courts
entertain interlocutory actions to vacate decisions by arbitrators or arbitration institutions
designating an arbitral situs?
a. Power of District Courts to Compel Arbitration in a Particular Arbitral Situs Under §4
The language of §4 of the FAA contains the seeds of disputes over a district court's power to
compel arbitration in a particular location. Section 4 provides, among other things:
“A party aggrieved by the alleged failure, neglect or refusal of another to arbitrate under a
written agreement for arbitration may petition any United States district court ... for an order
directing that such arbitration proceed in the manner provided for in the agreement.... The court
shall hear the parties, and upon being satisfied that the making of the agreement for
arbitration or the failure to comply therewith is not in issue, the court shall make an order
directing the parties to proceed to arbitration in accordance with the terms of the agreement.
P "581" The hearing and proceedings, under such agreement, shall be within the district in which the
P "582" petition for an order directing such arbitration is filed.” (19)
Numerous lower courts have considered whether, under §4, they have the power to compel
arbitration outside their own judicial district when the parties have so agreed. (20) As
discussed below, lower courts have reached divergent conclusions. Some have held that orders
under §4 are generally limited to compelling arbitration at a place within the territorial limits
of the district court's judicial district, while other lower courts have held that no such statutory
territorial restriction exists. (21)
b. Power of District Courts to Compel Arbitration in a Particular Arbitral Situs Under §206
The language of §206 was drafted to avoid the interpretive difficulties arising from §4. Section
206 provides:
“A court having jurisdiction under this chapter may direct that arbitration be held in
accordance with the agreement at any place therein provided for, whether that place is within
or without the United States.” (22)
By its plain terms, §206 allows a district court to compel arbitration “at any place ... provided
for” in the parties' arbitration agreement. Most lower courts have interpreted §206 as
permitting arbitration in a foreign situs to be compelled, provided that is what the parties
agreed. (23)
Nevertheless, uncertainty also surrounds §206. By its terms, the provision only permits an
order to compel arbitration at the place “provided for” in the parties' arbitration agreement.
As we have seen, parties sometimes fail to agree (or to agree unambiguously) upon an arbitral
situs; alternatively, parties often agree to institutional arbitration rules that delegate selection
of the arbitral situs to an appointing authority or arbitral tribunal. As discussed in detail
below, questions have arisen in each of these cases concerning a district court's power under
§206 to compel arbitration abroad. (24) And, where the parties have agreed upon neither an
arbitral situs nor a means of selecting a situs, it is unclear whether §206 permits a court itself
to select an arbitral situs and compel arbitration there. (25)
P "582"
P "583"
c. Power of District Court to Compel Arbitration in a Particular Arbitral Situs Under §303
Section 303 of the FAA grants district courts power to compel arbitration pursuant to
agreements falling under the Inter-American Convention and its implementing legislation. (26)
Section 303 provides:
(a) “A court having jurisdiction under this chapter may direct that arbitration be held in
accordance with the agreement at any place therein provided for, whether that place is
within or without the United States....
 (b) In the event the agreement does not make provision for the place of arbitration ... the
court shall direct that the arbitration shall be held ... in accordance with Article 3 of the
Inter-American Convention.”
Thus, like §206, §303(a) grants authority to compel arbitration “at any place ... whether that
place is within or without the United States,” provided that this location is “provided for” in the
parties' agreement.
If the parties' arbitration agreement does not select an arbitral situs, then §303(b) grants
district courts authority to compel arbitration in accordance with Article 3 of the Inter-
American Convention. As described above, Article 3 incorporates the procedural rules of the
Inter-American Commission (“IACAC”), except where the parties have expressly agreed
otherwise. (27) Those rules grant the arbitral tribunal the power to designate an arbitral forum.
(28) And, where such a designation occurs, §303(b) authorizes district courts to compel
arbitration at the situs specified by the arbitrators.
Likewise, where parties have expressly agreed upon some means other than the IACAC's rules
for selecting an arbitral situs, Article 3 of the Convention permits such an agreement. Less
explicitly, §303(b) would appear to grant a district court authority to direct arbitration at the
situs designated in accordance with the parties' agreement. (29)
d. Power to Compel Arbitration in a Particular Arbitral Situs Under State Law
State law may also grant state (or other) courts the power to compel arbitration in a particular
P "583" arbitral situs. Section 2(a) of the Uniform Arbitration Act authorizes the issuance of orders
P "584" compelling arbitration, without expressly imposing any geographical limits. Likewise, §18 of
the Act, relating to venue, does not appear to limit the places where arbitration may be
ordered.
e. Availability of Traditional Equitable Powers to Compel Arbitration in a Particular Arbitral
Situs
Apart from statutory authority, U.S. courts have broad equitable powers. It is well-settled that
a U.S. court has the power, in appropriate circumstances, to order persons subject to its
personal jurisdiction to perform (or refrain from performing) specified acts outside both the
forum and the United States. (30) Although there is no reason in principle that this authority
should not extend to ordering a party to proceed with arbitration in a foreign forum, the
historic common law prohibition against specific enforcement of arbitration agreements has
left the power of lower courts to compel arbitration abroad uncertain. (31)
3. Lower U.S. Court Applications of §4 Where the Parties Have Agreed Upon the Arbitral Situs
Sections 4 and 206 of the FAA have been the subject of substantial U.S. litigation even in
relatively straightforward cases where the parties have previously agreed upon a particular
arbitral situs. The opinion in Econo-Car Int'l, Inc. v. Antilles Car Rentals, Inc., (32) excerpted
below, illustrates the divergent interpretations that §4 has produced in these circumstances.
FEDERAL ARBITRATION ACT
9 United States Code §4
[excerpted below at pp. 999-1000]
ECONO-CAR INTERNATIONAL, INC. v. ANTILLES CAR RENTALS, INC.
499 F.2d 1391 (3d Cir. 1974)
ADAMS, CIRCUIT JUDGE.... The controversy prompting this appeal centers upon a franchise
P "584" agreement between Econo-Car International, Inc., the franchisor, and Antilles Car Rentals, Inc.,
P "585" the franchisee. On February 25, 1972, Antilles notified Econo-Car that it intended to
terminate the franchise agreement.... Econo-Car advised Antilles that it desired to submit the
[parties'] various disagreements to the process of arbitral resolution pursuant to paragraph 15
of the franchise agreement. (33) Antilles refused to submit the disputes to arbitration, and
Econo-Car thereupon filed petition in the district court for the Virgin Islands to compel
arbitration. On November 21, 1973, the district court ordered Antilles to “enter into arbitration
proceedings in the City of New York in accordance with the terms of the [franchise] agreement.”
...
On this appeal, Antilles challenges the district court's order on several grounds.... Under the
order's terms the contemplated arbitration is to take place in New York City, as specifically
provided in the agreement between the parties. Section 4 of the [FAA] permits a party to
request an order requiring arbitration “in the manner provided for in such agreement.” But §4
also provides that the arbitration “shall be within the district in which the petition for an order
directing such arbitration is filed.” In a case like the present, where the agreement provides for
arbitration outside the district in which the petition is filed, §4 can create a perplexing
dilemma: a district court might not be able to order arbitration strictly in accordance with the
terms of the agreement, as one portion of §4 seems to require, without contravening a second
portion of §4.
While any directive in §4 that arbitration be conducted according to the terms of the
agreement is implicit at best, (34) the requirement that arbitration take place in the district
court where the petition is filed is clear and unequivocal. Certainly the saving of resources
occasioned by the geographic concentration of all proceedings provides an appropriate
legislative basis for this limitation on the district court's power. We recognize that if the
 statutory language referring to the terms of the arbitration agreement is also given a restrictive
reading, a party who seeks arbitration in a district court properly having venue may well be
unable to secure an arbitration order in such district court in circumstances like those
presented by this case. Despite the somewhat paradoxical situation thus possibly created, we
are inclined to heed the unambiguous statutory language limiting the district court's power to
order arbitration outside of the district. We hold, therefore, that the district court erred in
ordering arbitration to take place in New York City. (35) ...
P "585"
P "586"
Notes on Judicial Selection of Arbitral Situs Under FAA
1. Lower U.S. court decisions holding that a district court lacks power under §4 to order
arbitration outside its district. Several lower U.S. courts have held or expressly concluded in
dicta that §4 does not permit a U.S. district court to compel parties to arbitrate outside the
judicial district where the court is located – even when that is what the parties' arbitration
agreement unambiguously provides. Management Recruiters Int'l, Inc. v. Bloor, 129 F.3d 851 (6th
Cir. 1997) (“We agree with the majority of courts that have recognized that, where the parties
have agreed to arbitrate in a particular forum, only a district court in that forum has
jurisdiction to compel arbitration pursuant to Section 4.”); Merrill Lynch, Pierce Fenner & Smith,
Inc. v. Lauer, 49 F.3d 323, 327 (7th Cir. 1995) (§4 “clearly requires a geographic link between the
site of the arbitration and the district which, by compelling arbitration or directing its scope,
exercises preliminary control ...”); Texaco, Inc. v. American Trading Transp. Co., 644 F.2d 1152,
1154 (5th Cir. 1981); Oil Basins Ltd v. Broken Hill Proprietary Co., 613 F.Supp. 483 (S.D.N.Y. 1985)
(dicta that, under §4, court may only stay litigation, and not compel arbitration, when contract
specifies arbitral forum in another district); Couleur International Ltd v. Saint-Tropez West, 547
F.Supp. 176 (S.D.N.Y. 1982); E.C. Ernst Inc. v. Potlatch Corp., 462 F.Supp. 694 (S.D.N.Y. 1978);
Netherlands Curacao Co. v. Kenton Corp., 366 F.Supp. 744, 745-46 (S.D.N.Y. 1973); Batson Yarn and
Fabrics Mach. Group, Inc. v. Saurer-Allma GmbH-Allgauer Maschinenbau, 311 F.Supp. 68, 75-76
(D.S.C. 1970) (staying litigation under §3, but concluding that it lacked authority to compel
arbitration in another district under §4).
2. U.S. lower court decisions holding that district court can compel arbitration under §4 outside
its district, if the parties' agreement expressly selects that place as the arbitral situs. In
contrast to the result in Econo-Car, some lower U.S. courts have concluded that §4 does permit
an order compelling arbitration in another U.S. judicial district (or abroad) – but only if the
parties' arbitration agreement specifically provides for arbitration in that forum. Jones v. Sea
Tow Services Freeport New York, Inc., 828 F.Supp. 1002 (E.D.N.Y. 1993); G.B. Michael v. SS
Thanasis, 311 F.Supp. 170 (N.D. Calif. 1970) (without analysis).
3. Rationale for territorial limits on §4 power. According to the Econo-Car court, §4 is internally
inconsistent. Its literal terms “can create a perplexing dilemma: a district court might not be
able to order arbitration strictly in accordance with the terms of the agreement, as one portion
of §4 seems to require, without contravening a second portion of §4.” Is §4 actually so
confused? Consider the court's explanation in Jones v. Sea Tow Services Freeport New York, Inc.,
828 F.Supp. 1002 (E.D.N.Y. 1993):
“The two clauses of Section 4 are easily reconciled by a close reading of the statutory language:
the court in the district in which the petition was filed must ‘hear’ the parties concerning
whether the ‘making of the agreement for arbitration’ is at issue; once that ‘hearing’ or
‘proceeding’ takes place, the court must order arbitration in accordance with the agreement.”
Is that persuasive?
Is the conclusion in Econo-Car, that §4 only permits a court to compel arbitration in its own
district, compelled by the language of §4? Is it desirable? Consider the following excerpt from
Econo-Car.
“While any directive in §4 that arbitration be conducted according to the terms of the
agreement is implicit at best, the requirement that arbitration take place in the district court
where the petition is filed is clear and unequivocal. Certainly the saving of resources
occasioned by the geographic concentration of all proceedings provides an appropriate
legislative basis for this limitation on the district court's power.”
If the parties have designated an arbitral situs that is within the United States is there any real
difficulty with the position taken in the foregoing excerpt? What can a party that wants to
P "586" compel arbitration do? Suppose, however, that the arbitral situs is outside the United States, as
P "587" is often the case in international arbitration? Is there any basis for interpreting the text of §4
as providing different rules in international, as compared to domestic, case? See supra pp. 114-
17, 119-26, 277.
4. Lower U.S. court decisions holding that district court can compel arbitration under §4 in
another district when party resisting arbitration commences litigation there. Other lower U.S.
courts have held or concluded in dicta that arbitration can be ordered in another judicial
district – but only if the party seeking the §4 order did not commence the litigation in which
the extraterritorial order is sought, but instead is defending against a suit brought against it in
federal court on the merits by invoking the arbitration agreement. Purdy v. Monex Int'l Ltd, 867
F.2d 1521 (5th Cir.), cert. denied, 493 U.S. 863 (1989); National Iranian Oil Co. v. Ashland Oil, Inc.,
817 F.2d 326, 330-32 (5th Cir.), cert. denied, 484 U.S. 943 (1987); Dupuy-Busching General Agency,
Inc. v. Ambassador Ins. Co., 524 F.2d 1275 (5th Cir. 1975) (per curiam); M & I Elec. Indus. Inc. v.
Rapistem Demag Corp., 814 F.Supp. 545 (E.D. Tex. 1993) (party cannot resist arbitration in order
to provoke §4 motion to compel in a judicial district other than the arbitral situs); Tolaram
Fibers, Inc. v. Deutsche Engineering etc., 1991 U.S. Dist. Lexis 3565 (M.D.N.C. 1991) (“when the party
 seeking to enforce arbitration did not initiate the action, a district court has authority under §4
to compel arbitration outside of the district in accordance with a specific arbitration forum
selection clause.”).
Is there any support in §4's language for the foregoing conclusion? If §4 incorporates a
territorial limitation, is there any basis for ignoring that limit when §4 is raised in defense to an
action on the merits? Note that a party confronted with such an action presumably may seek a
§3 stay in the plaintiff's action and commence a §4 action in the arbitral forum (if it is within
the United States). How inefficient would this be?
5. Lower U.S. court decisions holding that district court has discretion under §4 to order
arbitration wherever it deems appropriate, even if parties have not agreed on arbitral situs. A
few lower courts have held that §4 vests the trial court with discretion as to where to order
arbitration – even if the parties have not agreed upon a situs. Merrill Lynch, Pierce, Fenner &
Smith, Inc. v. DeCaro, 577 F.Supp. 616, 625 (W.D. Mo. 1983). Is this a desirable result?
6. Lower U.S. court decisions holding that district court should transfer §4 motion to compel to
district where arbitral situs is located. Some U.S. lower courts have taken the sensible
approach of transferring actions seeking to compel arbitration to the U.S. judicial district in
which the parties have agreed to arbitrate. See 28 U.S.C. §1404 Municipal Energy Agency of Miss.
v. Big Rivers Elec. Corp., 804 F.2d 338, 345 (5th Cir. 1986) (“It would stand reason on its head to
allow [plaintiff] to dictate the choice of forum for arbitration by seeking to avoid arbitration”);
Bosworth v. Ehrenreich, 823 F.Supp. 1175, 1177 (D.N.J. 1993) (where parties agreed to arbitrate in
New York, and §4 motion to compel was filed in New Jersey, district court would transfer action
to New York); Bao v. Gruntal & Co., 942 F.Supp. 978 (D.N.J. 1996) (same). See also Alpert v.
Alphagrahics Franchising, Inc. 731 F.Supp. 685, 689 (D.N.J. 1990) (arbitration agreement selected
Arizona as arbitral situs, but motion to compel was brought in New Jersey, New Jersey district
court stayed action so that action to compel could be brought in Arizona district court). This
solution works well if the arbitral situs is in the United States. What if the arbitral situs is
located abroad? Does the transfer analogy provide any guidance for forum non conveniens
analysis?
7. Traditional equitable power to order arbitration. U.S. courts have long possessed broad
equitable authority, including the power to order persons to do things outside the territorial
limits of the forum. E.g., United States v. First National City Bank, 379 U.S. 378 (1965);
Restatement (Second) Conflict of Laws §53 (1971); Messner, The Jurisdiction of a Court of Equity
Over Persons to Compel the Doing of Acts Outside the Territorial Limits of the State, 14 Minn. L.
Rev. 494 (1930); G. Born, International Civil Litigation in United States Courts 484-85 (3d ed. 1996).
Coupled with §2 of the FAA – which renders arbitration agreements valid and enforceable on a
par with other contracts, see supra pp. 161, 329-34 – this equitable power arguably provides a
basis for compelling arbitration in a particular forum, even if §4 does not.
Lower U.S. courts have not considered this possibility. They have, however, relied on
traditional equitable powers to remove arbitrators, see York Hannover Holding AG v. McDermott
Int'l, Inc., 1993 U.S. Dist. Lexis 6192 (S.D.N.Y. 1993) (possible equitable power to remove biased
arbitrator); to consider challenges to the selection of arbitral situses, Aerojet-General Corp. v.
American Arbitration Ass'n, 478 F.2d 248 (9th Cir. 1973) (possible equitable power to overturn
appointing authority's selection of arbitral situs); and to enjoin arbitrations, supra pp. 4,
sww397. Why couldn't the Econo-Car court have used its residual equitable powers to compel
the parties to perform their agreement? Is there any reason to think that §4 was meant to
provide the exclusive basis for compelling arbitration?
P "587"
P "588"
8. Wisdom of orders by national court compelling arbitration in a particular arbitral situs. Is it
sensible, as a matter of policy, for U.S. courts to compel arbitration in a particular situs? Recall
that other nations do not generally provide comparable relief. Consider in particular Article
20(1) of the UNCITRAL Model Law and §176(3) of the Swiss Law on Private International Law,
excerpted above.
In general, given the FAA's jurisdictional and venue limits, what sorts of entities are likely to be
defendants in such actions – U.S. nationals or foreign nationals? If the former, why should U.S.
courts provide exceptional measures available primarily against U.S. nationals?
Ordering arbitration in a particular arbitral situs may also create the risk of conflicts between
the U.S. court's order and the laws of the arbitral situs. For example, arbitration might be
compelled in a foreign arbitral situs pursuant to an agreement specifying procedures that
violate the arbitral situs' law. E.g., Rhone Mediterranee etc. v. Achille Lauro, 712 F.2d 50 (3d Cir.
1983) (arbitration before two arbitrators alleged to violate Italian law). Or arbitration might be
ordered of claims that are non-arbitrable under the arbitral situs' laws. Marchetto v. DeKalb
Genetics Co., 711 F.Supp. 936 (N.D. Ill. 1989). Finally, U.S. courts might require arbitrators to
award relief not permitted by the curial law. PPG Indus., Inc. v. Pilkington plc, 885 F.Supp. 1465
(D. Ariz. 1993) (arbitral tribunal in London; §4 order requiring application of U.S. antitrust laws
and treble damages).
Moreover, in most international arbitrations, orders compelling arbitration could potentially
be issued by the courts of several nations; inconsistent orders and multiplicitous litigation
would clearly be possible if national courts engage in selection of an arbitral situs. Recall that
one of the principal objectives of international arbitration is to minimize the role of national
courts in dispute resolution. See supra pp. 1-11. Given these potential conflicts, would it be
preferable for U.S. courts simply to stay U.S. litigation on the merits of an arbitrable dispute
and let arbitration take its course?
 4. Power of U.S. District Court to Select Arbitral Situs Where the Parties Have Agreed Upon
Institutional Arbitration Rules
As described above, where the New York Convention applies, §206 of the FAA contains language
expressly authorizing district courts to compel arbitration outside the United States (as well as
outside the district court's judicial district). (36) Where the parties have agreed to arbitrate in
a particular arbitral situs, §206 has generally been interpreted to permit an order compelling
arbitration there. (37) As a result, the powers of U.S. courts to enforce arbitration agreements
can vary significantly depending upon the applicability of §206 and the Convention (rather
than §4 of the domestic FAA). (38)
Despite the seemingly clear import of §206, it too has given rise to uncertainty. In particular, as
illustrated by the opinion excerpted below in Tolaram Fibers, Inc. v. Deutsche Engineering Der
Voest-Alpine Industrieanlagenbau GmbH, (39) lower U.S. courts have encountered difficulty in
deciding when the parties' arbitration agreement “provides for” a particular arbitral situs, and
what their powers are when it does not. This uncertainty can be particularly acute where the
P "588" parties have agreed to arbitrate under institutional rules (like the ICC, AAA International, and
P "589" UNCITRAL Rules, excerpted above), permitting either the arbitration institution or arbitral
tribunal to select the forum.
UNCITRAL ARBITRATION RULES
Article 16
[excerpted below at p. 1026]
ICC (1998 VERSION) RULES
Article 14
[excerpted below at p. 1064]
LCIA (1999 VERSION) RULES
Article 16
[excerpted below at pp. 1080-81]
ARAM FIBERS, INC. v DEUTSCHE ENGINEERING DER VOEST ALPINE INDUSTRIEANLAGENBAU GMBH
1991 U.S. Dist. Lexis 3565 (M.D.N.C. 1991)
ELIASON, U.S. MAGISTRATE. Defendant Barmag AG (“Barmag”) moves, pursuant to the [FAA,] to
compel arbitration and to stay this action pending the completion of arbitration. Plaintiff filed
this action in state court and it was removed to this Court by defendant Deutsche Engineering
Der Voest-Alpine Industrieanlagenbau GmbH (“Deutsche Engineering”) pursuant to 28 U.S.C.
§1441, et seq....
Defendant Barmag shows through an affidavit that the parties entered into a contract which
provided in paragraph 12 that any contract disputes were to be decided in accordance with
the Arbitration Rules and Regulations of the International Chamber of Commerce (“ICC”).
Defendant Barmag further shows that plaintiff's lawsuit claims breach of warranties and, thus,
falls within the scope of this arbitration provision. Consequently, defendant Barmag argues the
Court should grant the motion to compel arbitration and stay proceedings.
Plaintiff does not dispute defendant Barmag's claim that this action is subject to the parties'
arbitration clause and that defendant's motion to compel arbitration and to stay the
proceedings in this Court should be granted. Rather, plaintiff states that the claims against
Barmag are based upon allegations made by defendant Deutsche Engineering. Therefore, it
adds that judicial economy will only be served if Deutsche Engineering also requests that the
P "589" proceedings be referred to arbitration and that the proceedings against both Deutsche
P "590" Engineering and Barmag be coordinated. Finally, because the equipment is located in
Ashboro, North Carolina, plaintiff requests that the arbitration forum be set for Randolph
County, North Carolina.
Defendant Barmag opposes any such limitation on the arbitration forum. It claims that to
require arbitration to be held in Randolph County, North Carolina, would be tantamount to
rewriting the arbitration clause which is forbidden. It argues that plaintiff must direct its
request to the ICC because Article 12 of the ICC Arbitration Rules grants the arbitral court,
absent agreement by the parties, the power to fix the place of arbitration. Defendant Barmag
further points out that the ICC Rules do not present any obstacle to coordinated proceedings.
The Court finds considerable complications arise from the fact that defendant Barmag's
motion seeks both to compel arbitration and to stay this action pending arbitration.... Upon
motion of a party, §3 of the Act permits a court to stay court proceedings pending arbitration
should it find an issue referable to arbitration under the parties' contract. A §3 order does not
concern itself with the place of arbitration. Rather, the court merely enters an order staying
proceedings until such arbitration proceedings are completed. Zenol, Inc., v. Carblox, Ltd, 334
F.Supp. 866, 869-70 (W.D. Pa. 1971), aff'd, 474 F.2d 1338 (3d Cir. 1973); Batson Y. & F. M. Gr., Inc. v.
Saurer-Allma GmbH-Allgauer etc., 311 F.Supp. 68, 75-77 (D.S.C. 1970).
Section 4 grants the Court the power to compel arbitration. However, it requires that the
arbitration be held in the district issuing the order. Econo-Car Int'l, Inc. v. Antilles Car Rentals,
Inc., 499 F.2d 1391 (3d Cir. 1974); Continental Grain Co. v. Dant & Russell, Inc., 118 F.2d 967 (9th Cir.
1941). (40) A party may not misuse §4 by filing a lawsuit in a district and then seek to compel
arbitration in that district in contravention to a forum selection clause in the arbitration
agreement which directs arbitration to be conducted elsewhere. Snyder v. Smith, 736 F.2d 409,
 419-20 (7th Cir.), cert. denied, 469 U.S. 1037 (1984). In such an instance, the Court may dismiss the
petition, or upon a motion under §3, stay the proceedings pending completion of the
arbitration elsewhere.
While the provisions of §3 and §4 appear to be clear, problems can arise when the party
bringing the action opposes arbitration. A similar situation arises in the instant case. Here,
plaintiff initiated this lawsuit, but a defendant seeks to compel arbitration. While defendant
could obtain a §3 order staying this action pending completion of the arbitration, that order by
itself would not be sufficient to compel the arbitration proceedings. Rather, the defendant
would have to file a motion to compel arbitration. However, defendant faces a problem
because, according to its construction of the contract, the arbitration must take place outside
of this district in accordance with the arbitration forum selection clause, but under §4 this
Court may only order arbitration in this district. Defendant's other apparent alternative would
P "590" have been to file a §3 motion to stay in this Court and a suit to compel arbitration in the court
P "591" located at the place which is designated in the arbitration forum selection clause. See
Municipal Energy Agency v. Big Rivers Elec. Corp., 804 F.2d 338 (5th Cir. 1986).
By moving in this Court to compel arbitration, defendant Barmag faces the danger that the
Court will construe its motion as a waiver of the right to arbitrate in accordance with the forum
selection clause of the parties' contract and to submit to an arbitration in this district. To
avoid such unfairness, the Fifth Circuit, in a series of cases, has concluded that when the party
seeking to enforce arbitration did not initiate the action, a district court has authority under §4
to compel arbitration outside of the district in accordance with a specific arbitration forum
selection clause. [See supra pp. 581-83] Therefore, the Court may perhaps still entertain
defendant Barmag's motion to compel arbitration in the place listed in the forum selection
clause of the arbitration agreement and, if necessary, compel arbitration in another judicial
district.
Notwithstanding the resolution of the §4 problem by the Fifth Circuit, which would apparently
encompass the motion filed by defendant Barmag, there are additional wrinkles in this case
which present further complications. The Fifth Circuit cases involve interstate agreements for
arbitration at specific places in the United States as opposed to an international agreement
not setting out a specific place, as in the present case. The forum selection clause of the
instant contract does not identify a specific place for the arbitration. In fact, the contract does
not even contain a forum selection clause. It merely says arbitration will be conducted
pursuant to ICC Rules. And, Article 12 of the ICC Rules merely states that: “The place of
arbitration shall be fixed by the [arbitration?] Court, unless agreed upon by the parties.”
Furthermore, the contract is an international one, involving foreign parties. The defendants are
German corporations and plaintiff is a North Carolina corporation. Thus, it is possible that the
arbitration could be directed to take place not just outside of this judicial district but outside
of the country. The Ninth Circuit confronted such a scenario in Bauhinia Corp. v. China Nat.
Machinery & Equipment, 819 F.2d 247 (9th Cir. 1987) [excerpted below]....
Having found the forum selection clause of the arbitration agreement to be ambiguous, the
Bauhinia Corp. court noted that pursuant to §4 of the Act, a district court can only order
arbitration within its district. However, since the case involved a possible foreign arbitration, it
also looked to the provisions of the [New York] Convention. It noted that §206 of that
Convention empowers a district court to order arbitration in accordance with the agreement
whether that place be within or without the United States. However, that section does not
permit the court to designate a forum if the agreement fails to do so. The court then reasoned
that Chapter 1 of the [FAA] applies to international agreements to the extent that it does not
conflict with Chapter 2....
Under Chapter 1, when a court enters an order compelling arbitration, the proceedings must be
conducted within the district in which the petition to enforce it is filed. 9 U.S.C. §4. The court,
therefore, concluded that when an international contract left the location of the arbitration
P "591" forum open, and a petition is brought to enforce an arbitration contract, the district court
P "592" must resort to Chapter 1 and order arbitration within its own district.
The Bauhinia Corp. reasoning applies to the international contract before this Court. Here,
defendant Barmag fails to show that the place of arbitration has been fixed. It never identifies
a specific place. It merely points to a forum selection clause of the ICC Rules which are
mentioned in paragraph 12 of the contract. The ICC Rules merely say that the [arbitration?]
court will fix the place of arbitration unless agreed to by the parties. This clause does not
select a definite forum. The Court finds that this forum selection clause is not sufficiently
specific so as to come with §206 of the Act. (41) The provisions of Chapters 1 and 2 of the [FAA]
require the Court to compel arbitration to be held in this district unless there is a specific
place designated in the forum selection clause of the arbitration contract. (42)
Defendant Barmag has not shown that the contract specifies a specific place. At most, it
demonstrates that there is a specific method for forum selection under ICC Rules. That is not
sufficient. Arbitration will be compelled, but in this district....
Notes on Judicial Selection of Arbitral Situs Under the FAA When Parties Have Agreed Upon
Institutional Arbitration Rules
1. District courts' power under §206 to order arbitration outside its district. Consistent with the
plain language of §206, Tolaram Fibers and other lower courts have held that they have the
power under §206, at least in some circumstances (discussed below), to order arbitration
outside their judicial districts. See National Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326 (5th
Cir.), cert. denied, 484 U.S. 943 (1987); McCain Foods Ltd v. Puerto Rico Supplies, Inc., 1991 U.S.
Dist. Lexis 8458 (D.P.R. 1991); Oil Basins Ltd v. Broken Hill Proprietary Co., 613 F.Supp. 483, 486-87
 (S.D.N.Y. 1985). Indeed, the legislative history of §206 makes it clear that the provision was
intended specifically to correct §4's territorial limitation. See Foreign Arbitral Awards, S. Rep.
No. 91-702, 91st Cong., 2d Sess. 7 (Appendix; Statement of Richard D. Kearney).
(a) Power of U.S. district court under §206 to order arbitration abroad in accordance with the
parties' arbitration agreement. As Tolaram Fibers' analysis suggests, lower courts have
unanimously concluded that §206 authorizes U.S. district courts to compel arbitration
outside both their district and the United States, provided that the parties' agreement
P "592" designates a foreign arbitral forum. See Jain v. de Mere, 51 F.3d 686 (7th Cir. 1995) (“If the
P "593" [international arbitration] agreement calls for arbitration outside of the district in
which the action is brought, the limits of §4 directly conflict with the district court's
powers under §206, and §208 would render §4 inapplicable”); Becker Autoradio U.S.A., Inc.
v. Becker Autoradiowerk GmbH, 585 F.2d 39 (3d Cir. 1978); Daye Nonferrous Metals Co. v.
Trafigura Beheer BV, 1997 WL 375,680 (S.D.N.Y. 1997) (compelling arbitration under §206 in
Paris); Alvenus Shipping v. Delta Petroleum (U.S.A.) Ltd, 876 F.Supp. 482, 487 (S.D.N.Y. 1994);
Acme Brick Co. v. Agrupacion Exportadora de Maquinaria Ceramica, 855 F.Supp. 163 (N.D.
Tex. 1994) (compelling arbitration in Spain; dismissing without prejudice action on the
merits); Jones v. Sea Tow Services Freeport New York, Inc., 828 F.Supp. 1002 (E.D.N.Y. 1993),
rev'd on other grounds, 30 F.3d 360 (2d Cir. 1994); Remy Amerique, Inc. v. Touzet
Distribution, SARL, 816 F.Supp. 213 (S.D.N.Y. 1993); In the Matter of an Arbitration Between
the West of England Ship Owners Mutual Ins. Ass'n (Luxembourg) etc., 1992 WL 37700 (E.D.
La. 1992); Filantro, SpA v. Chilewich Int'l Corp., 789 F.Supp. 1229 (S.D.N.Y. 1992); Euro-Mec
Import, Inc. v. Pantrem & Co., SpA, 1992 WL 350211 (E.D. Pa. 1992); McCain Foods Ltd v.
Puerto Rico Supplies, Inc., 1991 U.S. Dist. Lexis 8458 (D.P.R. 1991); Miller and Co. v. China
Nat'l Minerals Import & Export Corp., 1991 WL 171268 (N.D. Ill. 1991) (dismissing claims in
favor of arbitration in China); Oil Basins Ltd v. Broken Hill Proprietary Co., 613 F.Supp. 483,
486-87 (S.D.N.Y. 1985); Siderius v. Compania de Acero del Pacifico, 453 F.Supp. 22 (S.D.N.Y.
1978); Star-Kist Foods, Inc. v. Diakan Hope, SA, 423 F.Supp. 1220 (C.D. Calif. 1976).
(b) Lower court decisions holding that district court has no power to compel arbitration abroad
under §206 if parties have not agreed on foreign arbitral forum. Like Tolaram Fibers, some
lower U.S. courts have held that §206 does not grant a district court power to compel
arbitration abroad if the parties have not agreed upon – “provided for,” in §206's phrase –
the arbitral forum. See Jain v. de Mere, 51 F.3d 686 (7th Cir. 1995); Bauhinia Corp. v. China
National Machinery & Equipment Import & Export Corp., 819 F.2d 247 (9th Cir. 1987)
(excerpted below); Prograph Int'l Inc. v. Barhydt, 928 F.Supp. 983 (N.D. Calif. 1996) (where
arbitration agreement subject to Convention does not specify arbitral situs, U.S. court
may compel arbitration in United States); Oil Basin Ltd v. Broken Hill Proprietary Co., 618
F.Supp. 483 (S.D.N.Y. 1985). Put negatively, these decisions hold that a U.S. court lacks the
power under §206 to order arbitration in a foreign arbitral forum if the parties have not
themselves agreed upon a situs.
(c) Apparent lack of precedent relying on §206 to compel arbitration abroad if the parties have
not agreed on a particular foreign arbitral situs. There is apparently no reported authority
relying on §206 to compel arbitration in a foreign situs in the absence of an agreement
either specifying a foreign arbitral situs or a means of selecting such a situs.
2. Wisdom of orders by national court in institutional arbitration compelling arbitration in a
particular arbitral situs. Is it wise for U.S. courts to issue orders in institutional arbitrations
selecting the arbitral situs? Is this consistent with leading institutional arbitration rules, and
hence, the parties' arbitration agreement? If not, is such judicial situs selection consistent with
the New York Convention?
Note the various alternatives, discussed above, under most institutional rules to judicial
selection of an arbitral situs. See supra pp. 577-79. If a national court does not select the
arbitral situs, then what will ordinarily happen in an institutional arbitration – for example,
under the ICC, AAA, and UNCITRAL Rules excerpted above? What about ad hoc arbitrations,
where no direct mechanism for selecting a situs exists?
3. Lower U.S. court decisions abstaining from selecting arbitral situs when an arbitral institution
can do so. Some lower U.S. courts have refused to select an arbitral situs and order arbitration
there if the parties' arbitration agreement incorporates institutional rules permitting the
arbitration institution to designate the situs. In Shearson Lehman Bros., Inc. v. Brady, 783
F.Supp. 1490 (D. Mass. 1991), for example, the court considered whether to select an arbitral
situs, and compel arbitration there, when the parties had agreed to AAA Rules without
specifying an arbitral situs. The court refused to do so, holding that “abstention” in deference
to the AAA was appropriate:
The inherent risks of cost and delay before arbitration could commence, should a trial court
undertake to decide, subject to appeal to higher courts, disputes concerning where an
application must be filed and where the arbitration must be held, are fundamentally
inconsistent with the parties' agreement to resolve their disputes by arbitration.... [The] AAA is
prepared to decide the appropriate situs of the arbitration pursuant to a number of neutral,
commonsense factors, including the location of the parties, the location of the witnesses and
documents, a consideration of the relative cost to the parties, the place of performance of the
contract, and the laws applicable to the parties. This process seems likely to be fair and far
less expensive than threshold determination of the issue of situs in courts.
P "593"
P "594"
Isn't that exactly right? For similar conclusions, see Seguro de Servicio de Salud de Puerto Rico v.
McAuto Systems Group, Inc., 878 F.2d 5, 9 (1st Cir. 1989) (where district court did not find that the
 AAA's determination of locale was rendered in bad faith or in manifest disregard of the law,
there was no justification for overturning decision); Imaging Technology Solutions, L.L.C. v. Tech
Data Corp., 1999 WL 493075 (E.D.La. 1999) (compelling arbitration but refusing to fix arbitral situs
and stating situs would be determined by the AAA, which had the power under its rules to do
so); Modern Drop Forge Co. v. Eumuco Hasenclever GmbH, 1997 WL 323660 (N.D.Ill. 1997) (refusing
to fix situs of arbitration within or without judicial district under §4 of the FAA and stating that
the determination of situs would be left to the ICC); Prudential Securities Inc. v. Thomas, 793
F.Supp. 764 (W.D.Tenn. 1992) (“I therefore conclude as a matter of law that the agreement of the
parties provides that the [AAA] is the proper entity to determine whether the parties have
agreed on a location for the arbitration proceedings, and, if not, to determine that location
under its Rule 11 [providing that arbitral tribunal will fix locale in absence of agreement by
parties].”); City of Naples v. Prepakt Concrete Co., 490 F.2d 182 (5th Cir. 1974) (stating that by
agreeing to allow the AAA to determine the location of the arbitration in an arms-length
contract, the party waived its right to challenge AAA's decision in court); Matter of United States
Lines, Inc., 833 F.Supp. 350 (S.D.N.Y. 1993) (where parties' arbitration agreement selected
appointing authority for arbitrators, but not arbitral situs, court would order arbitration but
not select situs, which should be left to arbitrators); Prudential Securities, Inc. v. Thomas, 793
F.Supp. 764, 767-68 (W.D. Tenn. 1992) (“The parties concede that the AAA has been selected as
the arbitration association to resolve their disputes. No valid reason has been advanced why
the AAA should not, in accordance with the agreement of the parties, resolve the controversy
that has arisen between them as to the proper venue of the arbitration proceedings”); Aacon
Auto Transport, Inc. v. Barnes, 603 F.Supp. 1347 (S.D.N.Y. 1985); In re Charles R. Stevens v. Coudert
Bros., 662 N.Y.S.2d 42 (N.Y. App. Div. 1997) (“Where parties have agreed to arbitration, courts
should proceed with ‘great caution’ in interfering with the process of the selected tribunal,
particularly with respect to procedural threshold questions such as venue.... The parties having
agreed to arbitrate their dispute pursuant to the rules of the American Arbitration Association,
and there being no clear violation of [the agreement's ambiguous provisions regarding an
arbitral situs], the issue of venue was properly referred to the AAA for resolution”); Matter of
Royal Globe Ins. Co. v. Spain, 36 A.D.2d 632 (App. Div. 1971). Compare Bear, Stearns & Co. v.
Bennett, 938 F.2d 31 (2d Cir. 1991) (excerpted below at pp. 602-03) (compelling arbitration under
AAA Rules in New York, on grounds parties had agreed to New York as arbitral situs).
4. Importance of application of New York Convention in actions to compel arbitration abroad.
Note that it is important to ascertaining whether or not an arbitration agreement is subject to
the New York Convention in determining whether arbitration can be compelled abroad. That is
because of the availability (under most lower court decisions) of power under §206 to order
arbitration abroad and the unavailability (in many U.S. courts) of any such power under §4. For
a detailed discussion of the jurisdictional requirements of the New York Convention, see supra
pp. 117-53.
5. Incorporation of §4 in actions under chapter 2 of the FAA when §206 is not applicable. As we
have seen, cases arise when §206 is not applicable to enforce an arbitration agreement that is
subject to the New York Convention – typically, because the parties have not agreed upon an
arbitral situs. See supra p. 580. When this occurs, §208 provides for the residual applicability of
§4 “to the extent that [it] is not in conflict with this chapter [2 of the FAA] or the Convention as
ratified by the United States.” 9 U.S.C. §208. See, e.g., Jain v. de Mere, 51 F.3d 686 (7th Cir. 1995);
Bauhinia Corp. v. China National Machinery & Equipment Import & Export Corp., 819 F.2d 247 (9th
Cir. 1987) (excerpted below).
When §4 is incorporated into chapter 2, is it appropriate to incorporate it wholesale? In
particular, is there not a reasonable argument that §4's purported prohibition against orders
compelling arbitration outside the judicial district is inconsistent with the purposes of the New
York Convention? What about the limits in §206?
6. Lower U.S. court decisions refusing to order arbitration abroad under §206 pursuant to
selection of foreign arbitral situs by contractually-designated appointing authority. As Tolaram
Fibers illustrates, even some decisions that in principle accept a court's power under §206 to
compel arbitration outside the judicial district, pursuant to the parties' agreement to
arbitrate, appear to conclude that an agreement to arbitrate pursuant to institutional rules –
like ICC or AAA Rules – which grant the arbitral institution (or arbitrator) authority to select a
situs, does not provide a basis for a §4 or §206 order compelling arbitration in a foreign situs
chosen by the institution.
P "594" Is the Tolaram Fibers decision wise? Given the significant role of arbitral institutions in
P "595" contemporary international commercial arbitration, does the decision contribute to the
efficient resolution of international business disputes? Other lower courts have not followed
Tolaram Fibers, and should not do so in the future. See infra p. 595.
7. Lower U.S. court decisions ordering arbitration under §§4 and 206 in local judicial district
where parties have not agreed on a foreign arbitral situs.Tolaram Fibers does not merely refuse
to enforce the forum selection mechanism agreed by the parties; it also compels arbitration in
a place not agreed by the parties. Like Tolaram Fibers, a few lower court decisions have
ordered arbitration in the local judicial district in cases where the parties have agreed to
arbitrate, but have not clearly or validly agreed to an arbitral situs. See, e.g., Jain v. de Mere, 51
F.3d 686 (7th Cir. 1995) (§206 does not apply where arbitration agreement designates no
arbitral situs, but §4 “not only permits but requires a court to compel arbitration in its own
district when no other forum is specified”); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Laner, 49
F.3d 323 (7th Cir. 1995) (§4 provides district court power to compel arbitration in its district,
even absent parties' agreement on situs); Bauhinia Corp. v. China National Machinery &
Equipment Import & Export Corp., 819 F.2d 247 (9th Cir. 1987) (excerpted below); Capitol
Converting Co. v. Curioni, 1989 WL 152832 (N.D. Ill. 1989) (where parties failed to agree on arbitral
 situs, arbitration must be ordered under §4 in district where action to compel was filed); Oil
Basins Ltd v. Broken Hill Proprietary Co., 613 F.Supp. 483 (S.D.N.Y. 1985) (“the place of arbitration
is not designated in the contract and it is readily apparent that the parties are not in
agreement as to the place to proceed.... Accordingly, the Court grants plaintiff's motion to
compel arbitration in New York”; subsequently modified).
One court explained the application of §4 to an international arbitration agreement, which
does not specify the arbitral situs, as follows:
Section 4 ..., which requires that the court direct that arbitration take place in its district,
conflicts with section 206 ..., which requires the court to direct that arbitration be held in
accordance with the agreement of the parties whenever the parties to an international
agreement have chosen a location for arbitration. However, ... [where] the parties have failed
to choose a place for arbitration, section 4 ... does not conflict with [section 206], and
accordingly has been applied.
Capitol Converting Co. v. Curioni, 1989 WL 152832 (N.D. Ill. 1989).
Recall that Article II(3) of the New York Convention requires national courts to “refer the parties
to arbitration” if they have entered into a valid arbitration agreement. Is Tolaram Fibers
consistent with Article II(3)? Will an award made in North Carolina against the German company
likely be enforceable in Germany? Should it be?
For a discussion of cases where the parties' agreement as to arbitral situs is incoherent, flawed,
or unenforceable, see infra pp. 596-609.
8. Practical value of decision by arbitral institution or tribunal selecting arbitral situs. Suppose
that the ICC International Court of Arbitration had made a decision selecting a specific arbitral
situs in Tolaram Fibers. Suppose, for example, that the ICC had already written to the parties
informing them that the arbitration would be sited in London or Washington D.C. How would
that have affected the court's analysis?
9. No power under §206 to order arbitration in a nation that is not a signatory to the New York
Convention. In NIOC, the court holds that it would not compel a party to arbitrate in a country
that had not ratified the New York Convention. Is that a fair interpretation of §206 and the New
York Convention? Note that, if a U.S. and a Japanese (or Iraqi) company agreed to arbitrate in
Iran (or another non-signatory of the New York Convention), the NIOC decision would preclude
the U.S. company from obtaining an order compelling the Japanese (or Iraqi) company to
arbitrate. Is that unwise?
10. The errors of Tolaram Fibers – importance of situs-selection by arbitral institutions or
tribunals. Most commentators would conclude that Tolaram Fibers, excerpted and discussed
above, was plainly wrong in holding that the parties' agreement to the ICC Rules “is not
sufficiently specific so as to come within §206.” Institutional rules, including those of the ICC,
have long provided for the selection of arbitral situses by either the arbitration institution or
the tribunal; this has played an important role in international dispute resolution, by providing
a neutral, efficient means of situs-selection which avoids the delays, expenses, and potentially
conflicting results that often follow judicial intervention.
P "595"
P "596"
The Tolaram Fibers court also refused to compel arbitration in the situs selected by the ICC
because it could not be certain that the situs would be a signatory to the New York Convention.
Although NIOC construes §206 as limited to compelling arbitration in signatory states, the
Tolaram Fibers conclusion does not follow from that premise. The ICC situs-selection process
can go forward even if one party does not participate. If the ICC selects a forum as to which
§206 does not permit an order compelling arbitration, then no such order will issue; if the ICC
picks a forum within §206's ambit, an order may issue. Could the Tolaram Fibers court have
waited until the ICC International Court of Arbitration had selected a specific arbitral situs, and
then ordered arbitration in that place?
11. The errors of Tolaram Fibers revisited – ordering arbitration locally. In addition to refusing
to compel arbitration in a situs selected by the ICC, the Tolaram Fibers court also compelled
arbitration in its own judicial district. An alternative course would have been merely to grant a
§3 stay, and leave the ICC proceedings free to go forward. If one party declined to participate
in arbitral proceedings in the forum selected by the ICC, it would face a potential default
award.
Compare the results in NIOC and Tolaram Fibers. In NIOC, the court refused to order arbitration
in its own judicial district, even though the parties' agreement to a foreign situs was no longer
valid or enforceable. In Tolaram Fibers, the court ordered arbitration in its own judicial district,
even though the parties' agreement as to a foreign situs was valid, but was (the court thought)
not specifically enforceable under §206. Which result is more defensible? Shouldn't the results
in the two cases be reversed?
If a company agrees to ICC arbitration, without agreeing on an arbitral situs, and wishes for the
arbitration to take place in the United States, what might it do after Tolaram Fibers?
5. Power of U.S. Courts to Select Arbitral Situs Where Parties' Arbitration Agreement is
Ambiguous or Defective
The preceding section examined the limits on a U.S. court's statutory power to compel
arbitration under §§4 and 206 in a particular arbitral situs even when the parties had expressly
chosen either that forum or a forum-selection process. This section considers the power of a U.S.
court to compel arbitration in a particular situs when there is no enforceable agreement
 between the parties concerning the arbitral situs or a means of selecting a situs. Implicit within
any such authority is, of course, the power of a U.S. court to select an arbitral situs.
When the parties' arbitration agreement is ambiguous, wholly silent as to arbitral situs, or
otherwise flawed, the potential for procedural mischief is considerable. Either or both parties
can commence judicial proceedings – in the courts of two or more nations – seeking
clarification of the agreement and designation of a favorable arbitral forum or situs. (43)
Alternatively, the parties can commence parallel arbitration proceedings before the various
arbitral institutions that are arguably designated in the parties' agreement(s).
As we have seen, one way of resolving disputes over the arbitral situs would be judicial
abstention. If the parties have not agreed upon an arbitral situs, the arbitrators can
themselves decide upon a situs. Even when the parties have not agreed to institutional rules
P "596" expressly granting the arbitrators such authority, (44) it is generally implicit in an agreement
P "597" to arbitrate, or explicit in national law, that the arbitrators are authorized (absent contrary
agreement) to pick a place to conduct the arbitration. (45)
U.S. courts have sometimes – but by no means consistently – taken the course of abstention.
(46) The Bauhinia, Lea Tai, NIOC, and Bear Stearns decisions, excerpted below, illustrate the
various ways that U.S. courts have dealt with requests to enforce arbitration agreements with
ambiguous or defective selections of an arbitral situs. As the decisions suggest, the state of U.S.
law on the subject is unfortunate and unsettled. Neither the power of district courts to select
an arbitral situs, nor the circumstances in which they will choose to exercise that power, are
clear. The result is an unhappy invitation to the very judicial forum selection battles and
multiplicitous litigation that agreement on international arbitration was intended to prevent.
LEA TAI TEXTILE CO. v. MANNING FABRICS, INC.,
411 F.Supp. 1404 (S.D.N.Y. 1975)
DUFFY, DISTRICT JUDGE. This petition to compel arbitration and to stay a pending state court
action is brought under diversity jurisdiction, 28 U.S.C. §1332, and the [FAA], 9 U.S.C. §4.
Petitioner, Lea Tai Textiles, Ltd (“Lea Tai”), is a corporation organized under the laws of Hong
Kong where it has its principal place of business. Respondent, Manning Fabrics, Inc.
(“Manning”), is a New York corporation with its principal place of business in St. Paul, North
Carolina....
From November 1973 to April 1974, the parties entered into a series of contracts for the sale of
cotton cloth. Manning would send a purchase order from its New York office to Lea Tai in Hong
Kong. Lea Tai, in turn, mailed confirmations to Manning. In September of 1974, Lea Tai shipped
400,000 yards of cotton duck and 120,000 yards of cotton sateen to Manning. Lea Tai alleges
that due to changing market conditions Manning wrongfully refused to accept the goods.
Manning argues that after an August, 1974 shipment of defective goods it instructed Lea Tai to
cease further shipments. Manning filed suit in the Court of Common Pleas, State of South
Carolina.... Lea Tai seeks to stay this suit and compel arbitration in New York. Manning
contends that no agreement to arbitrate was ever made.
P "597" The Act provides that a party aggrieved by another's failure to arbitrate may petition a United
P "598" States District Court to compel arbitration, 9 U.S.C. §4. “If the making of the arbitration
agreement ... be in issue, the court shall proceed summarily to trial thereof.” Although the
existence of the arbitration agreement is in dispute, the essential facts are not and thus the
matter can be disposed of without plenary hearing.
In determining the validity of a contract to arbitrate, the Court of Appeals for this Circuit has
consistently held that federal rather than state law controls. Robert Lawrence Company v.
Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir.); Coenen v. R. W. Pressprich & Co., 453 F.2d 1209 (2d
Cir.), cert. denied, 406 U.S. 949 (1972). In the context of this case the conflict of law inquiry is
more of an academic pursuit. Although Congress did not substitute the Uniform Commercial
Code (“U.C.C.”) for the federal common law of contracts, the Code is nevertheless “a most
appropriate source of federal law.”In re Yale Express System, Inc., 370 F.2d 433, 435 (2d Cir.
1966)....
Turning to the existence of a contract to arbitrate, I am faced with the not uncommon exchange
of inconsistent forms between a buyer and a seller. Both parties apparently concede the
existence of a series of valid contracts for the sale of goods, they argue whether an arbitration
clause was made a part thereof. Manning's order form under which Lea Tai seeks to compel
arbitration provides as follows:
“11. ARBITRATION: Any controversy arising out of or relating to this contract shall be settled by
arbitration in the City of New York in accordance with the Rules then obtaining of the American
Arbitration Association or the General Arbitration Counsel [sic] of the Textile Industry,
whichever shall be first selected by the party instituting the arbitration.... The parties consent
to the jurisdiction of the Supreme Court of the State of New York and the United States District
Court for the Southern District of New York for all purposes in connection with said
arbitration....”
Lea Tai's confirmation form, labelled a “contract,” contains an arbitration clause different from
Manning's:
“12. ARBITRATION.... Should any dispute arise between the Buyers and the Sellers in relation to
this Contract which they are unable themselves to settle the same shall be referred to the
arbitration of two arbitrators; one to be appointed by the Sellers and the other by the Buyers,
and the provisions of the Hong Kong Code of Civil Procedure as to a reference to two arbitrators
shall apply.”
 Thus, the parties now seek me to decide whether they agreed to arbitrate and if so which
clause controls. U.C.C. 2-207(1) provides that a confirmation may operate as an acceptance
even though its terms differ from that of the offer:
P "598" “A definite and seasonable expression of acceptance or a written confirmation which is sent
P "599" within a reasonable time operates as an acceptance even though it states terms additional
to or different from those offered or agreed upon, unless acceptance is expressly made
conditional on assent to the additional or different terms.”
Subdivision 2 outlines the effect of the conflicting term:
“The additional terms are to be construed as proposals for addition to the contract. Between
merchants such terms become part of the contract unless:
(a) the offer expressly limits acceptance to the terms of the offer;
(b) they materially alter it; (47) or
(c) notification of objection to them has already been given or is given within a reasonable
time after notice of them is received.”
The Official Comment to the section clearly indicates that a conflicting clause is to be
considered as a notification of objection for the purposes of U.C.C. §2-207(2)(c).... Since the
arbitration clauses are in hopeless conflict, I find that no contract to arbitrate was made.
This result suggested by the U.C.C. has a solid basis in logic and reason. While there is a strong
federal policy favoring arbitration, ... it remains a creature of contract. This Court will not
impose its will on parties whose intentions are in clear conflict on this important issue.
Arbitration under the Code of Hong Kong rather than the laws of New York may well affect
important substantive rights. It is irrelevant to the issues of contract formation that the Hong
Kong seller now concludes that it would be willing to arbitrate in New York....
BAUHINIA CORP. v. CHINA NATIONAL MACHINERY & EQUIPMENT IMPORT & EXPORT CORP.
819 F.2d 247 (9th Cir. 1987)
TANG, CIRCUIT JUDGE. China National Machinery & Equipment Import and Export Corporation
(“CMEC”) appeals an order of the district court compelling arbitration of a contract dispute
between CMEC and Bauhinia Corp. Bauhinia sued CMEC for breach of contract and CMEC moved
P "599" to compel arbitration before the China Council for the Promotion of International Trade
P "600" (“CCPIT”) in Peking. The district court granted the motion to compel arbitration, but ordered
arbitration before the American Arbitration Association (“AAA”).
Bauhinia is a California corporation founded by Mr. Abbies Tsang who fled the People's
Republic of China in 1974. CMEC is a Chinese state trading organization. In 1981 and 1982
Bauhinia contracted to purchase nails from CMEC. The parties executed the contracts in
California for delivery to [the United States.] CMEC failed to deliver the nails claiming that an
edict from the People's Republic of China prevented performance.
After Bauhinia filed suit in district court, CMEC moved to compel arbitration invoking
arbitration clauses in the contracts. The first contract, written in Chinese, provides “[i]n case
quality problems occurs, the both sides shall have consultation as soon as possible to resolve
it.” The other two contracts, written in English, contain the following clause:
All disputes in connection with the execution of this Contract shall be settled through friendly
negotiations. In case an arbitration is necessary and is to be held in Peking, the case in dispute
shall then be submitted for arbitration to the Foreign Trade Arbitration Commission of the
China Council for the Promotion of International Trade, Peking, in accordance with the
“Provisional Rules of Procedure of the Foreign Trade Arbitration Commission of the China
Council for the Promotion of International Trade.” The decision of the Commission shall be
accepted as final and binding upon both parties.
In case the Arbitration is to take place at [BLANK] either party shall appoint one arbitrator, and
the arbitrators thus appointed shall nominate a third person as umpire, to form an arbitration
committee. The award of the Arbitration Committee shall be accepted as final by both Parties.
The Arbitrators and the umpire shall be confined to persons of Chinese or [BLANK] Nationality.
On November 18, 1985, the district court granted CMEC's motion to compel arbitration and
further ordered the parties to submit the matter to the American Arbitration Association
pursuant to the Association's rules and regulations. In its order, the court noted the “strong
federal policy in favor of arbitration in the context of international agreements.” The order
does not state the court's reason for designating the AAA instead of CCPIT. At the hearing the
judge indicated that the contract clearly called for arbitration but was ambiguous as to
whether arbitration was mandated in Peking or some other location. He expressed concerns
that Mr. Tsang might be subjected to personal danger if forced to return to China and that the
CCPIT would not provide a “speedy, thorough, informal, neutral decision making process,”
consistent with the parties' intent in seeking arbitration. CMEC appeals that part of the order
P "600" designating AAA instead of CCPIT as the arbitration agency. It argues that the district court
P "601" erred in overriding the parties' choice of arbitrator, CCPIT....
Federal law governs arbitration issues in agreements affecting interstate and foreign
commerce.... The contract here expressly calls for arbitration. In light of the strong federal
policy favoring arbitration, we conclude that the trial judge did not err in ordering the parties
to submit the matter to arbitration.
The more difficult question, however, is whether the court properly ordered arbitration before
 the AAA. The clauses do not expressly choose a forum. The clauses consist of two paragraphs.
The first paragraph reads “in case arbitration is necessary and is to be held in Peking....”
(emphasis added). Likewise, the second paragraph begins: “In case arbitration is to take place
at [BLANK]....” (emphasis added). CMEC argues that by failing to complete the blanks in the
second paragraph, the parties implicitly chose the Peking forum. In support, CMEC cites the
[FAA's] requirement that such clauses be enforced according to their terms. Furthermore,
argues CMEC, most of the witnesses, evidence and law are in the People's Republic of China;
Mr. Tsang negotiated the contracts in the People's Republic of China; and the CCPIT is an
impartial agency.
“[I]n light of present-day commercial realities and expanding international trade,” the
Supreme Court has said, “[a] forum clause should control absent a strong showing that it should
be set aside.”Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972). In construing arbitration
clauses, standard contract principles apply. Fuller v. Guthrie, 565 F.2d 259, 260-61 (2d Cir. 1977)
(citing Atkinson v. Sinclair Refining Co., 370 U.S. 238, 241 (1962)).... We agree with the district
court that this contract is ambiguous. The two paragraphs are mutually exclusive. The
document lacks any indication what forum the parties intended to select. Furthermore, the
record offers no evidence of an implied agreement to select a particular forum. The record
permits only one conclusion, that the parties intended to leave the issue open. See Oil Basins
Ltd v. Broken Hill Proprietary Co., 613 F.Supp. 483, 487 (S.D.N.Y. 1985).
At the hearing, the judge indicated that he found the contract ambiguous on the forum issue.
He then asked the parties to “resolve the problem of when, where and how without court
intervention.... If you don't think you can do so, tell me and I'll issue an order that orders
arbitration be taken at the forum and under the requirements set forth by the Court.” The
parties failed to resolve the issue so the court ordered arbitration before the AAA.
In the absence of a term specifying location, a district court can only order arbitration within
its district. Chapter 2 of Title 9 codifies the [New York] Convention.... §206 empowers a district
court to “direct that arbitration be held in accordance with the agreement at any place therein
provided for, whether that place is within or without the United States.” However, by its terms,
§206 does not permit a court to designate a foreign forum when the agreement fails to
designate a place. Chapter 1 of the [FAA] applies to international agreements to the extent that
P "601" Chapter 1 does not conflict with Chapter 2. 9 U.S.C. §208. Under Chapter 1, the arbitration
P "602" proceedings “shall be within the district in which the petition for an order directing such
arbitration is filed.” (48) Therefore, under the statutory regime, the only place that the district
court could order arbitration is the Eastern District of California. See Oil Basins, 613 F.Supp. at
488. We conclude that the court acted reasonably. The contracts left the location open. The
judge gave the parties an opportunity to resolve the matter themselves. When they failed to do
so, he took the only action within his power.
NATIONAL IRANIAN OIL COMPANY v. ASHLAND OIL, INC.
817 F.2d 326 (5th Cir. 1987)
[excerpted above at pp. 142-46]
BEAR, STEARNS & CO. v. BENNETT
938 F.2d 31 (2d Cir. 1991)
VAN GRAAFEILAND, CIRCUIT JUDGE. Bear, Stearns & Co. appeals from a judgment ... dismissing
its petition to compel Robert C. Bennett, Jr. to arbitrate his claim against Bear Stearns before
the American Arbitration Association (“AAA”) in New York City. We hold that the petition should
have been granted.
In 1983 Bennett, a Florida resident, signed a Customer Agreement with Bear Stearns, a
securities broker-dealer, which agreement provided in part that “any controversy arising out of
or relating to your account in connection with transactions between us or pursuant to this
Agreement or the breach thereof shall be settled by arbitration in accordance with the rules,
then in effect, of the National Association of Securities Dealers, Inc., the Board of Governors of
the New York Stock Exchange, Inc. or the Board of Governors of the American Stock Exchange,
Inc. [AMEX] as you may elect.” Article VIII, §2(c) of the AMEX Constitution (“the AMEX Window”)
provides that if any of the parties to a controversy is a customer, the customer may elect to
arbitrate before the American Arbitration Association in the City of New York, unless the
customer has expressly agreed, in writing, to submit only to the arbitration procedure of the
Exchange.
P "602" In July 1990 Bennett filed a Demand for Arbitration with the AAA alleging that Bear Stearns had
P "603" mismanaged his account. Although Bennett made his demand pursuant to his Customer
Agreement, and perforce the AMEX rules, he filed the demand in Florida and sought arbitration
in the City of Naples [, Florida]. Relying upon the above-quoted provisions of the Agreement
and Constitution, Bear Stearns filed a petition in the Southern District of New York to compel
arbitration in New York City. Although Bennett's counsel conceded in the court below that Bear
Stearns had not waived its claim that the proper venue is New York City, he disputed Bear
Stearns's claim on the merits and moved to dismiss the petition. The district court granted the
motion, holding in substance that the hearing venue was a procedural matter to be
determined by the AAA, not the court. We believe that the clear and explicit contractual terms
at issue herein cannot be disregarded so readily.
In the almost two decades that have elapsed since the Supreme Court decided The Bremen v.
Zapata Off-Shore Co., 407 U.S. 1 (1972), the prima facie validity of forum-selection clauses has
been recognized consistently by both the Supreme Court and this court. See, e.g., Carnival
Cruise Lines, Inc. v. Shute, 111 S.Ct. 1522, 1526-29 (1991). Of particular significance in the instant
 case is the fact that the Bremen holding has been applied to forum-selection provisions in
arbitration agreements. See, e.g., Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974)....
The “situs of suit” in the instant case is the City of New York. We already have construed the
phrase “in the City of New York” as used in the AMEX Window as a forum-selection clause. Paine
Webber, Inc. v. Rutherford, 903 F.2d 106, 108-09 (2d Cir. 1990).... We reject Bennett's argument
that the “situs of suit” should be determined by the arbitrators or the AAA rather than by the
district court. Where there is a valid agreement for arbitration, Congress has directed the
district courts to order that arbitration proceed “in accordance with the terms of the
agreement.” 9 U.S.C. §4.... We vacate the judgment of dismissal and remand to the district court
with instructions to grant Bear Stearns's petition.
Notes on Judicial Interpretation of Defective Selections of Arbitral Situses
1. District court's power to select its own district as the arbitral situs under §4 and §206 if
parties have not agreed on a situs. Like Tolaram Fibers, the court in Bauhinia holds that a
district court lacks power under §206 to compel arbitration outside its judicial district if the
parties have not agreed upon an arbitral situs. More important, again like Tolaram Fibers, the
court in Bauhinia held that the district judge also had power – without any such agreement
between the parties – to compel arbitration in its own judicial district. “In the absence of a
term specifying location, a district court can only order arbitration within its district.” 819 F.2d
at 250 (emphasis added). Moreover, the court approved the trial judge's exercise of that power.
Other courts have done the same. See Schulze and Burch Biscuit Co. v. Tree Top, Inc., 831 F.2d
709, 716 (7th Cir. 1987) (where parties agreed only that “All disputes under this transaction shall
be arbitrated in the usual manner,” arbitration would be compelled in district where §4
motion was filed); Prograph Int'l Inc. v. Barhydt, 928 F.Supp. 983 (N.D. Calif. 1996) (where
arbitration agreement subject to Convention does not specify arbitral situs, U.S. court may
compel arbitration in United States); Rosgoscirc v. Circus Show Corp., 1993 U.S. Dist. Lexis 9797
(S.D.N.Y. July 16, 1993) (ordering arbitration under §206 and §4 in district court's district, where
parties had agreed to arbitrate before non-existent institution in Netherlands); Tolaram Fibers,
P "603" Inc. v. Deutsche Engineering etc., 1991 U.S. Dist. Lexis 3565 (M.D.N.C. 1991); Capitol Converting Co.
P "604" v. Carioni, 1989 WL 152832 (N.D. Ill. Nov. 9, 1989); Oil Basin Ltd v. Broken Hill Proprietary Co.,
618 F.Supp. 483, 487 (S.D.N.Y. 1985) (Ҥ206 does not, however, expressly give or deny authority
to direct arbitration to take place in a locale unspecified in the agreement between the
parties, other than the district in which the court sits.”).
The courts' conclusions in Bauhinia and Tolaram Fibers can have important practical
implications. They permit a party to an international arbitration agreement that does not
designate an arbitral forum (or that arguably does not do so) effectively to select a U.S. arbitral
situs by commencing an action to compel arbitration in the U.S. district court in the district of
its choice. This has vital consequences, including the likelihood that some U.S. law will provide
the procedural law of the arbitration, supra pp. 428-30, that U.S. courts will be available to
appoint arbitrators under §5 of the FAA, infra pp. 635-37, that U.S. courts will be available to
order discovery under §7 of the FAA, supra pp. 493-94, 511, that U.S. courts will be the forum for
a motion to vacate any resulting award, see supra pp. 744-68, and that non-U.S. courts
generally will not be able to do any of the foregoing. Note also that the designation of the
arbitral forum may have direct effects on the identity of the arbitrator(s), the applicable
conflict of laws rules, the availability of provisional measures, and the applicability of the New
York Convention. See supra p. 573-75.
2. Lower court decisions holding that no arbitration agreement exists if parties have not
resolved conflicting views in contractual negotiations about arbitral situs. In Lea Tai, the
parties had exchanged writings in contractual negotiations that purported to designate two
different arbitral situs (and two different appointing institutions). In contrast to Bauhinia and
the authorities cited above, the Lea Tai court resolved this confusion by concluding that the
arbitration agreement was invalid and refusing to compel arbitration anywhere. Some other
courts have taken a similar path. See Oilex AG v. Mitsui & Co. (USA), Inc., 669 F.Supp. 85 (S.D.N.Y.
1987) (concluding that the parties' agreement was too uncertain to be enforceable).
Is the Lea Tai result sensible? Does the answer depend on whether the parties are simply silent
on arbitral situs, as distinguished from affirmatively proposing two different places? Is the
arbitral situs such a critical term that disagreement on it vitiates the entire arbitration
agreement?
3. Refusals by some lower U.S. courts to compel arbitration in their judicial district when the
parties have validly agreed on a foreign arbitral situs. Where the parties have clearly agreed to
arbitrate in a specific foreign arbitral situs (or in another U.S. judicial district), there appears
to be no reported case where a U.S. court has relied on §4 or §206 to compel arbitration in its
own judicial district. See Snyder v. Smith, 736 F.2d 409, 419-20 (7th Cir.), cert. denied, 469 U.S.
1037 (1984); Tolaram Fibers, Inc. v. Deutsche Engineering etc., 1991 U.S. Dist. Lexis 3565 (M.D.N.C.
1991) (“A party may not misuse §4 by filing a lawsuit in a district and then seek to compel
arbitration in that district in contravention to a forum selection clause in the arbitration
agreement which directs arbitration to be conducted elsewhere.”).
Like the foregoing decisions, NIOC indicates that, even where a U.S. court lacks the power to
enforce an agreement to arbitrate in a particular foreign forum, that court will not compel
arbitration in its own district. Is this necessarily the right result? What if, in NIOC, it was Ashland
Oil that had sought an order compelling arbitration in Mississippi? What if the parties' choice
of Iran as the arbitral situs had not been rendered impracticable by unrest in Iran, but that
Iran's refusal to sign the New York Convention rendered §206 inapplicable? Would it be
appropriate to issue such an order requiring arbitration in the United States? What will happen
 if no such order is issued?
4. U.S. lower court decisions holding that a district court must compel arbitration where the
parties have agreed on arbitral situs. Do §§4 and 206 impose an obligation on district courts to
interpret the arbitration agreement as it relates to arbitral situs, and then to enforce that
agreement on the situs? Bear Stearns holds that a district court must order arbitration in the
parties' chosen arbitral situs. Other lower courts have reached the same conclusion. See Paine
Webber, Inc. v. Rutherford, 903 F.2d 106 (2d Cir. 1990) (ordering arbitration in situs designated in
parties' agreement, without deferring to arbitral institution specified in agreement); McCreary
Tire & Rubber Co. v. CEAT SpA, 501 F.2d 1032, 1037 (3d Cir. 1974); Euro-Mec Import, Inc. v. Pantrem
& Co., SpA, 1992 WL 350211 (E.D. Pa. Nov. 16, 1992) (“upon the request of defendant, this Court
must refer the parties to arbitration in Geneva”); Tennessee Imports, Inc. v. Filippi, 745 F.Supp.
1314, 1320 (M.D. Tenn. 1990) (court “must refer the parties to arbitration”); Painewebber Inc. v.
Pitchford, 721 F.Supp. 542, 551 (S.D.N.Y. 1989) (holding that agreement to arbitrate “before the
[AAA] in the City of New York” “specifically states the venue of such arbitration proceedings”).
One lower U.S. court has, while ordering arbitration abroad, in the parties' agreed arbitral
situs, also required reports on progress in commencing the proceedings, and indicated that it
would alter its order (and the arbitral situs) if no progress was reported. Euro-Mec Import, Inc.
P "604" v. Pantrem & C. SpA, 1992 WL 350211 (E.D. Pa. 1992) (“the Court will monitor any delay and
P "605" potential delay in the resolution of the terms for arbitration. The parties must reach
agreement within forty-five (45) days on how the arbitration will proceed in Geneva and inform
the court of their agreement as well as provide the Court with an update of the parties'
progress within thirty (30) days. If the parties are unable to reach a mutual agreement, the
Court will order the location and terms of the arbitration.”) Does anything in the FAA or New
York Convention permit this judicial oversight? Does anything prevent it?
5. U.S. lower court decisions holding that a district court may abstain from compelling
arbitration in a specific situs. Compare the result in Bear Stearns, and the cases in the
preceding Note, with that in Shearson Lehman Bros., Inc. v. Brady, 783 F.Supp. 1490 (D. Mass.
1991). As discussed above, supra pp. 593-94, the court in Brady refused to select an arbitral situs
and instead abstained pending the AAA's selection of a situs. In Brady, unlike Bear Stearns,
there was no express agreement on situs, but the court's concerns about the expense and delay
of litigation over situs selection are at least partially applicable even when a purported
agreement on situs exists. Should the Bear Stearns court have deferred to the AAA?
Is the Brady court's abstention permitted by §§4 and 206 and the Convention? A number of the
authorities cited above have interpreted the Convention as requiring orders compelling
arbitration in the parties' agreed arbitral situs. See McCreary Tire, supra; Euro-Mec Import,
supra; Tennessee Imports, supra. To the extent that these decisions rely on the Convention, they
are simply wrong. Article II(3) does not require any affirmative order compelling arbitration
(much less orders compelling arbitration in a particular place). See supra pp. 157-58.
Some authorities have relied on §4 of the FAA to conclude that a court has no discretion to
refrain from compelling arbitration. Cf. Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 219
(1985). But, particularly given the territorial limits on §4 power, that section cannot fairly be
read to require orders compelling arbitration in a specific situs. Moreover, the practical
considerations arguing against judicial involvement in selection of an arbitral situs strongly
support an interpretation of §4 to permit judicial abstention from issuing such orders.
6. Wisdom of national court compelling arbitration in a particular place when the parties have
not agreed on an arbitral situs. If the parties have not agreed – either expressly or impliedly –
upon an arbitral situs, should a national court pick the situs for them? This question is less
momentous in the domestic U.S. setting than in international cases, where different arbitral
situses can have very different arbitration regimes and practical consequences. See supra pp.
573-75. That is, compare the differences in arbitrating in California, rather than Illinois, with
those of arbitrating in Iran rather than the United States.
In the international context, is it appropriate for a court in one country to designate the place
at which the parties will arbitrate if they have not agreed upon an arbitral situs? Recall how
the UNCITRAL Model Law and the Swiss Law on Private International Law approach this
question. See supra p. 588. What are the costs and risks of national courts selecting the arbitral
situs in international arbitrations?
What is the consequence if national courts do not designate the arbitral situs? If the
consequence is no arbitration, should national courts not seek to effectuate the parties' basic
agreement to arbitrate, rather than to litigate? On the other hand, if national courts do issue
orders compelling arbitration in a particular place, there is a significant possibility that
different courts (sometimes with parochial biases) will select different arbitral situses, and
that expensive conflicts between inconsistent national court orders will result.
7. Proposals to amend §§4 and 206. How should the current confusion surrounding §4 and §206
be remedied? Proposals have been made to: (a) grant district courts the power to select the
arbitral venue, where the parties have not done so; or (b) grant arbitrators (and not courts) the
power to do so. Compare Report to the Washington Foreign Law Society on the UNCITRAL Model
Law on International Commercial Arbitration, reprinted in, 2 Int'l Arb. Rep. 772 (1987) (arbitrators
to pick situs) and Report on the UNCITRAL Model Law on International Commercial Arbitration
prepared by the International Litigation Committee of the Commercial and Federal Litigation
Section, New York State Bar Ass'n 31 (1990) (same) with Adoption of the UNCITRAL Model Law on
International Commercial Arbitration as Federal or State Legislation: Report of the Committee on
Arbitration and Alternative Dispute Resolution of the Association of the Bar of the City of New
York (1989) (courts to pick situs). Which approach is preferable?
 Save in exceptional circumstances, involving national courts in selecting arbitral situses is
contrary to fundamental principles of international arbitration: it subjects the parties to
national courts, multiplicitous (and potentially conflicting) litigation, and expensive delays, at
the same time that it preempts the arbitrators' resolution of issues properly within their
jurisdiction. The better course is to defer to the selection of an arbitral situs under applicable
institutional rules, and/or applicable law, see supra pp. 593-94, subject to very limited judicial
review, see infra pp. 609-14. Do you agree?
P "605"
P "606"
8. Inconvenient arbitral situs. Suppose that the parties' arbitration agreement provides for an
arbitral situs which is very inconvenient to one or both parties. What relief, if any, can a party
seek?
(a) Inconvenient arbitral situs as basis for challenging arbitration agreement. Is the
designation of an arbitral situs that is seriously inconvenient to one party a valid basis for
challenging the validity of the entire arbitration agreement? See infra pp. 606-09. What
would be the consequences of success on such a challenge?
(b) Inconvenient arbitral situs as basis for seeking designation of different situs. Is the
designation of an arbitral situs that is seriously inconvenient to one party a basis for
seeking designation of a new arbitral situs? If so, who should make the designation?
Under the ICC and UNCITRAL Rules, would a tribunal have the power to order the parties
to accept a new arbitral situs? Would the ICC itself?
(c) Inconvenient arbitral situs as basis for holding hearings elsewhere. Note that an arbitral
tribunal would ordinarily have the power to order hearings at places other than the
arbitral situs. See supra pp. 579-80. Is this an appropriate (or the appropriate) remedy for
an inconvenient arbitral situs?
(d) Factors making an arbitral situs inconvenient. Assuming the arbitral tribunal will accept
arguments regarding inconvenient forum, what factors should the tribunal consider?
National courts that recognize the doctrine of forum non conveniens apply different
standards to determine whether a particular situs is inconvenient. Compare Piper v.
Reyno, 454 U.S. 235 (1981) with Spiliada Maritime Corporation v. Cansulex, [1986] 3 All E.R.
843 (H.L.) and Amchem Products v. Workers' Compensation Board, (1993) 102 D.L.R. (4th) 96,
109-111 (Supreme Court of Canada). All of these courts apply a presumption that the
plaintiff/claimant's choice of forum should not be disturbed. Is this presumption
appropriate for an arbitral institution sited in, for example, New York?
9. Defense to arbitration based on claim that arbitral situs is inconvenient. In some national
court litigation, the doctrine of forum non conveniens permits a party to obtain dismissal of
claims in a forum (where it is subject to personal jurisdiction) on the grounds that the forum is
grossly inconvenient. See, e.g., G. Born, International Civil Litigation in United States Courts 289-
366 (3d ed. 1996). Similarly, a party may resist enforcement of a forum selection clause on the
grounds that it designates an unreasonably inconvenient forum. Id. at 405-14. In general,
analogous defenses are not available in national courts to the enforcement of international
arbitration agreements selecting particular forums.
(a) National court decisions involving claims that the agreed arbitral situs is forum non
conveniens. There is relatively little reported precedent outside the United States
dealing with challenges in national courts to contractually-agreed arbitral situses. See
M/S V/O Tractoroexport Moscow v. M/S Tarapore & Co. [1971] All India Rep. 1 (upholding
injunction against arbitration in Moscow: “The current restrictions imposed by the
Government of India on the availability of foreign exchange ... will make it virtually
impossible for the Indian Firm to take its witnesses to Moscow for examination before the
Arbitral tribunal and to otherwise properly conduct the proceedings there”); Bliss Corp.
Ltd v. Kobe Steel Ltd (Supreme Court of New South Wales Sept. 29, 1987) (“Having regard to
the substantial practical considerations in favor of holding the arbitration in Tokyo and
the contractual provision that it be held there, I would not ... impose a condition that the
whole of the arbitration be held in New South Wales. This would be an unwarranted
interference with the discretion of the arbitrators. The conduct of the arbitration is their
province.”), quoted in Rogers, Forum Non Conveniens in Arbitration, 4 Arb. Int'l 240 (1988).
(b) U.S. Supreme Court dicta that forum selection defenses in Bremen are available in
arbitration. In Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985),
the Supreme Court appeared to incorporate, as valid defenses to the enforcement of an
international arbitration agreement, several defenses to forum selection clauses outlined
in Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972). In particular, the Mitsubishi Court
suggested in dicta that an arbitration clause could be resisted by a showing that
“enforcement would be unreasonable and unjust” or that proceedings “in the contractual
forum will be so gravely difficult and inconvenient that [the resisting party] will for all
practical purposes be deprived of his day in court.” 473 U.S. at 632 (quoting Bremen, 407
U.S. at 12, 15, 18).
 (c) U.S. lower court decisions holding that FAA does not permit claim that arbitral situs is forum
non conveniens. Notwithstanding Mitsubishi, a number of lower U.S. courts have held or
stated in dicta that neither Bremen's defenses nor the forum non conveniens doctrine are
available as defenses to enforcement of an international arbitration clause. Roney & Co.
v. Goren, 875 F.2d 1218, 1223 (6th Cir. 1989) (Congress “did not intend that the parties be
able to disregard selected contractual obligations willy-nilly in order to choose an
arbitral forum more convenient or more suited to a party's particular needs.”); USM Corp.
P "606" v. GKN Fasteners, Ltd, 574 F.2d 17, 20 (1st Cir. 1978) (“if every party who signed an
P "607" arbitration clause could later come into court and attempt to defeat the clause on the
basis of its unfairness or unreasonableness, the advantages attendant on arbitration
rather than litigation would be largely lost. A party's right to defeat an arbitration clause
for specifically recognized reasons is explicitly protected in the statute.”); Sam Reisfeld &
Son Import Co. v. SA Eteco, 530 F.2d 679, 680-81 (5th Cir. 1976) (concluding that FAA does
not permit “inconvenient forum” defense under Bremen; enforceability of arbitration
clause “is governed exclusively by the explicit provisions of the [FAA]”); Tennessee
Imports, Inc. v. Filippi, 745 F.Supp. 1314 (M.D. Tenn. 1990); Paine Webber, Inc. v. Pitchford, 721
F.Supp. 542 (S.D.N.Y. 1989) (“a forum selection clause in an arbitration agreement, just like
any other contractual provision, is entitled to complete enforcement, absent a showing of
adhesion”); Redshaw Credit Corp. v. Insurance Professionals, Inc., 709 F.Supp. 1032, 1035 (D.
Kan. 1989) (no forum non conveniens defense under FAA; arbitration “clause must be
enforced even if the result is unreasonable”); Al-Salamah Arabian Agencies v. Reece, 673
F.Supp. 748 (M.D.N.C. 1987); Spring Hope Rockwool v. Industrial Clean Air, Inc., 504 F.Supp.
1385 (E.D.N.C. 1981) (same); Joseph Muller Corp. v. Societe Anonyme de Gerance et
d'Armement, 314 F.Supp. 439 (S.D.N.Y. 1970), aff'd in part & rev'd in part, 451 F.2d 727 (2d Cir.
1971), cert. denied, 406 U.S. 906 (1972); United States v. American Employers' Ins. Co. of
Mass., 290 F.Supp. 139 (D.S.C. 1968); Texas San Juan Oil Corp. v. An-Son Offshore Drilling Co.,
198 F.Supp. 284 (S.D.N.Y. 1961).
(d) U.S. lower court decisions refusing to hold that contractual arbitral situs was inconvenient
or unreasonable. Other courts have not held that forum non conveniens defenses are
simply unavailable under the FAA, but have uniformly found that the contractually-
designated arbitral situs was not so unreasonable or inconvenient as to permit non-
enforcement of the arbitration agreement. Riley v. Kingsley Underwriting Agencies, Ltd, 969
F.2d 953 (10th Cir. 1992) (rejecting claim that arbitral forum will be biased); Hart
Enterprises International, Inc. v. Anhui Provincial Import & Export Corp., 888 F.Supp. 587
(S.D.N.Y. 1995) (rejecting claim that arbitration in Beijing would be unduly inconvenient:
“The short answer to the assertion is that [plaintiff] should have thought of that before it
signed contracts specifying arbitration in Beijing”); Euro-Mec Import, Inc. v. Pantrem & C.,
SpA, 1992 WL 350211 (E.D. Pa. 1992) (“the Court finds plaintiff's claim of unreasonable delay
and substantial hardships as a result of the Court's decision to order arbitration [in
Geneva, Switzerland] to be without merit; plaintiff and defendant appear to be
sophisticated business people who knowingly entered into a distribution agreement at
arm's length”); Filantro SpA v. Chilewich Int'l Corp., 789 F.Supp. 1229 (S.D.N.Y. 1992) (holding
that “unsettled conditions” in Moscow did not excuse performance, even assuming forum
non conveniens or comparable defenses are available); McCain Foods Ltd v. Puerto Rico
Supplies, Inc., 766 F.Supp. 58 (D.P.R. 1991).
(e) No “reasonable relationship” required between transaction and arbitral forum. U.S. courts
also will not require that there be any relationship between the parties or their
transaction and the arbitral forum. McCain Foods Ltd v. Puerto Rico Supplies, Inc., 766
F.Supp. 57 (D.P.R. 1991).
(f) Wisdom of no forum non conveniens defense. Putting aside the fact that Mitsubishi appears
to suggest (albeit in dicta) that the forum non conveniens defense is available in
international arbitration, is the refusal of lower courts to permit such a defense sound
policy? Why should U.S. courts lend their assistance to the enforcement of agreements
selecting “unreasonable” foreign arbitral situses? Consider the following:
It is submitted that, strictly confined, as it should be, to instances where proper
opportunity for vindicating the rights of the parties demands it, the reserve power of the
courts to negate forum selection or transfer the place of hearing should be maintained
and exercised.
Rogers, Forum Non Conveniens in Arbitration, 4 Arb. Int'l 240, 254 (1988). Is that correct? As
a matter of policy, why should different defenses be available for forum selection clauses
than for arbitration clauses? Is there any reason that gross inconvenience and
unreasonableness should matter less in the arbitration context than in the forum
selection context? Who will decide claims of forum non conveniens? If the answer is
national courts, is not expensive, multiplictious litigation likely to ensue?
As discussed above, hearings in an arbitration can be conducted, for reasons of
convenience, at places other than the arbitral situs. See supra p. 580. If a forum non
conveniens defense were permitted to arbitration agreements, would the remedy be a
change in the arbitral situs, or merely in the place where hearings are conducted?
 (g) Forum non conveniens under the FAA and New York Convention. Do either the FAA or the
New York Convention permit a forum non conveniens defense? Is an agreement selecting a
P "607" grossly inconvenient or unreasonable arbitral situs “null and void”? or “revocable”? If not,
P "608" then don't §2 of the FAA and Article II of the Convention foreclose any forum non
conveniens defense? Is it of any consequence that most non-common law jurisdictions do
not recognize a forum non conveniens doctrine?
(h) Forum non conveniens where arbitral tribunal or institution selects situs. If a forum non
conveniens defense to an arbitration agreement is permitted, should different standards
apply to arbitral situses selected by the arbitrators (or an arbitration institution) than
agreed to by the parties? Consider:
The question does arise, however, whether it would be appropriate to apply a less
stringent test in the case where an arbitral institute, or the arbitrators themselves, have
selected the forum because the parties failed to provide for it in their agreement. In my
view, the same standards should prevail in this case as well, the parties having
deliberately left their choice to a third party with full knowledge of the possibilities that
that would entail.
Graham, Internationalization of Commercial Arbitration, 13 Can. Bus. L. J. 1, 29 (1988).
In some senses, shouldn't the arbitrators' situs selection be entitled to greater deference
than a contractual situs selection? The arbitrators' selection of the arbitral situs lacks, on
the one hand, the parties' direct consent, but, on the other hand, it reflects a
presumptively neutral decision of an expert body motivated by considerations of fairness
and economy, rather than by partisan self interest.

(i) Forum non conveniens and powers of arbitral tribunal or institution. Even if a forum non
conveniens defense exists in arbitration, why should it be considered by national courts
in the first instance? Would it not be more appropriate for the arbitrators to decide such
claims? See supra pp. 74-75. Where should the tribunal hold hearings on the issue?
(j) Consequences of concluding the arbitral situs is grossly inconvenient. Assume both that a
forum non conveniens defense is recognized and that the parties' selection of a particular
arbitral situs is so grossly inconvenient as to be invalid. What is the appropriate remedy?
Should arbitration be ordered somewhere else (and if so, where)? Or, should the entire
arbitration agreement be invalidated?
10. Changed circumstances in arbitral situs. Suppose that a previously-designated arbitral situs
becomes inconvenient or inaccessible. For example, suppose that a U.S. company agrees to
arbitrate in Iran or Iraq, prior to hostilities between those countries and the United States.
After hostilities develop, should the U.S. company be required to arbitrate in Iran or Iraq, as it
had promised to do? Would a different situs be justified or merely a change in the place of the
hearings? Under what circumstances? If so, what arrangements would need to be made for
legal representatives, witnesses, and executives travelling to the situs?
11. Challenges to validity of parties' agreement selecting an arbitral forum on grounds of
impossibility. In NIOC, the parties had unambiguously agreed upon Iran as the arbitral situs.
Nevertheless, NIOC successfully argued that the agreement was unenforceable because of
impossibility and impracticability. Consider the NIOC court's treatment of these issues.
(a) Law applicable to impossibility. What law did the NIOC court apply to the issues of
impossibility and impracticability? Note the court's reference to “traditional principles
of contract law,” and its citations to the Restatement (Second) of Contracts. It is not clear
whether the NIOC court was applying U.S. federal or state law, although it appears to have
been the former. Compare the discussion above concerning the respective roles of federal
and state law in issues of enforceability of the arbitration agreement. See supra pp. 113-
17, 349-56.
The NIOC court's apparent application of the U.S. forum's rules of impossibility and
impracticability (rather than foreign rules) is consistent with the application of U.S. law
by U.S. courts to the interpretation of international arbitration agreements, see supra pp.
315-17, to issues of enforceability (fraud, illegality and unconscionability), see supra pp.
113-17, 353-56, and to issues of arbitrability, see supra pp. 275-76. Is this appropriate? Why
should U.S. law govern the impossibility of performing an agreement to arbitrate in a
foreign country where the parties have specifically agreed to the application of foreign
law? Note that, according to the NIOC court, “the entire agreement is to be interpreted by
reference to Iranian law.” (The NIOC court did not consider whether the parties'
arbitration agreement might be governed by a different law than the underlying contract.
See supra pp. 41-45, 95-117.)

(b) Substantive issues of impossibility. Suppose that Iran had been a party to the New York
Convention and, therefore, that §206 would have permitted the district court to compel
arbitration in Iran. If NIOC had sought an order compelling arbitration in Tehran, and if
Ashland had defended on the grounds of impossibility and impracticability, would it
P "608" have prevailed? Compare China Resource Products (U.S.A.) v. Fayda Int'l, 788 F.Supp. 815
P "609" (D. Del. 1992) (entertaining but rejecting unconscionability defense by small U.S.
company that agreed to arbitrate in China against Chinese state-owned entity); Filantro
SpA v. Chilewich Int'l Corp., 789 F.Supp. 1229 (S.D.N.Y. 1992) (rejecting claim that conditions
in Russia were too unsettled to permit arbitration).
 (c) Relation between impossibility and inconvenience. As described above, a few lower U.S.
courts have suggested that arbitration agreements will not be enforced if they select an
unreasonably inconvenient arbitral forum. See supra pp. 606-07. Most other courts, like
NIOC, have held that the FAA does not permit an “inconvenience” defense to the
enforcement of arbitration agreements. See supra p. 606-07. Nevertheless, the NIOC court
was willing to recognize the related defenses of impracticability and impossibility. The
rationale is presumably that the latter defenses go to the existence of an arbitration
agreement that is not “null and void” or “revocable,” under Article II(3) of the New York
Convention or §2 of the FAA, whereas nothing in the Convention or the FAA provides a
basis for an inconvenient forum defense.
(d) Relation between unconscionability and inconvenience. Claims that an arbitral situs is
inconvenient can also be couched in “unconscionability” terms. E.g., China Resource
Products (U.S.A.) Ltd v. Fayda Int'l, Inc., 747 F.Supp. 1101 (D. Del. 1990); McCain Foods Ltd v.
Puerto Rico Supplies, Inc., 766 F.Supp. 58 (D.P.R. 1991). As with impossibility defenses, such
claims arguably fit within Article II(3)'s “null and void” exception and §2's savings clause.
Nevertheless, U.S. courts have virtually unanimously rejected such claims on the facts.
See supra pp. 606-07.
(e) Other grounds for challenging agreement as to arbitral situs. There are additional grounds
which can be invoked to challenge the selection of an arbitral situs in the parties'
arbitration agreement. One such ground is that a subsequent oral agreement was made
not to enforce the choice of arbitral situs. This argument raises interpretative issues
under the requirement in the New York Convention and many national laws that an
arbitration agreement must be in writing. See Alphagraphics Franchising, Inc. v. Whaler
Graphics, Inc., 840 F.Supp. 708 (D. Ariz. 1993) (holding that party's breach of oral promise
not to enforce contractual choice of arbitral forum was fraud or unconscionability
sufficient to invalidate choice of arbitral situs).
12. Consequences of unenforceable selection of arbitral situs. A U.S. court's conclusion that the
parties' selection of an arbitral situs is unenforceable does not end the analysis. The question
remains whether the arbitration agreement is still valid and, if so, where the arbitral situs will
be and who will make that decision.
Suppose that in NIOC the parties' selection of Iran as the arbitral situs had been held
unenforceable at Ashland's behest, and that Ashland also had sought an order compelling
arbitration in Mississippi. Would a U.S. court issue such an order? As described above, lower
U.S. courts are divided over these questions. See supra pp. 148, 188-89. What conclusion should
U.S. courts reach?
13. Interpreting provision attempting to select the arbitral situs. The creativity of drafters knows
few limits, and with surprising frequency produces ambiguous or contradictory selections of
the arbitral situs. For decisions interpreting such provisions, see Paine Webber, Inc. v. Pitchford,
721 F.Supp. 542 (S.D.N.Y. 1989) (provision in arbitration clause for arbitration “before the [AAA]
in the City of New York” “specifically states the venue of such arbitration proceedings,” and is
not “merely intended to state [where] the AAA's headquarters is”); Warnes SA v. Harvic Int'l Ltd,
1993 WL 228028 (S.D.N.Y. 1993) (“an agreement on a non-existent arbitration forum is the
equivalent of an agreement to arbitrate which does not specify a forum; since the parties had
the intent to arbitrate even in the absence of a properly designated forum”).
14. Litigation/arbitration strategy in NIOC. Why did Ashland resist arbitration in Mississippi?
Without arbitration or litigation between NIOC and Ashland, which party is better off and by
how much? Why didn't NIOC pursue arbitration in Iran? What could it have done with an award
by an Iranian arbitral tribunal? Why did NIOC challenge the unenforceability of the arbitral
situs selection? What consequences will that challenge have if the Iranian arbitral proceedings
go forward?

C. Judicial Review by U.S. Courts of Decisions by Arbitration Institutions or Arbitral

Tribunals Designating Arbitral Situses
P "609" As we have seen, most institutional arbitration rules permit either the arbitration institution or
P "610" the arbitral tribunal to select the arbitral situs (assuming that the parties have not done so
themselves). (49) In many cases, U.S. courts will (and should) permit a contractually-agreed
mechanism for selecting an arbitral situs to go forward. (50) When such a selection is made,
parties will not always be pleased with the arbitral situs that is chosen. That, in turn, raises the
possibility of a judicial challenge to the selection of the arbitral situs. In some countries,
including the United States, such a challenge is possible, at least in principle. (51)
In practice, however, U.S. courts have generally rejected judicial challenges to selections of
arbitral situses by arbitration institutions or tribunals. For example, in Aerojet-General Corp. v.
American Arbitration Association, excerpted below, the Ninth Circuit held that the AAA's choice
of the arbitral forum was subject to judicial review, but that the appropriate standard of review
was “manifest disregard.” In contrast, other courts have refused to permit any interlocutory
judicial review of selections of arbitral situses made by arbitrators or arbitral institutions. (52)
AEROJET-GENERAL CORPORATION v.AMERICAN ARBITRATION ASS'N
478 F.2d 248 (9th Cir. 1973)
EUGENE A. WRIGHT, CIRCUIT JUDGE. The plaintiff-appellee Aerojet contracted with defendant-
appellant Non-Ferrous in 1969 and 1970 to engage in a commercial venture in Israel. Aerojet, an
Ohio corporation, has its principal place of business in the Central District of California. Non-
 Ferrous, an Israeli corporation, has its principal place of business there. Each contract
provided that any dispute arising thereunder was subject to arbitration in accordance with the
rules of the American Arbitration Association (“AAA”).
A dispute involving a $30,000,000 contract arose in November 1970. Non-Ferrous requested
arbitration in New York. Aerojet responded with a lawsuit in the state court of New York seeking
to enjoin the proposed arbitration on the ground that it had been fraudulently induced to
enter into the contract calling for arbitration. An ex parte stay of arbitration was vacated in
March 19 when the New York court ordered the parties to proceed with arbitration. This order
was affirmed on appeal on June 10, 1971. After the final decision in the New York action was
P "610" rendered, Aerojet, by letter to the AAA, objected to New York as the locale and gave reasons for
P "611" holding the arbitration in Los Angeles. Non-Ferrous responded with a statement on behalf of
its own choice of New York.
On July 12, 1971, the AAA concluded that the arbitration should be held in New York. (53) Aerojet
objected and requested review of the decision by the Association's Executive Vice President.
When the latter reaffirmed the designation Aerojet immediately sued in the district court in
California. On July 21, 1971 Aerojet obtained an ex parte order temporarily restraining the AAA
from conducting the arbitration in New York.
Aerojet's amended complaint in the district court ... set forth the facts substantially as we have
outlined them, but charged the AAA with arbitrary and unreasonable conduct in its selection of
New York as the locale for arbitration,
in that New York City bears no relationship to either the dispute between plaintiff and Non-
Ferrous nor the parties and witnesses nor the making and performance of the aforesaid
contracts; and, that the proper locale in which to proceed with the arbitration is an agreeable
location within this District....
There followed a statement that Aerojet and its witnesses would find it more convenient to
arbitrate in Los Angeles than in New York. The AAA replied to the motion for preliminary
injunction with affidavits of its officers, giving reasons for fixing New York as the locale for
arbitration. (54)
P "611"
P "612"
After the hearing in the district court the AAA and Non-Ferrous were enjoined from proceeding
to arbitrate in New York “pending the trial of the cause on its merits.” ... Non-Ferrous appealed
... Our first question is whether judicial scrutiny of arbitration proceedings is ever appropriate
prior to the rendition of a final arbitration award. (55) If not, then the order of the district court
must be reversed irrespective of the merits of the AAA's decision.
The use of arbitration as a means of settling disputes has been accorded specific Congressional
endorsement in the [FAA], and should be encouraged by the federal courts. It is apparent,
therefore, that judicial review prior to the rendition of a final arbitration award should be
indulged, if at all, only in the most extreme cases. The basic purpose of arbitration is the
speedy disposition of disputes without the expense and delay of extended court proceedings.
To permit what is in effect an appeal of an interlocutory ruling of the arbitrator would frustrate
this purpose. For this reason it has been held the court review of evidentiary rulings should not
be had before a final award has been rendered. See Compania Panemena Maritima v. J. E.
Hurley Lumber Co., 244 F.2d 286 (2d Cir. 1957).
On the other hand a ruling fixing the place for hearing may cause irreparable harm to one or
more of the parties.... Extreme cases can be imagined in which the choice of locale for
arbitration is not made in good faith and severe irreparable injury is inflicted on one or more
of the parties. In such case the courts should be free to prevent a manifest injustice. For this
reason we decline to hold that immediate judicial review of a ruling setting the place for
arbitration is never justified. Only an extreme case could warrant such judicial review, and this
is emphatically not such a case.
Nor do we feel that the language in the AAA's Commercial Arbitration Rules that its
determination as to locale is “final and binding” precludes a limited inquiry into whether that
determination was made in accordance with a minimum standard of fair dealing. While it has
been held that parties to an arbitration can agree to eliminate all court review of the
proceedings, Gramling v. Food Machinery & Chemical Corp., 151 F.Supp. 853 (D.S.C. 1957), the
intention to do so must clearly appear. Payne v. SS Tropic Breeze, 423 F.2d 236 (1st Cir. 1970).
Ordinary language to the effect that the decisions of the arbitrator shall be “final and binding”
has been held not to preclude some judicial review. Good-all-Sandford, Inc. v. United Textile
Workers, 233 F.2d 104 (1st Cir. 1956). As the Fifth Circuit has stated, “‘finality’ is a mirage if relied
upon to preclude any judicial review of an arbitration award....” Brotherhood of Railroad
Trainmen v. Central of Georgia Railway Co., 415 F.2d 403, 412-413 (1969).
P "612" Having concluded that some judicial scrutiny of the arbitrator's choice of locale was
P "613" appropriate we must consider whether the court was justified in granting an injunction
against the arbitration proceedings prior to a trial of the facts. Aerojet argues that the
preliminary injunction was proper because it was likely that the determination of the
arbitrator would be set aside as “arbitrary and capricious.” We disagree.
In the first place we doubt that the standard Aerojet would have us apply is the proper
standard of review. Aerojet's contentions amount to no more than a lengthy statement that the
AAA acted erroneously in choosing New York over Los Angeles as the situs for the arbitration.
The “correctness” of the arbitrator's rulings is not a proper concern of the reviewing court. An
arbitration award must be upheld unless it be shown that there was partiality on the part of an
arbitrator, or that the arbitrator exceeded his authority, or that the award was rendered in
 “manifest disregard of the law.” (56)
There is no allegation that any such state of facts existed; nor is it at all likely that Aerojet
could have proved such facts even if they had been properly alleged. Indeed, even if we
applied something akin to the “clearly erroneous” test that Aerojet requests, we would still
uphold the AAA's decision. In view of the factors recited by representatives of the association
in support of its choice of New York the selection was entirely reasonable. The affidavits filed
in connection with the motion for a preliminary injunction do not conflict in any material
respect. Rather, they establish that both parties will be inconvenienced in terms of
transporting records and witnesses if the arbitration is held in New York, that Aerojet would not
incur such expenses if the arbitration were held in Los Angeles while Non-Ferrous' burden
would be increased, and that the AAA took these and other factors into account in making its
decision. The only factual showing that could conceivably strengthen Aerojet's case would be
that its two non-employee witnesses definitely would not go to New York. However, “no
suggestion [has been] made of further proofs upon the subject.” Moreover, Aerojet concedes
that Israel would be a rational location, and if the witnesses would not go to New York,
presumably they would not go to Israel either.
In sum, there is no material factual dispute in the case, and under the standard of review that
we have set out ... Non-Ferrous and the AAA would clearly be entitled to judgment as a matter
of law should they so move....
BEAR, STEARNS & CO. v. BENNETT
938 F.2d 31 (2d Cir. 1991)
[excerpted above at pp. 602-03]
P "613"
P "614"
Notes on Judicial Review of Selection of Arbitral Situs by Arbitration Institution or Arbitral
Tribunal
1. Divergent lower U.S. court decisions concerning possibility of interlocutory judicial review of
institutional selection of arbitral forum. Note that the Aerojet court holds that interlocutory
judicial review of an arbitral institution's selection of the arbitral forum is possible, albeit
exceedingly limited. A few other courts have agreed. Seguros de Servicios de Salud, Inc. v.
McAuto Systems Group, Inc., 121 F.R.D. 154 (D.P.R. 1988). Other U.S. courts do not, however,
appear to permit interlocutory challenges to selections of arbitral situses. Dan River, Inc. v. Cal-
Togs, Inc., 451 F.Supp. 497, 501-2 (S.D.N.Y. 1978).
2. Rationale for interlocutory judicial review of institutional selection of arbitral forum. Is it wise
to permit interlocutory judicial review of an appointing authority's (or tribunal's) selection of
the arbitral forum? Is that not a recipe for delay and judicial interference? Suppose that in
Bear, Stearns the AAA had selected an arbitral situs other than that expressly designated in the
parties' agreement. Shouldn't interlocutory judicial review of clear violations of the arbitration
agreement's situs provisions be permitted? What are the costs of permitting this? What are the
costs of not permitting it? How likely is a clear violation to happen?
3. Standard of interlocutory judicial review of selections of arbitral situs. Although the Aerojet
court recognized the possibility of judicial review of selections of arbitral situses, it made clear
that such review would be extremely deferential. Suppose that the parties do not agree upon
the arbitral situs, and the arbitral institution picks an irrational situs – for example, a country
that is not a signatory to the New York Convention. Should a court be able to review such
choices? What nation's court may do so?
4. Judicial refusals to permit arbitral institution to select arbitral forum. In Bear, Stearns, as we
have seen, the Second Circuit did not allow the AAA to designate the arbitral situs, reasoning
that the parties had clearly agreed upon arbitration in New York. In Tolaram Fibers, excerpted
above, the court took a similar course; moreover, as we have seen, it went further and
compelled arbitration in its own judicial district notwithstanding the parties' agreement to ICC
selection of an arbitral forum. Compare Reed & Martin, Inc. v. Westinghouse Electric Corp., 439
F.2d 1268 (2d Cir. 1971) (rejecting argument that AAA lacked power, or wrongly exercised
discretion, to select arbitral situs).
Is it not anomalous that a number of lower courts appear willing to affirmatively select an
arbitral situs under §§4 and 206, but that interlocutory judicial review of a tribunal's situs-
selection decisions is either non-existent or narrowly limited?
5. Respective roles of courts and arbitrators in selection of arbitral situs. Reread the discussion
above of the respective roles of courts and arbitrators in ruling on questions of arbitrability.
See supra pp. 74-95. Is that discussion relevant to issues of situs selection? Why shouldn't the
Bear, Stearns court have permitted the AAA to go forward – which, after all, will involve
application of AAA rules – and reach the obvious conclusion that the arbitration will be
conducted in New York? If the AAA does not, then the court can review the AAA's decision.
Compare the similar unwillingness to permit the arbitral institution to go forward and select a
situs in Tolaram Fibers, see supra pp. 589-96
Consider Article 20(1) of the UNCITRAL Model Law; it provides that the arbitral tribunal shall
select the arbitral situs (unless the parties have otherwise agreed). Is this approach preferable
to that under §4 and §206? What if the tribunal selects an irrational situs?
6. Circumventing restrictions on interlocutory judicial review of situs-selection decisions.
Consider note 55 to the Aerojet General opinion. Suppose that one party had argued that the
parties had orally agreed to select California as the arbitral situs or that the arbitration
 agreement would be unconscionable if arbitration was conducted in New York. Would these
arguments have permitted essentially de novo judicial review on the subject? Recall that
arbitration agreements must be in writing to be enforceable under the New York Convention
and FAA, see supra pp. 126-40; does that mean every term of the agreement must be in writing?
7. Availability of judicial review of situs-selection in action to confirm or vacate final arbitral
award. The general unavailability of interlocutory judicial review of situs-selection decisions
by the arbitral institution or tribunal does not necessarily preclude eventually challenging
such decisions when a final arbitral award is issued. Any judicial review, however, will be
extremely limited. For a discussion of the subject, see infra pp. 779-82, 797-814, 842-43.
If a party does contemplate an eventual challenge to the arbitral situs, it must take care to
avoid waiver or estoppel. See infra p. 847. It must also anticipate both arguments that no
prejudice resulted from the situs-selection and likely reluctance to overturn what may
otherwise be a carefully conducted arbitration.
P "614"

References
1) For a discussion of factors bearing on the choice of an arbitral forum, see Iwasaki, Selection
of Situs: Criteria and Priorities, 2 Arb. Int'l 57 (1986); W. Craig, W. Park & J. Paulsson,
International Chamber of Commerce Arbitration §7.02 (2d ed. 1990).
2) For a useful summary of such issues in different jurisdictions, see McClendon, Survey of
International Arbitration Sites (3rd ed. 1993).
3) For a helpful checklist of issues affected by the law of the arbitral forum, see W. Craig, W.
Park & J. Paulsson, International Chamber of Commerce Arbitration §7.02 (2d ed. 1990);
McClelland, International Arbitration: A Practical Guide for the Effective Use of the System for
Litigation of Transnational Commercial Disputes, 12 Int'l Law. 83 (1978); Holtzmann, The
Importance of Choosing the Right Place to Arbitrate an International Case, in Private
Investors Abroad – Problems and Solutions in International Business (1988).
4) It is possible that national courts outside the arbitral forum would interfere with the
conduct of the arbitration. But in practice parties seldom seek such relief, and national
courts in developed nations have generally been unwilling to grant it. If courts in other
jurisdictions do interfere in foreign arbitrations, their judgments are likely to be ignored.
American Construction Machinery & Equipment Corp. v. Mechanised Construction of Pakistan
Ltd, 659 F.Supp. 426 (S.D.N.Y. 1986), aff'd, 828 F.2d 117 (2d Cir. 1987), cert. denied, 484 U.S.
1064 (1988). See infra pp. 762-63.
5) For a discussion of the application of the Convention's exceptions by U.S. courts, see supra
pp. 155-295.
6) See infra pp. 757-58.
7) See infra pp. 797-814.
8) See infra pp. 809-12.
9) See supra pp. 514-21; Ragan, Arbitration in Japan: Caveat Drafter and Other Lessons From an
American Perspective on Trans-Pacific Dispute Resolution, 7 Arb. Int'l 93 (1991); Lowenfeld,
Singapore and the Local Bar: Aberration or Ill Omen?, 5 J. Int'l Arb. 71 (1988); Polkinghorne,
The Right of Representation in a Foreign Venue, 4 Arb. Int'l 333 (1988). Compare UNCITRAL
Rules Article 4 (“The parties may be represented or assisted by persons of their choice”). In
the not-so-distant past, the Singapore courts enjoined a U.S. law firm from representing
the respondents in an arbitration sited in Singapore. Builders Federal (Hong Kong) Ltd and
Joseph Gartner & Co. v. Turner (East Asia) Pte Ltd, 5 J. Int'l Arb. 140 (1988). That decision was
subsequently altered by regulation, but Singapore local counsel is still required in certain
cases. See also Ragan, Arbitration in Japan: Caveat Drafter and Other Lessons From an
American Perspective on Trans-Pacific Dispute Resolution, 7 Arb. Int'l 93 (1991) (describing
Japanese restrictions).
10) See infra pp. 622-23.
11) See infra pp. 712-30, 758-60. Note that arbitral hearings can under most institutional rules
and national laws be held in places other than the arbitral situs, without affecting the
parties' agreement on an arbitral situs. See supra pp. 429, 457-58. There is, of course, some
possibility that the situs of arbitral hearings will affect a national court's conclusion as to
where an award was “made” if the award does not so specify. See supra pp. 759-61.
12) Many signatories to the New York Convention (including the United States) have adopted
“reciprocity” reservations and will only apply the Convention to awards “made” in another
signatory state. See supra pp. 140-48.
13) See supra pp. 411-16.
14) See supra pp. 536-39.
15) In 10-20% of cases submitted to the ICC, the parties reportedly have not chosen the
arbitral situs. In 1982, the parties reportedly selected the place of arbitration in 62% of all
ICC cases; in 1991, the figure was 88%; and in 1998, 82%. Jarvin, The Place of Arbitration, ICC
Int'l Court of Arb. Bulletin 7, 9 (Oct. 1993); Places of Arbitration, The ICC Int'l Court of Arb.
Bulletin May 9 (May 1998).
16) See the clauses excerpted in Appendix P.
17) See, for example, the clauses excerpted at supra pp. 186-87.
18) UNCITRAL Model Law Article 20(i); Swiss Law on Private International Law §176(3).
19) 9 U.S.C. §4 (emphasis added).
20) See infra pp. 586-96.
21) See infra pp. 586-96.
22) 9 U.S.C. §206.
23) See infra pp. 588-93.
24) See infra pp. 584-96.
25) See infra pp. 593-96.
26) See supra pp. 391-92.
27) Inter-American Convention Article 3, Appendix C. See supra pp. 23-24, 391-92.
28) See supra pp. 23-24.
29) If the parties' agreement excludes the procedural rules of the IACAC but provides no
workable alternative, §303 would appear inapplicable. In that event, §307 would
incorporate §4's provisions for compelling arbitration.
30) See supra p. 395.
31) See infra p. 587-88.
32) 499 F.2d 1391 (3d Cir. 1974).
33) Paragraph 15 of the contract provides as follows:
It is mutually agreed that the parties hereto will submit any controversy or claim arising
out of or relating to this agreement, or the breach thereof, to arbitration in the City of New
York and shall abide by the provisions and rules of the “Rules of American Arbitration
Association” and that any judgment upon any award rendered by the arbitrator may be
entered in any court having jurisdiction thereof and all cost and expenses will be paid by
the parties hereto according to said rules.
34) Cf. discussion in The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), where the Court held
that a forum-selection clause was binding upon the parties unless the respondent could
meet the heavy burden of showing that its enforcement would be unreasonable, unfair or
unjust.
35) We note that had Econo-Car brought this suit initially in a district court in New York, such
court, it appears, would view the agreement to arbitrate in New York as a waiver of any
possible objections Antilles might make to the court's venue. See Joseph Muller Corp. Zurich
v. Commonwealth Petrochemicals, Inc., 334 F.Supp. 1013, 1021 (S.D.N.Y. 1971); Lawn v.
Franklin, 328 F.Supp. 791, 793-794 (S.D.N.Y. 1971).
36) See supra p. 582.
37) See cases cited infra p. 592-93.
38) See supra pp. 581-83.
39) 1991 U.S. Dist. Lexis 3565 (M.D.N.C. 1991).
40) Section 4 of the Act empowers the court to enter an order compelling arbitration with the
proviso that “the hearing and proceedings, under such agreement, shall be within the
district in which the petition for an order directing such arbitration is filed.” 9 U.S.C. §4.
41) Another problem should defendant Barmag attempt to assert that the parties' contract
contains a definite forum selection clause in conformance with 9 U.S.C. §206 is the very
limitations of that section. When the United States adhered to the Convention (Chapter 2 of
9 U.S.C.), the courts were only granted power to compel arbitration in signatory countries.
National Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326,331 (5th Cir.), cert. denied, 484 U.S.
943 (1987). The Court can find nothing in the instant parties' contract which sufficiently
identifies a place so that the Court can know that it would be ordering arbitration in
compliance with §206 of the Convention. This problem alone forecloses defendant
Barmag's argument that the parties' contract contains a sufficiently specific arbitration
forum selection clause to meet the requirements of §206.
42) Defendant Barmag cites Dan River, Inc. v. Cal-Togs, Inc., 451 F.Supp. 497, 501-502 & n.1
(S.D.N.Y. 1978), which is a case where the American Arbitration Association picked the place
of arbitration and the court affirmed the award. However, that case does not involve the
same issues as the instant one. It concerned the confirmation of an arbitration award
pursuant to §9 of the [FAA]. The parties had already submitted to arbitration and may have
waived any venue issue. In the instant case, the venue issue is still a live controversy and
involves a different section of the [FAA]. See also Purdy v. Monex Int'l Ltd, 867 F.2d 1521, 1523
(5th Cir.), cert. denied, 110 S.Ct. 180 (1989).
43) See National Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326 (5th Cir. 1987) (proceedings to
compel arbitration instituted in Iran and United States); Oil Basins Ltd v. Broken Hill
Proprietary Co., 613 F.Supp. 483 (S.D.N.Y. 1985) (proceedings to compel arbitration
instituted in Australia and United States).
44) See supra p. 579.
45) See UNCITRAL Model Law Article 20(1); Swiss Law on Private International Law Article 176(3).
In rare cases, the parties will have agreed to arbitrate, but without designating an arbitral
situs, an arbitrator, or an appointing authority for either. When that occurs, then
arbitration can only occur with some sort of judicial intervention. Even then, §206 would
permit a federal court to appoint arbitrators and §204 would provide for venue in such an
action in any court where “save for the arbitration agreement in action or proceeding with
respect to the controversy between the parties could be brought.” 9 U.S.C. §204.
46) See the excerpt above from Shearson Lehman Bros., Inc. v. Brady, 783 F.Supp. 1490 (D. Mass.
1991), where the district court refused to select an arbitral situs, on the grounds that the
AAA would. See supra p. 593-94.
47) There is a difference of opinion on the question of whether the inclusion of an arbitration
clause in an acceptance is a per se material alteration of the offer. Compare Matter of
Doughboy Industries, Inc., 233 N.Y.S.2d 488, 495-96 (1st Dep't 1962) (Brietel, J.) with Dorton v.
Collins & Aikman Corp., 453 F.2d 1161, 1169 (6th Cir. 1972); In re Wolfkill Feed & Fertilizer
Corp., New York Law Journal, May 16, 1975 at 16 (Sup. Ct. New York County).
48) 9 U.S.C. §4. Section 206 only applies to international agreements. We express no opinion on
whether a district court may order arbitration outside the district in cases of interstate
agreements that expressly specify location. See Snyder v. Smith, 736 F.2d 409, 420 (7th Cir.),
cert. denied, 469 U.S. 1037 (1984); Management Recruiters of Albany, Inc. v. Management
Recruiters. Int'l, Inc., 643 F.Supp. 750, 753 (N.D.N.Y. 1986).
49) See supra p. 577.
50) See supra p. 595. As we have seen, however, in Bear, Stearns & Co. v. Bennett, 938 F.2d 31 (2d
Cir. 1991), excerpted above, the Second Circuit refused even to permit the AAA to select the
arbitral forum, on the grounds that the parties' arbitration agreement was unambiguous
and that arbitration should be compelled under §4 in the contractual forum. And, in
Tolaram Fibers, Inc. v. Deutsche Engineering Der Voest-Alpine Industrieanlagen GmbH, 1991
U.S. Dist. Lexis 3565 (M.D.N.C. 1991), the court ordered arbitration in its own district instead
of allowing the ICC to select a situs.
51) Aerojet-General Corp. v. American Arbitration Association, 478 F.2d 248 (9th Cir. 1973).
52) Dan River, Inc. v. Cal-Togs, Inc., 451 F.Supp. 497, 501-2 (S.D.N.Y. 1978).
53) Section 10, Commercial Arbitration Rules provides:
“Section 10, Fixing of Locale – The parties may mutually agree on the locale where the
arbitration is to be held. If the locale is not designated within seven days from the date of
filing the Demand or Submission the AAA shall have power to determine the locale. Its
decision shall be final and binding. If any party requests that the hearing be held in a
specific locale and the other party files no objection thereto within seven days after notice
of request, the local shall be the one requested.”
54) The affidavit of Donald T. Cahill, Assistant to the Executive Vice President of the AAA,
stated:
( “Claimant's [Aerojet's] initial demand for arbitration ... was filed in the New York
a Regional Office of the Association and the respondent [Non-Ferrous], seeking an order
) staying the arbitration proceedings, filed motion papers in the New York courts, at first
instance in the Supreme Court of New York County, Special Term Part 1, and later on
appeal to the Supreme Court, Appellate Division, First Department.... Thus, the New
York jurisdiction was the location to which the parties addressed themselves from the
very beginning of the case.
( “The fact that the parties agreed in their contract that the law of California would
b apply and govern their case, is not conclusive on the locale of the hearing. If the
) arbitration is held in New York, the arbitrators can still apply California law.
( “While it is true respondent, its Divisions, Officers and employees are located in
c California, consideration was given to the fact that the claimant is based in Israel,
) thereby making it necessary for it to transport all its witnesses and evidence from one
country to another. If the hearings were to be held in California, an extra and unequal
burden and expense would be placed on the claimant with respect to transporting
these witnesses and evidence to that location. I determined New York to be a fair
central point, equally accessible and convenient to both parties.
( “Regarding the fact that the contracts involved in this case were negotiated, drawn and
d executed in California, the performance of the agreements, involves activity taking
) place in Israel. Further, because such performance does take place in Israel, there is a
closer connection between the subject matter of contracts and Israel than between the
subject matter and California. Thus, the claimant could have, if so desired, requested
Israel as the location for the arbitration hearings.”
55) Emphasis should be placed on the word “proceedings.” There can always be prior judicial
inquiry into the validity of an agreement to arbitrate. In the present case it is conceded
that there was a valid agreement to arbitrate at a locale selected by the AAA. See In re
Royal Globe Ins. Co. v. Spain, 319 N.Y.S.2d 115 (1971).
56) Even if we assume there is some distinction between the ruling of the AAA here and a final
arbitration award covered by 9 U.S.C. §10, the test would be the same. It was part of the
arbitration agreement that the AAA could select a locale for the arbitration if the parties
failed to agree on one. In re Royal Globe Ins. Co. v. Spain, supra. When the parties to a
contract agree that a factual determination is to be made by a neutral third party that
determination is upheld in the absence of fraud or gross mistake as would necessarily
imply bad faith. Baez v. Disabled American Veterans Service Foundation, 119 F.Supp. 490
(S.D.N.Y. 1954).
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part Two : Chapter 9.
Selection of Arbitrators in
International Arbitration', in
Gary B. Born , International
Commercial Arbitration:
Commentary and Materials
(Second Edition), 2nd edition
(© Kluwer Law International;
Kluwer Law International
2001) pp. 615 - 652
KluwerArbitration
Part Two : Chapter 9. Selection of Arbitrators in
International Arbitration
9 Selection of Arbitrators in International Arbitration (1)
Selection of the arbitrators is often one of the most important decisions in international
arbitration. This Chapter considers how international arbitrators are selected, focusing
separately on commonly-used procedural avenues. It first examines the selection of
arbitrators by the parties' agreement, and then considers selection by both non-judicial
appointing authorities and by national courts. Finally, the Chapter discusses how arbitrators
may be challenged and removed, again focusing first on non-judicial appointing authorities
and then considering national courts.
A. Selection of Arbitrator By Agreement Between the Parties or By Appointing
Authority
P "615" In many international arbitrations, the parties are able to agree, either directly or indirectly,
P "616" on the identity of the arbitrator(s) who will decide their dispute. This process is usually the
simplest, most direct, and best means of selecting an arbitrator, although it involves delicate
legal and tactical considerations. (2) Agreement on the identity of the arbitrator(s) can occur
either in the parties' original arbitration clause, before any dispute arises, or in post-dispute
negotiations during the course of the arbitral proceedings. The parties' agreement can be
reached in direct discussions between the parties themselves, or indirectly, through
discussions between the parties' legal advisers or party-nominated arbitrators.
In many cases, the parties' existing arbitration agreement will provide a procedural
mechanism for the selection of the arbitrator(s) – either expressly or by incorporating
institutional arbitration rules. (3) The almost universal contractual mechanism for selecting an
arbitrator is designation of a neutral “appointing authority” to choose the arbitrator(s) if the
parties cannot agree. All leading institutional arbitration rules provide for such a role by the
sponsoring institution when parties agree to arbitrate under the institution's rules. (4)
In most countries, national arbitration legislation permits and gives effect to the parties'
agreement on the identity of the arbitrator(s). This is true under leading national arbitration
statutes (some of which are excerpted below). It is also true under all leading institutional
arbitration rules, including the ICC, LCIA, and AAA Rules, as well as the UNCITRAL Arbitration
Rules (again, excerpted below).
As discussed elsewhere, (5) many international arbitration agreements provide for arbitration
by three arbitrators. Typically, each party (in a two-party dispute) nominates an arbitrator and
the two party-nominated arbitrators (or “co-arbitrators”) endeavor to agree upon a presiding
arbitrator (or “chairman”). Where the co-arbitrators are unable to reach agreement, an
“appointing authority” is delegated authority to select the presiding arbitrator. (6)
A party's exercise of its autonomy to select a co-arbitrator or to agree upon the identity of
other arbitrators is a crucial matter. Particularly in international commercial arbitrations,
exercise of this autonomy occurs against a complex background of legal rules and tactical
considerations. Among other things, parties must consider applicable legal standards
regarding the independence of arbitrators, including national law, the arbitration agreement,
and any applicable institutional rules. Parties must also consider what personal
characteristics, qualifications, and experience they would like an arbitrator to have, as well as
how any appointing authority would be likely to exercise its authority to select an arbitrator in
P "616" the absence of agreement between the parties or arbitrator(s). Of course, all of these factors
P "617" must be considered from the perspective of obtaining arbitrators who are most likely to
render a favorable, binding arbitral award for one's clients.
Excerpted below are materials bearing on the parties' selection of arbitrators. First, consider
the excerpts from the FAA and other leading arbitration statutes. Also excerpted below are
relevant provisions from the UNCITRAL, ICC, LCIA, and AAA Commercial Arbitration Rules. In
reviewing these materials, consider both the legal rules and framework which they establish,
and the way that parties (and arbitrators) will behave within this regime.
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Articles 179 & 180
[excerpted below at pp. 1033-34]
BELGIAN JUDICIAL CODE
Articles 1678 & 1680
1678(1). An arbitration agreement shall not be valid if it gives one of the parties thereto a
privileged position with regard to the appointment of the arbitrator or arbitrators; this defense
must be raised, if at all, before any other defense.
1680. Except for emancipated minors, persons for whom guardians have been appointed, and
 persons who have been permanently or temporarily deprived of their voting rights, any person
who has the legal capacity to contract may become an arbitrator.
RULES FOR THE IMPLEMENTATION OF THE SAUDI ARABIAN ARBITRATION REGULATION
Section 3
3. The arbitrator shall be a Saudi national or Muslim expatriate from the free professional
section or others. The arbitrator may also be an employee of the state, provided approval of
the department to which he belongs is obtained. In the case of more than one arbitrator, the
umpire shall have a knowledge of Sharia rules, commercial regulations, customs and traditions
applicable to Saudi Arabia.
ECUADOREAN ORGANIC LAW OF THE JUDICIARY
Articles 127 & 128
127. To be appointed an arbitrator, a person must be an Ecuadorean entitled to exercise his
rights of citizenship. Foreigners may be appointed amiable compositeurs.
P "617"
P "618"
128. The following persons may not be appointed arbitrators: ...
(1) the president of the Republic of Ecuador, the ministers of state, magistrates, and ordinary
and special judges;
(2) persons participating directly in the proceedings;
(3) close friends of any of the parties;
(4) persons related to any of the parties by consanguinity within the forth degree or by
affinity within the second degree; and
(5) principal enemies (enemigos) of any of the parties.
UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION
Articles 1, 6 & 10-15
[excerpted below at pp. 1012, 1013, 1014-15]
FEDERAL ARBITRATION ACT
9 United States Code §5 & §206
[excerpted below at pp. 1000, 1003]
UNIFORM ARBITRATION ACT
§3
§3. If the arbitration agreement provides a method of appointment of arbitrators, this method
shall be followed. In the absence thereof, or if the agreed method fails or for any reason cannot
be followed, or when an arbitrator appointed fails or is unable to act and his successor has not
been duly appointed, the court on application of a party shall appoint one or more arbitrators.
An arbitrator so appointed has all the powers of one specifically named in the agreement.
UNCITRAL ARBITRATION RULES
Articles 5-8
[excerpted below at pp. 1024-25]
ICC ARBITRATION RULES
Articles 7-9
[excerpted below at pp. 1061-63]
P "618"
P "619"
LCIA ARBITRATION RULES
Article 5-11
[excerpted below at pp. 1077-79]
AAA COMMERCIAL ARBITRATION RULES
Articles 12-17
[excerpted below at pp. 1049-50]
ARBITRATION RULES OF THE NETHERLANDS ARBITRATION INSTITUTE
Article 14 List-Procedure
(1) As soon as possible after the receipt of the short answer referred to in article 7 or, [in] the
absence thereof, after expiration of the period of time for filing the short answer, the
Administrator shall communicate to each of the parties an identical list of names. If one
arbitrator is to be appointed, the list shall contain not less than three names; if three
arbitrators are to be appointed, the list shall contain not less than nine names.
 (2) Each party may delete from this list the names of persons against whom he has overriding
objections, and number the remaining names in the order of his preference.
(3) If a list is not returned to the Administrator within two weeks after its dispatch to a party,
it will be assumed that all persons appearing on it are equally acceptable to that party
for appointment as arbitrator.
(4) As soon as possible after receipt of the lists, or failing this, after expiration of the period
of time referred to in the previous paragraph, the Administrator shall, taking into account
the preferences and/or objections expressed by the parties, invite one or three persons
from the list, as the case may be, to act as arbitrators.
(5) If and to the extent that lists which have been returned show an insufficient number of
persons who are acceptable as arbitrator to each of the parties, the Administrator shall
be authorized to invite directly one or more other persons to act as arbitrator. The same
shall apply if a person is not able or does not wish to accept the Administrator's
invitation to act as arbitrator, or if there appear to be other reasons precluding him from
acting as arbitrator, and there remain on the lists an insufficient number of persons who
are acceptable as arbitrator to each of the parties.
(6) If the arbitral tribunal is composed of three arbitrators, the arbitrators shall choose a
P "619" chairman from amongst themselves, if necessary, in accordance with the provisions of
P "620" Article 16(3).
(7) If the parties agreed only to the appointment of arbitrator(s) by the [Netherlands
Arbitration Institute], without referring to arbitration by the [Netherlands Arbitration
Institute] or arbitration in accordance with the [Netherlands Arbitration Institute] Rules,
such appointment shall take place in accordance with the provisions of this article unless
the parties agreed to another method of appointment by the [Netherlands Arbitration
Institute].
(8) For the application of the provisions of this article, the Administrator preferably shall
draw the names of persons from the General Panel of Arbitrators which is established,
expanded and amended by the [Netherlands Arbitration Institute].
(9) The appointment of the arbitrator(s) in accordance with the provisions of this article shall
take place within two months after commencement of the arbitration.
Notes on Selection of International Arbitrators by Agreement
1. Parties' autonomy under national arbitration statutes to select arbitrators. Consider Article 11
of the UNCITRAL Model Law, §5 of the FAA, and Article 179 of Swiss Law on Private International
Law, excerpted above. What effect do these provisions give to the parties' agreement on the
identity of the arbitrators? to the parties' agreement on an appointing authority or other
mechanism for selecting arbitrators? Compare §3 of the Rules for the Implementation of the
Saudi Arabian Arbitration Regulation and Article 127 of the Ecuadorean Organic Law of the
Judiciary. Note that both statutes also contemplate that the parties will have the autonomy to
select arbitrators. This is an almost universally-recognized rule (although it is also subject to
limitations and exceptions, which we discuss below).
2. Rationale for parties' autonomy to select arbitrators. One of the most significant differences
between arbitration and litigation (in most national legal systems) is the parties' autonomy to
select “their” arbitrators. Why do most national laws grant parties the autonomy to agree upon
the identity, or means of selecting, individual arbitrators? What benefits are derived from
permitting litigants to mutually agree upon the identity of the person who will decide their
dispute? Does this necessarily ensure a more expert or legally-sound outcome? a more
efficient proceeding? a greater chance of settlement? a result that will be voluntarily
accepted?
Are parties able to designate individual judges on a national court to resolve their dispute?
Why not? Suppose a particular judge had very relevant legal or other experience and the
confidence of the parties.
Compare §5 of the FAA with the UNCITRAL Model Law and Article 179 of the Swiss Law on Private
International Law. What mechanisms for appointment of arbitrators does §5 mention, and
which does it omit? See infra pp. 629-38 for a discussion of decisions by U.S. courts regarding
appointments of arbitrators.
3. Selection of arbitrators by incorporating procedural mechanism of institutional arbitration
rules. Consider the excerpts from the UNCITRAL, ICC, LCIA, and AAA Commercial Arbitration
Rules. How do these mechanisms for selecting arbitrators differ and how are they similar?
National arbitration statutes generally grant parties autonomy to agree to procedural
mechanisms for the appointment of arbitrators and will typically enforce those mechanisms.
Consider Article 11 of the UNCITRAL Model Law and Article 179 of the Swiss Law on Private
International Law. What does each section provide with respect to the enforceability of
procedural mechanisms agreed to by the parties for selecting arbitrators?
Likewise, §5 of the FAA and U.S. judicial decisions applying the section provide for the
enforcement of agreed procedural mechanisms for selecting arbitrators. Note that §5 begins by
providing that “[i]f in the agreement provision be made for a method of naming or appointing
an arbitrator or an umpire such method shall be followed.” For lower U.S. court decisions giving
effect to procedural mechanisms agreed by the parties for selecting an arbitrator, see ATSA of
California, Inc. v. Continental Insurance, Co., 754 F.2d 1394 (9th Cir. 1985); McMahon v.
 Shearson/American Express Inc., 709 F.Supp. 369, 373 (S.D.N.Y. 1989).
As discussed below, some U.S. courts have held, under FAA §5, that judicial appointment of an
P "620" arbitrator is improper if the parties have agreed to an alternative appointment method which
P "621" has not been exhausted. See infra pp. 634-35; Cargill Rice, Inc. v. Empresa Nicaraguense de
Alimentos Basicos, 25 F.3d 223 (4th Cir. 1994). Also as discussed below, national courts have
generally refused to interfere with, or subject to interlocutory review, institutional
appointment procedures. See infra pp. 638-51.
4. Selection of arbitrator in parties' arbitration agreement. It is possible to name a specific
individual as an arbitrator in an arbitration agreement made before any dispute has arisen
between the parties (e.g., “The arbitrator shall be Ms. Natascha Born.”). Note the approving
reference to such an approach in §5 of the FAA.
National courts have generally enforced agreements making pre-dispute selections of
arbitrators (subject, of course, to otherwise applicable challenges to the validity of the
agreement and the independence of the arbitrator). E.g., Aviall, Inc. v. Ryder System, Inc., 913
F.Supp. 826 (S.D.N.Y. 1996) (“when parties have validly contracted to have a particular
arbitrator resolve their dispute federal courts are loath to alter that selection”); Judgment of 26
May 1994, XXIII Y.B. Comm. Arb. 754 (1998) (Bezirksgericht, Affoltern am Albis, Switzerland) (“it is
not forbidden to appoint the arbitrator(s) already in the arbitration clause. This is, however, a
risky practice”).
What risks do parties run when naming a specific individual as arbitrator in their pre-dispute
arbitration agreement? What advantages and disadvantages does such an approach have?
5. Selection of arbitrators in post-dispute negotiations between the parties. After a dispute has
arisen, parties may find it difficult to agree on much, if anything. Nonetheless, parties to
international disputes not infrequently are able to reach post-dispute agreement on the
identity of a sole arbitrator or presiding arbitrator. This can be done either in direct
discussions between the parties (or their counsel) or through the party-nominated arbitrators
in three-person arbitral tribunals. See infra pp. 624-25. Why might hostile adversaries be able
to agree upon a sole or presiding arbitrator? What is the alternative? Might it be worse? Why?
6. Parties' autonomy under national arbitration statutes to select number of arbitrators.
Consider Article 10(1) of the UNCITRAL Model Law. It reflects the general principle, under most
national arbitration statutes, that parties are free to select the number of arbitrators. Although
it does not expressly address the issue, the FAA should be interpreted consistently with this
general position. Is there any reason parties should not be able to select the number of
arbitrators?
7. Prohibitions against even numbers of arbitrators under some national arbitration statutes.
Despite the general principle that parties may choose the number of arbitrators to decide
their dispute, some nations have prohibitions against arbitration before an even number of
arbitrators. Portugal Law No. 31/86 of 29 August 1986, Article 6(1) (sole or uneven), Int'l
Handbook on Comm. Arb. (Supp. 12 1991); Netherlands Arbitration Act, Article 1026(1).
Why is a requirement for an uneven number of arbitrators imposed? What could a tribunal of
two (or some other even number of) arbitrators do? How would deadlocks among the
arbitrators be broken? Is it precisely accurate to state that deadlocks would not, or would
hardly ever, be broken? Considering the deliberations of a two-person tribunal pragmatically,
how might such a tribunal reach unanimous decisions? If parties want such a procedure, why
can't they agree to it? Recall the comment, quoted above, supra p. 443, that parties can
(probably) agree to trial by a panel of three monkeys. If so, why not two?
8. Approaches under national arbitration statutes to the number of arbitrators where the
parties have not so agreed. Parties sometimes do not agree on the number of arbitrators for
disputes under their agreements. In the absence of agreement, both national law and
institutional (or other) arbitration rules provide fall-back rules or presumptions regarding the
number of arbitrators.
(a) Optimum number of arbitrators. Preliminarily, how many arbitrators should be selected in
an international arbitration? Should an odd or an even number of arbitrators be chosen?
Why? In practice, either one or three arbitrators are used in almost all cases. Why aren't
five or more arbitrators used? Are there cases where more than three arbitrators would
make sense?
As between one and three arbitrators, which number is preferable? Why? Does it depend
on the size of the case? The issues? The identities of the parties? What are the reasons
supporting the use of three arbitrators in international disputes? Is three a wise or
appropriate choice as the number of arbitrators in all international disputes?

(b) Number of arbitrators to be appointed under national arbitration statutes. Section 5 of the
FAA provides that, where the parties have not agreed upon the number of arbitrators, “the
P "621" arbitration shall be by a single arbitrator.” Compare the different approach, adopting a
P "622" presumption in favor of three arbitrators, in the UNCITRAL Model Law, Article 10(2).
Compare the approach of §3 of the Uniform Arbitration Act. For a lower U.S. court decision
refusing to appoint more than one arbitrator, see Ore & Chemical Corp. v. Stinnes Interoil,
Inc., 611 F.Supp. 237, 240-41 (S.D.N.Y. 1985).
(c) Number of arbitrators to be appointed under §206. If an appointment is made under §206,
is §5's presumption as to a single arbitrator incorporated by §208? Is there anything
about international cases that makes a single-arbitrator rule inappropriate?
 9. Approaches under institutional arbitration rules to the number of arbitrators. Compare the
approaches of Article 5 of the UNCITRAL Arbitration Rules, Article 8(2) of the ICC Rules, Article
5(4) of the LCIA Rules, and Rule 17 of the AAA Commercial Arbitration Rules to the number of
arbitrators. Again, which of the various approaches is wisest?
Consider the list procedure in the Netherlands Arbitration Institute and UNCITRAL Arbitration
Rules. What are the advantages and disadvantages of such an approach? Role play the
selection of arbitrators using a list procedure.
10. Practical relevance of applicable national law to selection of arbitrators. Parties to
international arbitrators must take potentially applicable national law constraints and
requirements into account in making their selections of arbitrators, and in agreeing with their
adverse party on the identity of a sole arbitrator or presiding arbitrator. Consider, in this
regard, the following hypothetical:
Company A is incorporated and headquartered in State 1. Company B is incorporated and
headquartered in State 2. Companies A and B enter into a contract with an arbitration
clause providing for arbitration in State 3, with the parties' underlying contract being
subject to the substantive laws of State 4.
State 1 has an arbitration statute identical to §5 of the FAA, but also providing (like the
Saudi and Ecuadorean legislation excerpted above): “All arbitrators shall be nationals of
State 1.” State 2 has an arbitration statute providing that recognition shall be denied an
arbitral award if the arbitrator was not “independent.” State 3 and 4 have arbitration
statutes identical to the UNCITRAL Model Law. The language of the arbitration is not
specified.
You represent Company B, which is preparing to commence an arbitration (not under any
institutional arbitration rules) against Company A. Consider the following: (a) how many
arbitrators will there be, assuming that nothing in the parties' agreement resolves the issues;
(b) what requirements apply to the arbitrators in terms of nationality and independence; and
(c) what relevance, if any, does the likely place of enforcement of an award have? What if State
3 had the same arbitration statute as State 1 or State 2?
11. Parties' role in nominating members of three-person tribunal under leading institutional
rules. Note how Article 8(4) of the ICC Rules deals with the appointment of arbitrators when
there is a three-person tribunal. Compare Articles 5(5), 5(6), and 7 of the LCIA Rules, Article 7 of
the UNCITRAL Rules, and Articles 13 and 14 of the AAA Commercial Arbitration Rules. Suppose
that an arbitration clause provides simply for a three-person tribunal, without any further
details. Assuming no further agreements between the parties, how would appointment of the
arbitrators proceed under the ICC and LCIA Rules? Which mechanism is preferable?
12. Party's selection of a party-nominated arbitrator. It is common for international arbitration
agreements, and some institutional arbitration rules, to permit each party (in two-party
disputes) to nominate a co-arbitrator, where three arbitrators are called for. Making this
selection of a co-arbitrator involves complex legal and tactical considerations.
(a) Considerations affecting choice of co-arbitrator. Consider again the hypothetical in Note 10
above. As counsel to Company B, what considerations would influence your selection of a
party-arbitrator? Very important considerations can include a party's confidence in the
personal competence, time availability, and integrity of an individual, as well as the
individual's arbitration experience and knowledge of a particular industry or type of
contract. Putting these points aside, what type of individual should Company B consider?
Should the individual be qualified to practice law in State 3? Should the individual be
qualified to practice law in State 4? What nationality will the presiding arbitrator have?
P "622" How does that affect Company B's choice of a co-arbitrator? See ICC Rules Article 9(1), 9(3)
P "623" and 9(5); LCIA Rules Articles 6 and 7; UNCITRAL Rules Article 6(4).
More generally, what is it that a party wants from a co-arbitrator? Is it a neutral,
objective, and dispassionate judge? Is it a partisan advocate? Consider:
When I am representing a client in an arbitration, what I am really looking for in a party-
nominated arbitrator is someone with the maximum predisposition towards my client,
but with the minimum appearance of bias.
Hunter, Ethics of the International Arbitrator, 53 Arb. 219, 223 (1987). Why is it important to
have a “minimum appearance of bias”? Imagine yourself in the role of a presiding
arbitrator. Compare Lowenfeld, The Party-Appointed Arbitrator in International
Controversies: Some Reflections, 30 Tex. Int'l L. J. 59 (1995); Smith, Impartiality of the Party-
Appointed Arbitrator, 6 Arb. Int'l 320 (1990).

(b) Role of arbitrators' nationalities. The role of nationality is important in the selection of
international arbitrators. Note that most leading arbitral institutions will not select as
presiding arbitrator a person with the nationality of one of the parties. Note also that, in
practice, many leading arbitral institutions are reluctant to select as presiding arbitrator
a person with the nationality of one of the co-arbitrators. Why? How does this affect your
choice of a co-arbitrator?
What does “nationality” mean? Are Germans and French nationals of the European Union?
Are Austrians the same nationality as Bavarians? Are there different nationalities in North
America?
 (c) Arbitrator's competence in applicable substantive law. Note that the applicable
substantive law in the above hypothetical is that of State 4. How would that affect
Company B's choice of an arbitrator?
(d) Personal characteristics. As much as anything else, the personal characteristics of
arbitrators play a vital role in selection. Recall the examples, set out above, of various
types of arbitrable disputes. See supra p. 448. Consider again selecting co-arbitrators
(and a presiding arbitrator) from your law school colleagues and instructors. Who would
you most want? Why? Who would you least want? Why? Does it depend on your case?
(e) Likely identity of presiding arbitrator. The efficacy and suitability of a co-arbitrator in a
particular Matter will often depend in part on the identity of the presiding arbitrator.
However, the presiding arbitrator will virtually never be chosen until after selection of the
co-arbitrators. Nonetheless, speculation about the likely identity, nationality, and other
characteristics of a future presiding arbitrator will inevitably influence choice of a co-
arbitrator. For example, in the exercise referred to in the previous subparagraph, how
would your thinking be influenced if you thought that the presiding arbitrator would be (i)
your professor; (ii) the law school dean; (iii) me; or (iv) another.
(f) Timing considerations. Note the timetables pursuant to which co-arbitrators must be
selected under various institutional rules. What advantages does a respondent have? Are
there any ways that a claimant might avoid this?
13. Institutional confirmation of party-nominated arbitrators. Under most leading institutional
arbitration rules, parties may only “nominate” a co-arbitrator, who must then be confirmed
and “appointed” by the relevant institution. What is the reason for this? Consider how the
different institutional arbitration rules deal with this topic. In particular, compare LCIA Rules
Articles 5.3, 5.5, and 7.1 with AAA Commercial Arbitration Rules Article 14. Which is preferable?
Why?
14. Consequences of a party failing to nominate an arbitrator under institutional arbitration
rules. Suppose that a party is intended to nominate a co-arbitrator, either directly by the
arbitration agreement or indirectly by institutional rules which it incorporates. Suppose
further that the party fails to make the nomination. What are the consequences of this failure?
Consider the treatment of defaults in nominating an arbitrator in the ICC, LCIA, and UNCITRAL
Rules. Suppose one party nominates an arbitrator, and the other does not. Is it procedurally
fair to proceed with an arbitral process where one party selects one of the arbitrators, but the
other party selects none of the arbitrators? What alternatives exist? Suppose the arbitral
process were stayed pending both parties' nominations; wouldn't most respondents be
delighted? Suppose all three arbitrators were chosen by the appointing authority.
Some arbitration agreements provide that, if one party fails to nominate an arbitrator, the
other party may make the nomination itself – thus, choosing the two co-arbitrators, who would
then in turn ordinarily select the presiding arbitrator. Is this approach fair? What if all three
arbitrators are required to be “independent”?
P "623"
P "624"
What if a party misses the time deadline for making an appointment by a few days? Should the
arbitrator it nominates nonetheless be confirmed?
15. Consequences of a party's failure to nominate an arbitrator under national arbitration
statutes. If a party fails to nominate an arbitrator within the time limits specified in an
arbitration agreement, applicable national law can impose severe consequences. As detailed
below, these can include forfeiture of the right to make a nomination.
 (a) Consequences of a party's failure to nominate an arbitrator under the FAA. U.S. courts have
generally been lenient in excusing delays in the appointment of an arbitrator, at least
where no bad faith delay or other improper motive existed. Rather than compelling a
party to proceed to arbitration before arbitrators selected by its adversary, U.S. courts
have granted the tardy party additional time to appoint an arbitrator and ordered
arbitration before the resulting panel. See Northwestern Nat'l Ins. Co. v. Kansa General Ins.
Co., 1992 U.S. Dist. Lexis 17841 (S.D.N.Y. 1992) (refusing to find party waived right to appoint
arbitrator, despite delay, but finding waiver of right to demand that chairman be from
neutral state); New England Reinsurance Corp. v. Tennessee Ins. Co., 780 F.Supp. 73 (D. Mass.
1991) (party's eight day delay in appointing arbitrator held not to waive right to appoint);
Compania Portorafti Commerciale v. Kaiser Int'l, 616 F.Supp. 236, 238 (S.D.N.Y. 1985) (“so
minor a delay, uncomplicated by indications of bad faith, does not in equity deprive a
party to an arbitration clause of its contracted for right to appoint an arbitrator of its
choosing ... unless the contract makes time of the essence”); Lobo & Co. v. Plymouth
Navigation Co., 187 F.Supp. 859, 860 (S.D.N.Y. 1960) (“it is desirable that the arbitration
panel consist of arbitrators chosen by each of the parties”); In re Utility Oil Corp., 10
F.Supp. 678 (S.D.N.Y. 1934) (“With all the arbitrators representing one party only, the party
unrepresented would in some cases be at the mercy of his opponent and the result a
foregone conclusion”).
Nonetheless, some U.S. courts have interpreted arbitration agreements strictly, holding
that the failure to comply with time limits for nominating an arbitrator results in loss of
the right to make a nomination. Universal Reinsurance Corp. v. Allstate Ins. Co., 16 F.3d 125
(7th Cir. 1994) (party's failure to nominate arbitrator within 30-day period waived its right
to do so and, under arbitration agreement, entitled other party to make nomination; “the
agreement is crystal clear, specifying a particular course for the appointment of a second
arbitrator when one of the parties fails to make its selection within thirty days”).
Additionally, if an agreement provides expressly that time is of essence in the
appointment of arbitrators within fixed deadlines, U.S. courts will be more likely to
require strict compliance with time limits for making nominations. See Compania
Portorafti, 616 F.Supp. at 239. In addition, a party cannot rely on the pendency of its own
judicial proceedings as an excuse for refusing to appoint an arbitrator or as staying the
time in which an appointment may be made. McMahon v. Shearson/American Express Inc.,
709 F.Supp. 369, 373-74 (S.D.N.Y. 1989).

(b) Consequences of party's failure to nominate arbitrator under other national arbitration
statutes. Consider Article 1678(1) of the Belgian Judicial Code. Suppose that a party fails
to nominate a co-arbitrator and, pursuant to the parties' agreement, the other party
nominates the co-arbitrator. Does Article 1678(1) forbid this? Should it (or other national
laws) impose such a prohibition? Is denial of a party's right to participate equally in
selecting the arbitral tribunal an appropriate and fair remedy for default in timely
nominating an arbitrator?
16. Constraints imposed by national law on procedures for selecting arbitrators. Consider
Article 1678(1) of the Belgian Judicial Code. What impact does this provision have on
agreements for the selection of arbitrators? Is the principle set forth in Article 1678(1) unusual?
Is it likely that other national laws would adopt similar approaches? Would that be desirable?
17. Selection of a presiding arbitrator. After selection of the co-arbitrators, in a three-person
tribunal, the presiding arbitrator must be chosen. Consider how the various institutional rules
set forth above deal with this issue. How does the ICC appoint a presiding arbitrator? What
limitations are imposed on the choice? Consider the same issues under the UNCITRAL
Arbitration Rules, the LCIA Rules, and the AAA Commercial Arbitration Rules. If you were
drafting an arbitration agreement, which approach would you prefer?
18. Role of co-arbitrators in selecting presiding arbitrator. Is it desirable for co-arbitrators to
attempt to agree upon a presiding arbitrator? What advantages, and what disadvantages, does
this have? Suppose that you were a co-arbitrator nominated by a party (for example, Company
B in the hypothetical set forth in Note 10 above). How would you go about fulfilling your task of
choosing a presiding arbitrator? What information would you want and with whom would you
like to communicate? Why?
P "624"
P "625"
Consider the IBA Ethics for International Arbitrators, excerpted in Appendix O. How do these
influence a co-arbitrator's activities in selecting a presiding arbitrator? Compare the
limitations upon a co-arbitrator's activities and communications in (a) the process of selecting
a presiding arbitrator, and (b) thereafter, with respect to the merits of the parties' dispute.
Why is there a distinction?
Suppose that two co-arbitrators agree upon a prospective presiding arbitrator. Should each of
them inform the party that nominated him? Must they? Can they? What purposes would be
served by such disclosure? Should such information be given before or after the two co-
arbitrators have agreed upon the identity of the presiding arbitrator? What if a party objects to
a prospective presiding arbitrator? What if a party objects repeatedly and uniformly to every
proposal by the co-arbitrators? Why might a party do so?
19. Procedure for selecting presiding arbitrator. There are numerous possible procedures for
attempting to reach agreement on a presiding arbitrator. For example, each party may
nominate one arbitrator and the two co-arbitrators can agree upon a list of five additional
potential arbitrators. Each party can then be entitled to strike two names from the list and the
 remaining person is the chairman. Obviously, the identity of the names on the list are critical.
Alternatively, the parties can exchange lists of persons whom they either would accept or
would be inclined to accept. Sometimes, the parties' lists overlap, in which case the common
name is deemed accepted; if they do not, there may be names on one list that are acceptable
to the other party. And even if that is not the case, the process of identifying potential
candidates can lead to a better understanding of the relevant expectations of each party,
thereby making subsequent agreement conceivable. Like everything else, an element of
gamesmanship can be brought to bear on this process. Parties may withhold favored
candidates, express feigned interest, raise ulterior objections, propose implausible choices,
and the like.
The UNCITRAL Rules provide for a “list-procedure” in Article 6 in which the appointing authority
sends both parties an identical list of at least three names; each party deletes names it finds
unacceptable and numbers the remaining names in order of preference. Based upon this, the
appointing authority selects the prospective arbitrator with the greatest support. Use this
procedure in connection with the hypothetical in Note 10.
20. Constraints imposed by national law on arbitrator's identity. National law may impose limits
on the identities of arbitrators in international commercial arbitrations. For example, in some
countries, arbitrators must be either local nationals, qualified to practice local law, or of a
particular religious faith. In other states, arbitrators must not have been convicted of
prescribed crimes, have been adjudged bankrupt, be a minor, or hold various public offices.
(a) Examples of constraints on arbitrator's identity. Consider the restrictions imposed by
Article 1680 of the Belgian Judicial Code, §3 of the Saudi Arbitration Regulation, and
Articles 127 and 128 of the Ecuadorean Organic Law. What are the policies underlying
these various restrictions? Are they appropriate in international commercial arbitration?
Compare Article 11(1) of the UNCITRAL Model Law with the Saudi and Ecuadorean
legislation.
In the United States, the FAA imposes no capacity restrictions, although other sources of
law may. For example, active judges are prohibited by canons of judicial conduct from
acting as arbitrators. ABA Code of Judicial Conduct Canon 5(E).

(b) Choice of law issues relating to national law constraints on arbitrators' identity. National
law constraints on the identities of arbitrators raise conflict of laws questions. Such limits
are sometimes said to be governed by the procedural law of the arbitration. Tupman,
Challenge and Disqualification of Arbitrators in International Commercial Arbitration, 38
Int'l & Comp. L. Q. 26, 27 (1989). That is usually true, but it is not necessarily the complete
answer. Suppose a U.S. and an English judge – both of whom are forbidden by statute or
public policy in the United States and England from acting as an arbitrator – sit as
arbitrators in Finland – where Finnish judges can sit as arbitrators. Is the U.S. judge's
resulting award enforceable? in the United States? What about the award made by the
English judge?
(c) Waiver of constraints on arbitrator's identity. To what extent can defects in an arbitrator's
capacity be waived? Suppose parties to an arbitration in Saudi Arabia agreed to non-
Muslim arbitrators. Cf. Island Territory of Curacao v. Solitron Devices, Inc., 356 F.Supp. 1, 12
(S.D.N.Y. 1973) (dicta that U.S. party waived right to challenge arbitrator's lack of capacity,
based on occupying judicial office in foreign country, in an arbitration held abroad).
To what arbitrations ought the national law constraints on arbitrators' identities be
P "625" applicable: (a) arbitrations sited within the state imposing the requirement; (b)
P "626" arbitrations where the substantive law is that of the state imposing the requirement;
(c) arbitrations where the procedural law of the arbitration is that of the state imposing
the requirement; or (d) arbitrations where the arbitral award is sought to be enforced in
the state imposing the requirement?

21. Arbitrator's obligations of independence. Arbitrators in international arbitrations are

subject to obligations of independence. Those obligations arise from a variety of sources,
including applicable national law, applicable institutional rules, and the arbitration
agreement. See infra pp. 627-28, 859-80. These obligations are of fundamental importance to
the international arbitration process, and to the process of selecting arbitrators.
(a) Independence obligations imposed by national arbitration statutes. As discussed in detail
below, national law in many countries, including the United States, imposes requirements
of independence on arbitrators. Consider Article 12 of the UNCITRAL Model Law. What
substantive obligations of independence does it impose? Compare Article 180 of the
Swiss Law on Private International Law and §10(b) of the FAA. What are the differences
between these various standards?
Note the approach to independence standards taken by the Ecuadorean legislation. Is
this more desirable than that of the UNCITRAL Model Law?
 (b) Choice of law issues relating to independence obligations imposed by national law. As with
other requirements relating to the identity of arbitrators, independence obligations
imposed by national law raise choice-of-law issues. That is, to what international
arbitrations (and which arbitrators) are a particular country's requirements concerning
independence applicable? To what arbitrations should such requirements apply?
There are several possible choices of applicable law to govern an arbitrator's
independence obligations in an international arbitration. As suggested above, these
include the law of the arbitral situs, the procedural law selected by the parties to govern
the arbitration (usually, that of the arbitral situs), and the law of an enforcement forum
where any award made by the arbitrators may be sought to be enforced. Which one (or
more) of these laws should govern the arbitrator's independence obligations? As a
practical matter, what approach should parties take in selecting arbitrators?

(c) Independence obligations imposed by institutional rules. Consider Articles 9 and 10 of the
UNCITRAL Arbitration Rules, Article 7 of the ICC Rules, and Article 5 of the LCIA Rules. How
does each set of rules define the arbitrator's independence obligations? What differences
exist between the rules?
Compare the foregoing approaches to Rules 12-15 and 19 of the AAA Commercial Rules.
Consider carefully the differences under the UNCITRAL, ICC, and LCIA Rules, on the one
hand, and the AAA Commercial Rules, on the other.

(d) Statements of independence required from arbitrators under institutional arbitration rules.
Note that most leading institutional arbitrations rules require arbitrators to complete
statements of independence. The standard ICC Statement of Independence is
reproduced as Appendix R. Consider what declarations and disclosures a prospective
arbitrator must make in completing the Statement of Independence. What purposes does
the Statement serve? What should be the consequences of non-disclosure?
(e) Practical applications of independence standards. Consider the following hypotheticals
under the independence standards set out in the institutional arbitration rules excerpted
above:
Suppose an arbitrator is in-house counsel to a party.
Suppose an arbitrator is outside counsel to a party. Consider separately cases where
the lawyer has advised on the dispute subject to arbitration and where he has advised
on an entirely unrelated matter.
Suppose an arbitrator was formerly employed as an officer of a party. Alternatively,
suppose an arbitrator was formerly retained as outside counsel by a party. In each
case, does it matter: (a) when the employment or retention occurred and how long it
lasted; (b) how senior the employment position was or how large and/or remunerative
the retention was; (c) whether the employment or retention related to the dispute
subject to arbitration?
Suppose an arbitrator is related by blood or marriage to principals of a party.
Suppose an arbitrator would derive economic benefit from the outcome of the
arbitration. For example, suppose (a) the arbitrator has a “contingent” fee
arrangement whereby he will be paid extra amounts if a party prevails; or (b) the
arbitrator owns shares in a party.
P "626" Suppose the parties each pay “their” co-arbitrator his fees as an arbitrator and one
P "627" party pays its arbitrator a higher hourly rate than the other.
Suppose an arbitrator is a partner in a law firm that represents a party, although the
arbitrator himself is not involved in the representation. Does it matter: (a) whether the
representation is ongoing; (b) how substantial the representation is; (c) whether the
representation is related to the dispute subject to arbitration?
Suppose an arbitrator knows the principals of a party socially. Suppose there is a close
personal friendship. Suppose the friendship has been or is intimate. Suppose there is
intense personal dislike.
Suppose an arbitrator is presently serving as co-arbitrator for a party in another
matter.
Suppose he did so in the past. Suppose an arbitrator is a chairman in one arbitration,
where lawyer X represents a party, and lawyer X then appoints the arbitrator as co-
arbitrator in a second arbitration.
Suppose an arbitrator knows the lawyers representing a party. Suppose he is advising
those lawyers on an unrelated matter. Suppose he is serving as a co-arbitrator in
another matter, monitored by those lawyers. What if he did so in the past?
Which hypotheticals would involve an arbitrator breaching his obligations of
independence under leading national laws or institutional rules? Would your answers be
any different with respect to presiding arbitrators, rather than co-arbitrators?

22. Differing approaches under national arbitration statutes and institutional arbitration rules
to respective independence obligations of party-nominated arbitrators and presiding arbitrator.
Different national arbitration statutes take materially different approaches to the respective
 independence obligations of party-nominated co-arbitrators and presiding arbitrators. These
differences are paralleled by differences on the same topic among institutional arbitration
rules.
(a) Customary distinction between “party-nominated” and “neutral” arbitrators in the United
States. Historically, party-nominated arbitrators in the United States have been
presumed (absent contrary agreement) to have a measure of partiality towards the party
that appointed them. In actions to vacate awards under the FAA, based upon an
arbitrator's alleged bias, U.S. courts have sometimes relied on this distinction. See
Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753 (11th Cir. 1993) (“Mr. Meyers, as
a party-appointed arbitrator, may be predisposed or sympathetic toward [the] position”
of the party that nominated him); Cia de Navegacion Omsil, SA v. Hugo Neu Corp., 359
F.Supp. 898, 899 (S.D.N.Y. 1973) (“As everyone known, the party's named arbitrator is an
amalgam of judge and advocate”); Stef Shipping Corp. v. Norris Grain Co., 209 F.Supp. 249
(S.D.N.Y. 1962) (party-appointed arbitrators “are partisans once removed from the actual
controversy”); Petition of Dover SS Co., 143 F.Supp. 738, 740-41 (S.D.N.Y. 1956) (“the
designation by the parties themselves of arbitrators who may not be completely
disinterested, accords with the generally accepted practice in arbitration proceedings of
this kind”); Petrol Corp. v. Groupement D'Achat des Carburants, 84 F.Supp. 446, 448
(S.D.N.Y. 1949) (justifying bias of one party-appointed arbitrator on grounds that other
party-appointed arbitrator “was likewise not disinterested”). See infra pp. 875-77 and the
IBA Code of Ethics, Appendix O.
(b) No distinction between independence obligations of party-nominated and presiding
arbitrators under most national arbitration statutes. In contrast to the customary
presumption under the FAA, most national arbitration statutes formally impose the same
standards of independence on both party-nominated and presiding (or sole) arbitrators.
Consider Article 12 of the UNCITRAL Model Law and Article 180 of the Swiss Law on Private
International Law. Do they distinguish between party-nominated and presiding (or sole)
arbitrators?
(c) Party-nominated and “neutral” arbitrators under AAA Commercial Rules. Consider the
excerpted portions of the 1999 AAA Commercial Arbitration Rules, and in particular the
differing treatment of “neutral” and party-nominated arbitrators. What precisely are the
differences in the obligations on each category of arbitrator? Is the AAA approach wise?
What limits are there on the partiality or conduct of a party-nominated arbitrator?
Compare the AAA/ABA Code of Ethics for Arbitrators in Commercial Disputes, discussed at
supra p. 49. Among other things, consider Canon VII of the AAA/ABA Code, which provides
that party-appointed arbitrators may be “predisposed” towards the party which
appointed them and, additionally, may have various types of relationships with that
party. See infra pp. 875-77.
There are limits on the extent of “partiality” of a party-nominated arbitrator, even under
the traditional U.S. and AAA/ABA Code approach What should these limits be?
P "627"
P "628"
(d) No distinction between independence obligations of party-nominated and presiding
arbitrators under leading institutional arbitration rules. Consider the independence
obligations of arbitrators under the UNCITRAL, ICC, and LCIA arbitration rules. Note that
none of these provisions establishes differing standards of independence for party-
nominated arbitrators and presiding arbitrators. Compare also Article 1 and 3 of the IBA
Ethics.
(e) Wisdom of distinction between “party-appointed” and “neutral” arbitrators. Is it
appropriate to impose more rigorous standards on the “neutral” chairman of a tribunal
than on the party-appointed arbitrators? Consider Tupman, Challenge and Disqualification
of Arbitrators in International Commercial Arbitration, 38 Int'l & Comp. L. Q. 26, 49 (1989):
Unquestionably all members of the tribunal in international arbitration should be held to
the same standard of independence, whether appointed by a party or not. The concept of
a non-neutral arbitrator as it exists in some common law systems simply has no place
where the parties are of different nationalities and might lose faith in the arbitral process
if a foreign, apparently lesser, standard were applied.
Is that correct? Query whether the author's premise is accurate.
Which of the above approaches to the arbitrator's independence is wiser? Why? Role-play
with your colleagues a three-person arbitral tribunal's internal deliberations under each
regime.
 (f) Importance of parties' agreement to arbitrators' independence obligations. Under most
national laws, the parties' agreement as to the arbitrator's independence obligations will
ordinarily be given effect. Under the FAA, for example, arbitration agreements
incorporating institutional rules imposing identical independence obligations on all
arbitrators will be given effect (notwithstanding the general U.S. acceptance of
differential standards of independence for co-arbitrators). See infra pp. 875-76.
Conversely, Western European and other national courts, with traditions of uniform
independence obligations for all arbitrators, would likely give effect to agreements
incorporating the AAA Commercial Arbitration Rules.
Suppose that parties do not expressly agree in an international arbitration to particular
independence standards for co-arbitrators and the presiding arbitrator. What do parties
really want when they appoint a co-arbitrator? How will this impact on a requirement
that all arbitrators be equally independent? As a practical matter, a significant number
of international arbitrations produce dissenting opinions by the co-arbitrator nominated
by the losing party, while virtually none produce dissenting opinions by the co-arbitrator
nominated by the prevailing party. What does this suggest?

(g) “Splitting the baby.” Arbitrators have a reputation, in some circles, of “splitting the baby,”
by reaching unprincipled compromises, rather than applying legal rules objectively. This
is said to occur less frequently in international commercial arbitrations than in domestic
U.S. arbitrations. Consider the likely decisions of an arbitral tribunal composed of (a)
three independent arbitrators, and (b) a “neutral” presiding arbitrator with two partisan
party-nominated arbitrators under the AAA Commercial Rules. Which model is
systemically wiser? Which model is likely to benefit one party disproportionately? Does it
depend on the case?
23. Relevance of arbitrator's independence obligations during appointment process. Consider
the procedures set forth in the UNCITRAL, ICC, LCIA, and AAA Commercial Rules for the
nomination of arbitrators. Role-play the process of nominating co-arbitrators, including
interviews between the party's counsel and two prospective nominees for co-arbitrators. In
doing so, assume that each of the prospective co-arbitrators affirmatively want to be
appointed, because of the money they will earn. Note the statements of independence that
must be submitted by an arbitrator under most institutional rules.
Consider the role of (a) counsel who is considering nominating a particular co-arbitrator, and
(b) counsel whose opposite number (i.e., opposing counsel) has nominated a particular co-
arbitrator. How do the independence obligations (and other qualification requirements)
applicable to the co-arbitrators affect your conduct? What should, or must, you do to ascertain
compliance with such obligations or requirements?
24. Lower U.S. court decisions holding that there is no general duty on party to investigate for
arbitrator's bias. U.S. courts have sometimes said that parties are not generally obliged to seek
out possible bases of bias of an arbitrator. See Merit Ins. Co. v. Leatherby Ins. Co., 714 F.2d 673,
683 (7th Cir.), cert. denied, 464 U.S. 1009 (1983); U.S. Wrestling Federation v. Wrestling Div. of AAU,
P "628" Inc., 605 F.2d 313, 321 (7th Cir. 1979). That view is subject to modification by institutional
P "629" arbitration rules or other aspects of the parties' agreement. It is also probably not safely
relied upon even in the absence of express agreements imposing duties to investigate.
25. No general requirement that arbitrators be experts. Unless the parties have so agreed in
their arbitration clause, there is no general requirement under the FAA or most other
developed arbitration statutes that the arbitrators be experts. Petition of Dover SS Co., 143
F.Supp. 738, 740 (S.D.N.Y. 1956). Particular arbitration agreements may impose requirements
that arbitrators have expertise, experience or qualifications in specific fields. U.S. courts have
generally been reluctant to enforce such provisions strictly. E.g., Remmey v. Paine Webber, Inc.,
32 F.3d 143 (4th Cir. 1994) (rejecting claims that arbitrators lacked qualifications required by
arbitration agreement).
26. Effects of participating in constituting arbitral tribunal on right to challenge arbitral award.
At least arguably, a party's participation in selection of an arbitral tribunal might waive its
subsequent rights to challenge the arbitrators' jurisdiction. This result would ordinarily not be
appropriate (save insofar as a challenge related to particular aspects of the constitutive
process to which the party consented). But see Degi Deutsche Gesellschaft fuer Immobilienfonds
bmH v. Haffey, 1995 WL 669087 (S.D.N.Y. 1995) (“New York courts have held that participation in
selecting arbitrators does preclude a party from later challenging in court the arbitral forum”);
Boston Old Colony Ins. v. Martin, 310 N.Y.S.2d 820 (App. Div. 1970). Prudence suggests a
reservation of rights before participating in constituting an arbitral tribunal.

B. Judicial Appointment of Arbitrators Under National Arbitration Statutes

The arbitration statutes of many countries permit the judicial appointment of arbitrators in
international arbitrations. The availability of judicial appointment ensures that arbitral
proceedings can be pursued, even where the parties have not agreed upon either an arbitrator
or an appointing authority.
In the United States, §5 of the domestic FAA provides that, if the parties have agreed on a
means of appointing an arbitrator, that means shall be followed. (7) If the parties have not so
agreed, then §5 authorizes the district court to appoint an arbitrator or arbitrators upon the
application of either party. (8) Similarly, §5 authorizes judicial appointment of an arbitrator if
a party fails to make use of the agreed means for selecting an arbitrator or if the agreed means
“lapses.” In actions subject to the New York Convention, §206 provides that: “A court having
 jurisdiction under this chapter ... may also appoint arbitrators in accordance with the
provisions of the [parties' arbitration] agreement.” (9)
The following materials illustrate the role of national courts in the appointment of arbitrators
in international arbitrations. Excerpted below are relevant provisions of the UNCITRAL Model
Law, the Swiss Law on Private International Law, the FAA, and the Uniform Arbitration Act, each
P "629" of which provide national courts with statutory powers to appoint arbitrators. Compare the
P "630" treatments of judicial appointment of arbitrators under these statutes, focusing among other
things on those arbitrations in which a particular national court can appoint arbitrators (i.e.,
does the FAA permit appointment of arbitrators only when the arbitral situs is in the United
States, or is it also applicable when the arbitral situs is located abroad). Consider also the
decision in Astra Footwear Industry v. Harwyn International, excerpted below, which illustrates
the importance of §5's appointment power in implementing defective arbitration agreements.
FEDERAL ARBITRATION ACT
9 United States Code §§5, 206 & 303
[excerpted below at pp. 1000, 1003, 1004]
UNIFORM ARBITRATION ACT
§3
[excerpted below at pp. 1005-6]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 179
[excerpted below at p. 1033]
UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION
Articles 1, 6 & 10-15
[excerpted below at pp. 1012, 1013, 1014-15]
ASTRA FOOTWEAR INDUSTRY v. HARWYN INTERNATIONAL
442 F.Supp. 907 (S.D.N.Y. 1978)
PIERCE, DISTRICT JUDGE. Petitioner Astra Footwear brings this action to compel arbitration to
resolve a contract dispute which has arisen between the parties. Petitioner is a footwear
manufacturer located in Zagreb, Yugoslavia; respondent is a footwear distributor with offices in
New York. In May, 1975 the parties entered into an agreement under which petitioner agreed to
sell and deliver and respondent agreed to purchase 13,400 pairs of shoes. Petitioner alleges
that it has shipped footwear pursuant to the agreement, but that respondent has refused to
pay....
P "630"
P "631" Petitioner seeks to compel arbitration before the International Chamber of Commerce.... In
so requesting, petitioner relies on paragraph 12 of the contract, which provides:
12. Disputes: For all claims of disputes arising out of this agreement which could not be
amicably settled between the parties, is competent the arbitrage for export trade at the
Federal Chamber of Commerce in Beograd. [sic] In the case that the buyer is accused, the
Chamber of Commerce in New York is competent.
It is petitioner's position that in designating the “Chamber of Commerce in New York,” the
parties were referring to the International Chamber of Commerce (“ICC”), which is based in
Paris and has offices in New York. (10) Petitioner further indicates that should the Court
determine that the ICC was not agreed to, it stands ready to arbitrate before any arbitrator
appointed by the Court, including the American Arbitration Association.
In reply, respondent maintains that the agreement refers to and the parties intended the New
York Chamber of Commerce (“NYCC”) to arbitrate disputes arising thereunder. In support of its
position, respondent asserts that prior to entering into this agreement it had never before
done business with a Communist concern, and therefore was careful to choose an arbitration
body – NYCC – that would best protect its interests. It appears that the New York Chamber of
Commerce ceased to arbitrate disputes in April, 1973 when it merged to become the New York
Chamber of Commerce & Industry (“NYCCI”). It is respondent's position that the naming of NYCC
was “an integral part of the substantive rights bargained for by Harwyn,” and that in light of
NYCCI's inability to hear the dispute, the agreement to arbitrate has been vitiated and the
petition must be dismissed.
Respondent argues that the question of whether the agreement was to arbitrate in general or
was to arbitrate before a particular organization is an issue mandating a jury trial under 9
U.S.C. §4 of the FAA. To support this position, respondent cites a New York case, (11)
Laboratorios Gross, SA v. Forest Laboratories, Inc., 295 N.Y.S.2d 756 (1st Dep't 1986) which dealt
with a closely analogous fact situation. There the parties agreed to arbitrate “in accordance
with the rules and procedures of the Pan American Arbitration Association,” an organization
which had never in fact existed. A petition was brought to stay arbitration. The Court, in
ordering a hearing to determine the parties' intent stated: “the issue to be decided is whether
P "631" the dominant purpose of the agreement was to settle disputes by arbitration, rather than the
P "632" instrumentality through which arbitration should be effected.” However, the intent of the
parties was necessary only to determine the appropriate arbitrator to appoint.
Petitioner, on the other hand, has cited the case of Delma Engineering Corp. v. K & L
 Construction Co., 174 N.Y.S.2d 620 (2d Dep't 1958), aff'd, 181 N.Y.S.2d 794 (1958), which has a
factual situation bearing greater resemblance to the present case than does Laboratorios. The
contract in Delma provided for arbitration before the New York Building Congress which
refused to take the case because it had discontinued arbitration procedures and neither
disputant was a member of the Building Congress. The Appellate Division rejected the
argument that since the provisions for arbitration had failed, the parties were relegated to
their remedies in court. Instead, the court held that there was a dominant intent to arbitrate
and not merely to arbitrate before particular arbitrators. Without requiring a trial on the
question of intent, the appellate court directed the lower court to appoint three arbitrators of
its own selection, pursuant to the New York statute. (12)
The Court of Appeals for this Circuit has stated that what a party must show in order to place
the making of an arbitration agreement in issue or to make a genuine issue entitling a party to
trial by jury is “an unequivocal denial that the agreement had been made ... and some
evidence should have been produced to substantiate the denial.”Interocean Shipping Co. v.
National Shipping & Trading Corp., 462 F.2d 673, 676 (2d Cir. 1972), quoting Almacenes Fernandez,
SA v. Golodetz, 148 F.2d 625, 628 (2d Cir. 1945). In Interocean, the party opposing arbitration
denied the very existence of the contract that contained the arbitration clause. In the present
case, respondent's main objection to arbitration appears to be fear that the arbitrator would
not support American business interests. (13) Respondent has not unequivocally denied that an
arbitration agreement was made in the present case. From the language of the contract and
the position of the parties, the Court finds that an arbitration agreement was made and that
the making of such agreement is not in issue here.
The Court further finds that by the term “Chamber of Commerce in New York” the parties
intended the New York Chamber of Commerce, and not the International Chamber of
Commerce which has an office in New York. Respondent has pointed out that even the
P "632" petitioner, when seeking arbitration applied first to the New York Chamber of Commerce and
P "633" Industry. In addition, the International Chamber of Commerce when approached as an
arbitrator [sic] also suggested that the parties try the New York Chamber of Commerce.
Since the New York Chamber of Commerce no longer arbitrates and the International Chamber
of Commerce was not specified in the agreement, petitioner next requested that the Court
appoint an arbitrator pursuant to 9 U.S.C. §5.... However, respondent contends that “[w]hile
there is a strong policy favoring arbitration ... it remains a creature of contract. [The Court
should] not impose its will on parties whose intentions are in clear conflict on this important
issue.”Lea Tai Textile Co. v. Manning Fabrics, Inc., 411 F.Supp. 1404, 1407 (S.D.N.Y. 1975). But
respondent's reliance on Lea Tai is misplaced. In that case, Judge Duffy held that there was no
agreement to arbitrate since buyer and seller had exchanged forms with “hopelessly”
inconsistent arbitration terms. In the present case, as had been noted, it is undisputed that the
parties did agree to arbitrate albeit before the “Chamber of Commerce in New York.”
The Court finds that 9 U.S.C. §5 was drafted to provide a solution to the problem caused when
the arbitrator selected by the parties cannot or will not perform. In view of the federal policy
to construe liberally arbitration clauses and to resolve doubts in favor of arbitration, Coenen v.
R. W. Pressprich & Co., 453 F.2d 1209 (2d Cir.), cert. denied, 406 U.S. 949 (1972), the Court
concludes that it cannot ignore the plain language of 9 U.S.C. §5, nor do the equities of the case
(14) warrant doing so. The Court thus agrees to appoint an arbitrator pursuant to 9 U.S.C. §5.
Accordingly, petitioner's motion to arbitrate is hereby granted. The only matter remaining is
the appointment of a substitute arbitrator. The parties are invited to submit in writing to the
Court by January 26, 1978 the names of possible alternate arbitrators. Should the parties fail
together in agreeing upon one arbitrator, the Court will designate one.
Notes on Appointment of Arbitrators By National Courts
1. Appointment of arbitrator by a national court when parties have not agreed upon an
appointing authority. As described above, parties do not always agree upon an arbitrator or
appointing authority. Alternatively, a party may refuse to comply with a contractual
mechanism for selecting arbitrators or the appointing authority agreed to by the parties may
refuse or be unable to act. In those circumstances, most developed national arbitration
statutes provide for appointment of an arbitrator(s) by a national court.
(a) Institutional ability of national court to appoint international arbitrator. Consider
preliminarily the advantages and disadvantages of the appointment of international
arbitrators by a national court. What experience and expertise does a national court
judge have in selecting suitable international arbitrators? Compare that expertise and
P "633" experience to the abilities of a leading arbitral institution. Consider also the possibilities
P "634" of parochial or other predispositions, both of national courts and arbitral institutions.
Who would you prefer to appoint arbitrators in a case involving your client? Does it
depend on the identity of the client and the national court making the selection? Does it
depend only on these factors?

(b) Appointment of international arbitrators under national arbitration statutes. Consider

Article 179 of the Swiss Law on Private International Law. In what circumstances does
Article 179 permit Swiss courts to appoint an arbitrator? Compare Article 11 of the
UNCITRAL Model Law.
 (c) Appointment of international arbitrators under §5 and §206 of the FAA. Like other leading
national arbitration statutes, §5 and §206 of the FAA authorize a district court to
“designate and appoint an arbitrator or arbitrators” or to “appoint arbitrators.” As Astra
Footwear illustrates, U.S. lower courts have frequently exercised this power by appointing
arbitrators. See Zechman v. Merrill Lynch, Pierce, Fenner & Smith, 742 F.Supp. 1359 (N.D. Ill.
1990); CAE Industries Ltd v. Aerospace Holdings Co., 741 F.Supp. 388 (S.D.N.Y. 1989); Schulze
and Burch Biscuit Co. v. Tree Top, Inc., 642 F.Supp. 1155 (N.D. Ill. 1986), aff'd, 831 F.2d 709
(7th Cir. 1987); Ore & Chem. Corp. v. Stinnes Interoil, Inc., 611 F.Supp. 237, 240-41 (S.D.N.Y.
1985); In re Hidrocarburos y Derivados, CA, 453 F.Supp. 160 (S.D.N.Y. 1977); Hawaii Teamsters
etc. v. Honolulu Rapid Transit Co., 343 F.Supp. 419 (D. Haw. 1972).
Section 206, by its terms, only authorizes the appointment of arbitrators “in accordance
with the provisions of the [arbitration] agreement.” This arguably would not allow judicial
appointment where an agreement failed to specify an appointment mechanism (which, of
course, is the one time when judicial appointment is really useful). Notwithstanding this
drafting, it is relatively clear that §§5 and 206, taken together, authorize the appointment
of arbitrator(s) in international arbitrations when the parties have neither selected an
arbitrator nor a contractual appointment mechanism. Jain v. de Mere, 51 F.3d 686 (7th Cir.
1995) (in action subject to New York Convention, §5 of FAA is incorporated into FAA's
second chapter and permits appointment of arbitrator, when parties have not agreed on
alternative means of appointment).

2. Appointment of arbitrator by a national court when party refuses to appoint co-arbitrator. In

cases involving three-member tribunals, one party will occasionally fail to appoint a co-
arbitrator, either through neglect or a desire to frustrate the arbitral process. As we have seen,
institutional arbitration rules provide mechanisms for selecting an arbitrator notwithstanding
a party's inaction. See supra p. 623. Similarly, national arbitration statutes also provide
appointment alternatives (for ad hoc arbitrations or when an appointing authority also refuses
to act). Article 11(4)(a) of the UNCITRAL Model Law is an example of such legislation.
Section 5 of the FAA specifically permits court-appointment of an arbitrator where “any party
[to the arbitration agreement] shall fail to avail himself of” his right to appoint. For cases where
the court exercised this power, see Pacific Reinsurance Mgt Corp. v. Ohio Reinsurance Corp., 814
F.2d 1324 (9th Cir. 1987); Neptune Maritime, Ltd v. H & J Isbrandtsen, Ltd, 559 F.Supp. 531, 533
(S.D.N.Y. 1983). It is seldom that a party will persist in its refusal to appoint an arbitrator to the
point of forfeiting its right to make an appointment. See supra pp. 623-24, for a discussion of
the consequences of a party's delay in appointing an arbitrator.
3. Appointment of arbitrator by a national court when the individual specified in parties'
agreement cannot or will not serve. Although it is usually inadvisable, parties sometimes
provide in their arbitration agreement that a particular individual will act as arbitrator. That
individual occasionally cannot (because of a conflict or otherwise) or will not serve. In those
circumstances, assuming that the parties cannot reach an agreement on a new choice, most
developed national arbitration legislation (including §5 of the FAA) permits judicial
appointment. Erving v. Virginia Squires Basketball Club, 349 F.Supp. 726 (S.D.N.Y. 1972), aff'd, 468
F.2d 1064 (2d Cir. 1972); Masthead Mac Drilling v. Fleck, 549 F.Supp. 854 (S.D.N.Y. 1982) (parties
agreed that individual designated in arbitration agreement was conflicted; court designated
AAA to select substitute if parties could not agree); Hawaii Teamsters etc. v. Honolulu Rapid
Transit Co., 343 F.Supp. 419, 425 (D. Haw. 1972).
4. Appointment of arbitrator by a national court when appointing authority declines to act.
Suppose that the parties select an appointing authority in their arbitration agreement, but it
refuses to act (like the ICC in Astra Footwear) or has gone out of existence. Will a national court
appoint an arbitrator, or will it conclude that the arbitration agreement is no longer valid (on
grounds of frustration, failure of an essential term, or otherwise)?
U.S. courts have been willing in principle to appoint arbitrators under §5 of the FAA when the
parties' contractually-agreed appointing authority cannot or will not act. In addition to Astra,
see ATSA of California, Inc. v. Continental Ins. Co., 702 F.2d 172 (9th Cir. 1983), amended, 754 F.2d
1394 (9th Cir. 1985); Zechman v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 742 F.Supp. 1359 (N.D.
Ill. 1990).
P "634"
P "635"
5. Appointment of arbitrator by a national court when parties' arbitration agreement is
indefinite or internally inconsistent. Parties sometimes attempt to designate an appointing
authority (or procedure) in their arbitration agreement, but do so in either an incoherent or
internally inconsistent fashion. In such cases, most national arbitration statutes contemplate
judicial appointment of an arbitrator.
In the United States, U.S. courts are generally willing to appoint arbitrators under §5 of the FAA
where there is a defective agreement regarding an appointing authority. CAE Industries Ltd v.
Aerospace Holdings Co., 741 F.Supp. 388, 392-93 (S.D.N.Y. 1989); Astra Footwear Industry v.
Harwyn Int'l, Inc., 442 F.Supp. 907, 910 (S.D.N.Y. 1978). See also Chattanooga Mailers etc. v.
Chattanooga News-Free Press Co., 524 F.2d 1305 (6th Cir. 1975) (appointing arbitrator
notwithstanding parties' reference to non-existent procedures).
Compare the provisions of Article 11(4) of the UNCITRAL Model Law and Article 179(2) of the
Swiss Law on Private International Law.
6. Consequences of indefinite, inconsistent or otherwise defective appointment mechanism. If
an arbitration clause contains an indefinite, inconsistent or otherwise defective appointment
 mechanism, what are the consequences of this defect on the arbitration agreement generally?
In particular, is the defective provision severed from the remainder of the clause (which is
enforced) or is the entire arbitration provision invalid?
The foregoing issues are discussed in detail above. See supra pp. 187-88, 596-609. U.S. courts
have generally inquired whether the parties' agreement to arbitrate was their basic
commitment, such that failure of the collateral term regarding selection of the arbitrators does
not invalidate the fundamental arbitration agreement. See Zechman v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 742 F.Supp. 1359 (N.D. Ill. 1990) (“Where one term of an arbitration
agreement has failed, the decision between substituting a new term for the failed provision
and refusing to enforce the agreement altogether turns on the intent of the parties at the time
the agreement was executed, as determined from the language of the contract and the
surrounding circumstances.... To the extent the court can infer that the essential term of the
provision is the agreement to arbitrate, that agreement will be enforced despite the failure of
one of the terms of the bargain. If, on the other hand, it is clear that the failed term is not an
ancillary logistical concern but rather is as important a consideration as the agreement to
arbitrate itself, a court will not sever the failed term from the rest of the agreement and the
entire arbitration provision will fail.”).
7. Wisdom of judicial salvage of defective arbitration agreement. Are decisions such as Astra,
which salvage a defective arbitration agreement, sound? When is it correct to conclude that an
arbitration clause indicates the parties' overriding intention to arbitrate, even if no agreement
was reached, or, if an agreement was reached, it is frustrated, on one of the most important
issues concerning the arbitral process (i.e., the appointing authority and arbitral situs)? In
international arbitrations, selection of the arbitral situs and the appointing authority are
crucial decisions. After unsuccessful negotiations on situs and/or appointing authority, parties
sometimes are unable to agree on an arbitration clause and either omit any reference to
dispute resolution mechanisms in their contract or agree to a forum selection clause. If
purported agreement on issues such as situs and appointing authority turns out to be
ambiguous or is frustrated, can one readily assume that both parties still wanted to arbitrate?
Note that the court in Astra emphasized that there was, in its view, agreement on New York as
the situs.
8. Appointment of arbitrator by a national court before parties' contractual appointment
mechanism has been exhausted. Suppose that the parties' arbitration agreement sets forth a
contractual mechanism for selecting the arbitrators and that, before this mechanism has run
its course, one party seeks judicial appointment of an arbitrator. Why might a party do this?
Should a national court appoint an arbitrator in these circumstances?
One U.S. decision ordered parties to comply with their arbitration agreement, by appointing
co-arbitrators, who in turn were to select a presiding arbitrator; the court reversed a lower
court order under §5 that the appointing authority, specified in the institutional rules
incorporated into the parties' arbitration agreement, should select the entire tribunal. Cargill
Rice, Inc. v. Empresa Nicaraguense de Alimentos Basicos, 25 F.3d 223 (4th Cir. 1994). Compare
Pacific Reinsurance Mgt Corp. v. Ohio Reinsurance Corp., 814 F.2d 1324 (9th Cir. 1987) (affirming
district court's appointment of “umpire,” notwithstanding parties' failure to conclude
contractual selection process: “the contractual selection method seemed doomed from the
start” and parties had received “ample time and opportunity to comply with their own
agreement”); Zechman v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 742 F.Supp. 1359 (N.D. Ill.
1990) (appointing arbitrator where parties' agreed selection mechanism failed).
P "635"
P "636"
9. What national court possesses jurisdiction to appoint an arbitrator(s) in an international
arbitration? Suppose that parties are unable to agree upon an arbitrator, and they have made
no workable selection of an appointing authority. What national court has jurisdiction to
appoint an arbitrator? Assume that Party A, domiciled in State 1, has agreed to arbitrate with
Party B, domiciled in State 2, and the arbitral situs is specified as State 3. Can the courts of
State 1, State 2, or State 3 appoint the missing arbitrator(s)? Can more than one state's courts
do so? What problems would arise if the courts of more than one state could appoint an
arbitrator?
(a) Jurisdictional limits on judicial appointment of arbitrators under national arbitration
statutes. Consider Article 11 of the UNCITRAL Model Law and Article 179 of the Swiss Law
on Private International Law. When do they permit a local court to appoint an arbitrator
in an international arbitration?
(b) Applicability of §5 when parties have agreed on U.S. arbitral situs. If the parties have
agreed to arbitrate in a particular place in the United States, it is fairly clear that §5 will
permit the district court at that place to appoint the arbitrator(s). See Ore & Chemical
Corp. v. Stinnes Interoil, Inc., 611 F.Supp. 237 (S.D.N.Y. 1985); Masthead Mac Drilling Corp. v.
Fleck, 549 F.Supp. 854 (S.D.N.Y. 1982). That is consistent with §4's venue restrictions. See
supra pp. 390-91.
Should other U.S. courts also be permitted to exercise powers of appointment under §5?
Is it reasonable to assume that Congress intended that only a single U.S. court could act
under §5? What if an action to compel arbitration is brought outside the arbitral situs?
What if an action to compel arbitration is brought in response to a judicial action on the
parties' underlying dispute? If a §4 order is permitted, is §5 also available? Should it be?
 (c) Applicability of §206. If the parties have agreed to arbitrate in the United States, it is
fairly clear that §206 will permit the district court in the arbitral situs to appoint the
arbitrator(s). In addition, however, under §206, the power to appoint arbitrators is
granted in the same section as, and appears coextensive with, the power to compel
arbitration. Section 206, of course, permits orders compelling arbitration in U.S. judicial
districts other than the arbitral situs. See supra pp. 588-96. Does §206 therefore permit
the appointment of arbitrators for such foreign arbitrations? Should it? See infra p. 637.
(d) Applicability of §5 and §206 when parties have not agreed on arbitral situs. Suppose that
the parties have not agreed upon either arbitrators or an arbitral situs, or upon means of
choosing either. If the parties have not agreed upon an arbitral situs, neither §4, §5, nor
§206 speaks clearly to the question whether a U.S. district court (and if so, which one)
would have jurisdiction to appoint the arbitrator(s). There also is little U.S. authority on
the issue.
In a dispute between two U.S. companies, what objection would there be to a U.S. court
appointing an arbitrator? Suppose that a dispute involves a U.S. and a French (or Somali)
company, and no arbitral situs is specified. What objection would there be to a U.S. court
appointing an arbitrator?
Neither §5 nor §206 of the FAA directly address the jurisdictional question whether a U.S.
court may appoint arbitrators for non-U.S. arbitrations. As a consequence, both sections
(and particularly §206) can arguably be invoked to appoint arbitrators for both U.S. and
non-U.S. arbitrations.
Where both parties are subject to the personal jurisdiction of a particular district court,
and where subject matter jurisdiction exists, U.S. courts will likely often conclude that §5
and §206 grant the power to appoint an arbitrator, even where the arbitration agreement
does not specify a U.S. arbitral situs. See United States Lines, Inc. v. Liverpool and London
SS Protection and Indemnity Ass'n, No. 93 Civ. 3807 (S.D.N.Y. 1993); Astra Footwear, supra. As
to whether this jurisdiction should be exercised, see the discussion below, infra p. 637. As
to a U.S. court's related power in such circumstances to specify the arbitral situs, see
supra pp. 581-609.
Of course, §§5 and 206 can only be invoked if the counter-party is properly subject to
personal jurisdiction and venue in the district court where relief is sought. See supra pp.
385-91. Section 5 should also presumably be read together with §4, which contains
jurisdictional and venue limitations. As discussed above, see supra pp. 390-91, §4
arguably contains a venue limitation, requiring actions to compel arbitration to be
brought in the contractual arbitral situs. Compare §7 of the FAA permitting court-ordered
discovery in aid of arbitration from the district court in the district where the arbitrators
“sit.” See supra pp. 493-94. (Note that some courts have held that the venue limits of §4
are non-exclusive, see supra pp. 390-91.)
Alternatively, §206 might also be read in conjunction with §204, providing for venue in
any court “in which save for the arbitration agreement an action or proceeding with
respect to the controversy between the parties could be brought” or in the contractually-
designated arbitral situs. See supra pp. 380-85. (Again, note that it is unclear whether
§204's venue provisions are exclusive, supra p. 3824)

P "636" (e) Applicability of §5 and §206 where parties have agreed on foreign arbitral situs. If the
P "637" parties have agreed on a foreign arbitral situs, may a U.S. court appoint an arbitrator?
If a §4 or §206 action is brought because one party refuses to arbitrate, the court can
generally order arbitration in the foreign situs under §206. See supra pp. 588-96. Given
the inclusion of an appointment power in §206, why doesn't the U.S. court also have the
power to select an arbitrator for the foreign arbitration? Does it matter what the law in
the arbitral situs provides with respect to appointment of an arbitrator by local courts?
10. Exercise of authority to appoint arbitrator in foreign arbitration. Assuming that a national
court has the power to appoint arbitrators in both local and “foreign” arbitrations, when should
it use that power?
Suppose that one party to an international arbitration sited in London is a U.S. entity and the
other is not (e.g., it is French or Somali). Assuming both parties are subject to U.S. personal
jurisdiction, should a U.S. court have the power to appoint an arbitrator in the London
arbitration? What about French (or Somali) courts? What about English courts? What national
court, in this hypothetical, is the sensible one to make an appointment? Should a U.S. court's
exercise of its power depend on the power (and jurisdiction) of English courts to appoint an
arbitrator?
Suppose that both parties to an arbitration agreement are U.S. companies, who have agreed to
arbitrate in London. Should a U.S. court more readily appoint an arbitrator?
Should national courts rely on discretionary doctrines like forum non conveniens to decline to
appoint arbitrators in foreign or potentially foreign arbitrations except in limited
circumstances? See supra pp. 400-407. There is apparently no reported U.S. precedent on the
issue in the context of the appointment of arbitrators.
There are good reasons for a national court to be wary about appointing arbitrators in
arbitrations sited abroad. First, local law will often permit local courts to appoint arbitrators in
arbitrations sited in a particular place. Suppose that in Astra Footwear, both a U.S. court and a
Yugoslav court had appointed arbitrators. The parties would have been left with conflicting
 U.S. and Yugoslav judicial orders and competing arbitral tribunals. Even the potential for such
an occurrence would be costly and highly disruptive.
Second, an arbitrator conducting an arbitration in a particular arbitral situs usually should be
versed in that jurisdiction's laws. He also would ideally live there, if only for convenience in
conducting hearings. It will be difficult, as a practical matter, for foreign courts to make
intelligent selections of arbitrators who practice in other jurisdictions; local courts will be
much better positioned to do so (and international arbitration institutions will be best
positioned of all).
Third, foreign arbitral situses may impose capacity or other limits on arbitrators that national
courts in other jurisdictions cannot be expected to be familiar with, and that can only
inefficiently be learned. Consider again the Saudi and Ecuadorean legislation, excerpted
above, supra pp. 617-18.
Finally, the standards of independence and conduct for arbitrators in the arbitral situs will
almost certainly apply to the arbitrators in an arbitration conducted there. See supra pp. 625-
26. The courts in the arbitral situs will be much more familiar with these rules than courts
elsewhere.
All of this suggests that national courts should ordinarily not appoint arbitrators in “foreign”
arbitrations. As a general principle, therefore U.S. courts should refuse under §§5 and 206 to
appoint arbitrators except where: (a) the arbitration is to be conducted in the United States
pursuant to the parties' agreement; or (b) there is no agreement as to the arbitral situs and the
United States had the closest connection to the dispute and the arbitration agreement; or (c)
the parties have expressly or impliedly conferred jurisdiction on U.S. courts to appoint
arbitrators; or (d) the parties have selected U.S. law as the procedural law governing the
arbitration.
What if a “foreign” arbitration involves a substantive dispute governed by U.S. law? What if U.S.
public law claims (antitrust) are involved? What if a foreign state-owned company is involved
in an arbitration and the contractual arbitral situs is located in the foreign state that owns the
company? What if the foreign arbitration involves two U.S. companies and litigation to enforce
the arbitration agreement is pending before the U.S. court?
11. Order by U.S. court that parties request appointment from arbitral institution. U.S. courts
have sometimes ordered the parties to have recourse to an arbitration institution for the
appointment of an arbitrator. Schulze and Burch Biscuit Co. v. Tree Top, Inc., 831 F.2d 709, 716
(7th Cir. 1987); Masthead Mac Drilling Corp. v. Fleck, 549 F.Supp. 854, 856 (S.D.N.Y. 1982) (parties
who had selected individual with conflict ordered to submit to AAA for appointment); ATSA of
California, Inc. v. Continental Insurance, Co., 754 F.2d 1394 (9th Cir. 1985) (parties who agreed to
ICC rules ordered to apply to ICC for appointment). What are the benefits, in international
cases, of such an approach?
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P "638"
12. Judicial appointment of arbitrators under the Inter-American Convention and §303 of the FAA.
Chapter 3 of the FAA, which implements the Inter-American Convention, deals with the
appointment of arbitrators in a somewhat different way than other parts of the FAA. Section
303 provides:
(a) A court having jurisdiction under this chapter may direct that arbitration be held in
accordance with the agreement at any place therein provided for, whether that place is
within or without the United States. The court may also appoint arbitrators in accordance
with the provisions of the agreement.
(b) In the event the agreement does not make provision for the place of arbitration or the
appointment of arbitrators, the court shall direct that the arbitration shall be held and
the arbitrators appointed in accordance with Article 3 of the Inter-American Convention.
Article 3 of the Inter-American Convention provides that “[i]n the absence of an express
agreement between the parties, the arbitration shall be conducted in accordance with the
rules of procedure of the Inter-American Commercial Arbitration Commission.” Under Article
III, the Commission adopted the UNCITRAL Rules, with minor modifications, including
provisions specifying the Commission as appointing authority.
13. Appointment of partisan arbitrators. Where the parties have agreed to partisan party-
appointed arbitrators, as is customary in many U.S. domestic contexts, U.S. courts will permit
this and, if necessary, appoint the neutral chairman. See ATSA of California, Inc. v. Continental
Ins. Co., 702 F.2d 172 (9th Cir. 1983) (ordering parties to “attempt arbitration as they originally
contemplated, i.e., using two partisan arbitrators and one umpire. If they cannot select an
umpire, they may then be required to proceed under the ICC rules, which require neutral
arbitrators”) and ATSA of California, Inc. v. Continental Ins. Co., 754 F.2d 1394 (9th Cir. 1985).
14. Relationship between §5 of the FAA and §3 of the Uniform Arbitration Act (or other state
law). Suppose that a party seeks appointment of an arbitrator under state law – for example,
the local version of §3 of the Uniform Arbitration Act. Is §3 preempted by the FAA? In state
court, or only in federal court? There is apparently no reported precedent.

C. Challenge and Replacement of Arbitrators Under Institutional Arbitration Rules (15)

On occasion, parties will be dissatisfied with the choice of an arbitrator by an appointing
P "638" authority (or by another party) and will seek to “challenge” the appointment. (16) Typically, a
P "639" party will challenge the arbitrator appointed by the adverse party (in a three member
 tribunal), or the chairman, by appealing to the appointing authority pursuant to procedures set
forth in institutional arbitration rules. If unsuccessful in that forum, or in ad hoc arbitrations
without institutional challenge mechanisms, the disappointed party may seek to pursue its
complaint through litigation in a national court. (17)
The following materials illustrate the mechanisms for challenging arbitrators under leading
institutional rules. Consider the excerpts from UNCITRAL, ICC, LCIA, and AAA Commercial
Arbitration Rules. Also consider the decision in Technostroyex-port v. International
Development and Trade Services, Inc., (18) as an example of the practical issues which
challenges to arbitrators present for parties and their counsel.
UNCITRAL ARBITRATION RULES
Articles 5-8
[excerpted below at pp. 1024-25]
ICC ARBITRATION RULES
Articles 7-9
[excerpted below at pp. 1061-63]
LCIA ARBITRATION RULES
Articles 5-11
[excerpted below at pp. 1077-79]
AAA COMMERCIAL ARBITRATION RULES
Articles 12-17
[excerpted below at pp. 1049-50]
AAOT FOREIGN ECONOMIC ASSOCIATION (VO) TECHNOSTROYEXPORT v. INTERNATIONAL
DEVELOPMENT AND TRADE SERVICES, INC.
139 F.3d 980 (2d Cir. 1999)
P "639"
P "640"
SCHWARZER, SENIOR DISTRICT JUDGE. We must decide whether the District Court for the
Southern District of New York (Koeltl, J.) erred in confirming two international arbitration
awards rendered by an allegedly corrupt tribunal where the losing party, knowing the relevant
facts, chose to participate fully in the proceedings without disclosing those facts until after the
adverse awards had been rendered. In 1991 and 1992 appellant International Development and
Trade Services, Inc. (“IDTS”) entered into contracts for the purchase of non-ferrous metals from
appellee AAOT Foreign Economic Association (VO) Technostroyexport (“Techno”). Disputes arose
over IDTS's performance under the contracts. The disputes were submitted to arbitration
pursuant to the contracts' arbitration clauses which provided for arbitration before the
International Court of Commercial Arbitration of the Chamber of Commerce and Industry of the
Russian Federation in Moscow. Hearings were held before a tribunal appointed by the
Arbitration Court which rendered awards in favor of Techno of approximately $200 million.
Techno filed a petition in the district court to confirm the awards under the [New York]
Convention. IDTS opposed enforcement of the awards under Article V(2)(b) of the Convention as
“contrary to the public policy” of the United States. (19) The district court rejected IDTS's
contention and entered judgment confirming the awards. This appeal followed....
The factual showing on which IDTS founded its opposition may be briefly summarized.
Following the initiation of the arbitration proceedings, IDTS sent an interpreter – Tamara
Sicular – to Moscow to file papers, clarify the status of the cases and gain an understanding of
the procedures that would be followed. On July 14, 1993, Sicular met with Sergey Orlov, the
Secretary of the Arbitration Court, and his superior at the Chamber of Commerce. According to
IDTS, Sicular, on her own initiative and to test the integrity of the court, asked Orlov whether
the court could be “bought.” Orlov responded affirmatively and offered to “fix” the cases for
IDTS in exchange for a substantial payment. His superior later that day told Sicular he would
personally assist IDTS “sort out” the arbitration. On the next day, Orlov presented Sicular with
his plan which called for a payment of $1 million for which he would rig the tribunal. There
followed a series of communications with Orlov over the next two months in which Sicular
ostensibly sought to gather further evidence and establish that the Arbitration Court and its
officials were corrupt. They ended inconclusively in September 1993, without any payment
being made. Sicular passed all of this information on to IDTS president Edith Reich prior to the
commencement of any arbitration hearings. The Arbitration Court held hearings beginning in
December 1994 and ending in September 1995. IDTS, represented by several attorneys,
participated actively. The final awards in favor of Techno were rendered in March 1996.
P "640"
P "642"
In November 1996, Techno filed its petition to confirm the awards in the district court. In its
opposition to the petition, IDTS for the first time disclosed the offer to bribe the Arbitration
Court – the sting, as IDTS describes it – in support of its contention that enforcement of an
award rendered by a corrupt tribunal would be contrary to the public policy of the United
States. The district court determined that IDTS's allegations failed to establish that the
Arbitration Court was not impartial in these cases; that the use of the public policy exception is
not appropriate where one party to an arbitration has initiated the situation itself prior to the
commencement of the arbitration hearing, participated thereafter fully in the arbitration,
received an unfavorable award, and then alleges that the arbitral proceeding was corrupt as a
means of avoiding an unfavorable result; and that IDTS waived its right to assert the public
policy exception where it had knowledge of the facts but remained silent until an adverse
award was rendered. Because we agree with the court's third ground, it is unnecessary for us to
consider whether application of the public policy exception would be appropriate in this case.
We also need not address whether IDTS authorized Sicular to offer the bribe.
The settled law of this circuit precludes attacks on the qualifications of arbitrators on grounds
previously known but not raised until after an award has been rendered. “Where a party has
knowledge of facts possibly indicating bias or partiality on the part of an arbitrator he cannot
remain silent and later object to the award of the arbitrators on that ground. His silence
constitutes a waiver of the objection.”Ilios Shipping & Trading Corp. v. American Anthracite &
Bituminous Coal Corp., 148 F.Supp. 698, 700 (S.D.N.Y.), aff'd, 245 F.2d 873 (2d Cir. 1957) (per
curiam). This law of waiver controls the outcome of this appeal. It is undisputed that IDTS had
knowledge of concrete facts possibly indicating the corruption of the Arbitration Court –
namely, the apparent willingness of some members of the Arbitration Court to take bribes.
Despite this knowledge, IDTS remained silent. Accordingly, it cannot now object to the award
based on these facts. IDTS contends that it cannot be charged with waiver because it did not
voluntarily and intentionally waive its right to a corruption-free tribunal. It argues that any
attempt to seek relief would have been futile: from the tribunal because it was corrupt, from
the Arbitration Court because its officials were corrupt and because its rules precluded it, and
from the Russian courts because the applicable law did not permit it. We express no view on
the validity of these contentions. But even if they are valid, it was incumbent on IDTS to notify
opposing counsel. It is no answer, as IDTS claims, that it was unlikely that Techno would agree
to the charge of corruption of the tribunal or to surrender any perceived resulting advantage.
Had Techno insisted in the face of IDTS's charges on proceeding with the arbitration as
arranged, IDTS would have preserved its objections and been free to raise them in any later
confirmation proceeding. Instead IDTS tried to put the case in a posture in which, as the
district judge aptly characterized it, “Heads I win, tails you lose.” We therefore conclude that
IDTS waived whatever objections it had to the tribunal and affirm....
Notes on Institutional Challenges to Arbitrators
1. Practical implications of challenging arbitrators. Consider a party's reactions if, during the
process of selecting a tribunal, it discovers grounds for challenging either (a) another party's
co-arbitrator, or (b) the presiding arbitrator. What happens if a challenge is made, but fails?
What happens if a challenge succeeds? What are the benefits of a successful challenge? The
costs? What are the costs of an unsuccessful challenge? Does your view of the consequences of
failure depend upon whether it is the presiding arbitrator who is being challenged? Consider
the reactions of the presiding arbitrator to both a successful and an unsuccessful challenge to
a co-arbitrator.
Consider the Technostroyexport case, and put yourself into the position of the U.S. party. Why
did the U.S. party act as it did? Were there sensible reasons for doing so? As a practical matter,
what probably would have happened had it protested the events in question?
2. Procedure under institutional rules for challenging arbitrators. Consider Articles 9-12 of the
UNCITRAL Arbitration Rules, Article 11 of the ICC Rules, Article 10 of the LCIA Rules, and Article
19 of the AAA Commercial Arbitration Rules. Note how the challenge procedures operate under
each set of rules, including the time limits. Who decides challenges to an arbitrator under each
set of rules? What is the procedure for such decision-making?
As a practical matter, an arbitrator who is challenged at the outset of an arbitration will
sometimes withdraw; having invested little in the case, some prospective arbitrators are
reluctant to go forward over the opposition of one party. Appointing authorities will often
encourage such withdrawals, at least where there is some reasonable doubt as to partiality.
Paulsson, Securing the Integrity, Impartiality and Independence of Arbitrators: Judicial
Intervention, 1993 Y. B. Arb. Inst. Stockholm Cham. Comm. 91, 93. On the other hand, appointing
authorities will also be reluctant to deny a party the opportunity to appoint the individual it
desires as an arbitrator of its dispute, and weak or baseless challenges may sometimes be
used as a weapon to interfere with either this opportunity or the arbitral process.
3. Standards for challenging arbitrators under institutional arbitration rules. Consider again the
grounds for challenging arbitrators under each of the leading sets of institutional arbitration
rules. Which set of rules provides the broadest grounds for challenging an arbitrator? Note the
reference in the ICC Rules to challenges based on an “alleged lack of independence or
otherwise.” What might fall within the latter category?
Compare the LCIA Rules' requirement that an arbitrator be “impartial and independent,” the
UNCITRAL Arbitration Rules' reference to “impartiality or independence,” and the ICC's
reference to “independence.” Is there a difference between these formulations? Does
“independence” mean something different from “impartiality”?
4. Representative bases for challenges under institutional arbitration rules. Consider again the
hypotheticals set forth above, supra pp. 626-27, positing various possible grounds for
questioning an arbitrator's independence. Also consider the discussion below, infra pp. 859-80,
of U.S. judicial decisions vacating or confirming arbitral awards following challenges to an
arbitrator's independence. In reviewing the above hypotheticals, consider whether or not you
would bring a challenge based on the stated facts.
5. Who decides challenges to arbitrators? Consider the identity of the person(s) who decide
challenges to arbitrators under the institutional rules set forth above. Why doesn't the arbitral
tribunal itself decide challenges? at least preliminarily? Is it appropriate for challenges to be
 decided essentially by administrative committees whose membership is often secret?
In practice, challenges to arbitrators are much more likely to succeed if made prior to
confirmation, rather than during the course of the arbitral proceedings. Various surveys of ICC
practice suggest that approximately 70% of pre-appointment objections are accepted, while
less than 10% of post-appointment challenges succeed. W. Craig, W. Park & J. Paulsson,
International Chamber of Commerce Arbitration 216-17 (1991). Consider what explains this
disparity.
6. Procedures for making and deciding challenges under institutional arbitration rules. Consider
the procedures set forth in each of the sets of institutional arbitration rules excerpted above.
What opportunity is there for written submissions? oral submissions? live witnesses or an
evidentiary hearing? discovery? The short answer, under all these institutional rules, is that a
party can submit a written presentation regarding its challenge, and that is it (i.e., there is no
discovery and no evidentiary or other hearing). An arbitrator who is challenged may respond,
as may the other party, but no further procedures exist.
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P "643"
Is the foregoing appropriate? Would this sort of procedure satisfy due process or adversarial
procedure standards in many other contexts? What are the advantages and disadvantages of
the procedure?
Consider whether the procedures for dealing with challenges under institutional rules would
likely have played any role in the unwillingness of IDTS to challenge the arbitral tribunal in
Technostroyexport. Consider whether the foregoing procedures are more troubling when an
arbitrator who was appointed by the arbitral institution is challenged.
7. No explanation of reasons for decision on challenge under institutional arbitration rules. Note
that no reasoned explanation for decisions on challenges is provided under most institutional
rules. Why is that? Is it wise? What benefits would an explanation provide? At what costs?
8. Waiver of objections under institutional rules based on an arbitrator's lack of independence
under institutional arbitration rules. Consider the procedural requirements of leading
institutional rules, including particularly the timing requirements for making challenges based
upon lack of independence. Are the requirements wise? Why?
9. Party's ability to remove its own arbitrator under institutional arbitration rules. Most
institutional rules vest the appointing authority with power to both confirm and remove party-
nominated arbitrators. ICC Rules Article 7-11; UNCITRAL Rules Article 6, 12; AAA International
Rules Article 6, 8. After a party's nominee has been confirmed, he cannot ordinarily be
removed by that party, and must instead be challenged (like any other arbitrator). Indeed,
under most institutional rules, a party cannot challenge its own arbitrator except for reasons it
became aware of following the appointment. UNCITRAL Rules Article 10(2). For an unusual
decision holding that a party could remove the party-appointed arbitrator it selected, and
substitute a new nominee, see Boston Mutual Ins. Co. v. Insurance Agents' Int'l Union, 258 F.2d
516 (1st Cir. 1958).
10. Possibility of judicial review of procedures followed by appointing authority. Several lower
U.S. courts have issued interlocutory orders resolving disputes over the procedures used by an
appointing authority for appointing arbitrators. E.g., Sperry Int'l Trade, Inc. v. Israel, 670 F.2d 8,
10 n.2 (2d Cir. 1982); Lobo & Co. v. Plymouth Navigation Co., 187 F.Supp. 859 (S.D.N.Y. 1960) (party
allegedly failed to appoint one of three arbitrators within time period specified in parties'
agreement, and other party appointed an arbitrator for the defaulting party; court held that
untimely appointment would be excused); In re Utility Oil Corp., 10 F.Supp. 678 (S.D.N.Y. 1934)
(same).
11. Judicial review of institutional appointing authority's appointment decision or resolution of
challenge to arbitrator. It is at least theoretically possible for an appointing authority's
decision on the appointment or challenge of an arbitrator to be appealed to national courts.
Consider the desirability of such litigation. Consider also the extent to which national law
permits judicial review of challenge decisions. Compare UNCITRAL Model Law Article 13 and
Swiss Law on Private International Law Article 180. As discussed in detail below, U.S. courts
have virtually never permitted judicial review of challenge decisions by appointing authorities.
We discuss in greater detail below the role of national courts in removing international
arbitrators. See infra pp. 643-51.

D. Judicial Challenge and Replacement of Arbitrators Under National Law

Institutional challenge mechanisms are not the exclusive means of seeking to remove an
arbitrator; it is also possible to pursue an interlocutory challenge to an arbitrator in a national
court. As discussed in detail below, it is also generally possible to seek to vacate, or prevent
recognition of, an arbitral award on the grounds that the arbitrator(s) was not independent.
(20)
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Moreover, as the materials excerpted below illustrate, many developed national arbitration
statutes permit national courts to entertain interlocutory challenges to arbitrators. Articles 179
and 180 of the Swiss Law on Private International Law, Article 13 of the UNCITRAL Model Law,
and the decision in Veritas Shipping Ltd v. Anglo-Canadian Cement Ltd, all illustrate this point.
The law in the United States is somewhat different. As the decision, excerpted below, in Marc
Rich & Co. v. Transmarine Seaways Corp., (21) illustrates, interlocutory judicial challenges to
 arbitrators are narrowly limited under the FAA and virtually always fail. Rather, U.S. law seeks
to direct challenges to arbitrators to the review of final arbitral awards. (22) As discussed
below, however, challenges of this sort also rarely succeed in U.S. courts. (23)
UNCITRAL MODEL LAW
Article 13
[excerpted below at p. 1015]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Articles 179 & 180
[excerpted below at pp. 1033-34]
VERITAS SHIPPING LTD v. ANGLO-CANADIAN CEMENT, LTD
[1966] Lloyds L. Rep. 76 (Q.B. 1965)
MR. JUSTICE MCNAIR. In this matter Counsel moves on behalf of Veritas Shipping Corporation
[“Veritas”] for an order that Dr. W. K. Wallersteiner, the arbitrator appointed by Anglo-Canadian
Cement, Ltd. [“Anglo”] in the reference to arbitration between Veritas and Anglo, under the
arbitration clause contained in a charter-party dated May 11, 1964, be removed and that an
arbitrator be appointed on behalf of Anglo in the said reference.
Veritas were the owners and Anglo the charterers in a charter-party in the Gencon form dated
May 11, 1964, which charter-party contained by Clause 30 an arbitration clause to the following
effect:
... Any dispute arising under this Charter Party shall be referred to arbitration in London. One
P "644" arbitrator to be nominated by the Owners and the other by the Charterers. In case such
P "645" arbitrators cannot agree, then the dispute to be referred to the decision of an Umpire who
shall be appointed by said arbitrators....
Disputes arose between the parties, the shipowners advancing a claim amount to a sum of just
under £10,000 in respect of freight and demurrage. The shipowners, Veritas, are a Panamanian
company and Anglo are a company incorporated in Nigeria. These disputes having arisen,
correspondence took place, and the correspondence on behalf of Anglo ... was conducted by Dr.
W. K. Wallersteiner as their managing director. Correspondence proceeded for a long time.
Finally the shipowners appointed Mr. R. A. Clyde as their arbitrator and called upon Anglo to
appoint their arbitrator. In response to that request, they received a letter from Anglo signed
by Dr. W. K. Wallersteiner appointing Dr. W.K. Wallersteiner as the arbitrator to act on their
behalf in this arbitration. The shipowners, through their representatives, objected to this
appointment on the grounds of the close connection that Dr. Wallersteiner had with Anglo and,
indeed, with this particular dispute or series of disputes, which they said disqualified him from
acting as an arbitrator under this clause. In the course of further correspondence between the
representatives of Anglo and Dr. Wallersteiner personally, Dr. Wallersteiner refused to withdraw
and Anglo refused to appoint anybody in his stead.
... [B]y this motion the shipowners seek the assistance of the Court to get the arbitration
properly constituted. The order they ask for is that the Court should remove Dr. W. K.
Wallersteiner under §23 of the Arbitration Act on the ground that Dr. Wallersteiner has
misconducted himself in the arbitration in not only allowing himself to be appointed as
arbitrator but, having appointed himself, having as managing director of Anglo signed the
letter appointing him to act. Without making any reflections upon the propriety and skill of Dr.
Wallersteiner, I am quite satisfied that it would be quite wrong for him to be allowed to
continue to act as arbitrator in a dispute of this nature. It is quite true that under the clause, if
the two arbitrators disagree and the matter is referred to the umpire for his decision, the
arbitrators, according to the customary way in which these matters are dealt with in the City of
London, may if they so wish act as advocates. They need not do so but there is nothing wrong in
them doing so. Until that moment arrives, the arbitrators must not only act judicially and show
no bias at all but must also appear to be in a position to act judicially and without any bias.
Accordingly, in the exercise of my discretion, I remove Dr. W. K. Wallersteiner from his position
as arbitrator in this matter.
The motion also asks that, if he is removed, an arbitrator should be appointed in his place on
behalf of Anglo in this arbitration. That power so to do is contained in §25(1) of the Arbitration
Act of 1950 [and the court exercised it.]
MARC RICH & CO. v. TRANSMARINE SEAWAYS CORP. OF MONROVIA
443 F.Supp. 386 (S.D.N.Y. 1978)
P "645"
P "646"
KNAPP, DISTRICT JUDGE. A dispute has arisen between plaintiff Marc Rich & Co. (“Rich”) and
defendant Transmarine Seaways Corp. (“Transmarine”), which is arbitrable pursuant to a
contract which provides that arbitration shall proceed before a panel consisting of “one
arbitrator to be appointed by the Owner, one by the Charterer, and one by the two so chosen.”
Pursuant to that provision, the owner (Transmarine) appointed one Lloyd C. Nelson as its
arbitrator. As all parties were fully aware, Mr. Nelson is the president of a corporation, which as
agent for the owner of another vessel, was Rich's adversary in an unrelated dispute then in
arbitration. (24) Suggesting that Nelson's involvement in that separate dispute created at least
the appearance of bias, Rich asked Nelson to disqualify himself. Upon Nelson's failure to do so
– and before the arbitration was commenced – Rich instituted the present action for a
 judgment declaring that Nelson is disqualified and directing Transmarine to name a different
arbitrator. Transmarine has moved to dismiss the complaint for lack of subject matter
jurisdiction (on the ground that the qualifications of an arbitrator are not subject to review
until after an award has been rendered) and for failure to state a claim (on the ground that the
facts alleged could not disqualify Nelson). As we grant the motion on the first ground, we
express no views as to the second.
Prior to 1968 it was accepted law that the qualifications of an arbitrator could not be subjected
to judicial scrutiny until after an award had been made. Catz Am. Co. v. Pearl Garage Fruit
Exchange, 292 F.Supp. 549, 551 (S.D.N.Y. 1968); Petition of Dover S.S. Co., 143 F.Supp. 738, 742
(S.D.N.Y. 1956); Albatross S.S. Co. v. Manning Bros., 95 F.Supp. 459 (S.D.N.Y. 1951). In that year,
however, the Supreme Court in Commonwealth Coatings Corp. v. Continental Casualty Co., 393
U.S. 145 (1968), in such a postaward scrutiny, vacated the award, finding an arbitrator to have
been disqualified because he had failed to disclose a possible conflict of interest before
entering upon his duties. Rich strongly argues that Commonwealth Coatings necessarily
overrules prior law, in that it would be futile to require an arbitrator to disclose any possible
disqualification at the outset if the parties were precluded from making effective objection
until after the arbitration had been completed. Although this argument has surface
plausibility, we do not think it should prevail.
As was recognized by all the Justices writing in Commonwealth Coatings (Mr. Justice Black for
the majority, Mr. Justice White in concurrence and Mr. Justice Fortas in dissent), a prime
objective of arbitration law is to permit a just and expeditious result with a minimum of
judicial interference. It seems to us that this objective can best be achieved by requiring an
arbitrator – as does the Commonwealth decision – to declare any possible disqualification, and
then to leave it to his or her sound judgment to determine whether to withdraw. The arbitrator
must of course be aware that such a decision would be subject to judicial review after the
P "646" award had been made. 9 U.S.C. §10(b). (25) Any other rule might spawn endless applications
P "647" and indefinite delay. For example, should we deny this motion and ultimately find Mr. Nelson
disqualified, there could be no assurance that Rich would be satisfied with his successor and
would not bring yet another proceeding to disqualify him or her. (26)
We distinguish the instant situation from the one before Judge Neaher in Erving v. Virginia
Squires Basketball Club, 349 F.Supp. 716, 719 (E.D.N.Y. 1972), aff'd, 468 F.2d 1064 (2d Cir. 1972). The
contract in Erving provided for a specifically named arbitrator, and the court, in finding him
disqualified and providing for his replacement, was in effect reforming the contract, an action
that the named arbitrator lacked the power to undertake. The unreported decision in Seidman
v. Merrill Lynch, 75 Civ. 6316 (S.D.N.Y. August 24, 1977), is susceptible of similar analysis. In that
case, the court found jurisdiction, prior to the commencement of arbitration, to consider the
qualifications of the New York Stock Exchange, which, like the League Commissioner in Erving,
was the arbitrator named in the contract. The alternative in both cases to continuing with the
arbitrator designated by contract was replacement with another specifically named arbitrator.
(27) Thus neither case presented the specter of successive objections to arbitrators designated
by the parties.
We believe our decision to be consonant with the dictum in the opinion of the Court of Appeals
in Sanko S.S. Co. v. Cook Industries, Inc., 495 F.2d 1260 (2d Cir. 1973), to the effect that the
question of qualification, where initially committed to the arbitrators themselves, is subject to
judicial review only after an award has been made. Our conclusion is also consistent with the
decisions in Sunrise Undergarment v. Undergarment, etc. Local 62, 419 F.Supp. 1282, 1286
(S.D.N.Y. 1976), and Fairwind Maritime Corp. v. Transworld Maritime Corp., 76 Civ. 2293 (S.D.N.Y.
P "647" June 16, 1976), aff'd without opinion, 551 F.2d 300 (2d Cir. 1976). For the foregoing reasons we
P "648" dismiss the complaint on the ground that we at this time lack jurisdiction to pass upon the
qualifications of the arbitrator.
AAOT FOREIGN ECONOMIC ASSOCIATION (VO) TECHNOSTROYEXPORT v. INTERNATIONAL
DEVELOPMENT AND TRADE SERVICES, INC.
139 F.3d 980 (2d Cir. 1999)
[excerpted above at pp. 639-41]
Notes on Judicial Removal of Arbitrators
1. Interlocutory judicial removal of arbitrators under selected national arbitration statutes.
Consider the excerpts above from the Swiss Law on Private International Law and the UNCITRAL
Model Law. Note that both statutes permit interlocutory judicial challenges of arbitrators. Note
also that both statutes impose constraints on the timing of judicial challenges and appellate
review; these constraints are designed to produce an immediate decision on any challenge
and to minimize delays and interference in the arbitral process.
Consider the English court's decision in Veritas Shipping. As with the UNCITRAL Model Law and
the Swiss Law on Private International Law, the Veritas Shipping court was prepared to
entertain an interlocutory judicial challenge to an arbitrator.
2. Lower U.S. court decisions refusing to permit interlocutory judicial challenges to arbitrators
under the FAA. As the Marc Rich decision illustrates, U.S. courts generally refuse to consider
interlocutory judicial challenges to the appointment of an arbitrator. For similar lower court
decisions, see Aviall, Inc. v. Ryder System, Inc., 113 F.3d 892 (2d Cir. 1997) (“‘it is well established
that a district court cannot entertain an attack upon the qualifications or partiality of
arbitrators until after the conclusion of the arbitration and the rendition of the award’”);
Florasynth, Inc. v. Pickholz, 750 F.2d 171 (2d Cir. 1984) (“The [FAA] does not provide for judicial
scrutiny of an arbitrator's qualifications to serve, other than in a proceeding to confirm or
 vacate an award, which necessarily occurs after the arbitrator has rendered his service.”);
Michaels v. Mariforum Shipping, SA, 624 F.2d 411, 414 n.4 (2d Cir. 1980); Sanko S.S. Co. v. Cook
Indus., Inc., 495 F.2d 1260, 1264 n.4 (2d Cir. 1973); Reeves Bros., Inc. v. Capital-Mercury Shirt Corp.,
962 F.Supp. 408 (S.D.N.Y. 1997) (deferring to refusal by arbitral institution to remove arbitrator);
Alter v. Englander, 901 F.Supp. 151, 153 (S.D.N.Y. 1995); The Daiei, Inc. v. United States Shoe Corp.,
755 F.Supp. 299 (D. Haw. 1991) (refusing to consider whether ICC properly selected sole
arbitrator); York Hannover Holding AG v. McDermott Int'l, Inc., 1993 U.S. Dist. Lexis 6192 (S.D.N.Y.
May 11, 1993) (“the court must defer to the decision of the AAA”); Catz American Co. v. Pearl
Grange Fruit Exchange, Inc., 292 F.Supp. 549, 551 (S.D.N.Y. 1968); Petition of Dover SS Co., 143
F.Supp. 738, 740-42 (S.D.N.Y. 1956) (“Under the [FAA], the court's power to deal with bias is
limited to setting aside the award after it has been rendered.”); Albatross SS Co. v. Manning
Brothers, 95 F.Supp. 459, 462 (S.D.N.Y. 1951); San Carlo Opera Co. v. Conley, 72 F.Supp. 825, 833
(S.D.N.Y. 1946) (“the court does not appear to have the power to order a substitution of
arbitrators”), aff'd, 163 F.2d 310 (2d Cir. 1973); Dewart v. Northeastern Gas Transmission Co., 101
A.2d 299, 301 (Conn. Sup. Ct. 1953) (“arbitration will not be encouraged, as it should be, if, during
the proceedings and before an award, either party can come into court ... and challenge the
qualifications of an arbitrator.”). See also Reed & Martin, Inc. v. Westinghouse Electric Corp., 439
F.2d 1268 (2d Cir. 1971) (rejecting argument that AAA wrongly exercised discretion to select
presiding arbitrator by choosing only from among lawyers residing near arbitral situs); Garfield
& Co. v. Wiest, 432 F.2d 849, 853-54 (2d Cir. 1970) (agreement to arbitrate pursuant to NYSE
constituted waiver of objections to arbitrators with business dealings with parties); Conley v.
San Carlo Opera Co., 163 F.2d 310 (2d Cir. 1947). Compare Rogers v. Schering Corp., 165 F.Supp.
295 (D.N.J. 1958), aff'd, 271 F.2d 266 (3d Cir. 1959) (vacating award because AAA appointed
replacement arbitrator without disclosing arbitrator's previous business dealings with one
party or permitting party to express views on appointment; “party should have the right to
argue the matter with the appointing authority before the appointment is effected”).
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Suppose that a party or an appointing authority selects, or refuses to remove, an arbitrator
who is manifestly biased and partial. For example, Dr. Wallersteiner. Should not a court have
the interlocutory power to remove the arbitrator and direct a new appointment? Suppose that
the facts alleged in the Technostroyexport case occurred with respect to an arbitration sited in
the United States and IDTS sought judicial relief in a U.S. court.
3. Lower U.S. court decisions asserting equitable power to review selection of arbitrator on
interlocutory basis. Notwithstanding Marc Rich, some U.S. courts have held open (without
deciding) the possibility of a general “equitable power” to issue interlocutory orders removing
or replacing arbitrators. See Michaels v. Mariforum Shipping SA, 624 F.2d 411, 415 n.5 (2d Cir.
1980); Aviall, Inc. v. Ryder System, Inc., 913 F.Supp. 826 (S.D.N.Y. 1996) (indicating judicial power
to disqualify arbitrator prior to award when “one party has deceived the other, ... unforeseen
intervening events have frustrated the intent of the parties, ... or the unmistakable partiality of
the arbitrator will render the arbitration a mere prelude to subsequent litigation”); York
Hannover Holding AG v. McDermott Int'l, Inc., 1993 U.S. Dist. Lexis 6192 (S.D.N.Y. 1993); Masthead
Mac Drilling Corp. v. Fleck, 549 F.Supp. 854, 856 (S.D.N.Y. 1982).
In a few cases, usually citing extenuating circumstances, U.S. courts have removed arbitrators
in interlocutory actions. Metropolitan Casualty Ins. Co. v. J.C. Penny Casualty Ins. Co., 780 F.Supp.
885 (D. Conn. 1991) (granting interlocutory order removing arbitrator who had “fiduciary
relationship” with party; Third Nat'l Bank v. Wedge Groups, Inc., 749 F.Supp. 851 (M.D. Tenn. 1990)
(granting interlocutory order removing arbitrator who had discussed issues with party before
nomination); Christina Blouse Corp. v. International Ladies Garment Workers' Union, Local 162,
492 F.Supp. 508, 509 (S.D.N.Y. 1980) (arbitrator named in contract possessed relationship with
one party, which was concealed from other party at time contract was signed). These decisions
generally rely on Aerojet-General, excerpted and discussed above at supra pp. 609-12 in the
context of judicial review of the selection of an arbitral situs, and on New York state law
holdings.
Other U.S. decisions have indicated that district courts have power to disqualify arbitrators
prior to an award where their appointment was not in compliance with the parties' arbitration
agreement. See Compania Espanola de Petroleos, SA v. Nereus Shipping, SA, 527 F.2d 966 (2d Cir.
1975) (removing 3 arbitrators appointed by one party in connection with §4 order compelling
arbitration); In the Matter of the Arbitration Between Certain Underwriters at Lloyd's London v.
Continental Casualty, 1997 WL 461035 (N.D. Ill. 1997) (district court has no power under §10 of FAA
to consider interlocutory challenge to arbitrator's neutrality, but may make pre-award
disqualification order where arbitrator's appointment was in violation of arbitration
agreement).
4. Wisdom of interlocutory judicial review of arbitrators' qualifications or bias. Is it wise to
permit interlocutory judicial review of an arbitrator's bias or qualifications, as the UNCITRAL
Model Law and Swiss Law on Private International Law contemplate? Is this a more sensible
approach than that taken under the FAA by Marc Rich? What are the respective advantages and
disadvantages of each approach?
An advisory committee examining reform of English arbitration law declined to recommend
following the UNCITRAL Model Law regarding interlocutory judicial challenges to arbitrators.
Mustill, A New Arbitration Act for the United Kingdom? The Response of the Departmental
Advisory Committee to the UNCITRAL Model Law, reprinted in, 6 Arb. Int'l 3, 28 (1990) (“To
introduce a formal procedure for challenging the arbitrator [during the arbitral proceedings]
would be an open invitation to delaying tactics by the respondent.”). Note the concerns stated
by the Marc Rich court, that interlocutory judicial challenges of arbitrators “might spawn
 endless applications and indefinite delay” and that “there could be no assurance that [a party]
would not bring yet another proceeding to disqualify” any arbitrator that might be selected.
Are these concerns realistic? sufficient to justify a prohibition against any interlocutory judicial
relief?
On the other hand, consider the court's removal of Dr. Wallersteiner in Veritas Shipping and the
alleged facts in Technostroyexport. Would it have been sensible in either case to permit the
arbitration to go forward with the challenged (or challengeable) arbitrators acting? How would
the Marc Rich court have decided Veritas Shipping?
5. Possibility of action to remove arbitrator under state law. Under some state laws, particularly
New York law, courts have the power to remove arbitrators on an interlocutory basis. See
Astoria Medical Group v. Health Ins. Plan etc., 11 N.Y.2d 128, 132 (1962) (“Courts have an inherent
power to disqualify an arbitrator before an award has been rendered”); Belanger v. State Farm
Mutual Auto Ins. Co., 426 N.Y.S.2d 140, 141 (App. Div. 1980) (equitable power to issue
interlocutory order requiring arbitration to be conducted in English).
P "649"
P "650"
If the FAA applies, are these state law rules preempted? Are they inconsistent with the FAA and
its purposes? Recall that most foreign laws permit interlocutory challenges to arbitrators, in
part because this is regarded as supportive of the arbitral process.
Suppose that the parties have agreed to a choice-of-law clause selecting the law of a U.S. state
that permits interlocutory challenges. How would Volt Information and Mastrobuono regard the
application of that state law? See supra pp. 358-80.
6. Level of U.S. judicial scrutiny of arbitrator's bias or qualifications on interlocutory review.
Even if interlocutory judicial review is available, U.S. courts will be highly deferential to
selections of arbitrators made by the parties or appointing authority. As discussed below, infra
pp. 869-75, U.S. standards for establishing bias or partiality are difficult to meet in the context
of reviewing final awards.
7. Deference to institutional challenge procedures. As we have seen, most institutional
arbitration rules provide a procedure for challenging arbitrators before an appointing
authority. As discussed elsewhere, where an institutional challenge procedure exists, the
outcome of that process will very likely be deferred to by U.S. (and other) courts. See supra pp.
648-49. See also Paulsson, Securing the Integrity, Impartiality and Independence of Arbitrators:
Judicial Intervention, 1993 Y.B. Arb. Inst. of Stockholm Cham. Comm. 91, 95 (“Nor should courts, in
the context of institutional arbitration, be encouraged to intervene in the process ... before the
award is rendered, [although] ... earlier court intervention in the case of ad hoc arbitration is
another matter.”); AT&T Corporation v. Saudi Cable Co., 2 Lloyd's Rep. 127 (Ct. App. 2000) (“I do
not accept the view ... the finality provision means that the English courts have no power to
review the decision of the ICC Court” in a challenge to an arbitrator; “When doing so, the court,
if required to interpret the ICC Rules, would naturally pay the closest attention to any
interpretation of the ICC Rules adopted by the ICC Court, but the English courts retain their
jurisdiction to determine whether the ICC Rules have been breached when entertaining an
application to remove for alleged misconduct.”); Reeves Bros., Inc. v. Capital-Mercury Shirt
Corp., 962 F.Supp. 408 (S.D.N.Y. 1997) (deferring to refusal by arbitral institution to remove
arbitrator); Reed & Martin, Inc. v. Westinghouse Electric Corp., 439 F.2d 1268 (2d Cir. 1971)
(rejecting argument that AAA wrongly exercised discretion to select presiding arbitrator by
choosing only from among lawyers residing near arbitral situs).
8. Possibility of judicial review of arbitrator selected in parties' agreement. Parties sometimes
specify that a named individual or the occupant of a named office should act as arbitrator (or
the chairman in a three-person tribunal). For example, in Erving v. Virginia Squires Basketball
Club, 349 F.Supp. 716 (E.D.N.Y. 1972), aff'd, 468 F.2d 1064, 1067 (2d Cir. 1972), the parties'
agreement selected the Commissioner of the American Basketball Association.
It can later develop that there is a basis to challenge the previously-selected arbitrator – as
occurred in Erving, where the Commissioner at the time was a partner in a law firm that
represented one party to the arbitration. In these circumstances, will a U.S. court consider a
challenge to the arbitrator previously selected by the parties? As the court in Marc Rich
observes, the answer appears to be in the affirmative. See Erving, supra; Masthead Mac Drilling
Corp. v. Fleck, 549 F.Supp. 854 (S.D.N.Y. 1982) (court indicates willingness to hear claim that
person designated as arbitrator in agreement was partial); Cristina Blouse Corp. v. International
Ladies Garment Workers Union, 492 F.Supp. 508 (S.D.N.Y. 1980); Modern Brokerage Corp. v.
Massachusetts Bonding & Ins. Co., 56 F.Supp. 696 (S.D.N.Y. 1944).
Is there a principled basis for distinguishing Erving from Marc Rich?
9. Unavailability of court order reinstating arbitrator who recuses himself. Arbitrators can, of
course, recuse themselves if they believe that conflicts of interest or other issues preclude
them from acting. If that occurs, U.S. courts will refuse to entertain challenges to the
arbitrator's resignation. In Florasynth, Inc. v. Pickholz, 750 F.2d 171, 173-4 (2d Cir. 1984), the court
reasoned:
There are certainly circumstances under which, although a party could not successfully mount
a charge of evident partiality against an arbitrator, the arbitrator may wish to resign. That
decision is better left to the discretion of the individual arbitrator.
The Court concluded, “[t]here is, therefore, no basis, statutory or otherwise, for a court to review
an arbitrator's earlier resignation, and we know of no authority that grants courts the power to
force unwilling arbitrators to serve.”
 10. Appropriate U.S. court for judicial review and/or replacement of arbitrators under §5 and
P "650" §206. If §5 and §206 are held to permit some measure of interlocutory judicial review of the
P "651" selection of an arbitrator, what U.S. district court may exercise this power? Consider again
the discussion above of jurisdiction and venue under §5 and §206 to appoint arbitrators. See
supra pp. 635-37. Are those limits equally appropriate in case involving challenges?
Alternatively, the venue provisions applicable to actions to vacate an arbitral award may
apply. See infra pp. 898.
11. Waiver of objections under national law to arbitrator's lack of independence. Consider the
challenge provisions set forth in Article 11(1) of the UNCITRAL Model Law and Article 180 of the
Swiss Law on Private International Law. Note the requirements for timely challenges. What is
the reason for these requirements?
12. Waiver of objections under FAA to arbitrator's lack of independence. U.S. courts have held,
outside the context of institutional arbitration rules containing requirements for timely
challenges, that a party must make any challenge to an arbitrator in a timely fashion, or risk
waiving the challenge. See Health Services Management Corp. v. Hughes, 975 F.2d 1253 (7th Cir.
1992) (objection to arbitrator's impartiality in arbitral proceedings will preserve party's
objection, even where party proceeds with arbitration after its objection is overruled); York
Research Corp. v. Landgarten, 927 F.2d 119 (2d Cir. 1991) (holding that party's failure to promptly
object to arbitrator, as required by AAA Rules, waived objections based on partiality); Hayme,
Miller & Farmi, Inc. v. Flume, 888 F.Supp. 949 (E.D. Wis. 1995) (“Where a party was fully aware of
facts which could possibly indicate arbitrator partiality at the time of the arbitration hearing
and that party fails to make an objection during the course of the hearing, it waives its right to
object”); Ilios Shipping & Trading Corp. v. American Anthracite & Bituminous Coal Corp., 148
F.Supp. 698 (S.D.N.Y.), aff'd, 245 F.2d 873 (2d Cir. 1957).
Consider the Technostroyexport case. Was it correctly decided? Why? Note that the allegations
of corruption are consistent with many reports from comparable international settings, and
were in any event assumed correct for purposes of the appeal.
Note that the allegations in Technostroyexport were directed towards the Russian appointing
authority and arbitral institution, not the arbitrators themselves. How does this affect waiver
analysis? If the U.S. party had come into possession of information that the presiding arbitrator
was corrupt, is it appropriate to require it to act upon that information in a timely fashion upon
pain of waiving the objection? Why? To whom would the U.S. party direct its challenge?
Technostroyexport involved alleged corruption of the appointing authority itself. To whom
would the U.S. party direct its “challenge”?
13. Removal under §205 of state court action challenging arbitrator. As detailed above, §205
permits removal from state court of any action that “relates to an arbitration agreement”
falling under the Convention. 9 U.S.C. §205. One lower court has held that §205 permits removal
of a state court action challenging the composition of an AAA-appointed arbitral tribunal. York
Hannover Holding AG v. McDermott Int'l, Inc., 794 F.Supp. 118 (S.D.N.Y. 1992). The rationale of
other lower court decisions is to the contrary. See supra p. 383; Tesoro Petroleum v. Asamera
(South Sumutra) Ltd, 798 F.Supp. 400 (W.D. Tex. 1992).
14. Power of U.S. court to revise its appointment. If a party objects to a court-appointed
arbitrator, before the arbitration commences, the court has the power under §5 to vacate its
original appointment and name a replacement. San Carlo Opera Co. v. Conley, 72 F.Supp. 825,
833 (S.D.N.Y. 1946), aff'd, 163 F.2d 310 (2d Cir. 1947).
15. Vacancies on the arbitral tribunal. During the course of some arbitrations, one of the
members of the arbitral tribunal will fall ill, die, or otherwise leave a vacancy on the tribunal.
Dealing with this issue once a dispute is in litigation may prove difficult and time-consuming.
As a consequence, some arbitration clauses contain provisions regarding vacancies that may
occur on the panel. The typical approach is to provide that vacancies will be filled in the same
manner the former arbitrator was selected. Institutional rules also contain provisions for
appointment by the appointing authority of a “party-nominated” arbitrator if one party fails or
refuses to make its nomination. See UNCITRAL Rules Article 7(2); ICC Rules Article 2(4); AAA
International Rules Article 6 (by implication); LCIA Rules Article 3(4).
P "651"

References
1) For commentary, see Berlinguer, Impartiality and Independence of Arbitrators in
International Practice, 6 Am. Rev. Int'l Arb. 339 (1995); Bishop & Reed, Practical Guidelines
for Interviewing, Selecting, and Challenging Party-Appointed Arbitrators in International
Commercial Arbitration, 14 Arb. Int'l 395 (1998); Bond, The Selection of ICC Arbitrators and the
Requirements of Independence, 4 Arb. Int'l 300 (1988); Bond, The Experience of the ICC in the
Confirmation/Appointment Stage of an Arbitration, in The Arbitral Process and the
Independence of Arbitrators 9 (ICC Publishing 1991); Bond, The International Arbitrator: From
the Perspective of the ICC International Court of Arbitration, 12 N.W.J. Int'l L. & Bus. 1 (1991);
Coulson, An American Critique of the IBA's Ethics for International Arbitrators, 4 J. Int'l Arb.
103 (1987); Hascher, ICC Practice in Relation to the Appointment, Confirmation, Challenge and
Replacement of Arbitrators, 6 ICC Int'l Ct. Arb. Bull. 4 (Nov. 1995); Hunter, Ethics of the
International Arbitrator, 53 Arb. 219 (1987); Kendall, Barristers, Independence and Disclosure,
8 Arb. Int'l 287 (1992); Lowenfeld, The Party-Appointed Arbitrator in International
Controversies: Some Reflections, 30 Texas Int'l L. J. 59 (1995); Morera, The Appointment of
Arbitrators by the Court, 7 ICC Int'l Ct. Arb. Bull. 32 (1996); Pantle, The Duty of an Attorney as
Arbitrator to Disclose Possible Bias, 18 Colo. Law. 859 (1989); Paulsson, Securing the Integrity,
Impartiality and Independence of Arbitrators: Judicial Intervention, 1993 Y.B. Arb. Inst.
Stockholm Cham. Comm. 91; Smith, Impartiality of the Party-Appointed Arbitrator, 6 Arb. Int'l
320 (1990); Tupman, Challenge and Disqualification of Arbitrators in International
Commercial Arbitration, 38 Int'l & Comp. L.Q. 26 (1989); Varady, On Appointing Authorities in
International Commercial Arbitration, 2 Emory J. Int'l Dispute Res. 311 (1988); Werner, The
Independence of Arbitrators in Totalitarian States – Tackling the Tough Issues, 14 J. Int'l Arb.
141 (1997); Wetter, Ethical Guidelines, 1993 Y.B. Arb. Inst. Stockholm Cham. Comm. 99.
2) See infra pp. 621-23.
3) See infra pp. 620-21.
4) See supra pp. 11-12, 453-55 & infra pp. 620-21; ICC Rules Article 7-9; UNCITRAL Rules Article
6; LCIA Rules Article 5-9. Alternatively, some neutral individual or office-holder – like the
Secretary General of the ICC or the President of the Swiss Federal Tribunal – can be
designated.
5) See infra pp. 621-25.
6) See infra p. 625.
7) 9 U.S.C. §5. See McMahon v. Shearson/American Express Inc., 709 F.Supp. 369, 373 (S.D.N.Y.
1989).
8) Section 5 provides no express guidance as to the qualifications or characteristics of
arbitrators or as to the procedures to be followed by courts in selecting arbitrators. Like §5
of the FAA, the Uniform Arbitration Act permits appointment of arbitrators, but does not
provide procedural or other guidance concerning the subject. Uniform Arbitration Act §3,
see Appendix E.
9) 9 U.S.C. §206
10) Petitioner in fact approached the International Chamber of Commerce in January 1977 and
requested arbitration before that body. ICC denied petitioner's request since it was not the
organization specified in the agreement and respondent refused to consent to ICC
jurisdiction.
11) The New York statutes relevant to this inquiry are N.Y. C.P.L.R. §§7503 & 7504 (McKinney
1963). They are similar to the [FAA], in providing for a trial where there is a question
regarding the making of an agreement to arbitrate and in providing for Court appointment
of a substitute arbitrator. However, the federal statute, 9 U.S.C. §4, provides for trial by jury
if one is demanded.
12) Although the Court of Appeal for this Circuit has consistently held that federal rather than
state law controls in determining the validity of a contract to arbitrate, Coenen v. R. W.
Pressprich & Co., 453 F.2d 1209 (2d Cir.), cert. denied, 406 U.S. 949 (1972); Robert Lawrence Co.
v. Devonshire Fabrics, Inc., 271 F.2d 402 (2d Cir.), app. dismissed, 364 U.S. 801 (1960), state law
is particularly helpful in this situation where the state and federal arbitration statutes are
fairly similar and there is no apparent federal precedent. Cf. Lea Tai Textile Co. v. Manning
Fabrics, Inc., 411 F.Supp. 1404 (S.D.N.Y. 1975) (Court looked to Uniform Commercial Code in
determining the question of existence of contract to arbitrate).
13) Respondent apparently feels that the International Chamber of Commerce would not be as
protective of the interests of American businesses as would the New York Chamber of
Commerce. However, although preferring the International Chamber of Commerce,
petitioner is willing to appear before any arbitrator including the American Arbitration
Association, which apparently should alleviate respondent's fears of the arbitrator being
prejudiced against American businesses.
14) But cf. Cia de Navegacion Omsil, SA v. Hugo Neu Corp., 359 F.Supp. 898 (S.D.N.Y. 1973). Court
did not appoint arbitrator when one arbitrator on three person panel died, but instead
ordered parties to select a new panel. The Court noted that it would not be fair for the
appointed arbitrator – “respondent's arbitrator” – to join in the deliberations after a series
of hearings and meetings had transpired without him. “The two remaining arbitrators,
‘petitioner's’ and neutral, have worked together and been exposed to each other's
influence. The results of that may have been good, bad, or nil for respondent.... It is not fair
or fitting to impose the risk, which respondent never agreed to accept, by judicial
command.”Id. at 899.
15) For commentary, see Alvarez, The Challenge of Arbitrators, 6 Arb. Int'l 203 (1990); Art,
Challenge of Arbitrators: Is an Institutional Decision Final?, 2 Arb. Int'l 261 (1986); Berlinguer,
Impartiality and Independence of Arbitrators in International Practice, 6 Am. Rev. Int'l Arb.
339 (1995); Bishop & Reed, Practical Guidelines for Interviewing, Selecting, and Challenging
Party-Appointed Arbitrators in International Commercial Arbitration, 14 Arb. Int'l 395 (1998);
Bond, The Selection of ICC Arbitrators and the Requirement of Independence, 4 Arb. Int'l 300
(1988); Bond, The International Arbitrator: From the Perspective of the ICC International Court
of Arbitration, 12 N.W.J. Int'l L. & Bus. 1 (1991); Carter, Living with the Party-Appointed
Arbitrator: Judicial Confusion, Ethical Codes and Practical Advice, 3 Am. Rev. Int'l Arb. 153
(1992); Lowenfeld, The Party-Appointed Arbitrator in International Controversies: Some
Reflections, 30 Texas Int'l L. J. 59 (1995); Hascher, ICC Practice in Relation to the Appointment,
Confirmation, Challenge and Replacement of Arbitrators, 6(2) ICC Ct. Bull. 4 (1995); Paulsson,
Securing the Integrity, Impartiality and Independence of Arbitrators: Judicial Intervention,
1993 Y.B. Arb. Inst. Stockholm Cham. Comm. 91; Tupman, Challenge and Disqualification of
Arbitrators in International Commercial Arbitration, 38 Int'l & Comp. L.Q. 26 (1989); Wetter,
Ethical Guidelines, 1993 Y.B. Arb. Inst. Stockholm Cham. Comm. 99.
16) For a discussion of the challenge process, see supra p. 455 & infra pp. 641-43.
17) For a discussion of judicial challenges, see infra pp. 643-51.
18) 139 F.3d 980 (2d Cir. 1999).
19) On appeal, IDTS also argues that it was denied due process, relying on Article V.1(b) which
provides that recognition and enforcement may be denied when a party “was otherwise
unable to present its case.” Although IDTS did raise a due process concern to the district
court in sur-reply memorandum, it did so only as part of a response to Techno's waiver
argument and did not squarely present to the district court the argument it now presents
to this Court. Therefore, IDTS did not properly raise this point in the district court, in any
event, we do not reach it.
20) See infra pp. 859-80. Also as noted below, if a party chooses to reserve judicial challenge
based on lack of independence until an action to vacate a final award, great care must be
taken not to waive such objections. See infra pp. 877-88.
21) 443 F.Supp. 386 (S.D.N.Y. 1978).
22) 9 U.S.C. §19(b); New York Convention Article V(1)(d).
23) See infra pp. 869-75.
24) The arbitration panel in that unrelated dispute has since made an award, which was
confirmed by the district court. In re Arbitration between Andros Compania Maritima and
Marc Rich & Co. (S.D.N.Y. Nov. 30, 1977) 77 Civ. 5183. The matter is currently on appeal.
25) Congress, in enacting the [FAA], provided for judicial vacation of awards on grounds of
“evident partiality or corruption in the arbitrators,” 9 U.S.C. §10(b), and for judicial
appointment of arbitrators in situations where the agreement establishes no procedure for
designating them or where there is a lapse in making an appointment or in filling a
vacancy, 9 U.S.C. §5. These sections indicate that Congress was aware of both the potential
dangers of bias and of the possibility of judicial intervention in the process of designating
arbitrators. No section of the Act, however, provides for judicial scrutiny of an arbitrator's
qualifications in any proceeding other than an action to confirm or vacate an award. If
Congress had wished to authorize such review before arbitration proceedings commence, it
could easily have so provided.
26) As Judge Brieant has recently noted,
“[relationships] in the maritime community in the Port of New York tend to be somewhat
incestuous....With the shrinkage and decline of maritime commerce in the Port of New York,
the number of commercial men skilled in such matters, and willing to undertake
arbitration of maritime disputes has become small. These leaders meet and confer
regularly in the course of their activities in trade associations, representation of their
clients, and while attending to industry problems.”
Andros Compania Maritime, supra, at 8-9. It thus seems likely that any arbitrator named by
the parties would have some relationship with one or another of them that one party might
want to challenge in court before the commencement of arbitration.
27) Judge Neaher designated a neutral arbitrator in his order. Erving, supra, 349 F.Supp. at 719.
In Seidman the action was for an order directing that the New York Stock Exchange be
replaced by the American Arbitration Association.
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part Two : Chapter 10. Multi-
Party Issues in International
Arbitration', in Gary B. Born ,
International Commercial
Arbitration: Commentary and
Materials (Second Edition),
2nd edition (© Kluwer Law
International; Kluwer Law
International 2001) pp. 653 -
700
KluwerArbitration
Part Two : Chapter 10. Multi-Party Issues in International
Arbitration
10 Multi-Party Issues in International Arbitration (1)
International disputes often involve multiple parties and multiple agreements. (2) Multi-party
disputes present difficult questions for the arbitral process. This Chapter examines two sets of
these questions, considering their resolution by both international arbitrators and national
courts. First, we examine when an arbitration agreement will bind parties that have not
executed the agreement. Second, we discuss the related problems of consolidation,
intervention, and joinder of parties in international arbitration.
A. The Parties to the Arbitration Agreement
A threshold issue in many international arbitrations is determining the identity of the parties
P "653" to the arbitration agreement. (3) As we have seen, virtually all national legal regimes regard
P "654" arbitration as consensual and provide that only the parties to an arbitration agreement can
be compelled to comply with that agreement. (4) As a consequence, it is often of critical
importance to determine the identity of the parties to an arbitration agreement.
In most cases, the parties to the arbitration agreement are – and are only – the entities that
formally executed the underlying contract containing the arbitration clause. Nevertheless,
some cases involve claims that entities which have not executed an agreement are bound by
its arbitration clause. A variety of legal theories have been invoked to bind entities that have
not executed an arbitration agreement. These include alter ego and agency principles,
assignment and other transfer doctrines, assumption and ratification, and guarantor relations.
(5)
The materials excerpted below illustrate the issues that arise in determining the identity of
the parties to an international arbitration agreement. The first excerpt is from a widely-
discussed award in ICC Case No. 4131, where the arbitral tribunal held that several non-
signatories were bound by an arbitration agreement. Also excerpted below are two national
court decisions in Builders Federal (Hong Kong) Ltd v. Turner Construction and Oriental
Commercial and Shipping Co. (U.K.) Ltd v. Rosseel NV. In Builders Federal, the court discusses the
procedures which should apply in resolving an alter ego dispute in a national court
proceeding. In Oriental Commercial, the court discusses the standards for determining when a
party will be bound by an arbitration agreement on an alter ego theory.
INTERIM AWARD IN ICC CASE NO. 4131 OF SEPTEMBER 23, 1982
IX Y.B. Comm. Arb. 131 (1984) (©)
SANDERS, GOLDMAN & VASSEUR, ARBITRATORS. [Dow Chemical Company is incorporated in the
United States. It owns 100%, either directly or indirectly, of Dow Chemical (Venezuela), Dow
Chemical AG, Dow Chemical Europe, and Dow Chemical France. In 1965, Dow Chemical
(Venezuela) entered into a contract with a French company for the distribution of thermal
isolation equipment in France. Dow Chemical (Venezuela) later assigned the contract to Dow
Chemical AG. In 1968, Dow Chemical Europe entered into a similar contract with different
French companies. The 1965 and 1968 agreements each contained an ICC arbitration clause.
Both the 1965 and the 1968 agreement was eventually assigned by Dow's original French
counter-party to Isover Saint Gobain, a French company. Both agreements permitted any
P "654" subsidiary of the Dow Chemical Company to make deliveries contemplated by the agreements.
P "655" In practice, Dow Chemical France made the deliveries. Various difficulties arose with the
products distributed by Isover Saint Gobain for Dow Chemical. Eventually, several lawsuits
were brought against various Dow Chemical subsidiaries in French courts.
As a consequence, a Request for Arbitration was filed with the ICC against Isover Saint Gobain.
Named as claimants were four Dow entities connected with the contracts – Dow Chemical
Company, Dow Chemical AG, Dow Chemical Europe, and Dow Chemical France. Isover Saint
Gobain challenged the arbitral tribunal's jurisdiction to hear claims asserted by Dow Chemical
Company and Dow Chemical France, as well as the standing of Dow Chemical AG and Dow
Chemical Europe. The tribunal issued an interim award, which is excerpted below.]...
Considering that it is not disputed that the arbitration clauses relied upon by the claimants
are contained in contracts that have been signed by neither Dow Chemical (France) nor Dow
Chemical Company; that these two companies, nonetheless, maintain that they may invoke
them, by reason both of the factual context of the conclusion and performance of the contracts,
and of the fact that these companies, along with the signatories of the contracts, are part of a
group of which Dow Chemical Company is the parent company, the three others being its
daughter and granddaughters, entirely controlled by the former;
Considering, thus, that the jurisdictional objection and, in consequence, the related objection
as to the admissibility of the action give rise to the issue of the scope and effects of the
relevant arbitration clause. Therefore, the sources of law appropriate to the determination of
said scope and said effects should be defined;
 Considering that the Defendant, in fact, has argued that the arbitration clause contained in the
1968 contract, according to which “any difference arising under this agreement will be settled
..., according to French law ...” should be interpreted to mean not only that the merits of the
dispute should be determined by reference to French law but also the scope and the effects of
the arbitration agreement;
Considering, however, that in referring to the ICC Rules, the parties incorporated its provisions
concerning the arbitral tribunal's authority to decide as to its own jurisdiction, which
provisions do not refer to the application of any national law. The reference to French law
could therefore concern only the merits of the dispute;
Considering that the sources of law applicable to determine the scope and the effects of an
arbitration clause providing for international arbitration do not necessarily coincide with the
law applicable to the merits of a dispute submitted to such arbitration. Although this law or
these rules of law may in certain cases concern the merits of the dispute as well as the
arbitration agreement, it is perfectly possible that in other cases, the latter, because of its
autonomy, is governed – not only as to its scope, but also as to its effects – by its own specific
sources of law, distinct from those that govern the merits of the dispute;
Considering that this is particularly the case – unless the parties have expressly agreed
otherwise – with respect to an arbitration clause referring to the ICC Rules;
P "655" Considering in effect that these Rules, in their 1975 version (whose applicability to this case,
P "656" given the dates of the litigious contracts, will be decided in due course), contain provisions
relating to the proper law to be applied to the merits of the dispute (Article 13(3)), but are
silent on this subject in their prior version. However, both versions of the Rules contain
practically identical provisions (1955 Rules, Article 13; 1975 Rules, “Arbitration” section, Article
8) concerning the arbitrator's competence to decide on his own jurisdiction. These provisions
establish in particular, the principle of the complete autonomy of the arbitration clause
(paragraph 4 of both texts) and confer on the arbitrator the power to take any decision as to his
own jurisdiction upon the Court's determination that the arbitration will take place (paragraph
3) without obliging him to apply any national law whatever in order to do so.
Considering that the tribunal shall, accordingly, determine the scope and effects of the
arbitration clauses in question, and thereby reach its decision in regarding jurisdiction, by
reference to the common intent of the parties to these proceedings, such as it appears from
the circumstances that surround the conclusion and characterize the performance, and later
the termination of the contracts in which they appear. In doing so, the tribunal, following, in
particular, French case law relating to international arbitration should also take into account,
usages conforming to the needs of international commerce, in particular, in the presence of a
group of companies;
Considering that in conformity with the “General rule” set forth in Article 31 (1955 version) and
Article 26 of the “Arbitration” Section of the ICC Rules, the tribunal will however make every
effort to make sure that the award is enforceable at law. To this end, it will assure itself that
the solution it adopts is compatible with international public policy, in particular, in France....
Considering that in conformity with the preceding it is appropriate, in order to determine the
scope and the effects of the arbitration clauses relied upon, to examine in succession the
circumstances under which the negotiation, the performance and the termination of the
contracts in which these claims appear, took place and to explore thereafter the possible
bearing, in this context, of the fact that the claimants are part of a group of companies....
Considering that in point of fact Dow Chemical France at the time of signature of the 1965
contracts as well as the negotiations which led to the 1968 contract, appeared to be at the
center of the organization of the contractual relationship with the companies succeeded by the
present Defendant. Moreover, this relationship could not have been formed without the
approval of the American parent company, which owned the trademarks under which the
relevant products were to be marketed in France;
That this analysis reveals that neither the “Sellers” nor the “Distributors” attached the slightest
importance to the choice of the company within the Dow Group that would sign the contracts. It
is significant to note that none of the documents produced contains any trace of a discussion
on this subject. In reality all the entities of the Dow Group involved in distribution in France
understood themselves to be contracting with the distributor or distributors in France and
likewise, it was with the aggregate of these entities that the present defendant's predecessors
understood themselves to be contracting....
P "656"
P "657"
Considering that – as it has been mentioned above – the distribution agreement of 1965 as well
as the one of 1968 designated first of all Dow France for delivery of the products to distributors.
Although it has been provided for that deliveries could also be effectuated, at the choice of the
“seller”, by other subsidiaries of Dow Chemical Company, it is to be noted that, in fact, it has
not been sustained that this option has ever been used. It has always been Dow France which
has assured the execution of the contracts; ... Dow France, therefore, played in the execution of
the contracts an equally preponderant role as it did in the establishment of the contractual
relations....
[It also] appears, as was the case with respect to the conclusion and performance of the
distribution agreements, that Dow Chemical France played an essential role in the termination
of the 1968 contract, which had been substituted for the 1965 contract; that all of these factors
permit the conclusion that Dow Chemical France was a party to each of these contracts and,
consequently, to the arbitration clauses they contained; that the same conclusion should be
 reached with respect to Dow Chemical Company by reason of its ownership of the trademarks
under which the products were marketed, and its absolute control over those of its subsidiaries
that were directly involved, or could under the contracts have become involved in the
conclusion, performance, or termination of the litigious distribution agreements.
Considering that the Defendant adopted the same position in its brief of 1 July 1980 before the
Court of Appeal of Paris, in support of its motion for the compulsory joinder of inter alia Dow
Chemical Company. That the Defendant there in fact wrote as follows:
“Whereas Dow Chemical Company, owner to the patents and organizer of the manufacturing
and distribution of Roofmate, decided and conceived the modalities of the manufacturing and
distribution of said product, thus engaging its direct liability.” (Translated from French-Gen.
Ed.)
Considering that in the circumstances of this case, the application of the arbitration clauses to
Dow Chemical Company may also be justified, as we shall now show, by the fact that the
contracts containing these clauses concern, in the context of a group of companies, a parent
company and certain of its subsidiaries. The same fact could justify, if necessary, the
application of the arbitration clause to Dow Chemical France.
Considering that it is indisputable – and in fact not disputed – that Dow Chemical Company has
and exercises absolute control over its subsidiaries having either signed the relevant contracts
or, like Dow Chemical France, effectively and individually participated in their conclusion,
their performance, and their termination;
Considering that irrespective of the distinct juridical identity of each of its members, a group
of companies constitutes one and the same economic reality (une réalité économique unique)
of which the arbitral tribunal should take account when it rules on its own jurisdiction subject
to Article 13 (1955 version) or Article 8 (1975 version) of the ICC Rules.
P "657"
P "658"
Considering, in particular, that the arbitration clause expressly accepted by certain of the
companies of the group should bind the other companies which, by virtue of their role in the
conclusion, performance, or termination of the contracts containing said clauses, and in
accordance with the mutual intention of all parties to the proceedings, appear to have been
veritable parties to these contracts or to have been principally concerned by them and the
disputes to which they may give rise.
Considering that ICC arbitral tribunals have already pronounced themselves to this effect (see
Award in ICC Case No. 2375 of 1975, 1976 Journal du droit international 978). The decisions of
these tribunals progressively create case law which should be taken into account, because it
draws conclusions from economic reality and conforms to the needs of international
commerce, to which rules specific to international arbitration, themselves successively
elaborated should respond.
Considering that it is true that in another award (Award in ICC Case No. 2138 of 1974, 1975 Journal
du droit international 934) the arbitral tribunal refused to extend an arbitration clause signed
by one company to another company of the same group. However, in so doing it based itself on
the factor “that it was not established that Company X” (which the tribunal had determined
was neither a signatory nor a party to the contract) “would have accepted the arbitration
clause if it had signed the contract directly.”
Considering that in the absence of such a showing, the tribunal did not allow application of the
arbitration clause; but that in the present case, the circumstances and the documents
analyzed above show that such application conforms to the mutual intent of the parties.
That it is not without interest to recall that an American arbitral tribunal recently reached a
similar result, referring to U.S. national court decisions and observing that “it is neither
sensible nor practical to exclude (from the arbitral jurisdiction) the claims of companies who
have an interest in the venture and who are members of the same corporate family.”Partial
Final Award No. 1510, VII Y.B. Comm. Arb. 151 (Society of Maritime Arbitrators 28 November
1980).)
Considering finally that in a matter directly connected with the issues litigated in the present
arbitration, the Court of Appeal in Paris on 5 February 1982 held that it lacked jurisdiction to
hear Isover Saint Gobain's motion for the compulsory joinder of not only Dow Chemical Europe
(which signed the 1968 distribution contract), but also Dow Chemical Company (U.S.A.) and
“(referred) Isover Saint Gobain to the proper jurisdiction of the arbitral tribunal of the ICC in
Paris.” In order to justify this decision, the Court of Appeal stated “that Isover Saint Gobain
cannot dispute the fact that the litigation is pending and that its claims against Dow Company
and Dow Europe in their relations inter se flow directly from the two contracts” (of 1965 and
1968);
P "658" It is true that by the same decision the Court reached a decision on the merits as regards Dow
P "659" Chemical France. However, in that case, the said company had been sued on the grounds of
quasi-tortious liability, and did not invoke the arbitration clauses and did not contest
jurisdiction.
In conclusion, it is appropriate for the tribunal to assume jurisdiction over the claim brought
not only by Dow Chemical AG (Zürich) and Dow Chemical Europe, but also by Dow Chemical
Company (U.S.A.) and Dow Chemical France.
In so doing, the tribunal contradicts no principle nor any rule of international “public policy,”
in particular, that of the French legal system. The latter is not based on any principle, nor does
 it contain any rule of such a stature, that would prohibit giving to an arbitration clause
implicating companies that are legally distinct but form part of a group of companies, the
scope attributed to it by the present award. To the contrary, by taking into account, in reaching
this result, the needs of international commerce to which the rules of international arbitration
should be responsive, the tribunal follows the example of French case law to which express
reference was made in the report to the Prime Minister explaining the purposes of the Decree
of May 12, 1981.
Considering that, as has been recalled, the alleged non-admissibility of the claims of Dow
Chemical AG and Dow Chemical Europe invoked by the Defendant is connected by the
arbitrators' Terms of Reference, to the decision sought from the tribunal on its jurisdiction with
respect to the two other Claimants;
Considering that the tribunal will reject the challenge to its jurisdiction, it will as a result, not
at present uphold the challenge to the admissibility of the action. This decision will not,
however, preclude a future ruling by the tribunal on the existence or the absence of interest to
institute an action as far as one or both of the Claimants in question, are concerned or a
possible finding that the claims of one or both of them may not be heard due to an absence of
direct interest in the cause of action.
FOR THESE REASONS, the Tribunal:
1. Assumes jurisdiction to decide the claims of the four Claimants.
2. Rejects, for the present, the Defendant's challenge to the admissibility of the action of Dow
Chemical AG (Zürich) and Dow Chemical Europe.
3. Reserves the question of costs.
ORIENTAL COMMERCIAL AND SHIPPING CO. (U.K.) LTD v. ROSSEEL, NV
609 F.Supp. 75 (S.D.N.Y. 1985)
LEISURE, DISTRICT JUDGE. Defendant moves pursuant to Article II(3) of the New York Convention
and 9 U.S.C. §206 to compel arbitration....
P "659"
P "660"
Rosseel NV (“Rosseel”), a Belgian corporation, entered into a contract to purchase specified oil
from Oriental Commercial and Shipping Co. (U.K.) Ltd (“Oriental U.K.”). The oil was apparently
never delivered and Rosseel alleges damages as a result. Oriental Commercial and Shipping
Co. Ltd (“Oriental SA”) is a Saudi Arabian company with headquarters in Jeddah, Saudi Arabia,
and representative offices located throughout the world. The Bokhari family owns both Oriental
SA and Oriental U.K. but neither corporation owns shares of the other. Oriental SA was not a
signatory to the contract of sale between Oriental U.K. and Rosseel.
Rosseel served its Notice of Intention to Arbitrate upon Oriental U.K. and Oriental SA
demanding arbitration under the contract. Oriental SA responded with a petition to stay
arbitration in the Supreme Court of the State of New York. Rosseel removed the proceeding to
this Court.
The arbitration provision in the contract is the only contract term here in dispute. Oriental
U.K.'s telex to Rosseel stated the terms of the agreement which included the following
provision: “Arbitration: If required in New York City.” Oriental U.K. and Oriental SA claim that
the wording of the phrase is insufficient to create an enforceable arbitration provision and
challenge the scope of the provision. Additionally, Oriental SA claims the arbitration clause is
enforceable, if at all, between Oriental U.K. and Rosseel only. This Court has jurisdiction under
the Convention, implemented in 9 U.S.C. §§201 et seq....
[The court first held that the arbitration agreement was valid and that it covered the claims in
dispute.] It is within the province of this Court to determine whether Oriental SA, although not
formally a party to the arbitration agreement, should be made a party to the arbitration
proceeding in addition to Rosseel and Oriental U.K. See Orion Shipping and Trading Co. v.
Eastern States Petroleum Corp., 312 F.2d 299 (2d Cir. 1983). Ordinary contract and agency
principles determine which parties are bound by an arbitration agreement, and parties can
become contractually bound absent their signatures. McAllister Bros., 621 F.2d at 524; Fisser v.
International Bank, 282 F.2d 281, 283 (2d Cir. 1960).
Rosseel suggests two theories to support its contention that Oriental SA should be made a
party to the arbitration proceeding. The first is that Oriental U.K. is merely the alter ego of
Oriental SA. The second alleges that Oriental U.K. acted as Oriental SA's agent in contracting
with Rosseel. Rosseel claims that either theory allows this Court to pierce the corporative veil
and bind Oriental SA to the arbitration agreement.
To apply the alter ego doctrine to justify the disregard of a corporate entity, the court must
determine that there is such unity of interest and ownership that separate personalities of the
corporations no longer exist, and that failure to disregard the corporate form would result in
fraud or injustice. Flynt Distributing Co. v. Harvey, 734 F.2d 1389, 1393 (9th Cir. 1984); accord FMC
Distributing Co. v. Murphree, 632 F.2d 413, 422 (5th Cir. 1980); Kirno Hill Corp. v. Holt, 618 F.2d 982,
P "660" 985 (2d Cir. 1980). However, a stringent showing is required before a court will pierce the
P "661" corporate veil. Hidrocaburos y Derivados CA v. Lemos, 453 F.Supp. 160, 172 (S.D.N.Y. 1977). The
courts do not lightly disregard the separate existence of related corporations, even in
deference to a strong policy favoring arbitration of private commercial disputes. Coastal States
Trading, Inc. v. Zenith Navigation SA, 446 F.Supp. 330, 387 (S.D.N.Y. 1977).
 There are insufficient facts before the Court to determine whether Oriental SA should be made
a party to the arbitration proceeding. Consequently, by June 1, 1985 the parties shall complete
discovery on the issue of whether Oriental SA is a party to the arbitration agreement with
regard to this transaction. At that time the Court shall conduct an evidentiary hearing on this
issue.
The Court notes that an alternative procedure suggested in McAllister Bros., 621 F.2d at 524,
may be useful to expedite resolution of this matter. With the assistance of this Court, if
required, the parties may stipulate that a final determination of whether Oriental SA is bound
by the arbitration agreement would be stayed pending arbitration of Rosseel's claims against
both companies. Oriental SA would fully participate in the arbitration proceedings. If Rosseel
prevails in its claim, and Oriental U.K. alone is unable or unwilling to satisfy the arbitration
award, this Court, upon Rosseel's motion, will order discovery to proceed in the manner set
forth above. An evidentiary hearing would then be held to determine whether Oriental SA was a
party to the arbitration agreement and thus bound by the arbitration award.
If the parties agree to this latter procedure, the matter will be referred to the American
Arbitration Association. Otherwise, Rosseel's motion for appointing of an arbitrator is stayed
pending this Court's determination of the identity of the parties to the arbitration proceeding,
and discovery shall proceed as set forth above.
BUILDERS FEDERAL (HONG KONG) LTD v. TURNER CONSTRUCTION
655 F.Supp. 1400 (S.D.N.Y. 1987)
HAIGHT, DISTRICT JUDGE. [Builders Federal (Hong Kong) Ltd (“Builders Federal”), is a Hong Kong
corporation. Turner Construction (“Turner”) and Turner International Industries, Inc. (“Turner
International”) are incorporated in the United States; Turner owned 100% of a Singapore
company, Turner (East Asia) Pte. Ltd (“TEA”); TEA was the main contractor for a major
construction project in Singapore. Builders Federal was a subcontractor to TEA, pursuant to an
agreement between TEA, Builder Federal and various other subcontractors; Turner and Turner
International were not parties to the subcontract. The subcontract contained an arbitration
clause, providing for arbitration in Singapore. In addition the clause provided that:
“... if the dispute or difference between the Contractor and the Subcontractor is substantially
P "661"
the same as a matter which is a dispute or difference between the Contractor and the
P "662" Employer under the Main Contract the Contractor and the Sub-Contractor hereby agree that
such dispute or difference shall be referred to arbitration pursuant to the terms of the Main
Contract.”
Disputes arose during the construction project and TEA ceased work. Various litigation and
arbitration commenced in Singapore, including an action in Singapore courts by Builders
Federal against TEA seeking to compel arbitration of disputes between them. TEA refused to
arbitrate with Builders Federal on the grounds that the disputes had to be heard pursuant to
an arbitration clause in its main contract.
Builders Federal and other subcontractors filed a petition in U.S. district court seeking an
order compelling Turner, TEA, and various of their affiliates to proceed with arbitration in
Singapore and a declaration that each of these entities was bound to arbitrate. The court
refused to grant the relief requested, reasoning as follows]....
[D]efendants' motion to dismiss the petition fails. The petition states a viable claim that
defendants should be compelled to join an arbitration in Singapore of disputes between
plaintiffs and TEA.
The briefs of counsel debate at some length just what claims plaintiffs are asserting. Plaintiffs'
basic premise, I think it fair to say, is that defendants are liable for TEA's contractual
obligations (including the obligation to arbitrate) because TEA is their alter ego. Defendants,
for their part, appear to characterize the plaintiffs' theory as one of implied guaranty of TEA's
performance. Both theories of liability may, in appropriate circumstances, support an order to
compel arbitration. See, e.g., Fisser v. International Bank, 282 F.2d 231 (2d Cir. 1960) (alter ego);
Compania Espanola de Petroleos SA v. Nereus Shipping, SA, 527 F.2d 966, 973-74 (2d Cir.), cert.
denied, 426 U.S. 1936 (1976) (written contract of guaranty)....
It is clear that plaintiffs state a viable claim under the alter ego theory. The petition is replete
with allegations that defendants exercised dominance and control over TEA, and that TEA was
under-capitalized. Those allegations are not sufficient of themselves to “pierce a corporate
veil” so as to visit upon parent corporations the obligations of a subsidiary. Walkovsky v.
Carlton, 276 N.Y.S.2d 585 (1966). But the petition alleges more than that. It alleges that the
subcontract between plaintiff's and TEA obligated TEA to make certain payments to plaintiffs
upon termination of the main contract; and that defendants decided that TEA would breach
those obligations, sending implementing instructions to TEA. These allegations, even in the
absence of allegations of fraud requiring Rule 9(b) particularity, are sufficient to state a claim
for alter ego liability. Gorrill v. Iceland Air/Flugleider, 761 F.2d 847, 853 (2d Cir. 1985) (construing
New York law). The petition states a viable claim falling within this Court's subject matter
jurisdiction.
In the alternative, defendants ask that proceedings in this Court be stayed pending completion
P "662" of the arbitration proceedings in Singapore. I will grant that application, subject to the
P "663" conditions set forth below. 9 U.S.C. §4 provides that:
“If the making of the arbitration agreement of the failure, neglect, or refusal to perform the
same be in issue, the court shall proceed summarily to the trial thereof.”
When the existence of any agreement obligating anyone to arbitrate anywhere is at issue, then
 by definition the §4 trial must precede the arbitration. But that is not necessarily so when an
arbitration agreement concededly exists, undisputedly binding named parties to arbitrate,
and the §4 petitioner claims that non-signatories to the contract are also bound to arbitrate. In
those circumstances an arbitration will in any event take place between the named parties to
the contract. If the prevailing party's award is not satisfied by the other party, the prevailing
party may subsequently proceed against the non-signatory, either as guarantor of the named
party's obligations or on an alter ego theory. Orion Shipping & Trading Co., Inc. v. Eastern States
Petroleum Corp. of Panama, SA, 312 F.2d 299, 301 (2d Cir. 1963). The precise holding in Orion is
that a proceeding to confirm an award of arbitrators under §9 of the Act, a limited proceeding,
is “not the proper” time for the District Court to consider “piercing the corporate veil” of the
parent. But the Second Circuit's more general holdings, to which I have just referred, prompted
Judge Carter of this Court in Cochin Refineries Ltd v. Triton Shipping Inc., S.D.N.Y. 74 Civ. 216
(decided March 19, 1974), to stay a corporate veil piercing effort until resolution of the
arbitration between the named parties. Judge Carter wrote:
“If plaintiff prevails against Triton at arbitration, and the latter is unable to satisfy the
judgment award, plaintiff's action against the other defendants will still be pending. It will be
time enough at that time for a trial to determine whether these defendants are bound.”
For that proposition, Judge Carter cited Orion by comparison.
I declined to follow Judge Carter's lead in Hidrocarburos y Derivados, CA v. Lemos, 453 F.Supp.
160, 173-74 (S.D.N.Y. 1977). But in that case, the non-signatory party flatly declared that it would
not be bound by any award in the arbitration involving the company for whose performance
the non-signatory party was said to be liable. Furthermore, the signatory party was pressing
affirmative claims against the §4 petitioner. 453 F.Supp. 174 at n.31. In those circumstances, it
seemed to me right to direct that New York arbitrators determine in advance of the arbitration
whether the non-signatory parties would be fully bound by the arbitration, both in respect of
an obligation to arbitrate and the quantum of the arbitrators' award. The Second Circuit
adopted a similar rationale in Fisser v. International Bank, supra.
In the case at bar, were I to “proceed summarily” at this time to the trial of plaintiff's petition,
P "663" it would have a disruptive effect upon the pending judicial and arbitral proceedings in
P "664" Singapore, the agreed-upon situs of the arbitration. Plaintiffs' brief seeks to minimize that
disruption, but it appears to me both real and significant. Plaintiffs' discovery demands in aid
of its alter ego theory are far-reaching, in respect of both document production and answers to
interrogatories. The taking of depositions of TEA and defendants' officers and employees
cannot be far behind. I say this not in criticism of the litigation tactics of plaintiffs' counsel
here, but in recognition that such litigation would in all likelihood disrupt and delay the rather
stringent procedural deadlines imposed by Mr. Gardam, the Singapore arbitrator. In addition,
the Singapore court is currently considering whether plaintiffs are required to submit their
claims as part of the arbitration under the main contract, or are entitled to a separate
arbitration against TEA. This Court's order, adding three additional corporate parties to the
Singapore proceedings, would constitute an intrusive action against which comity counsels.
Quite apart from these considerations, resolution of the issues in the Singapore arbitration
may well limit or narrow the issues here. That is a sufficient basis for this Court to exercise its
inherent power “to control the disposition of the cases on its docket with economy of time and
effort for itself, for counsel and for litigants.” There is ample authority in this circuit for staying
suits here on alleged guarantees given by corporate parents pending arbitration abroad
between plaintiff and subsidiary. Nederlandse Erts-Tanker-Smaatschappij, NV v. Isbrandtsen
Company, 339 F.2d 440 (2d Cir. 1964), and subsequent orders reported at 362 F.2d 205 (2d Cir.
1966) and 387 F.2d 954 (2d Cir. 1968).
The concerns this Court addressed in Hidrocarburos, supra, are alleviated by the present
defendants' willingness, expressed through counsel, to waive any “due process” arguments
arising out of their desired non-participation in the Singapore arbitration. I will exact that
undertaking as a condition for a stay of these proceedings. Meaning no disrespect to counsel,
the undertaking must take the form of corporate resolutions in proper form, given by each of
the three corporate defendants. Those resolutions must set forth the defendants' agreements
that if plaintiffs prevail on the merits of the petition at bar, defendants will regard themselves
as bound by any award rendered in the Singapore arbitration against TEA, as to merits and
quantum, precisely as if defendants had participated in that arbitration as parties from its
inception....
In addition, this court directs in an exercise of its equitable powers that the defendants take
no steps which would hamper the progress of the Singapore arbitration, or serve to impede its
completion within a reasonable time. In making that direction, I do not mean to preclude such
litigation steps as TEA may be advised by their Singapore counsel to pursue. My focus will be
upon possible bad-faith obstructionism generated by the corporate parents.... On these terms
and conditions and in the exercise of my discretion, I grant a stay of proceedings under the
petition and complaint, including discovery.
Notes on Parties to International Arbitration Agreement
1. Allocation of competence to determine the parties to an arbitration agreement. As with other
P "664" disputes over the enforceability and interpretation of arbitration agreements, determining the
P "665" identities of the parties to an international arbitration agreement gives rise to debates
concerning the allocation of competence between national courts and arbitrators. See supra
pp.74-95. Consider how the materials excerpted above dealt with this issue.
 (a) Arbitral awards considering arbitrators' competence to determine parties to the arbitration
agreement. The arbitral tribunal in Dow Chemical readily concluded that it had the
authority to decide whether the parties' arbitration agreement was binding on particular
parties. Other international arbitral tribunals have agreed. See Award in ICC Case No. 4402
of March 17, 1983, in S. Jarvin & Y. Derains, Collection of ICC Arbitral Awards 1974-85 153
(1990).
What was the rationale for the tribunal's conclusion in Dow Chemical that it possessed
competence to determine the parties to the relevant arbitration agreement? What role
did the ICC Rules (and particularly Article 8 of the 1975 Rules) play in the tribunal's
conclusion? How (if at all) do disputes regarding the identity of the parties to an
arbitration agreement differ from other disputes over the enforceability and
interpretation of arbitration agreements?

(b) Arbitrators' competence to determine parties to an arbitration agreement under national

arbitration statutes. As discussed above, most national arbitration statutes address the
allocation of competence between national courts and arbitrators to decide disputes
over the enforceability and interpretation of arbitration agreements. See supra pp. 88-93.
Consider Articles 7, 8 and 16 of the UNCITRAL Model Law, Articles 178 and 186 of the Swiss
Law on Private International Law, and Articles 1458 and 1466 of the French Civil Code,
excerpted above at supra pp. 76-78. How does each provision deal with the allocation of
competence to determine the parties to an arbitration agreement?
(c) National court decisions holding that arbitrators can determine parties to arbitration
agreement. In Builders Federal, the court upheld an arbitral tribunal's authority to decide
what parties are bound by an arbitration agreement. Consider the court's explanation of
this conclusion. Does the court discuss how the parties' arbitration agreement (or any
relevant institutional rules) submitted disputes over the parties to the arbitration
agreement to arbitration? Is Builders Federal consistent with First Options? See supra pp.
74-95.
(d) National court decisions holding that arbitrators cannot determine parties to arbitration
agreement. In apparent contrast to Builders Federal, Oriental Commercial and other courts
have held that an “arbitration proceeding [is] not the proper forum for deciding whether
an arbitrator may afford relief against a non-signatory who is not covered by an
arbitration agreement.”Fiat SpA v. Ministry of Finance and Planning, 1989 U.S. Dist. Lexis
11995 (S.D.N.Y. 1989); Orion Shipping & Trading Co. v. Eastern States Petroleum Corp., 312
F.2d 299, 301 (2d Cir. 1983).
(e) Allocation of competence to determine parties to arbitration agreement under First
Options. Review the U.S. Supreme Court's analysis in First Options, excerpted at supra pp.
81-84. The Court held that “arbitrability questions” could be arbitrable, provided that the
parties have agreed to do so; additionally, the Court also held that an agreement to
arbitrate arbitrability issues must be established by “clear and unmistakable” evidence.
See supra pp. 89-93. These requirements were formulated by the First Options Court in the
context of a dispute over the identity of parties to an arbitration agreement.
When will there be “clear and unmistakable” evidence of an agreement to arbitrate
disputes over the identity of parties to the arbitration agreement? Suppose that a
company denies that it is a party to an arbitration clause (or that it is bound by any
institutional arbitration rules incorporated by the clause). What might constitute “clear
and unmistakable” evidence that the company had agreed to arbitrate arbitrability
issues? Wouldn't such evidence necessarily require showing (in court) that the company
was a party to the arbitration agreement itself? See supra pp. 89-93.

2. Competence of U.S. courts to determine the parties to an arbitration agreement.

(a) Determining parties to arbitration agreement in §4 action. Lower U.S. courts have generally
held that disputes over the proper parties to an arbitration agreement can be resolved in
an action to compel arbitration under §4. These courts have reasoned that a party's
denial that it is bound by an arbitration agreement puts into question “the making of the
arbitration agreement” for §4 purposes. See McAllister Bros., Inc. v. A & S Transp. Co., 621
F.2d 519, 522 (2d Cir. 1980); N & D Fashions, Inc. v. DHJ Industries, Inc., 548 F.2d 722, 729 (8th
Cir. 1977); Interocean Shipping Co. v. National Shipping and Trading Corp., 462 F.2d 673, 677
(2d Cir. 1972) (“Whether a person is a party to [an] arbitration agreement ... is included
within the statutory issue of ‘the making of the arbitration agreement.’”); Fisser v.
International Bank, 282 F.2d 231 (2d Cir. 1960); In re Hidrocarburos y Derivados, C.A., 453
P "665" F.Supp. 160 (S.D.N.Y. 1978) (“The question is one for the Court to determine, not the
P "666" arbitrators.”).
Is this necessarily the correct result? Applying First Options, when might there be “clear
and unmistakable” evidence that the question of the identity of the parties to an
arbitration agreement had been submitted to arbitration? Consider the possibility of
conduct during an arbitration. See supra pp. 89-93. Recall that First Options itself involved
a dispute over the parties to an arbitration agreement.
 (b) Section 4 trials concerning alter ego or agency status. A dispute over the identity of the
parties to an arbitration agreement often raises issues of fact. Some lower courts have
required discovery and a hearing on such factual issues. Interbras Cayman Co. v. Orient
Victory Shipping, etc., 663 F.2d 4 (2d Cir. 1981); Oriental Commercial and Shipping Co. v.
Rosseel, NV, 609 F.Supp. 75, 79 (S.D.N.Y. 1985). See also supra pp. 357-58.
3. Judicial abstention from compelling non-signatories to arbitrate. The Builders Federal court
declined to consider whether to compel the various Turner entities, which had not executed
the arbitration agreement, to participate in the Singapore arbitration. In doing so, the court
cited considerations of comity and deference to the Singapore arbitral proceedings. Was this a
sensible decision? Is this the same conclusion as a decision that the parties had agreed to
arbitrate arbitrability issues?
For another lower court decision declining to compel arbitration by non-signatories, see Cochin
Refineries Ltd v. Triton Shipping Inc., No. 74 Civ. 216 (S.D.N.Y. March 19, 1974).
Does §4 of the FAA permit the abstention practised in Builders Federal? Other U.S. lower courts
have concluded that it does not, and have compelled the joinder of non-signatories. See O & Y
Landmark Associates of Virginia v. Nordheimer, 725 F.Supp. 578 (D.D.C. 1989). Consider the
discussion about the propriety of abstention under §4 in other contexts. See supra pp. 400-407.
4. Conditions on abstention from compelling non-signatories to arbitrate. Note that in Builders
Federal the court only agreed to abstain from deciding the proper parties to the arbitration
after extracting commitments from the non-signatories to be bound by the arbitral award. Is
this appropriate? Is it less of an interference in the Singapore arbitration than compelling the
non-signatories to arbitrate? Why would the Turner companies have agreed to such an
arrangement? Consider the issue of discovery in the Singapore arbitration.
5. Procedural postures of disputes considering whether non-signatories are bound by an
arbitration agreement. As the materials excerpted above illustrate, disputes over the identities
of the parties to an arbitration agreement can arise in various procedural settings. First, as in
Dow Chemical, non-signatories may act in the capacity of claimants, seeking to invoke the
benefits of an arbitration agreement. Second, as in the underlying Builders Federal and Oriental
Commercial disputes, non-signatories to an agreement may be named as respondents. Third,
as discussed below, a respondent may assert counterclaims against non-signatories who have
not been named as claimants in the initial request or notice of arbitration.
(a) Arbitral awards considering whether non-signatories may act as claimants. Like Dow
Chemical, several arbitral awards have permitted non-signatories to an arbitration
agreement to act as claimants. See MAP Tankers, Inc. v. Mobil Tankers, Ltd, VII Y.B. Comm.
Arb. 151 (1982) (Society of Maritime Arbitrators); Award in ICC Case No. 2375 of 1975, 1976
Journal du droit international 974 (arbitration clause held to bind both non-signatory
claimant and respondent); Award in ICC Case No. 1434, 1976 Journal du droit international
978 (same).
(b) Arbitral awards considering whether non-signatories may be named as respondents. Other
cases have involved claims being asserted in arbitration against respondents who did not
execute the arbitration agreement. Several arbitral tribunals have permitted such
claims. See MAP Tankers Inc. v. Mobil Tankers Ltd, VII Y.B. Comm. Arb. 151 (1982); Interim
Award of 5 March 1984 in ICC Case No. 3879, XI Y.B. Comm. Arb. 127 (1986).
Other tribunals have refused to conclude that, based upon particular facts, that non-
signatories could be named as respondents. See Award in ICC Case No. 4402 of March 17,
1983, in S. Jarvin & Y. Derains, Collection of ICC Arbitral Awards 1974-1985 153-57 (1990).
Are cases where claimants assert that they are bound by an arbitration clause different in
principle from cases where claimants assert that respondents are bound by an
arbitration agreement? See Sandrock, Arbitration Agreements and Groups of Companies, 27
Int'l Law. 941 (1993). Is it not the fact that, in both cases, a party will be required to
arbitrate against an entity with which it asserts it has no arbitration agreement? What
effect should a party's “waiver” of its separate corporate status have?

(c) Arbitral awards considering whether to permit non-signatories to be named as

counterclaim-respondents. There are few reported arbitral awards considering whether a
non-signatory to an arbitration agreement may be named as a counterclaim-respondent.
As discussed below, infra pp. 676-77, the ICC's practice is to deny respondents the right to
P "666" name additional parties as either claimants, respondents, or counterclaim-respondents.
P "667" In contrast, under LCIA Rules, additional parties can be joined without the claimant's
consent. See infra p. 677.
6. Determining parties to arbitration agreement in action to enforce arbitral award. Suppose
that an arbitral award is made against one party, and then is sought to be enforced against
another entity. May a party seek to enforce an award made against one entity against another
entity?
Some national courts have answered in the negative. See Orion Shipping & Trading Co. v.
Eastern States Petroleum Corp., 312 F.2d 299 (2d Cir. 1963).
A few courts have suggested, however, that where factual issues are simple, an award made
against one party can be enforced against another entity. See Productos Mercantiles E
Industriales SA v. Faberge USA, Inc., No. 92 Civ. 7916 (S.D.N.Y. Sept. 14, 1993) (Orion not
applicable, and alter ego liability can be considered in §9 action to confirm, where “factual
 determination at issue is not complex”); International Ass'n of Machinists, Inc. v. Numberale
Stamp and Tool Co., 1987 U.S. Dist. Lexis 12736, at *4 (S.D.N.Y. October 28, 1987); In re Arbitration
Between Bowen and 39 Broadway Assoc., 1992 WL 73480, at *6 (S.D.N.Y. April 2, 1992); Orlogin, Inc.
v. U.S. Watch Co., 1990 U.S. Dist. Lexis 7794, at *17 (S.D.N.Y. June 25, 1990).
Some courts have also suggested that an arbitral award can be enforced, after it has been
confirmed against one party, against another party. See Orion Shipping & Trading Co. v. Eastern
States Petroleum Corp., 312 F.2d 299 (2d Cir. 1963); Carte Blanche (Singapore) Pte., Ltd v. Diners
Club Int'l Inc., 2 F.3d 24 (2d Cir. 1993); Cecil's, Inc. v. Morris Mechanical Enterprise, Inc., 735 F.2d
437 (11th Cir. 1984) (award enforced against non-signatory subcontractor); Gilberg Switzer Assoc.
v. National Housing Partnership, Ltd, 641 F.Supp. 150 (D. Conn. 1986) (award enforced against
general partner and third-party defendant).
In most cases, however, courts will regard a party's failure to join a non-party to an arbitration
as a waiver of any right to enforce the award against the non-party. Brownko Int'l, Inc. v. Ogden
Steel Co., 585 F.Supp. 1432 (S.D.N.Y. 1983) (where party to arbitration tried to join third-party,
but abandoned effort, it cannot later attempt to enforce award against that third-party).
Compare Productos Mercantiles E Industriales SA v. Faberge USA, Inc., No. 92 Civ. 7916 (S.D.N.Y.
Sept. 14, 1993) (holding that award may be enforced against non-signatory of arbitration
agreement on alter ego theory).
7. Choice of law issues in determining parties to an arbitration agreement. What law governs the
question whether a non-signatory is bound by an arbitration agreement? As Dow Chemical
illustrates, choice of law issues frequently arise in disputes over the identities of the parties to
international arbitration agreements.
(a) Effect of separability doctrine on choice of law analysis. As discussed above, the
separability doctrine permits the application of one law to the parties' underlying
contract and another law to the arbitration clause contained in that contract. See supra
pp. 72, 107-08. Dow Chemical illustrates this point well. What law applied to the
underlying contract in Dow Chemical? to the arbitration clause?
Recall the discussion above regarding the laws which are ordinarily applicable to the
arbitration agreement (assuming no express choice of this law by the parties): (i) the law
applicable to the parties' underlying contract; or (ii) the law of the arbitral situs. See
supra pp. 110-16. Consider again the arguments in favor of each. Is there any reason to
prefer one or the other alternative more strongly in the context of determining the law
governing the identity of the parties to an arbitration agreement?

(b) Relevance of legal theory invoked against non-signatory to choice of law analysis. Note
that different legal theories can be invoked to subject non-signatories to an arbitration
agreement. Consider how choice of law analysis may be affected by the substantive legal
theory that is asserted against a non-signatory. For example, would the same law
necessarily govern (i) alter ego; (ii) assumption; (iii) agency; or (iv) guarantee claims?
Suppose that A and B enter into an arbitration agreement that is expressly governed by
the laws of State X. Does the law of State X necessarily govern the question whether C is
an alter ego of B or whether C guaranteed B's obligations under the arbitration
agreement?

8. Choice of law issues under the FAA in determining parties to an arbitration agreement. As in
other contexts, choice of law issues in U.S. courts give rise to special difficulties in determining
the parties to an international arbitration agreement.
(a) Federal common law. In actions under the FAA, U.S. courts have generally applied federal
common law to the question whether a non-signatory is bound by an arbitration
agreement. See McPheeters v. McGinn, Smith & Co., 953 F.2d 771 (2d Cir. 1992); Valero
Refining, Inc. v. M/T Lauberhorn, 813 F.2d 60, 64 (5th Cir. 1987); McAllister Bros., Inc. v. A & S
P "667" Transp. Co., 621 F.2d 519, 524 (2d Cir. 1980); Fisser v. International Bank, 282 F.2d 231, 233
P "668" (2d Cir. 1960); Creative Securities Corp. v. Bear Stearns & Co., 671 F.Supp. 961, 965
(S.D.N.Y. 1987), aff'd, 847 F.2d 834 (2d Cir. 1988); Dougherty v. Mieczkowski, 661 F.Supp. 267,
275 (D. Del. 1987); Oriental Commercial and Shipping Co. v. Rosseel, NV, 609 F.Supp. 75
(S.D.N.Y. 1985); First Citizens Municipal Corp. v. Pershing Division etc., 546 F.Supp. 884, 887
(N.D. Ga. 1982); In re Hidrocarburos y Derivados CA, 453 F.Supp. 160, 167-68 (S.D.N.Y. 1977).
As discussed above, lower U.S. courts have generally held that federal common law
governs issues relating to the formation of international arbitration agreements subject
to the New York Convention. See supra pp. 114-16, 353-55. The same analysis and
conclusion would appear fairly clearly to apply to determining the parties to an
international arbitration agreement (thus confirming the weight of U.S. lower court
authority).
 (b) State law. As described above, the U.S. Supreme Court has held that generally-applicable
state law governs the formation and validity of domestic arbitration agreements. See
supra pp. 350-53. Similarly, some lower U.S. courts have applied state law, albeit without
analysis, to determine whether an entity is bound by a domestic arbitration agreement it
has not signed. The American Ins. Co. v. Cazort, 871 S.W.2d 575 (Ark. 1994) (applying state
law contract principles to determine whether non-signatory is bound by arbitration
clause); Tyco Laboratories, Inc. v. DASI Industries, Inc., 1993 U.S. Dist. Lexis 12654 (N.D. Ill.
1993); Wren Distributors, Inc. v. Phone-Mate, Inc., 600 F.Supp. 1576, 1580 (E.D.N.Y. 1985). See
also Carte Blanche (Singapore) Pte. Ltd v. Diners Club Int'l, Inc., 2 F.3d 24 (2d Cir. 1993)
(applying New York law to enforce judgment entered on award against subsidiary against
parent).
(c) Foreign law. Also as described above, some lower U.S. courts have applied foreign law to
determine the formation and validity of international arbitration agreements. See supra
pp. 115-16. The same theory should apply to the question whether a non-signatory is
bound by the arbitration agreement.
(d) International principles. Also as discussed above, some lower U.S. courts and other
authorities have concluded that “internationally neutral” principles govern the formation
and validity of international arbitration agreements under the New York Convention. See
supra pp. 114-15. Again, this theory would presumably extend to determining the parties
to an arbitration agreement. What sources would contribute to the development of these
principles of international law? How would lawyers (and arbitrators) ascertain these
principles? How would legislators change them?
(e) Lex mercatoria. The Dow Chemical case relied on an international lex mercatoria to derive
the “group of companies” theory. For a discussion of the lex mercatoria doctrine, see supra
pp. 556-57. Other awards have followed Dow Chemical. See Award in ICC Case No. 5721 of
1990, 1990 Journal du droit international 1019. Is there any difference between the
principles of lex mercatoria referred to in Dow Chemical and the “international neutral”
principles relied upon by some lower U.S. courts?
9. The “group of companies” theory. The Dow Chemical award is widely cited in international
arbitration circles as establishing the “group of companies” theory. That theory holds that
companies which form part of an integrated economic “group” may, in some circumstances, be
bound by one another's arbitration agreements. A more recent ICC arbitral award summarizes
the “group of companies” theory as follows:
When concluding, performing, nonperforming and renegotiating their contractual relations with
[defendants], the three claimant companies appear, pursuant to the common intention of all
parties engaged in the procedure, to have been real parties to all the contracts. In its
formulation and in its spirit, this analysis is based on a remarkable and approved tendency of
arbitral rulings favoring acknowledgement, under those circumstances, of the unity of the
group.... The security of international commercial relations requires that account should be
taken of its economic reality and that all the companies of the group should be held liable one
for all and all for one for the debts of which they either directly or indirectly have profited at
this occasion.
Award in ICC Case No. 5103, 1988 Journal du droit international 1206 (quoted and translated in
Sandrock, Arbitration Agreements and Groups of Companies, 27 Int'l Law. 941, 944 (1993)).
What law provides the basis for the “group of companies” doctrine, as formulated in Dow
Chemical? Is it national law or international law? If it is the latter, what are the sources of this
law and who makes it?
Compare the “group of companies” doctrine to the alter ego theory, as articulated in U.S.
decisions under the FAA such as Oriental Commercial. Which rule is more expansive (i.e., which
rule more likely will subject new signatories to an arbitration agreement)? What precisely was
the basis of the tribunal's award in Dow Chemical? What if Isover Saint Gobain had not asserted
in French courts that all the Dow companies were liable under the underlying agreements?
P "668"
P "669"
10. Alter ego as a basis for subjecting a non-signatory to an arbitration agreement. As Oriental
Commercial suggests, a number of authorities have concluded that a party that has not
executed or otherwise directly assented to a contract containing an arbitration provision may
nonetheless be bound by the provision, albeit only in exceedingly rare cases, if that party is an
“alter ego” of an entity that did execute the agreement. Definitions of “alter ego” vary widely,
but generally require compelling evidence that one entity entirely dominated the day-to-day
actions of another and that it exercised this power to work fraud or gross injustice upon a third
party.
(a) Lower U.S. court decisions applying alter ego theory under the FAA. A number of lower U.S.
court decisions have considered whether alter ego analysis provides a basis for
subjecting a non-signatory to an arbitration agreement. See McAllister Bros., Inc. v. A & S
Transp. Co., 621 F.2d 519 (2d Cir. 1980); Interocean Shipping Co. v. National Shipping &
Trading Co., 523 F.2d 527, 539 (2d Cir. 1975), cert. denied, 423 U.S. 1054 (1976); Fisser v.
International Bank, 282 F.2d 231 (2d Cir. 1960); Oriental Commercial and Shipping Co. v.
Rosseel NV, 609 F.Supp. 75 (S.D.N.Y. 1985); Wren Distributors, Inc. v. Phone-Mate, Inc., 600
F.Supp. 1576, 1579 (E.D.N.Y. 1985); Coastal States Trading, Inc. v. Zenith Nav. SA, 446 F.Supp.
330 (S.D.N.Y. 1977).
 (b) Federal common law standards for establishing alter ego status under the FAA. Lower U.S.
courts have articulated various federal common law standards for determining alter ego
status. According to the Second Circuit:
Ordinary contract principles determine who is bound. In an appropriate situation, the
corporate veil may be pierced and a party may be held bound to arbitrate as the
signatory's alter ego.
Interocean Shipping Co. v. National Shipping and Trading Corp., 523 F.2d 527, 539 (2d Cir.
1975) (citing Fisser v. International Bank, 282 F.2d 231, 233-34 (2d Cir. 1960)).
(c) Presumption of separate corporate identity under the FAA. The standard for establishing
alter ego status under the FAA is, as in other contexts, extremely difficult to satisfy. The
starting point is a strong presumption that a parent corporation and its affiliates are
legally separate and distinct entities. Gorill v. Icelandair/Flugleidir, 761 F.2d 847, 853 (2d
Cir. 1985); American Renaissance Lines, Inc. v. Saxis SS Co., 502 F.2d 674, 677 (2d Cir. 1974)
(“absent findings of fraud or bad faith, a corporation ... is entitled to a presumption of
separateness from a sister corporation ... even if both are owned and controlled by the
same individuals”).
(d) Overcoming presumption of separate corporate identity under the FAA. Most U.S. courts
have held that overcoming the presumption of separateness requires showing: (i) the
complete domination and control of the affiliate, including disregard of corporate
formalities, such that it has no separate identity or existence, and (ii) fraudulent misuse
of that control to the injury of adverse parties. See Interocean Shipping Co. v. National
Shipping & Trading Corp. 523 F.2d 527, 539 (2d Cir. 1975), cert. denied, 423 U.S. 1054 (1976);
American Renaissance Lines, Inc. v. Saxis SS Co., 502 F.2d 674, 677 (2d Cir. 1974); Fisser v.
International Bank, 282 F.2d 231, 238 (2d Cir. 1960); In re Hidrocarburos y Derivados, CA, 453
F.Supp. 160 (S.D.N.Y. 1977); Coastal States Trading, Inc. v. Zenith SA, 446 F.Supp. 330, 336-37
(S.D.N.Y. 1977) (finding no alter ego status). See generally P. Blumberg, The Law of
Corporate Groups (1983). Compare Carte Blanche (Singapore) Pte. Ltd v. Diners Club Int'l,
Inc., 2 F.3d 24 (2d Cir. 1993).
(e) Factors relevant to alter ego status under the FAA. Lower U.S. courts have identified a
variety of factors that are relevant to alter ego status. For typical lists, see Carte Blanche
(Singapore) Pte Ltd v. Diners Club Int'l, Inc., 2 F.3d 24 (2d Cir. 1993) (absence of corporate
formalities; inadequate capitalization; financial dealings between parent and subsidiary;
overlap in ownership, officers, directors, and personnel; common office space, address,
and phone numbers; business discretion of allegedly dominated company; whether
companies deal with each other at arms' length; whether companies are separate profit
centers; parent's payment or guarantee of subsidiary's debts; subsidiary's use of parent's
property); Andrew Martin Marine Corp. v. Stork-Werkspoor Diesel BV, 480 F.Supp. 1270 (E.D.
La. 1979) (common ownership, common directors or officers, financing, capitalization,
payment of expenses, use of property, sources of business, observance of legal
formalities, integration of operations, control).
Typically, alter ego status can only be established with respect to an entity or person
which owns shares in a company or holds a corporate position. Nonetheless, in unusual
cases, other sorts of control relationships have been regarded as sufficient to establish
alter ego status. Freeman v. Complex Computing Co., 199 F.3d 1044 (2d Cir. 1997) (holding
that an “equitable owner” of a corporation may be held its alter ego, even where he is not
a shareholder, officer, director or employee).
P "669"
P "670"

(f) Requirement of fraud or its equivalent. Even if alter ego status exists, most U.S. courts held
that there must be a showing of fraud or its equivalent in order to bind a non-signatory to
an arbitration agreement. Freeman v. Complex Computing Co., 119 F.3d 1044, 1053 (2d Cir.
1997) (quoting Morris v. New York State Department of Taxation & Fin., 603 N.Y.S.2d 807, 811
(Ct. App. 1993) (While complete domination of the corporation is the key to piercing the
corporate veil, ... such domination, standing alone, is not enough; some showing of a
wrongful or unjust act toward plaintiff is required.”)); Interocean Shipping Co. v. National
Shipping & Trading Corp., 523 F.2d 527, 539 (2d Cir. 1975), cert. denied, 423 U.S. 1054 (1976)
(even if company has “no mind of its own,” showing of fraud or something akin to fraud is
needed); Wren Distributors, Inc. v. Phone-Mate, Inc., 600 F.Supp. 1576 (E.D.N.Y. 1985).
11. Agency relationship as a basis for subjecting a non-signatory to an arbitration agreement. A
number of authorities have also held that, in appropriate cases, an entity may be bound as
principal by an arbitration agreement which it has not signed, but which was executed on its
behalf by an agent. Alternatively, an agent may be permitted to invoke an arbitration clause in
an agreement it executed on behalf of a principal.
(a) Principal bound by arbitration clause in contract executed by agent. Numerous authorities
hold that a principal may be bound by an arbitration clause contained in a contract
executed on its behalf by an agent. E.g., In the Matter of the Arbitration Between Herlofson
Mgt A/S and Ministry of Supply, Kingdom of Jordan, 765 F.Supp. 78 (S.D.N.Y. 1991) (party
need not sign arbitration agreement; agent may do so on its behalf).
 (b) Agent's right to invoke arbitration clause in principal's contract. Some authorities have
held that an agent may invoke an arbitration agreement contained in a contract which it
executes on behalf of a principal. Arnold v. Arnold Corp., 920 F.2d 1269, 1282 (6th Cir. 1990)
(applying “the well-settled principle affording agents the benefits of arbitration
agreements made by their principal”).
(c) Standards for establishing agency relationships under the FAA. In resolving disputes under
the FAA over principal-agent relations, lower U.S. courts have generally applied federal
common law agency principles, derived from the Restatement (Second) of Agency.
Interocean Shipping Co. v. National Shipping & Trading Corp., 523 F.2d 527, 537 (2d Cir. 1975);
In re Hidrocarburos y Derivados, CA, 453 F.Supp. 160 (S.D.N.Y. 1977). But see Wren
Distributors, Inc. v. Phone Mate, Inc., 600 F.Supp. 1576, 1580-81 (E.D.N.Y. 1985) (“state
contract law principles”); Farkar Co. v. R.A. Hanson DISC, Ltd, 441 F.Supp. 841, 845 (S.D.N.Y.
1977), modified, 583 F.2d 68 (2d Cir. 1978), modified on other grounds, 604 F.2d 1 (2d Cir.
1979).
12. Incorporation and transfer of arbitration obligations. Arbitration obligations in one contract
may be incorporated into a related contract, including a contract involving different parties, or
transferred.
(a) Incorporation of arbitration agreement. An arbitration clause in one agreement can be
incorporated (by express reference or otherwise) into another agreement. This can occur,
for example, when a charter party containing an arbitration clause is incorporated into a
bill of lading. Son Shipping Co. v. De Fosse & Tanghe, et al., 199 F.2d 687 (2d Cir. 1952);
Banque de Paris et des Pays-Bas v. Amoco Oil Co., 573 F.Supp. 1464 (S.D.N.Y. 1983); Bunge
Corp. v. M/T Stolt Hippo, 1980 A.M.C. 2611 (S.D.N.Y. 1979); Coastal States Trading, Inc. v.
Zenith Nav. SA, 446 F.Supp. 330 (S.D.N.Y. 1977); G.B. Michael v. SS Thanasis, 311 F.Supp. 170
(N.D. Calif. 1970). See also supra pp. 189-90.
(b) Guarantors of arbitration agreement. The guarantor of a contract may be deemed to have
assumed obligations to arbitrate in the underlying contract which it has guaranteed. See
Compania Espanola de Petroleos, SA v. Nereus Shipping, SA, 527 F.2d 966 (2d Cir. 1975); Son
Shipping Co. v. De Fosse & Tanghe, 199 F.2d 687, 688 (2d Cir. 1952); Development Bank of the
Philippines v. Chemtex Fibers Inc., 617 F.Supp. 55 (S.D.N.Y. 1985) (guarantor of loan
agreement, that signed loan agreement, bound by arbitration clause in agreement); In re
Hidrocarburos y Derivados, CA, 453 F.Supp. 160 (S.D.N.Y. 1977); Griffin v. Semperit of America,
Inc., 414 F.Supp. 1384 (S.D.N.Y. 1976); Wells Fargo Bank v. London SS Owners' Mutual Ins.,
408 F.Supp. 626 (S.D.N.Y. 1976); Vespe Contracting Co. v. Anvan Corp., 399 F.Supp. 516, 521
(E.D. Pa. 1975); Midland Tar Distilleries, Inc. v. M/T Lotus, 362 F.Supp. 1311 (S.D.N.Y. 1973);
Lowry & Co. v. SS Le Moyne D'Iberville, 253 F.Supp. 396, 398 (S.D.N.Y. 1966).
A number of U.S. courts have rejected guarantee theories on particular facts as grounds
for binding non-signatories to an arbitration clause. Grundstad v. Ritt, 166 F.3d 867 (7th
Cir. 1997) (guarantor of agreement not bound by arbitration clause contained in
agreement); Interocean Shipping Co. v. National Shipping & Trading Corp., 523 F.2d 527 (2d
Cir. 1975), cert. denied, 423 U.S. 1054 (1976) (guarantor of charter party not bound by
arbitration clause in charter party agreement); Taiwan Navigation Co. v. Seven Seas
Merchants Corp., 172 F.Supp. 721 (S.D.N.Y. 1959).
P "670"
P "671"
(c) Assignment of arbitration agreement. It is frequently argued that the assignee of a
contract is bound by an arbitration clause contained in the assigned agreement. Banque
de Paris et des Pays-Bas v. Amoco Oil Co., 573 F.Supp. 1464 (S.D.N.Y. 1983); Instituto Cubano
v. The MV Driller, 148 F.Supp. 739 (S.D.N.Y. 1957); Application of Reconstruction Finance
Corp., 106 F.Supp. 358 (S.D.N.Y. 1952). Compare Lachmar v. Trunkline LNG Co., 753 F.2d 8 (2d
Cir. 1988) (assignee not bound by arbitration clause because assignment agreement
absolved it); United States v. Panhandle Eastern Corp., 672 F.Supp. 149 (D. Del. 1987) (same).
(d) Assumption of arbitration agreement. A non-signatory party may be bound by an
arbitration clause if it has assumed that provision by conduct or otherwise. Thomson-CSF,
SA v. American Arbitration Association, 64 F.3d 773 (2d Cir. 1995) (“party may be bound by
an arbitration clause if its subsequent conduct indicates that it is assuming the
obligation to arbitrate”); Gvozdenovic v. United Air Lines, Inc., 933 F.2d 1100, 1105 (2d Cir.),
cert. denied, 502 U.S. 910 (1991); Matter of Arbitration between Keystone Shipping Co. and
Texport Oil Co., 782 F.Supp. 28 (S.D.N.Y. 1992).
 (e) Estoppel. A number of courts have recognized estoppel as a basis for permitting a non-
signatory to invoke an arbitration agreement: where a party claims rights as a party under
a contract, which contains an arbitration clause, it may be estopped from denying that it
is a party to the arbitration provision. Thomson-CSF, SA v. American Arbitration
Association, 64 F.3d 773 (2d Cir. 1995) (courts are “willing to estop a signatory from avoiding
arbitration with a nonsignatory when the issues the nonsignatory is seeking to resolve in
arbitration are intertwined with the agreement that the estopped party has signed”); Sink
Soft Drinks, Inc. v. Sink Trowers, Inc., 10 F.3d 753 (11th Cir. 1993), cert. denied,-U.S.-(1994)
(party that asserts claim under contract is equitably estopped from denying it is party to
arbitration clause in contract); J.J. Ryan & Sons, Inc. v. Rhone Poulenc Textile, SA, 863 F.2d
315 (4th Cir. 1988); McBio Planning & Dev. Co. v. Triangle Elec. Constr. Co., 741 F.2d 342 (7th
Cir. 1984); The Am. Ins. Co. v. Cazort, 871 S.W.2d 575 (Ark. 1994); Hughes Masonry Co. v.
Greater Clarke County School Bldg Corp., 659 F.2d 836 (7th Cir. 1981); Messing v.
Rosenkrantz, 872 F.Supp. 539 (N.D. Ill. 1995) (party that claimed non-signatory was bound
by contract could not object to non-signatory invoking contract's arbitration clause); A.L.
Williams & Assoc. v. McMahon, 697 F.Supp. 488 (N.D. Ga. 1988); Tapper Realty Co. v. Mosaic
Tile Co., 259 F.Supp. 688, 692 (S.D.N.Y. 1966) (“In short, [plaintiff] cannot have it both ways.
It cannot rely on the contract when it works to its advantage and ignore it when it works to
its disadvantage.”).
Estoppel has not been applied, however, to bind a non-signatory to an arbitration
agreement to which it objects. Thomson-CSF, SA v. American Arbitration Association, 64
F.3d 773 (2d Cir. 1995).

(f) Employment relations. A few U.S. courts have held that corporate employees, sued for
actions taken in the course of their employment, (may invoke and be bound by)
arbitration clauses contained in their employer's contracts with the adverse third party.
Nesslage v. York Securities, Inc., 823 F.2d 231, 233 (8th Cir. 1987) (employees of company
that entered into arbitration agreement are third party beneficiaries of agreement);
Letizia v. Prudential-Bache Sec., Inc., 802 F.2d 1185, 1187-89 (9th Cir. 1986); Mosca v. Doctors
Assoc., Inc., 852 F.Supp. 152 (E.D.N.Y. 1993) (“Courts have consistently held that the acts of
employees of party to an arbitration agreement are arbitrable ...”); Ripmaster v. Toyoda
Gosei, Co., 824 F.Supp. 116 (E.D. Mich. 1993) (employee held bound by arbitration
agreement entered into by his corporate employer); Scher v. Bear Stearns & Co., 723
F.Supp. 211, 216-17 (S.D.N.Y. 1989); Dale v. Prudential-Bache Sec., Inc., 719 F.Supp. 1164, 1169
(E.D.N.Y. 1989).
(g) Third party beneficiaries. In many legal systems, non-parties to a contract may, in certain
circumstances, invoke the benefits of that contract as third party beneficiaries. In such
circumstances, the third party may either be able to invoke or be bound by an arbitration
clause contained in the contract. Tractor-Trailer Supply Co. v. NCR Corp., 873 S.W.2d 627
(Mo. Ct. App. 1994) (third party beneficiary that invokes contract is bound by arbitration
clause contained therein); Thomson-CSF, SA v. American Arbitration Association, 64 F.3d
773 (2d Cir. 1995) (if party “directly benefitted” from underlying contract, “it would be
estopped from avoiding arbitration” pursuant to arbitration clause in contract); Bevere v.
Oppenheimer & Co., 862 F.Supp. 1243 (D.N.J. 1994) (party asserting claims under agreement
is bound by arbitration clause contained in agreement); Ziegler v. Whale Securities Co.,
786 F.Supp. 739 (N.D. Ind. 1992); Lester v. Basner, 676 F.Supp. 481, 483 (S.D.N.Y. 1987); Cauble
v. Mabon Nugent & Co., 594 F.Supp. 985 (S.D.N.Y. 1984); Jeans v. Arrow Ins. Co., 494 P.2d
1334 (Ariz. Ct. App. 1972).
(h) Miscellaneous. Some authorities have extended arbitration agreement to non-signatories
in a variety of ill-defined, potentially expansive circumstances. Isidor Paiewonsky Assoc.,
P "671" Inc. v. Sharp Properties, Inc., 990 F.2d 145, 155 (3d Cir. 1993) (non-party bound by arbitral
P "672" award because it had “related and congruent interests” with the parties); Barrowclough
v. Kidder, Peabody & Co., 752 F.2d 923, 938-39 (9th Cir. 1985) (party who has not executed
arbitration agreement may nevertheless be bound by it when its claims arise from
contract containing agreement).
13. Possible applicability of presumption of arbitrability to determining whether non-signatory is
bound by arbitration clause. As discussed in detail above, U.S. courts uniformly apply a strong
presumption in favor of arbitrability in interpreting the scope of an arbitration agreement, and
some courts have applied a similar presumption in determining the existence of an arbitration
agreement, see supra pp. 182-84, 317-18. A few lower courts have also applied a presumption of
arbitrability to the question whether a particular party is bound by an arbitration agreement.
See Banque de Paris et des Pas-y-Bas v. Amoco Oil Co., 573 F.Supp. 1464, 1472 (S.D.N.Y. 1983).

B. Consolidation, Joinder, and Intervention in International Arbitration

When three or more entities are party to an arbitration agreement, the arbitral tribunal or
appointing authority can be faced with difficult procedural issues concerning the structure of a
particular arbitration proceeding under that agreement. Most important are questions as to
the identities and alignments of parties to the arbitral proceedings. This section examines
these issues. The section first considers the extent to which a claimant's request or notice for
arbitration defines the proper parties to the arbitration. Thereafter, it considers when a
respondent may join additional parties, when such parties may intervene in an arbitration, and
when two or more different arbitrations may be consolidated into a single proceeding. We
consider the treatment of consolidation, joinder, and intervention by both arbitral tribunals
and national courts.
 1. Introduction
In national courts, a variety of mechanisms exist for consolidating different claims between
different parties to a dispute into a single judicial proceeding, (6) or permitting intervention or
joinder of additional parties in an ongoing proceeding. (7) For example, if A, B, and C enter into
related contracts (A with B and B with C), separate actions between A versus B and B versus C
can often be consolidated into a single action; alternatively, C can either intervene or be
joined in an existing action between A and B.
Rules regarding consolidation, joinder, and intervention in national court proceedings are
intended to permit proceedings to occur more efficiently and to avoid the possibility of
inconsistent results. These considerations are, of course, equally applicable to international
arbitration. In general, however, consolidation and joinder in international arbitration is far
less common and much more difficult than in national court litigation.
P "672"
P "673"
2. Consolidation, Joinder, and Intervention in International Arbitration: The Role of Arbitral
Tribunals
International arbitral tribunals (and appointing authorities) sometimes must resolve disputes
over consolidation, joinder, and intervention. If all parties concerned agree to the joinder or
intervention of additional parties, or to consolidation, then that will virtually always be
permitted by the arbitrators. On the other hand, if there is no agreement among the parties as
to joinder, intervention, or consolidation, institutional arbitration rules generally do not permit
it. That is largely true under the UNCITRAL, ICC, and AAA International Rules, as well as most
other leading institutional rules.
In unusual cases, the parties' arbitration agreement will specifically contemplate multi-party
arbitration and will include workable provisions for commencing arbitration, appointing
arbitrators, and the like. Nevertheless, it is rare to find contractual provisions dealing with
consolidation, intervention, or joinder. (8) And, as described below, institutional rules often do
not deal with these subjects. (9)
In the absence of either contractual provisions or institutional rules dealing expressly with the
consolidation of arbitrations, the subject is governed principally by national law. (10) In most
countries, including the United States, national arbitration legislation does not deal expressly
with consolidation. As a result, both arbitral tribunals and national courts have been left to
resolve questions of consolidation, intervention, and joinder based on either mandatory
prescriptions or assumptions about the parties' implied intent.
The materials excerpted below illustrate differing approaches under institutional arbitration
rules to consolidation, joinder, or intervention. Compare Article 41 of the Netherlands
Arbitration Institute Arbitration Rules, which permits “intervention” or “joinder,” Article 4(6) of
the 1998 ICC Rules, and Article 13 of the LCIA Rules. Also consider the Award in ICC Case No. 5265,
refusing to permit a respondent to assert counterclaims against entities not named as
claimants in the Request for Arbitration.
NETHERLANDS ARBITRATION INSTITUTE ARBITRATION RULES
Article 41
41(1). A third party who has an interest in outcome of arbitral proceedings to which these rules
apply may request the arbitral tribunal for permission to join the proceedings or to intervene
therein.
P "673"
P "674"
41(2). Such request shall be filed with the Administrator in six copies. The Administrator shall
communicate a copy of the request to the parties and to the arbitral tribunal.
41(3). A party who claims to be indemnified by a third party may serve a notice of joinder on
such a party. A copy of the notice shall be sent without delay to the arbitral tribunal, the other
party and the Administrator.
41(4). The joinder, intervention or joinder for the claim of indemnity may only be permitted by
the arbitral tribunal, having heard the parties and the third party, if the third party accedes to
the arbitration agreement by an agreement in writing between him and the parties to the
arbitration agreement. On the grant of request for joinder, intervention or joinder for the claim
of indemnity, the third party becomes a party to the arbitral proceedings.
41(5). In case of a request or notice as referred to in paragraphs (1) and (3), respectively, the
arbitral tribunal may suspend the proceedings. After the suspension, the proceedings shall be
resumed in the manner as determined by the arbitral tribunal, unless the parties have agreed
otherwise.
41(6). The provisions on the costs of the arbitration contained in the sixth section shall apply
accordingly to a third party who has acceded to the arbitration agreement in accordance with
the provisions of paragraph (4).
ICC ARBITRATION RULES (1998 VERSION)
Article 4(6) & 10
[excerpted below at pp. 1060, 1063]
LONDON COURT OF INTERNATIONAL ARBITRATION RULES
 Article 22.1(h)
[excerpted below at p. 1083]
PARTIAL AWARD IN ICC CASE NO. 5265 OF 1987
[excerpted in ICC, Multi-Party Arbitration 41-42]
[This award arose from a Request for Arbitration filed by A against B. The dispute arose from a
contract, containing an arbitration clause, between A, B, and C. B replied to A's Request by
seeking to join both C and D (which was the controlling company of A) as additional claimants.
B also sought to add E as an additional respondent, on the theory that E was its controlling
P "674" company. Among other things, B relied upon various decisions permitting arbitrations to be
P "675" commenced against the alter egos of formal parties to an arbitration agreement. The
tribunal rejected B's efforts to join additional parties, reasoning as follows.]
The question whether a person is or not bound by an agreement to arbitrate, and the debate
whether and under what circumstances companies belonging to one group are bound by an
agreement to arbitrate which has been signed by other companies belonging to that same
group, can only arise in a situation where they identify themselves as claimants, or are being
identified by a claimant as defendants, in a Request for Arbitration.
The Rules for the ICC Court of Arbitration leave no doubt as to who is, or are, to be identified as
a claimant/claimants: it is that person that submits, on the basis of Article 3 a Request for
Arbitration. In this particular case the Request for Arbitration has been submitted by (A) and by
it only.
Neither do the rules leave any doubt as to who is, or are, the defendant/defendants: it is that
person which is being identified as such in the Request. In this particular case the Request for
Arbitration identifies as the defendant (B) and it only ... From (Article 5 of the ICC Rules) it
follows that a counter-claim is a claim by the Defendant, – that is: the person identified as such
by the Claimant in its Request for Arbitration –, against the Claimant, – that is: the person that
has submitted the Request and identified himself as being the Claimant.
That follows not only from the text of Article 5, but is moreover in conformity with the meaning
of the word counter-claim and the way that mechanism is understood in many national
legislations ... It is up to the interested person involved to determine whether it wishes to be a
claimant in a procedure and one can only be drawn as a defendant in a procedure through the
mechanisms thereto prescribed, i.e. in this case through the mechanism of Article 3 of the
Rules ... There is one way only in which one can become a party in an arbitral procedure under
the ICC Rules: that is by way of Article 3, by a Request in which one constitutes oneself a
claimant or is being identified by such a claimant as a defendant ...
Under the ICC Rules, the Arbitrators once they have been nominated, have no discretion to add
as parties to the arbitration Claimant(s) or Defendant(s) who were not identified as such in the
Request for Arbitration.
Notes on Arbitral Rules and Awards Concerning Joinder and Intervention
1. Advantages and disadvantages of consolidation, joinder, and intervention. Permitting
consolidation of separate international arbitrations, and joinder or intervention of additional
parties, can provide some obvious advantages. First, a single arbitration can be more efficient
than two or more separate arbitrations. A single proceeding permits the same savings of
attorneys' fees, other litigation expenses, witness's time, preparation efforts, and the like that
exist in litigation. Moreover, a single arbitration proceeding avoids the unique expenses
associated with multiple arbitral panels – each of whose members must be compensated by
the parties. “[O]n the whole it seems reasonable to conclude that the consolidation of closely-
related disputes, where essentially the same evidence will be presented, will result in
significant savings of both time and money.” Chiu, Consolidation on Arbitral Proceedings and
International Commercial Arbitration, 7 J. Int'l Arb. 53, 55 (1990). On the other hand, cost savings
P "675" will not always be distributed evenly among the parties; indeed, in some instances, a
P "676" particular party's costs may actually increase because of consolidation – for example, if it is
required to be present throughout a lengthy consolidated arbitration rather than only at a
single unconsolidated arbitration.
Second, a consolidated arbitration reduces the risk of inconsistent results. One party to a
tripartite dispute may be found liable to another party in one arbitration, while in a second
arbitration it may be denied recovery from a different party on a theory inconsistent with the
rationale of the first proceeding. Worse, a tribunal could issue injunctive relief inconsistent
with that of another tribunal – for example, requiring a party to do something that another
tribunal forbid it from doing. Neither result is likely in a consolidated arbitration.
On the other hand, consolidation, joinder, and intervention in arbitration also have
disadvantages, which may outweigh these perceived benefits. Although “[l]ack of chronological
coordination, potentially conflicting findings and the possibility of diverging judgments may
cast disfavour upon arbitration,” care must be taken to ensure that “the remedy [is not] worse
than the evil.” Bernini, Overview of the Issues, in ICC, Multi-Party Arbitration 161, 163 (1991).
First, requiring consolidation or joinder without the parties' agreement, runs counter to the
consensual character of arbitration. On the other hand, notions of “intent” as to consolidation
are somewhat artificial: parties do not ordinarily have the slightest idea whether or not their
arbitration can be consolidated, or whether additional parties can be joined, and if so when.
They agree to arbitration in order to obtain a neutral, relatively enforceable, and speedy
decision, supra pp. 2-3, 7-10 – and procedural details on the level of consolidation are usually
disregarded. (As discussed below, the one significant exception may be where a party expects
 to have the right to appoint an arbitrator. See infra pp. 677-78. As explained elsewhere, this
feature of arbitration is significant, both in terms of character of the proceedings and parties'
expectations. See supra pp. 615-51.)
Second, consolidating arbitrations involving multiple parties, or permitting joinder, raises very
significant problems with respect to the appointment of arbitrators and composition of the
tribunal. If the parties have all agreed to a single arbitrator, then the issues are not
particularly acute: all the parties can agree on an acceptable individual or the appointing
authority can appoint an acceptable person. In neither case does consolidation significantly
affect the issues of appointment and composition.
But many arbitrations involve three-person tribunals, with each party appointing one member
of the tribunal, and the two party-appointed arbitrators agreeing upon a third (or the
appointing authority selecting a third) arbitrator. If there are three or more parties with
distinct interests, then the foregoing model simply cannot work. Either one or more parties
must forego the right to appoint an arbitrator, or there will be no neutral chairman.
Of course, all the members of the tribunal could be appointed by the appointing authority. But
this solution would deny each party the opportunity it would otherwise enjoy to participate
directly in selecting the tribunal. That is a significant change in the arbitral procedure.
Similarly, expanding the size of the tribunal is usually also problematic, because it increases
expense, creates logistical difficulties, and poses risks of deadlocked results. (As discussed
below, when U.S. courts have consolidated two arbitrations into a single three-party
arbitration they have usually permitted each party to appoint one arbitrator and then
provided for two court-appointed neutrals. See infra pp. 699-700. Of course, in principle, a 5-
person tribunal costs at least 66% more than a 3-person panel.)
2. Confidentiality and consolidation. Most institutional arbitration rules require or suggest that
arbitral proceedings will be confidential to the parties, absent contrary agreement. See supra
p. 9. In general, parties to ad hoc arbitration agreements can be presumed to have intended
the same thing. Does courtordered consolidation run contrary to this principle of
confidentiality? Concerns over confidentiality were the basis for English decisions refusing to
permit consolidation without the parties' unanimous consent. See Veeder, Multi-Party Disputes:
Consolidation Under English Law, 2 Arb. Int'l 310 (1986).
3. Consolidation, joinder, and intervention under the ICC Rules.
(a) Consolidation under the ICC Rules. Consider Article 4(6) of the 1998 ICC Rules. Under what
circumstances may an arbitral tribunal “consolidate” (or join) two proceedings? What
conditions must exist for consolidation to occur? Suppose that A and B sue C and that A
sues C and B. May the two arbitrations be joined under Article 4(6)? Suppose A and B sue
C and B sues C. Then what? Suppose A and B sue C and C sues B.
Does Article 4(6) permit C to intervene in an arbitration commenced by A against B? Does
it permit A (or B) to join C in an ongoing arbitration?

(b) Joinder and intervention under the ICC Rules. As the Award in ICC Case No. 5265 illustrates,
P "676" institutional practice at the ICC International Court of Arbitration in principle permits the
P "677" claimant to structure “its” arbitration as it chooses, naming (or not naming) the other
parties to the arbitration that it thinks fit (provided that they are parties to the
arbitration agreement). The parties named as respondents cannot join additional parties
as co-respondents, nor implead additional parties as claimants or counter-claim
respondents. That is true even if the additional parties sought to be joined are parties to
the same contracts and arbitration agreements. See Bond, The Experience of the ICC
International Court of Arbitration, reprinted in, ICC, Multi-Party Arbitration 37, 41-42 (1991).
As the Award in ICC Case No. 5265 illustrates, this practice rested in part on a technical
reading of the 1988 ICC Rules, but also on concerns that are generally applicable outside
the ICC context:
“The [ICC] Court's position has been based ... [on] the insuperable problems that could
arise from permitting a defendant to add parties to an arbitration over the objections of
the claimant. Thus, should the arbitral tribunal already have been constituted, the
subsequent addition of a party which had had no opportunity to participate in the
selection of the arbitral tribunal would present obvious difficulties for the eventual
enforcement of an award against such party.” Id. at 42.
Is the ICC approach wise? Are the interests of justice and efficiency served by the ICC
approach? Are the problems with joinder and intervention so great? Do the 1998 ICC Rules
recognise the approach adopted in ICC Case No. 5265?

4. Netherlands Arbitration Institute Rules. Compare Article 41 of the Netherlands Arbitration

Institute Rules to the ICC Rules and practice. Does Article 41 permit intervention without the
consent of all parties?
5. London Court of International Arbitration Rules. Compare LCIA Rule Article 22 with both the
ICC practice and Article 41 of the Netherlands Arbitration Institute's Arbitration Rules. When is
joinder permitted under the LCIA Rules? Which of these various institutional approaches is
wisest?
6. Other institutional rules. Consider the UNCITRAL, AAA International, and AAA Commercial
Rules. What provisions does each set of rules make for consolidation, joinder, and intervention?
If a set of institutional rules (and arbitration agreement) is silent regarding consolidation, what
 powers does this provide the arbitral tribunal? See infra pp. 695-97.
7. Rationale for requiring parties' unanimous consent to consolidation, joinder, and intervention.
Is it appropriate to deny consolidation, joinder, and intervention in arbitration unless the
parties have consented? Given the consensual basis of arbitration, is not this result compelled?
Consider the requirement that the parties “consent” to consolidation, intervention, or joinder.
What must be proved to establish such consent? If the parties are silent concerning
intervention and joinder, why shouldn't the presumption be that all the parties to an
arbitration agreement can be required to be made parties to a single arbitration? Permitting
joinder, intervention, and consolidation reduces litigation expenses and the risks of
inconsistent results. Do the concerns described above, concerning the appointment of
arbitrators, require foregoing these benefits?
8. Appointment of arbitrators in multi-party disputes. Many arbitration clauses give each “party”
the right to appoint one member of a three-person arbitral tribunal. When a party commences
arbitration against two other parties under such a clause, there is no completely satisfactory
way of dealing with appointment issues.
Permitting the claimant to appoint one arbitrator and two (or more) respondents jointly to
appoint a second denies each respondent the opportunity to select “its” arbitrator. Worse, if
one respondent's interests are in fact aligned with the claimant's, requiring joint selection by
the two “respondents” may be perceived to be seriously tainted.
On the other hand, permitting each respondent to select an arbitrator could permit two
respondents with aligned interests to choose arbitrators with a controlling vote; and where
more than two respondents are involved, it would be impossible to accommodate
individually-appointed arbitrators with a three-person tribunal. Finally, denying any of the
three (or more) parties the right to select an arbitrator denies all parties the right to a
significant voice in constituting the tribunal; as discussed elsewhere, that right is an important
feature of contemporary international commercial arbitration. See Herrlin, Issues to be
Discussed, in, ICC, Multi-Party Arbitration 131, 133-35 (1991); de Boisseson, Constituting an Arbitral
Tribunal, in, ICC, Multi-Party Arbitration 147, 150 (1991) (ldquo;the right of each party to appoint
an arbitrator appears to be mandatory and substantially linked to arbitration”); supra pp. 615-
51. Nevertheless, neutral selection of all three tribunal members, or enlargement of the
tribunal, appear to do least violence to the parties' expectations regarding the arbitral
process.
P "677"
P "678"
Consider how the appointment of arbitrators in multi-party cases is dealt with under Article 10
of the ICC Rules and Article 8 of the LCIA Rules. Read each rule carefully. How, if at all, do they
differ? Suppose A sues B, C, and D, and that B and C agree on a jointly-nominated arbitrator,
but D does not. Can B and C appoint “their” arbitrator? Can D appoint “its” arbitrator? If not,
can A appoint “its” arbitrator? What if D's interests are actually aligned with those of A?
9. ICC Guide to Multi-Party Arbitration. In 1984, the ICC published a “guide” to parties
contemplating arbitration agreements among multiple parties. The ICC's recommended
solution to the problems of appointing arbitrators was to provide, in the parties' arbitration
agreement, for ICC appointment of all arbitrators, without any party being entitled to nominate
an arbitrator. Review the 1998 version of the ICC Rules. How is appointment dealt with in
multiparty cases?
10. Multi-party arbitration clauses. The recommended solution to the problem of consolidation,
of course, is for the parties to agree in advance that related proceedings may be consolidated.
For examples of multi-party agreements, which usually permit some forms of consolidation or
intervention, see Bartels, Multiparty Arbitration Clauses, 2 J. Int'l Arb. 61 (1985); Wetter, A Multi-
Party Arbitration Scheme for International Joint Ventures, 3 Arb. Int'l 2 (1987); Wetter, Six Multi-
Party Arbitration Clauses, in ICC, Multi-Party Arbitration 117 (1991).
11. Allocation of authority to order consolidation between national courts and arbitrators. There
is relatively limited reported authority considering the allocation of power between national
courts and arbitral tribunals to order consolidation. For an exception, see Kalman Floor Co. v.
Jos. L. Muscarelle, Inc., 481 A.2d 553 (N.J. Super. 1984) (permitting arbitral tribunal's
consolidation of disputes among owner, general contractor, and subcontractor: “questions of
consolidation and use of a common panel, with serial arbitration, were procedural issues for
determination in the arbitration forum, free from judicial interference”).
12. The Dutco decision. In Siemens AG and BKMI Industrieanlagen GmbH v. Dutco Construction
Co., (Cour de Cassation Jan. 7, 1992), reprinted in 1992 Revue de l'arbitrage 470, the French Cour
de Cassation vacated an arbitral award entered in a three-party arbitration where the two
“respondents” had each claimed the right to appoint a separate arbitrator. The respondents
had made a joint appointment, but only under protest. The French court reasoned that “the
principle of the equality of the parties in the designation of arbitrators is a matter of public
policy; it can be waived only after the dispute has arisen.” Although it is unclear whether this
language was intended to be read broadly, it has potentially significant consequences. How
might this reasoning affect the approach to multiparty arbitration under the ICC and LCIA
Rules?
3. Consolidation, Joinder, and Intervention in International Arbitration: The Role of National
Courts
National legislation dealing with consolidation and joinder by national courts (as distinct from
arbitral tribunals) can take several forms. This section examines the role of national courts in
 ordering consolidation or joinder in international arbitration. First, as the Netherlands statute
excerpted below illustrates, national courts can be granted the power to consolidate
arbitrations even without the parties' agreement. Indeed, as the Massachusetts legislation
excerpted below suggests, this can be possible even where the parties have specifically
excluded court-ordered consolidation.
Second, court-ordered consolidation or joinder may be permitted if the parties' agreement
expressly or impliedly contemplates it – but not otherwise. This is arguably the case under the
FAA in the United States.
As the materials excerpted below illustrate, the power of U.S. courts to consolidate
P "678" international arbitrations is better-suited for an examination question in advanced
P "679" international litigation than for practical application. These materials excerpted below
explore the tangle of U.S. statutes and judicial precedents dealing with the subject, as well as
selected examples of approaches under other national legislation.
In the absence of clear guidance from the FAA's text, (11) lower U.S. courts have reached
divergent results in cases involving requests for court-ordered consolidation. (12) Although not
directly addressing the subject of consolidation, two provisions of federal law have figured in
most lower court decisions. First, §4 of the FAA requires U.S. courts to “make an order directing
the parties to proceed to arbitration in accordance with the terms of [their arbitration]
agreement.” Second, Rule 81(a)(3) of the Federal Rules of Civil Procedure provides for the
application of the Federal Rules in proceedings relating to arbitration, including Rule 42(a)
which permits the consolidation of district court actions.
As described below, some U.S. courts have concluded that the FAA provides district courts with
a generalized grant of power to compel consolidation, even absent the parties' agreement. (13)
In contrast, most lower U.S. courts have held that §4 permits court-ordered consolidation
where the parties have so agreed, but not otherwise. (14) Similarly, some U.S. courts have
relied on Rule 42(a) to compel consolidation, while other courts have held that the Rule is
irrelevant to the court-ordered consolidation of arbitrations. (15)
The uncertainty that exists under the FAA is exacerbated when the effect of U.S. state law is
considered. In contrast to the FAA, several states have enacted statutes that deal expressly
with the consolidation of arbitrations, including California, Florida, Georgia, Massachusetts,
and Michigan. (16) All of these statutes permit court-ordered consolidation even without the
parties' agreement.
The effect of state legislation permitting consolidation in cases under the FAA is unclear. Some
courts have held that the FAA preempts such laws, while others have reached the contrary
result. (17) And, where the parties have agreed to a choice-of-law clause selecting state law, the
effect of Volt Information Sciences is not settled. (18)
Excerpted below are Rules 81(a)(3) and 42(a) of the Federal Rules of Civil Procedure, as well as
California, Massachusetts, and Netherlands statutes dealing with the consolidation of
arbitrations. Also excerpted below are decisions by U.S. courts in United Kingdom v. Boeing
P "679" Company and New England Energy Inc. v. Keystone Shipping Company. The Boeing decision is
P "680" leading precedent in a series of U.S. cases considering when court-ordered consolidation is
permitted under the FAA. In contrast, the New England Energy decision illustrates the complex
interrelationship between the FAA, state arbitration statutes, the parties' arbitration
agreement, and the parties' choice-of-law clause.
In reading the materials excerpted below, focus on each of the following issues: (a) does the
FAA provide an affirmative grant of authority to federal (and state) courts to consolidate
arbitrations, even absent the parties' express or implied agreement to consolidation; (b) do
the Federal Rules provide an affirmative grant of authority to federal courts to consolidate
arbitrations, even absent the parties' agreement to consolidation; (c) assuming that state law
authorizes court-ordered consolidation, absent the parties' agreement, can a federal (or state)
court rely on that authority, either (i) when the parties have agreed that that state law shall be
the curial law, or (ii) if the arbitration is conducted in that state; (d) does the FAA preempt
state laws authorizing court-ordered consolidation absent the parties' agreement; and (e) what
sort of agreement should constitute acceptance by the parties of court-ordered consolidation,
sufficient to permit court-ordered consolidation under the FAA.
NETHERLANDS ARBITRATION ACT (1986)
Article 1046
1046(1). If arbitral proceedings have been commenced before an arbitral tribunal in the
Netherlands concerning a subject matter which is connected with the subject matter of arbitral
proceedings commenced before another arbitral tribunal in the Netherlands, any of the
parties may, unless the parties have agreed otherwise, request the President of the District
Court in Amsterdam to order a consolidation of the proceedings.
1046(2). The President may wholly or partially grant or refuse the request, after he has given all
parties and the arbitrators an opportunity to be heard. His decision shall be communicated in
writing to all parties and the arbitral tribunals involved.
1046(3). If the President orders consolidation in full, the parties shall in consultation with each
other appoint one arbitrator or an uneven number of arbitrators and determine the procedural
rules which shall apply to the consolidated proceedings. If, within the period of time
prescribed by the President, the parties have not reached agreement on the above, the
President shall, at the request of any of the parties, appoint the arbitrator or arbitrators and, if
necessary, determine the procedural rules which shall apply to the consolidated proceedings.
 The President shall determine the remuneration for the work already carried out by the
arbitrators whose mandate is terminated by reason of the full consolidation.
1046(4). If the President orders partial consolidation, he shall decide which disputes shall be
P "680" consolidated. The President shall, if the parties fail to agree within the period of time
P "681" prescribed by him, at the request of any of the parties, appoint the arbitrator or arbitrators
and determine which rules shall apply to the consolidated proceedings. In this event the
arbitral tribunals before which arbitrations have already been commenced shall suspend
those arbitrations. The award of the arbitral tribunal appointed for the consolidated
arbitration shall be communicated in writing to the other arbitral tribunals involved. Upon
receipt of this award, these arbitral tribunals shall continue the arbitrations commenced
before them and decide in accordance with the award rendered in the consolidated
proceedings.
1046(5). The provisions of Article 1027(4) [regarding appointment of arbitrators] shall apply
accordingly in the cases mentioned in paragraphs (3) and (4) above.
1046(6). An award rendered under paragraphs (3) and (4) above shall be subject to appeal to a
second arbitral tribunal if and to the extent that all parties involved in the consolidated
proceedings have agreed upon such an appeal.
MASS. GEN. LAWS ANN.
Chap. 251, §2A
§2A Consolidation or severance of arbitration proceedings; application; determination.
A party aggrieved by the failure or refusal of another to agree to consolidate one arbitration
proceeding with another or others, for which the method of appointment of the arbitrator or
arbitrators is the same, or to sever one arbitration proceeding from another or others, may
apply to the superior court for an order for such consolidation or such severance. The court
shall proceed summarily to the determination of the issue so raised. If a claimant under
section twenty-nine of chapter one hundred and forty-nine applies for an order for
consolidation or severance of such proceedings, the issue shall be decided under the
applicable provisions of said section twenty-nine of said chapter one hundred and forty-nine
governing consolidation or severance of such actions; otherwise the issue shall be decided
under the Massachusetts Rules of Civil Procedure governing consolidation and severance of
trials and the court shall issue an order accordingly. No provision in any arbitration agreement
shall bar or prevent action by the court under this section.
FEDERAL RULES OF CIVIL PROCEDURE
Rules 81(a)(3) and 42(a)
81(a)(3). In proceedings under Title 9, U.S.C., relating to arbitration ... these rules apply only to
the extent that matters of procedure are not provided for in those statutes.
P "681" 42(a). When actions involving a common question of law or fact are pending before the court, it
P "682" may order a joint hearing or trial of any or all the matters in issue in the actions; it may order
all the actions consolidated; and it may make such orders concerning proceedings therein as
may tend to avoid unnecessary costs or delay.
CALIFORNIA CIVIL PROCEDURE CODE
Section 1281.3 (West 1982)
A party to an arbitration agreement may petition the court to consolidate separate arbitration
proceedings, and the court may order consolidation of separate arbitration proceedings when:
(1) separate arbitration agreements or proceedings exist between the parties; or one party is
a party to a separate arbitration agreement or proceeding with a third party;
(2) the disputes arise from the same transaction or series of related transactions; and
(3) there is a common issue or issues of law or fact creating the possibility of conflicting
rulings by more than one arbitrator or panel of arbitrators.
UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND v. THE BOEING COMPANY
998 F.2d 68 (2d Cir. 1993)
MESKILL, CHIEF JUDGE. This is an appeal from a judgment ... granting the motion of petitioner-
appellee Government of the United Kingdom, Ministry of Defense (“United Kingdom”), to
consolidate an American Arbitration Association (“AAA”) arbitration proceeding between the
United Kingdom and respondent-appellant The Boeing Company (“Boeing”) with a separate
AAA arbitration proceeding between the United Kingdom and respondent Textron, Inc.
(“Textron”). The district court held that it has the authority pursuant to the [FAA], and the
Federal Rules of Civil Procedure to compel consolidation of separate arbitration proceedings
when the proceedings involve the same questions of fact and law, even in the absence of the
parties' consent to consolidation. We hold that a district court cannot order consolidation of
arbitration proceedings arising from separate agreements to arbitrate absent the parties'
agreement to allow such consolidation. Therefore, we reverse the district court.
This case, filed under seal, arises from a January 1989 ground testing incident in which a
military helicopter owned by the United Kingdom was damaged. The incident occurred during
Boeing's testing of a new electronic fuel control system (“FADEC”) that had been designed by
Textron and installed in the helicopter by Boeing. The helicopter had been manufactured by
 Boeing and its engine had been manufactured by Textron.
P "682"
P "683"
Boeing and Textron have separate contracts with the United Kingdom governing long-standing
relationships that each company has with the United Kingdom on a variety of military projects.
The relevant arbitration agreement between the United Kingdom and Boeing is contained in a
1981 base contract for certain services. The relevant arbitration agreement between the United
Kingdom and Textron is contained in a 1985 contract relating specifically to the design and
development of FADEC. The contracts contain identical arbitration clauses which read:
“Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall
be settled by arbitration in New York City by three arbitrators in accordance with the Rules of
the American Arbitration Association, and judgment upon the award rendered by the
Arbitrators may be entered in any court having jurisdiction thereof.”...
[T]he United Kingdom filed Demands for Arbitration with the AAA against Boeing and Textron
for its losses resulting from the January 1989 ground testing incident. Both before and after
filing the Demands for Arbitration, the United Kingdom requested that Boeing and Textron
consent to consolidation of the arbitration proceedings. Boeing refused, alleging that
consolidation would lead to undue expense and effort on its behalf because of the alleged
simplicity of the issues involved in its arbitration with the United Kingdom compared to those
in the United Kingdom/Textron arbitration. The AAA informed the United Kingdom that it will
not order consolidation of arbitration proceedings without the consent of all parties. [T]he
United Kingdom filed a Petition to Compel Consolidated Arbitration in the United States
District Court for the Southern District of New York. All parties agreed that both arbitrations
would be stayed pending disposition of the United Kingdom's petition.... Judge Stanton ...
granted the United Kingdom's Petition....
The United Kingdom urges, and the district court held, that our decision in Compania Espanola
de Petroleos, SA v. Nereus Shipping, SA, 527 F.2d 966 (2d Cir. 1975), cert. denied, 426 U.S. 936 (1976)
(“Nereus”), definitively established in this Circuit the district court's authority pursuant to the
FAA and the Federal Rules of Civil Procedure to consolidate arbitration proceedings that turn
on the same questions of fact and law. As we describe in greater detail below, the facts in
Nereus were much different than the facts in this case, and the district court erred in applying
the Nereus holding.
In Nereus, a maritime contract of affreightment, or Charter Party, was signed by Nereus, as
owner, and Hideca, as charterer. The Charter Party contained a detailed arbitration clause
somewhat similar to the one contained in the United Kingdom contracts. Five months later,
Addendum No. 2 to the Charter Party was signed by Nereus, Hideca and Cepsa, as guarantor.
The addendum provided that “should HIDECA default in payment or performance of its
obligations under the Charter Party, [Cepsa] will perform the balance of the contract and
P "683" assume the rights and obligations of HIDECA on the same terms and conditions as contained in
P "684" the Charter Party.” Later, when the Arab oil embargo occurred, complications developed
causing Nereus to give notice to Cepsa that it felt Hideca was in default and asking Cepsa to
perform the balance of the Charter Party. A month later Nereus demanded arbitration with
Hideca and Hideca consented. Several weeks after that, Nereus demanded arbitration with
Cepsa. Cepsa, however, rejected the demand, claiming that it had not agreed to arbitrate.
Cepsa filed suit in the district court seeking a declaratory judgment that it had not agreed to
arbitrate disputes. The district court disagreed with Cepsa and held that Cepsa had consented
to arbitrate disputes in signing Addendum No. 2, which the court held incorporated the
arbitration clause of the Charter Party. Several months later Hideca filed suit seeking to
restrain the Cepsa/Nereus arbitration until after the conclusion of the Hideca/Nereus
arbitration. In this second action, one of the parties requested consolidation of the two
arbitrations and the district court granted the request to compel consolidation.
On appeal, we affirmed the district court's order compelling consolidation and reformed the
arbitration provision from which both arbitrations arose to provide for five arbitrators instead
of three, one to be selected by each of the three parties and the remaining two arbitrators to
be selected by the three arbitrators already selected. We held that a guarantor can be bound
by an arbitration clause contained in the original contract when broad and inclusive guarantee
language is employed, such as the language of Addendum No. 2.
Nereus is distinguishable from the case before us. In Nereus, all three parties signed Addendum
No. 2, which incorporated the provisions of the Charter Party, including the arbitration
provision. We held that in signing the addendum, Cepsa had agreed to “assume the rights and
obligations” of Hideca, including the obligation to participate in arbitration over any disputes.
Thus, all three parties were in arbitration pursuant to a single arbitration agreement. We
determined that the intention of the signatories to Addendum No. 2 would be most closely
adhered to with a single arbitration proceeding. In contrast, in the case before us, Boeing and
Textron are in arbitration with the United Kingdom pursuant to two distinct agreements to
arbitrate contained in two distinct contracts. Neither agreement contains any provision for
consolidation. Boeing never agreed to participate in arbitration with Textron, and vice-versa.
We simply have no grounds to conclude that the parties consented to consolidated arbitration.
The district court is without authority to consolidate the two actions based upon the mere fact
that the disputes contain similar or identical issues of fact and law. See Volt Information
Sciences v. Board of Trustees, 489 U.S. 468, 478 (1989) (“[The FAA] simply requires courts to
enforce privately negotiated agreements to arbitrate, like other contracts, in accordance with
their terms.”).
As the district court and the United Kingdom point out, in our holding in Nereus we also relied
 on the Federal Rules of Civil Procedure and the “liberal purposes” of the FAA. We stated that:
P "684" “Fed. R. Civ. P., Rules 42(a) and 81(a)(3), are applicable. Moreover, we think the liberal purposes
P "685" of the [FAA] clearly require that this Act be interpreted so as to permit and even to encourage
the consolidation of arbitration proceedings in proper cases, such as the one before us.”
Subsequent to our decision in Nereus, several district courts in this Circuit have determined
that they have the authority to compel consolidated arbitration in cases involving separate
agreements to arbitrate but similar or identical factual circumstances and questions of law.
However, as we explain below, recent Supreme Court case law has undermined our previous
conclusion that the FAA's “liberal purposes” and the Federal Rules of Civil Procedure allow us
to consolidate arbitration proceedings absent consent. To the extent that Nereus relied on that
conclusion it is no longer good law.
The United Kingdom brought this federal action under the FAA, asserting that the district court
has authority to compel consolidation pursuant to the FAA and the Federal Rules of Civil
Procedure, Rules 42(a) and 81(a)(3). The relevant section of the FAA provides, in pertinent part:
“A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a
written agreement for arbitration may petition any United States district court ... for an order
directing that such arbitration proceed in the manner provided for in such agreement.... The
court shall hear the parties, and upon being satisfied that the making of the agreement for
arbitration or the failure to comply therewith is not in issue, the court shall make an order
directing the parties to proceed to arbitration in accordance with the terms of the agreement.”
9 U.S.C. §4. Boeing takes the position that the district court did not have the authority under
the FAA to compel consolidation because (1) the United Kingdom cannot seek relief as an
“aggrieved” party because none of the parties has refused to arbitrate, and (2) given the court's
narrowly circumscribed role in private arbitrations to merely “direct[] the parties to proceed
to arbitration in accordance with the terms of the agreement,” the district court is without
authority to direct consolidation when consolidation is not provided for in the agreements. We
need not decide whether the United Kingdom is properly deemed a “party aggrieved” under §4
of the FAA because we now hold that the FAA does not authorize consolidation of arbitration
proceedings unless doing so would be “in accordance with the terms of the agreement.” 9 U.S.C.
§4.
In Nereus, we found authority to consolidate arbitration proceedings in “the liberal purposes of
the Federal Arbitration Act,” 527 F.2d at 975, and we based our finding on our prior decision in
Robert Lawrence Co. v. Devonshire Fabrics, 271 F.2d 402 (2d Cir. 1959), cert. dismissed, 364 U.S. 801
(1960). We stated in Robert Lawrence that:
“any doubts as to the construction of the [FAA] ought to be resolved in line with its liberal
P "685" policy of promoting arbitration both to accord with the original intention of the parties and to
P "686" help ease the current congestion of court calendars. Such policy has been consistently
reiterated by the federal courts and we think it deserves to be heartily endorsed.”
271 F.2d at 410. Cases decided in the Supreme Court since our decisions in Robert Lawrence and
Nereus have undermined our interpretation of the purposes of the FAA. See Volt Information
Sciences v. Board of Trustees, 489 U.S. 468 (1989); Dean Witter Reynolds Inc. v. Byrd, 470 U.S. 213
(1985); Moses H. Cone Memorial Hosp. v. Mercury Construction Corp., 460 U.S. 1 (1983). These
cases concluded that the FAA was intended merely to assure the enforcement of privately
negotiated arbitration agreements, despite possible inefficiencies created by such
enforcement.
The Supreme Court affirmed an order requiring enforcement of an arbitration agreement in
Moses H. Cone Memorial Hosp., even though arbitration would result in bifurcated proceedings
because not all of the parties to the dispute were parties to the arbitration agreement. In
words quite relevant to the case at hand, the Supreme Court stated that “under the [FAA], an
arbitration agreement must be enforced notwithstanding the presence of other persons who
are parties to the underlying dispute but not to the arbitration agreement.” 460 U.S. at 20.
Subsequently in Byrd, the Supreme Court explained in detail the limited purposes behind the
FAA:
“The legislative history of the [FAA] establishes that the purpose behind its passage was to
ensure judicial enforcement of privately made agreements to arbitrate. We therefore reject the
suggestion that the overriding goal of the [FAA] was to promote the expeditious resolution of
claims. The [FAA], after all, does not mandate the arbitration of all claims, but merely the
enforcement – upon the motion of one of the parties – of privately negotiated arbitration
agreements. The House Report accompanying the [FAA] makes clear that its purpose was to
place an arbitration agreement “upon the same footing as other contracts, where it belongs,”
H.R. Rep. No. 96, 68th Cong., 1st Sess. 1 (1924), and to overrule the judiciary's longstanding
refusal to enforce agreements to arbitrate.... The preeminent concern of Congress in passing
the [FAA] was to enforce private agreements into which parties had entered, and that concern
requires that we rigorously enforce agreements to arbitrate, even if the result is ‘piecemeal’
litigation, at least absent a countervailing policy manifested in another federal statute.”
470 U.S. at 219-21. Four years later the Supreme Court reemphasized its position by stating that
the FAA “simply requires courts to enforce privately negotiated agreements to arbitrate, like
other contracts, in accordance with their terms.”Volt Information Sciences, 489 U.S. at 478.
Each of our sister circuit courts to have considered the question since these Supreme Court
decisions has held that district courts do not have the authority under the FAA to consolidate
arbitrations absent the parties' consent. In Weyerhaeuser Co. v. Western Seas Shipping Co., 743
P "686"
F.2d 635 (9th Cir.), cert. denied, 469 U.S. 1061 (1984), the Ninth Circuit declined to compel
P "686"
P "687" consolidation, stating:
“The district court correctly held that our authority under the [FAA] is narrowly circumscribed....
We can only determine whether a written arbitration agreement exists, and if it does, enforce it
“in accordance with its terms.” As the district court noted, this provision “comports with the
statute's underlying premise that arbitration is a creature of contract, and that ‘an agreement
to arbitrate before a special tribunal is, in effect, a specialized kind of forum-selection clause
that posits not only the situs of suit but also the procedure to be used in resolving the
dispute.’Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974).”
Similarly, the Sixth Circuit has made clear that “a court is not permitted to interfere with
private arbitration arrangements in order to impose its own view of speed and economy. This is
the ease even where the result would be the possibly inefficient maintenance of separate
proceedings.”American Centennial Ins. Co. v. National Casualty Co., 951 F.2d 107, 108 (6th Cir.
1991).
The United Kingdom also claims that the district court has the authority to compel
consolidation of the U.K./Boeing and U.K./Textron arbitrations pursuant to the Federal Rules of
Civil Procedure, Rules 42(a) and 81(a)(3). The United Kingdom and the district court point out
that in Nereus, we specifically stated that Rules 42(a) and 81(a)(3) were applicable. Nereus, 527
F.2d at 975. We hold that these rules are not applicable to the case before us.
Rule 42(a) provides, in pertinent part, that “when actions involving a common question of law
or fact are pending before the court ... it may order all the actions consolidated.” Rule 81(a)(3)
provides, in pertinent part, that “in proceedings under Title 9, U.S.C., relating to arbitration, ...
[the Federal Rules of Civil Procedure] apply only to the extent that matters of procedure are
not provided for in those statutes.” The United Kingdom asserts that Rule 42(a) as incorporated
through Rule 81(a)(3) allows, or at least “provides valuable guidance” to, the district court to
consolidate private arbitration proceedings in appropriate situations.
We reject this argument. Rule 81(a)(3) merely allows the application of the Federal Rules of
Civil Procedure to judicial proceedings that are before a court pursuant to U.S.C. Title 9, to the
extent that Title 9 does not provide appropriate procedural rules. Rule 81(a)(3) clearly does not
import the Federal Rules of Civil Procedure to the private arbitration proceedings that
underlie the Title 9 proceedings pending before a court. See 4 C. Wright & A. Miller, Federal
Practice and Procedure §1015, at 66-67 (1987) (“It is only the judicial proceedings under the [FAA]
... that are subject to the rules. The federal rules do not govern the procedure in the hearings
before the arbitrators.”); Washington-Baltimore Newspaper Guild v. The Washington Post Co., 442
F.2d 1234, 1239 (D.C. Cir. 1971) (“[None] of the Federal Rules of Civil Procedure was ever designed
to apply to proceedings in other than the United States District Courts.”); Foremost Yarn Mills v.
Rose Mills, 25 F.R.D. 9, 11 (E.D. Pa. 1960) (“it is clearly evident that the [FAA] itself does not in any
P "687" wise attempt to regulate the procedures before the arbitrators or prescribe rules or
P "688" regulations with respect to hearings before arbitrators”). Therefore, although a district judge
considering related petitions to compel arbitration can have all of the petitions heard at once
pursuant to Rule 42(a), he or she could not use Rule 42(a) to order that the underlying
arbitrations, once compelled, be conducted together.
The United Kingdom also makes much of the inefficiencies and possible inconsistent
determinations that may result if the U.K./Boeing and U.K./Textron arbitrations are allowed to
proceed separately. Although these may be valid concerns to the United Kingdom, they do not
provide us with the authority to reform the private contracts which underlie this dispute. If
contracting parties wish to have all disputes that arise from the same factual situation
arbitrated in a single proceeding, they can simply provide for consolidated arbitration in the
arbitration clauses to which they are a party. See Volt Information Sciences, 489 U.S. at 479
(“Arbitration under the [FAA] is a matter of consent, not coercion, and parties are generally free
to structure their arbitration agreements as they see fit. Just as they may limit by contract the
issues which they will arbitrate, ... so too may they specify by contract the rules under which
that arbitration will be conducted.”).
We reverse the judgment of the district court granting the United Kingdom's Petition to Compel
Consolidated Arbitration and we hold that the district court cannot consolidate arbitration
proceedings arising from separate agreements to arbitrate, absent the parties' agreement to
allow such consolidation. To the extent our decision in Nereus is based on the Federal Rules of
Civil Procedure and the “liberal purposes” of the Federal Arbitration Act, we hold that it is no
longer good law. We do not disturb Nereus to the extent it is based on the general equitable
powers of the court and principles of contract law.
NEW ENGLAND ENERGY INC. v. KEYSTONE SHIPPING COMPANY
855 F.2d 1 (1st Cir. 1988)
COFFIN, CIRCUIT JUDGE. This case requires us to decide whether federal courts have the power
to order consolidation of two arbitrations when the parties' agreements to arbitrate make no
express reference to the issue of consolidation. The district court, although determining that
consolidation was appropriate under the circumstances, held that it lacked the power to order
consolidation. We have carefully reviewed the authorities and see no compulsion of law or
policy barring a district court from issuing such an order, at least when the agreement between
the parties is silent and the pertinent state law specifically provides for such. We therefore
reverse.
We shall briefly describe the facts at this point in order to give some context to our discussion,
but the primary question before us is a purely legal one and so we need not dwell on the
particulars of this case. The parties here are signatories to one of two maritime contracts, both
P "688"
P "688" of which provide that disputes arising out of the agreements will be referred to arbitration in
P "689" Boston “pursuant to the laws relating to arbitration there in force.” In one contract,
appellant New England Energy Inc. (“NEEI”) and appellee Keystone Shipping Co. (“Keystone”)
created a joint venture known as the New England Collier Company (“NECCO”), which became
owner and operator of a coal carrying ship named the Energy Independence. In the other
agreement, appellant New England Power Company (“NEP”) chartered the Energy
Independence from the joint venture. Both NEEI and NEP are part of the New England Electric
System, an electric utility holding company. Arbitration #1 is between NEEI and Keystone – the
joint venturers – and Arbitration #2 is between NEP, the ship operator, and NECCO, the joint
venture that chartered the ship to NEP.
NEEI and NEP filed an action in state court in January 1988 seeking consolidation of the two
arbitrations pursuant to the Massachusetts Uniform Arbitration Act, Mass. Gen. Laws Ann. ch.
251, §2A. (19) Keystone removed the action to federal court based on diversity jurisdiction. After
a hearing, the district court ruled that the factual circumstances were appropriate for
consolidation, but it nevertheless denied the application for consolidation on the ground that
it lacked the power to join the cases. The court interpreted the [FAA] and Supreme Court
precedent to say that, in the absence of a specific provision in the parties' contracts allowing
consolidation, federal courts are without power to consolidate arbitrations. The district court
implicitly found both that the Act preempted the Massachusetts statute providing for
consolidated arbitrations, and that it deprived the court of its power to order consolidation
under Fed. R. Civ. P. 42(a). NEEI and NEP then filed this appeal.
After carefully reviewing the Supreme Court cases and considering the policies of the Act, we
conclude that consolidation could be ordered in this case pursuant to the Massachusetts
arbitration consolidation statute. We need not decide whether a federal court also has the
power, under Fed. R. Civ. P. 42(a), to order consolidation in the absence of a state law providing
for it. We now turn to our reasons for concluding that Massachusetts law is not preempted in
this case.
The FAA was passed to ensure that courts would honor the contractual agreements of parties
who choose to resolve their disputes by means of the informal arbitration procedure.... The Act
makes no reference to consolidation of arbitrations. Recognizing that this statute establishes a
“federal policy favoring arbitration,”Moses H. Cone Memorial Hospital v. Mercury Construction
Corp., 460 U.S. 1, 24 (1983), the Supreme Court in a series of recent decisions repeatedly has
stressed that courts must “‘rigorously enforce agreements to arbitrate,’”Shearson/American
P "689" Express v. McMahon, 482 U.S. 220 (1987). Appellee argues that the principle of strict adherence
P "690" to arbitration agreements, established by both the Act and the Supreme Court cases, means
that unless consolidation is affirmatively approved in the agreement to arbitrate, it may not
be ordered, notwithstanding any state law providing for consolidation. Specifically, appellee
contends that ordering consolidation in the absence of the parties' explicit consent is barred
by §4 of the Act, which requires courts to enforce arbitration agreements “in accordance with
[their] terms.” Appellee relies for this proposition on two circuit court decisions holding that a
federal court's role in this context is to determine “only whether the contract provides for
consolidated arbitration, a question free of the underlying facts [concerning the merits],”Del E.
Webb Construction v. Richardson Hospital Authority, 823 F.2d 145, 150 (5th Cir. 1987). See also
Weyerhaeuser Co. v. Western Seas Shipping Co., 743 F.2d 635, 637 (9th Cir. 1984). One other circuit
has held that federal courts may consolidate arbitrations. Compania Espanola de Petroleos, SA
v. Nereus Shipping, SA, 527 F.2d 966 (2d Cir. 1975).
We note first that, even when federal law applies to an arbitration agreement, (20) the FAA has
never been construed to preempt all state law on arbitration. We do not read the recent series
of Supreme Court arbitration cases to establish such a proposition by implication. Those cases
concerned only laws that would override the parties' choice to arbitrate rather than litigate in
court, in direct conflict with the Act's primary purpose of ensuring the enforcement of privately
negotiated arbitration agreements. At best, the Supreme Court's decisions support a
conclusion that all state laws seeking to limit the use of the arbitral process are superseded by
federal law. None of the various preemption standards suggests that Congress intended the
federal Act to supersede all state arbitration law, and appellee Keystone does not argue to the
contrary....
Nor do we see a preemption problem between the Act and the particular statute before us, the
Massachusetts arbitration consolidation provision. Because the Act says nothing about
consolidation, the Massachusetts statute – as appellants seek to enforce it (21) – does not
P "690" directly conflict with the Act's provisions. Appellee's argument, however, is not that the Act
P "691" directly contradicts the Massachusetts statute, but that the state law is superseded in this
case because the parties' contracts do not provide for consolidation, and an order to
consolidate would therefore conflict with the requirement in section four of the federal Act that
courts enforce arbitration agreements according to their terms.
We disagree that ordering consolidation pursuant to a state statute when the contract is silent
on the subject improperly modifies the agreement struck by the parties in violation of section
four. We believe, as appellants argue, that an order not contradicting the contractual terms
regarding arbitration is “in accordance with [those] terms.” This is certainly true when the
language of the arbitration clause is broad and in no way suggests limits on the subjects or
parties to the agreed-upon arbitration. See, e.g., Compania Espanola de Petroleos, 527 F.2d at
969 (“Any and all differences and disputes of whatsoever nature arising out of this Charter shall
be put to arbitration ...”). To borrow appellants' illustration, a person directed to take an early
plane to New York would be acting “in accordance with” her instructions whether she flew
coach or first class, notwithstanding the instructions' silence on the type of seat to purchase.
Our traveller also would not violate her instructions, which were silent on how she was to get to
 the airport, if she were to take a taxicab. Simply put, arbitration is still arbitration even if it is
consolidated arbitration.
Moreover, as the Supreme Court has emphasized, the purpose of the Arbitration Act was “to
place an arbitration agreement ‘upon the same footing as other contracts, where it
belongs,’”Dean Witter Reynolds Inc., 470 U.S. at 219 (quoting H.R. Rep. No. 96, 68th Cong., 1st
Sess. 1 (1924)). Under the Federal Rules of Civil Procedure, a federal court may consolidate
separate actions pending before it if the actions involve a common question of fact or law. Fed.
R. Civ. P. 42(a). There is no limitation on the court's power to consolidate contract actions
based on the parties' failure affirmatively to agree to consolidation. (22) See 9 C. Wright & A.
Miller, Federal Practice and Procedure §2383 (1971) (court is given broad discretion to decide
whether consolidation is desirable; parties' consent not required). Thus, to the extent that the
Act requires a court to treat an arbitration agreement as it would any other contract, consent is
not a prerequisite to ordering consolidation. See Prima Paint Corp. v. Flood & Conklin Mfg. Co.,
388 U.S. 395, 404 n.12 (1967) (“the purpose of Congress in 1925 was to make arbitration
agreements as enforceable as other contracts, but not more so”). (23)
P "691"
P "692"
In addition to its argument that section four of the Act prevents a court from ordering
consolidation without the parties' consent, appellee also suggests that the Supreme Court in
its decisions has decided that the federal Act mandates federal courts to observe a “hands-off”
approach to arbitrable claims, i.e., that courts should refrain from any unnecessary
involvement with arbitrable claims. This view – which is, in essence, a preemption argument –
is reflected in the Fifth and Ninth Circuit cases that hold that a court's role with regard to
consolidation is simply to determine whether the parties agreed to it, without regard to the
merits of consolidation and without scrutiny of the underlying facts of the parties' disputes.
Weyerhaeuser, 743 F.2d at 637; Del E. Webb, 823 F.2d at 150.
We conclude that neither the Act nor Supreme Court precedent mandates such a narrowly
circumscribed role for the courts.... [N]othing in the recent series of Supreme Court decisions
indicates that a state law whose purpose is to promote the expeditious resolution of cases by
means of the arbitral process is at odds with the policy behind the Federal Arbitration Act. In
each of the cases emphasized by the appellee, the justices were faced with competing laws
that would have placed claims in the courts instead of in arbitration.... The Massachusetts
arbitration consolidation provision, as appellants seek to enforce it, does not in any way limit
“the broad principle of enforceability” of private agreements to arbitrate. There is no attempt
here to divert a case from arbitration to court. Massachusetts seeks only to make more
efficient the process of arbitrating. Although the Supreme Court has held that agreements to
arbitrate must be enforced “even if the result is ‘piecemeal’ litigation,”Dean Witter Reynolds,
470 U.S. at 221, the Court also has recognized the Act's endorsement of “speedy and efficient
decision making,”id. at 219. We fail to see why a state should be prevented from enhancing the
efficiency of the arbitral process, so long as the state procedure does not directly conflict with
a contractual provision.
Nor does the Act's general approach indicate that a federal court would overstep its role if it
ordered consolidation under state law after determining that the contract does not bar
consolidated arbitrations. Because a federal court must have subject matter jurisdiction
independent of the Act to hear a case arising under the Act, a finding that a matter is
arbitrable does not automatically divest the court of its authority over the case. Indeed, the
Act in certain situations empowers the court to choose arbitrators and enforce arbitration
P "692" subpoenas. See 9 U.S.C. §§5, 7. Thus, federal courts have jurisdiction to decide more than just
P "693" the question of arbitrability, and if requested to do so, a court has the power to order
compliance with an applicable state law.
We therefore turn now to the question of whether the district court should have ordered
consolidation in this case. Our assumption in this case is that the parties' contracts are, in fact,
silent on the issue of consolidation. Unquestionably, there is no intent manifested against
consolidation. Both contracts contain broad provisions calling for arbitration of “any and all
differences and disputes of whatsoever nature.” Appellants, however, argue that the contracts
evidence an intention to permit consolidation by means of the clause in each providing for
arbitration “in the City of Boston pursuant to the laws relating to arbitration there in force.” The
arbitration laws in force in Boston include not only the federal Act but also the Massachusetts
arbitration consolidation statute. Thus, appellants suggest that the parties affirmatively
agreed to the possibility of consolidation.
We need not rest our decision on these contractual clauses, however, because we have
concluded that consent is not a prerequisite to application of the Massachusetts consolidation
statute. Our task, therefore, is simply to determine whether the district court correctly found
that the two arbitrations at issue here meet the requirements for consolidation. (24)
Massachusetts law provides that the issue of consolidation shall be decided under Mass. Rule
Civ. P. 42, which follows federal law and allows consolidation if there is a common question of
law or fact. If this requirement is met, a court typically has broad discretion to decide whether
consolidation is appropriate. See, e.g., Sutcliffe Storage & Warehouse Co. v. United States, 162
F.2d 849, 851 (1st Cir. 1947); 9 C. Wright & A. Miller, Federal Practice and Procedure §2383 (1971)....
We cannot say that the district court abused its discretion in concluding that the two
arbitrations should be consolidated. Both will necessarily involve resolution of the rate of hire
questions, and the possibility of inconsistent results seems real. As appellants point out, even
formally NEEI is a participant in each of the two arbitrations, individually in one and as a co-
venturer in the other. Although Arbitration #1 will entail consideration of more issues and
 different law from Arbitration #2, which is limited to the question of the 1988 rate of hire,
complete identity of the cases is not a prerequisite to consolidation. Moreover, we are
unpersuaded that consolidation of the cases necessarily would diminish the attention given to
Keystone's fiduciary duty claims. We presume Keystone will vigorously argue its position, and
that the arbitrators will therefore give it full consideration.
P "693" As to Keystone's argument that proceedings in Arbitration #1 must be held before Arbitration #2
P "694" may begin in order to determine who has the authority to appoint NECCO's arbitrator in the
later-noticed arbitration, we do not believe this is a sufficient basis for reversing the district
court's finding that consolidation is appropriate. Our assumption is that the arbitrators
selected for Arbitration #1 could set the consolidated arbitrations in motion by deciding upon
the selection of arbitrators for Arbitration #2. Once all arbitrators have been appointed, the
merits of the cases could be heard. The district court may have other ideas, however, about
how the consolidated arbitrations should proceed, and we leave that decision to it in the first
instance. (25)
SELYA, CIRCUIT JUDGE, DISSENTING. I respectfully dissent. Although the question posed in these
appeals is not free from doubt, I take a more isthmian view of it than do my colleagues.
The FAA cuts quite a precise pattern, leaving little room for judicial embroidery. It specifically
directs that, if there is “an agreement for arbitration ... made in writing and ... a default in
proceeding thereunder, the court shall make an order summarily directing the parties to
proceed with the arbitration in accordance with the terms [of the agreement].” 9 U.S.C. §4
(emphasis supplied). In crafting this provision, Congress' “preeminent concern ... was to enforce
private agreements into which parties had entered.”... Dean Witter Reynolds, Inc. v. Byrd, 470
U.S. 213, 221 (1985).... Wanted considerations of administrative efficacy and the like do not
weigh in this unique balance; the Act “requires piecemeal resolution when necessary to give
effect to an arbitration agreement.”Moses H. Cone Memorial Hospital v. Mercury Const. Corp.,
460 U.S. 1, 20 (1983) (emphasis in original).
Here, there are two separate agreements, involving somewhat different parties. Both
agreements contain arbitral clauses and are, concededly, subject to the Act. Neither
agreement provides for consolidation. Absent such a provision, the duty rigorously to enforce
the agreements “in accordance with the terms thereof,” 9 U.S.C. §4, does not allow us to
substitute our judgment for that of the parties and order the proceedings consolidated. Nor
can the happenstance that a state has a law allowing consolidation – or mandating it, for that
matter – command a different result.
I need not paint the lily. Consolidation is an action which can have important consequences,
especially where – as here – the parties and issues are not identical. It is a course which, in
cases falling within the ambit of the FAA, must be left to the parties' negotiations. By fashioning
an arbitral clause which omits reference to consolidation, the parties have made a choice. By
imposing consolidation ab extra, the majority trumps that choice. Rather than order the
parties to hold the arbitration to which they consented, as the Act suggests, the court disrupts
the negotiated risk/benefit allocation and directs them to proceed with a different sort of
arbitration. Perhaps the consolidated arbitration will prove to be better conceived, or more
efficient – but it is not what the parties agreed to undertake.
P "694"
P "695" There is a second reason why my colleagues' decision strikes me as wrong. In leaving the
dimensions of the changed bargain to the vagaries of state law, the majority demeans the
quintessentially federal nature of the rule of decision. See Perry, 107 S. Ct. at 2527 n.9. In my
mind, judicial recourse to a salmagundi of differing state arbitration laws countervails the
objectives of the FAA. Put another way, superimposing Massachusetts' pro-consolidation policy
on the expressed wishes of the contracting parties unduly exalts state law and, in the process,
subverts the concept of “[creating] a body of federal substantive law of arbitrability,
applicable to any arbitration agreement within the coverage of the Act.”Moses H. Cone
Memorial Hospital, 460 U.S. at 24.
The FAA necessitates that we enforce the parties' bargain as they wrote it – nothing more.
Neither the language of the statute nor the decisions of the Supreme Court leave the door ajar
for reshaping the bargain based on state law. Because I think that the district court correctly
gauged the impropriety of ordering consolidation absent a provision to that effect in the
agreements, I would affirm the judgments below. (26)
Notes on Court-Ordered Consolidation and Joinder in International Arbitration
1. Consolidation and the New York Convention. How, if at all, does the New York Convention
affect issues of consolidation? Suppose that an arbitration agreement expressly permits the
arbitral tribunal to order consolidation of related proceedings. Does Article II of the
Convention require national courts to give effect to this agreement? What if the arbitration
agreement forbids consolidation? What if the arbitration agreement purports to allow national
courts to consolidate related arbitrations? What effect does Article VI have?
Is an award rendered in a court-ordered consolidated arbitration enforceable under the New
York Convention? In Burmah Oil Tankers Ltd v. Marlucides Armadora SA, No. Civ. 5324 (Jan. 22,
1981), aff'd, 661 F.2d 90 (1981), one party argued that consolidation should not be ordered
because it would render any resulting award unenforceable under Article V(1)(d) of the
Convention (permitting non-recognition of an award where the arbitral procedure was not in
accordance with the parties' agreement). See infra p. 857. Although the issue in Burmah was
mooted, is enforceability not a very serious concern if international arbitrations are
consolidated by a national court without an agreement between the parties permitting such
action?
 If consolidation is based on the parties' implied consent, then Article V(1)(d) would presumably
not be offended. Some commentators have gone further and suggested that agreement on a
curial law that permits mandatory consolidation constitutes enforceable acceptance of such
consolidation for purposes of Article V(1)(d). A. Redfern & M. Hunter, International Commercial
Arbitration 187 (2d ed. 1991).
2. National arbitration legislation dealing with consolidation, joinder, and intervention. Most
national arbitration statutes do not deal expressly with issues of consolidation, joinder or
intervention. Consider, for example, the UNCITRAL Model Law and the FAA. Neither statute
addresses the subject of court-ordered consolidation. If a national arbitration statute does not
deal with consolidation or related issues, then what attitude should a national court adopt?
Consider Article 1046 of the Netherlands Arbitration Act. How does it deal with issues of court-
ordered consolidation? Is this a wise approach?
Compare §2A of the Massachusetts arbitration legislation. How does it differ from Article 1046
of the Netherlands Arbitration Act? Which approach is wiser?
P "695"
P "696"
3. Lower U.S. court decisions holding that the FAA authorizes court-ordered consolidation of
arbitrations, even absent the parties' agreement. Prior to United Kingdom v. Boeing, a number
of lower U.S. courts (principally in the Second Circuit) had held that the FAA contains an
implied grant of authority to lower courts to order the consolidation of separate arbitrations –
even if the parties have not agreed to permit court-ordered consolidation. The seminal
decision was Compania Espanola de Petroleos, SA v. Nereus Shipping, SA, 527 F.2d 966 (2d Cir.
1975), cert. denied, 426 U.S. 936 (1976), discussed in Boeing, where the Second Circuit ordered
three parties to participate in a consolidated arbitration. Without relying on the fact that all
three parties had signed the same agreement, the court reasoned broadly that “we think the
liberal purposes of the Federal Arbitration Act clearly require that this Act be interpreted so as
to permit and even to encourage the consolidation of arbitration proceedings in proper cases.”
As Boeing observes, Nereus involved unusual facts – a two-party arbitration agreement, which
was held to bind a “non-party” guarantor. At least arguably, all three parties were bound by the
same arbitration agreement – on an alter ego or guarantor theory – and had therefore agreed
to a single arbitration. Nevertheless, after Nereus, a number of lower court decisions,
particularly in the Southern District of New York, ordered consolidation in the absence of a
common arbitration agreement. See P/R Clipper Gas v. PPG Indus., 804 F.Supp. 570, 575 (S.D.N.Y.
1992); North River Ins. Co. v. Philadelphia Reinsurance Corp., 1991 WL 90735, at *3 (S.D.N.Y. May 23,
1991); Rio Energy Int'l, Inc. v. Hilton Oil Transport, 776 F.Supp. 120 (S.D.N.Y. 1991); Benship Int'l v.
Phosphate Chemicals Export Ass'n, 771 F.Supp. 87, 88-89 (S.D.N.Y. 1991); Kanuth v. Prescott, Ball &
Turben, Inc., 1989 WL 90579 (D.D.C. 1989); Elmarina, Inc. v. Comexas, NV, 679 F.Supp. 388, 390
(S.D.N.Y. 1988); Sociedad Anonima de Navegacion Petrolera v. CIA de Petroleos de Chile, 634
F.Supp. 805 (S.D.N.Y. 1986); In re Shoyo Shipping Co., 1986 AMC 2374, 2375 (S.D.N.Y. 1986); Conoco
Shipping Co. v. Norse Shipping Co., 1983 AMC 1146, 1147 (S.D.N.Y. 1983); In re Voest-Alpine Int'l,
1982 AMC 921, 922-23 (S.D.N.Y. 1982); In the Matter of Czarnikow-Rionda Co., 512 F.Supp. 1308
(S.D.N.Y. 1981).
4. Lower U.S. court decisions holding that the Federal Rules of Civil Procedure authorize
consolidation of arbitrations absent the parties' agreement. An alternative basis for the court's
decision in Nereus was the Federal Rules of Civil Procedure. As excerpted above, Rule 81(a)(3)
provides that the Federal Rules will apply in actions under Title 9, except to the extent that
that Title provides for an issue; in turn, Rule 42(a) sets out the standards for consolidating
proceedings in federal district courts. In Nereus, the Second Circuit declared – without analysis
– that “Rules 42(a) and 81(a)(3) are applicable.”See Hoover Group Inc. v. Probala & Associates,
710 F.Supp. 677 (N.D. Ohio 1989); Seguros de Servicios de Salud v. McAuto Systems Group, Inc., 121
F.R.D. 154 (D.P.R. 1988); Robinson v. Warner, 370 F.Supp. 828 (D.R.I. 1974).
Is it not clear, as Boeing concludes, that Rule 42(a) has nothing to do with consolidating
arbitrations, as distinguished from district court actions under the FAA?
5. No court-ordered consolidation under the FAA if parties' agreement forbids it. Of course, if the
parties' arbitration agreement forbids consolidation, then even the rationale of Nereus and its
progeny would not allow it. Sociedad Anonima de Navegacion Petrolera v. Cia. de Petroleos de
Chile SA, 634 F.Supp. 805 (S.D.N.Y. 1986).
6. Lower U.S. court decisions holding that the FAA and Federal Rules do not authorize
consolidation of arbitrations absent the parties' agreement. The weight of lower court
precedent rejects the conclusion in Nereus, concluding that neither the FAA nor the Federal
Rules affirmatively authorize the court-ordered consolidation of arbitrations in the absence of
the parties' agreement. Champ v. Siegel Trading Co., 55 F.3d 269 (7th Cir. 1995) (no consolidation
of arbitration without consolidation provision in arbitration agreement); American Centennial
Ins. Co. v. National Casualty Co., 951 F.2d 107 (6th Cir. 1991) (“a district court is without power to
consolidate arbitration proceedings, over the objection of a party to the arbitration
agreement, when the agreement is silent regarding consolidation”); Baesler v. Continental Grain
Co., 900 F.2d 1193 (8th Cir. 1990); Protective Life Ins. Co. v. Lincoln National Life Ins. Corp., 873 F.2d
281 (11th Cir. 1989); Del E. Webb Construction v. Richardson Hospital Authority, 823 F.2d 145 (5th
Cir. 1987); Weyerhaeuser Co. v. Western Seas Shipping Co., 743 F.2d 635 (9th Cir. 1984);
Painewebber, Inc. v. Fowler, 791 F.Supp. 821 (D. Kan. 1992); American Centennial Ins. Co. v.
National Casualty Co., 761 F.Supp. 472 (N.D. Ohio 1991); Ore & Chemical Corp. v. Stinnes Interoil,
Inc., 606 F.Supp. 1510 (S.D.N.Y. 1985). As Boeing illustrates, even the Second Circuit has
abandoned decisions reading Nereus broadly.
 7. Lower U.S. court decisions holding that consolidation may be compelled under §4 if the
parties have agreed to consolidation. A corollary of holding that §4 forbids court-ordered
consolidation if the arbitration agreement does not so provide is that the same section
P "696" requires court-ordered consolidation if all the parties have so agreed. Several lower courts
P "697" have concluded in particular cases that, if the parties had agreed upon court-ordered
consolidation, orders for consolidation would be issued. See Protective Life Ins. Corp. v. Lincoln
National Life Ins. Co., 873 F.2d 281 (11th Cir. 1989) (“the sole question for the district court is
whether there is a written agreement among the parties providing for consolidated
arbitration”; concluding that two separate contract (A with B and B with C) did not provide for
consolidated arbitration); Del E. Webb Construction v. Richardson Hospital Authority, 823 F.2d
145, 150 (5th Cir. 1987) (“The question of consolidation ... is for the district court because the
court must determine only whether the contract provides for consolidated arbitration, a
question free of the underlying facts”; concluding that agreement did not provide for
consolidation); Matter of Coastal Shipping Ltd and Southern Petroleum Tankers Ltd, 812 F.Supp.
396, 402-03 (S.D.N.Y. 1993) (inquiring whether the parties' agreement provides for consolidation
“either directly or by implication”).
8. Determining when the parties have agreed to consolidated arbitration. Relatively few U.S.
decisions have found that the parties in fact agreed to consolidated arbitration. What should
be required in order to find that the parties agreed to consolidated arbitrations? Should
express agreements be required? If not, what will constitute an implied agreement?
(a) Possible requirement for an express consolidation agreement. In virtually all cases, the
parties' arbitration agreement does not expressly address the subject of consolidation.
One lower court has suggested that consolidation can only be ordered if the parties
expressly agreed to that. Ore & Chemical Corp. v. Stinnes Interoil, Inc., 606 F.Supp. 1510
(S.D.N.Y. 1985) (requiring express agreement on consolidation). As described above, other
lower courts have permitted implied agreements. Maxum Foundations, 817 F.2d at 1087;
Gavlik Constr. Co., 526 F.2d at 788-89.
(b) Consolidation where all parties are bound by a single arbitration agreement. Consider the
rationales of Nereus and Boeing. In both cases, the parties' arbitration agreements were
silent concerning consolidation. Why, in Nereus, should the parties be assumed to have
agreed to consolidation? Is it enough that all three parties agreed to the same arbitration
agreement? Compare P/R Clipper Gas v. PPG Indus., Inc., 804 F.Supp. 570 (S.D.N.Y. 1992)
(district court has power to consolidate arbitrations, based on identical arbitration
clauses covering “all” disputes). Doesn't the parties' joint acceptance of a single dispute
resolution mechanism, to deal with disputes under a single contractual relationship,
strongly suggest that they expected a unified proceeding to resolve their disputes, rather
than fragmented proceedings?
(c) Consolidation where all parties are bound by interrelated agreements. Consider the
premise underlying the Boeing decision: if three or more parties sign a single arbitration
agreement, they consent to court-ordered consolidation of all disputes encompassed by
the agreement, but if they do not sign the same agreement they do not consent to any
consolidation. Why does this presumption make sense? Why, in Boeing, should the parties
be assumed not to have agreed to arbitration? Should the parties in two inter-related
contracts be presumed to have agreed to consolidated arbitration? See Maxum
Foundations, Inc. v. Salus Corp., 817 F.2d 1086, 1087 (4th Cir. 1987) (finding agreement to
consolidated arbitration, even though no “unambiguous[]” provision to that effect); Gavlik
Construction Co. v. H.F. Campbell Co., 526 F.2d 777, 778-79 (3d Cir. 1975) (same). In both of
these cases, a tripartite contractual relationship existed, with an Owner, Contractor, and
Subcontractor. Although each agreement contained an arbitration clause, neither the
principal contract, nor the subcontract, provided for consolidated arbitration.
Nevertheless, the courts held that the broad provisions of the arbitration clauses in both
contracts contemplated arbitration of disputes between all three parties to both
agreements (notwithstanding the fact that the two contracts each had only two parties
(i.e., A with B and B with C)).
Consider the dispute in Boeing. Would it not make eminent practical sense to consolidate
the two arbitrations? Would not the parties' reasonable expectations have been that
consolidation would occur?

9. Court-ordered joinder and intervention. Court-ordered joinder and intervention raise issues
similar to those presented by consolidation.
(a) Court-ordered joinder of respondents. If an arbitration agreement is made among three (or
more) parties, Boeing, Oriental Commercial, and other decisions permit the claimant to
name all the other parties as respondents and to obtain orders under §4 compelling
them to arbitrate together in a single arbitration. See supra pp. 695-97. As Builders Federal
illustrates, some U.S. courts have concluded that they have discretion not to order
“joinder” of respondents in foreign arbitrations. See infra pp. 698-99.
 (b) Court-ordered joinder of claimants or counterclaim-respondents. If a claimant initiates
arbitration against some, but not all, of the other parties to a multi-party agreement, a
respondent may seek to join some of the “missing” parties; alternatively, a missing party
P "697" may seek to intervene in an ongoing arbitration. Nereus and Oriental Commercial suggest,
P "698" that U.S. courts have the power to compel the joinder of parties in an arbitration
(provided, after Boeing, that they are also parties to the arbitration agreement). There
are few examples of this power being exercised. See Uniroyal, Inc. v. A. Epstein & Sons,
Inc., 428 F.2d 523 (7th Cir. 1970) (granting respondent-contractor's request for order that
subcontractor participate as co-respondent in arbitration).
Even if §4 permits court-ordered joinder of additional claimants or counterclaim
respondents, there remains the question whether that power should be exercised. As
described above, there are substantial practical arguments against joinder, relating
particularly to questions of appointing the arbitrators. See supra pp. 675-76. These
considerations should influence the exercise of a court's power to compel joinder.
Moreover, under some institutional rules, a respondent generally cannot add additional
parties to an arbitration beyond those named by the claimant. See supra pp. 676-77. An
agreement to arbitrate under such rules should constitute a waiver of any right of a
respondent to court-ordered joinder of additional parties.

10. Basis for decisions relying on FAA to order consolidation. Where in the FAA is there any grant
of authority to consolidate arbitrations absent the parties' agreement? Of course, §4 authorizes
courts to compel arbitration in accordance with the parties' arbitration agreement. If there is
no express agreement on consolidation, is it fair to conclude that parties generally
contemplate court-ordered consolidation? Can such an intention be presumed from the
general objectives that motivate parties to enter into arbitration agreements? If it can, then §4
permits district courts to compel consolidation. Is that wise?
11. U.S. state statutes authorizing court-ordered consolidation absent parties' agreement. The
Massa chusetts statute, quoted above at supra p. 681, provides for consolidation even when the
parties' agreement forbids this. Like the Massachusetts statute, a number of other state
arbitration statutes permit court ordered consolidation of related arbitrations. See, e.g., Calif.
Civ. Pro. Code §1281.3 (West 1982); Bode v. Drexel Burnham Lambert, Inc., 541 N.Y.S.2d 172 (Sup.
Ct. 1989) (applying New York law to consolidate related AAA arbitrators); Matter of Vigo SS Corp.,
309 N.Y.S.2d 165 (same); Grover-Dimond Associates v. American Arbitration Ass'n, 211 N.W.2d 787
(Minn. 1973) (compelling consolidation under state law). Compare J. Brodie & Son, Inc. v. George
A. Fuller Co., 167 N.W.2d 886 (Mich. App. 1969) (no consolidation without parties' agreement);
Wm. C. Blanchard Co. v. Beach Concrete Co., 297 A.2d 587 (N.J. Super. 1972) (same).
12. Lower U.S. court decisions holding that the FAA does not preempt state arbitration statutes
providing for consolidation, even if the parties have not agreed. The court in New England
Energy held that it could rely on a Massachusetts state arbitration statute permitting
consolidation to consolidate two arbitrations, even absent the parties' agreement authorizing
such action. Moreover, the New England Energy court held that the FAA did not preempt
application of the Massachusetts statute. Is that persuasive? On what theory? Compare Vigo SS
Corp. v. Marship Corp., 309 N.Y.S.2d 165 (Ct. App. 1970) (New York law held applicable to issue of
consolidation because it is “procedural in nature”).
Note that the parties' agreement in New England Energy contained a choice-of-law provision
selecting the law of the arbitral situs. Under Volt, the state consolidation provision could
properly be applied without offending the FAA: consolidation is less inimical (indeed, arguably
supportive) to arbitration than the California statute in Volt permitting a stay of arbitration.
See supra pp. 373-76.
The New England Energy court did not, however, rely on the Volt rationale. It specifically
concluded that “consent is not a prerequisite to application of the Massachusetts
consolidation statute.” That is, of course, an accurate summary of the Massachusetts law, but is
it an answer to arguments that the Massachusetts law is preempted? Sections 2 and 4 of the
FAA require enforcement of the parties' arbitration agreement in accordance with its terms; if
those terms do not include a consolidation clause, does not the mandatory Massachusetts
consolidation statute conflict or interfere with the parties' bargain regarding arbitration?
Like many other issues in arbitration, the foregoing issue depends, ultimately, on presumptions
about the parties' expectations: absent express agreement, are parties likely to have
contemplated consolidation or not? If they did impliedly intend to allow court-ordered
consolidation, then the FAA should not preempt a state law making this explicit. On the other
hand, if the parties impliedly intended to exclude any judicial involvement in the arbitral
process, including by way of consolidation, then the FAA should preempt state laws purporting
to override that agreement.
13. Lower U.S. court decisions holding that the FAA does preempt state arbitration decisions
forbidding consolidation. In contrast to New England Energy, some federal courts have refused
to apply state precedents permitting consolidation absent an agreement between the parties.
Huber, Hunt & Nichols, Inc. v. Architectural Stone Co., 625 F.2d 22, 25-6 (5th Cir. 1980); Ore &
Chemical Corp. v. Stinnes Interoil, Inc., 606 F.Supp. 1510 (S.D.N.Y. 1985).
P "698"
P "699"
14. Discretion to compel consolidation. Lower U.S. courts that conclude they have authority to
consolidate arbitration uniformly hold that the issuance of a consolidation order is within their
discretion. Rio Energy Int'l, Inc. v. Hilton Oil Transport, 776 F.Supp. 120 (S.D.N.Y. 1991); Elmarina,
 Inc. v. Comexas, NV, 679 F.Supp. 388, 391 (S.D.N.Y. 1988); Sociedad Anonima de Navegacion
Petrolera v. Cia. de Petrols de Chile SA, 634 F.Supp. 805 (S.D.N.Y. 1986).
In deciding whether to exercise discretion to consolidate, lower courts have considered the
existence of common questions of law and fact, risks of conflicting awards, efficiencies of proof,
and prejudice to the parties. See Hoover Group Inc. v. Probala & Associates, 710 F.Supp. 677, 681
(N.D. Ohio 1989) (listing various factors); Conoco Shipping Co. v. Norse Shipping Co., 1983 AMC
1146 (S.D.N.Y. 1983) (consolidation based on common factual issues, notwithstanding dissimilar
legal issues); In re Marine Trading Ltd, 432 F.Supp. 683, 684 (S.D.N.Y. 1977); Insco Lines, Ltd v.
Cypromar Navigation Co., 1975 AMC 2233 (S.D.N.Y. 1975) (considering common issues of law and
fact and possible prejudice); Application of Adam Consol. Indus., Inc., 180 N.Y.S.2d 507 (App. Div.
1958) (consolidating two separate arbitrations between the same parties, under two separate
agreements).
Some lower courts appear to presume that consolidation is appropriate if common legal and
factual issues exist. Cable Belt Conveyors, Inc. v. Alumina Partners of Jamaica, 669 F.Supp. 577
(S.D.N.Y. 1987) (to resist consolidation, party “must show prejudice ‘is sufficiently substantial to
outweigh the advantages of resolving the dispute in a consolidated proceedings’”).
For lower court decisions refusing to consolidate several arbitrations, see In re Franc,
Strohmenger & Cowan Co., 135 N.Y.S.2d 842 (S. Ct. 1954) (consolidating three arbitrations,
between three parties, under two sets of contracts, into two arbitrations, but declining to
consolidate into one arbitration); Stewart Tenants Corp. v. Diesel Constr. Co., 229 N.Y.S.2d 204
(App. Div. 1962) (declining to consolidate arbitration between two parties before AAA with
second arbitration between same parties, before Real Estate Board of New York); see Matter of
Arbitration Between Egyptian Co. for Maritime Transport & Hamlet Shipping Co., 1982 AMC 874
(S.D.N.Y. 1981).
15. Consolidating arbitrations in the United States, notwithstanding the fact that one or more of
the arbitrations is foreign. Suppose that two or more arbitrations are initiated, or could be
initiated, between three or more parties to different contracts and that one or more of the
designated arbitral situses is outside the United States. For a lower U.S. court decision,
ordering a consolidated arbitration in these circumstances, notwithstanding the fact an
arbitration had been commenced in London, see Elmarina, Inc. v. Comexas, NV, 679 F.Supp. 388
(S.D.N.Y. 1988).
Compare the approach under Article 1046 of the Netherlands Arbitration Act. How does it deal
with “foreign” arbitrations? Why? Which approach is wiser?
16. Allocation of authority to order consolidation between national courts and arbitrators. Given
the effect of consolidation on the procedural conduct of an arbitration, and the relevance of
procedural issues to deciding whether to order consolidation, is not an arbitral tribunal much
better placed to deal with issues of consolidation than a national court? Suppose an arbitral
tribunal decides that “its” arbitration should not be consolidated with another dispute, or that
a new party should not be permitted to intervene or be joined in “its” arbitration. Should a
national court second-guess this decision? What if the parties' arbitration agreement is
interpreted to permit consolidation where the arbitrators conclude considerations of efficiency
and fairness so require?
17. Relevance of parties' “right” to appoint arbitrators. As described above, many two-party
arbitrations contemplate that the parties will each appoint a party-appointed arbitrator, who
will then select a chairman. To varying degrees, arbitration agreements and institutional
arbitration rules provide for this procedure. See supra pp. 624-25.
One consequence of consolidation is that it threatens the expectation of each party that it will
be able to appoint an arbitrator. As described above, the “right” to appoint an arbitrator is
widely regarded as fundamental in international arbitration. See supra pp. 677-78. Moreover,
arbitration agreements often provide each party that “right.” Is it acceptable to consolidate
arbitrations if that entails denying each party its right to appoint an arbitrator – for example, if
the court selects a neutral sole arbitrator or all three members of a three-person tribunal?
Although this is not specifically what an arbitration agreement provides for, cannot the parties
also be assumed to have contemplated changes to their agreed procedures where these are
necessary to preserve the fundamental attributes of arbitration?
P "699" Following the Nereus decision, several lower U.S. courts have attempted to accommodate the
P "700" parties' rights to appoint arbitrators by expanding the size of the tribunal – in the case of
three-party arbitrations, to five members. This preserves each parties' right to appoint an
arbitrator, but at the cost of expanding the size of the tribunal. If the parties have specified a
three-person tribunal in their agreement, is the Nereus solution permissible? More seriously,
what if two of the three parties have the same interests? They then can appoint two out of five
members of the tribunal and need to win only one of the neutral votes to obtain a majority. Is
that acceptable?
Another lower court, in a dispute involving up to ten parties, refused to consolidate several
related arbitrations because a tribunal with as many as eleven members might have been
needed. Matter of Arbitration Between Egyptian Co. for Maritime Transport & Hamlet Shipping
Co., 1982 AMC 874 (S.D.N.Y. 1981). See also Insco Lines, Ltd v. Cypromar Navigation Co., 1975 AMC
2233 (S.D.N.Y. 1975) (refusing to appoint chairman of arbitration A, when consolidated with
arbitration B, as chairman of consolidated arbitration).
Where several parties have identical interests, or are represented by a single real party in
interest, courts may retain a three-person tribunal and require the parties with shared
interests to select a single arbitrator. Bunge Corp. v. M/T Stolt Hippo, 1980 AMC 2618 (S.D.N.Y.
 1979).
P "700"

References
1) For commentary, see Barron, Court-Ordered Consolidation of Arbitration Proceedings in the
United States, 4 J. Int'l Arb. 85 (1987); Branson & Wallace, Court-Ordered Consolidated
Arbitrations in the United States, 5 J. Int'l Arb. 93 (1988); Chiu, Consolidation of Arbitral
Proceedings and International Commercial Arbitration, 7 J. Int'l Arb. 53 (1990); Dore, Theory
and Practice of Multiparty Commercial Arbitration (1990); ICC, Multi-Party Arbitration (1991);
ICC, Guide on Multiparty Arbitration (1983); Level, Joinder of Proceedings, Intervention of Third
Parties, and Additional Claims and Counterclaims, 7 ICC Ct. Bull. 36 (1996); MacKellar, To
Consolidate or Not to Consolidate: A Study of Federal Court Decisions, 44 Arb. J. 15 (1989);
Sandrock, Arbitration Agreements and Groups of Companies, 27 Int'l Law. 941 (1993);
Stipanowich, Arbitration and the Multiparty Dispute: The Search for Workable Solutions, 72
Iowa L. Rev. 473 (1987); van den Berg, Consolidated Arbitrations and the 1958 New York
Convention, 2 Arb. Int'l 367 (1986); Wetter, A Multi-Party Arbitration Scheme for International
Joint Ventures, 3 Arb. Int'l 2 (1987).
2) Between 1984 and 1988, approximately 21% of the Requests for Arbitration filed with the
ICC involved more than two parties. Bond, The Experience of the ICC International Court of
Arbitration, reprinted in, ICC, Multi-Party Arbitration 37, 40 (1991).
3) A separate issue is whether an entity that is a party to a multi-party arbitration agreement
may properly be made a party to a particular arbitration that is commenced under the
agreement. For example, if A, B, and C are parties to an arbitration agreement, and an
arbitration is brought only between A and C, can B either voluntarily intervene or be non-
voluntarily joined by A or C? We discuss this issue below. See infra pp. 672-700.
4) See supra pp. 155-67. The principal exception to this rule is the possibility of “arbitration
without privity” under BITs or IPAs. See supra pp. 191-95.
5) See infra pp. 668-71.
©) International Council Commercial Arbitration.
6) See Fed. R. Civ. P. 42(a); C. Wright & A. Miller, Federal Practice and Procedure §2381-92 (1971).
7) See Fed. R. Civ. P. 19-21, 24.
8) See ICC, ICC Guide on Multi-Party Arbitration (1983); Wetter, A Multi-Party Arbitration Scheme
for International Joint Ventures, 3 Arb. Int'l 2 (1987).
9) See infra pp. 676-77.
10) Neither the New York Convention nor most other international arbitration conventions or
treaties deal with the subject.
11) The FAA does not expressly address the subject of court-ordered consolidation. Nothing in
the Act, or its legislative history, directly permits court-ordered consolidation, either with
or without the parties' agreement. Likewise, nothing in the FAA expressly forbids court-
ordered consolidation or joinder.
12) Although closely related conceptually to consolidation, few U.S. courts have considered
issues of joinder or intervention.
13) See infra pp. 695-96.
14) See infra p. 696.
15) See infra p. 696.
16) Similarly, under New York law, state courts have the power to consolidate arbitrations.
Sullivan County v. Edward L. Nezelek, Inc., 397 N.Y.S.2d 371 (1977).
17) See infra p. 698.
18) See infra p. 698.
19) The statute provides, in relevant part:
“A party aggrieved by the failure or refusal of another to agree to consolidate one
arbitration proceeding with another or others, for which the method of appointment of the
arbitrator or arbitrators is the same ... may apply to the superior court for an order for such
consolidation.... [T]he issue shall be decided under the Massachusetts Rules of Civil
Procedure governing consolidation and severance of trials and the court shall issue an
order accordingly. No provision in any arbitration agreement shall bar or prevent action by
the court under this section.”
20) The FAA governs the validity, enforceability and interpretation of all arbitration contracts
involving maritime or interstate commerce transactions, such as those at issue here. This is
so even if the parties include a choice of law provision in their contract selecting a
particular state's law. See Southland Corp., 465 U.S. at 12 (Arbitration Act was an exercise of
the commerce clause power, thus applicable in federal and state court, citing Prima Paint
Corp. v. Flood & Conklin Manufacturing Co., 388 U.S. 395, 405 (1967)); Apex Fountain Sales Inc.
v. Kleinfeld, 818 F.2d 1089, 1094 n.4 (3d Cir. 1987); Huber, Hunt & Nichols, Inc. v. Architectural,
Stone Co., 625 F.2d 22, 25 n.8 (5th Cir. 1980); Commonwealth Edison Co. v. Gulf Oil Corp., 541
F.2d 1263, 1268-71 (7th Cir. 1976); Collins Radio Co. v. Ex-Cell-O Corp., 467 F.2d 995, 997-99 (8th
Cir. 1972); American Airlines Inc. v. Louisville & Jefferson County Air Board, 269 F.2d 811, 815-
817 (6th Cir. 1959). In this case, there is no question concerning the supremacy of the federal
Act in determining the validity and enforceability of an arbitration clause. Everyone agrees
that the federal Act governs those matters, which are not in dispute here. The issue before
us is whether state law may supplement that Act on matters collateral to the agreement to
arbitrate.
21) The statute states that “no provision in any arbitration agreement shall bar or prevent
action by the court under this section.” Mass. Gen. Laws Ann. ch. 251, §2A. Because the
parties' agreements in this case do not refer to consolidation, we need not address
whether federal law bars the state statute from superseding a contractual provision
expressly prohibiting consolidation. Supreme Court precedent strongly indicates, however,
that state law should not prevail over such a privately negotiated contractual provision.
See, e.g., Mitsubishi Motors, 473 U.S. at 625 (“‘The preeminent concern of Congress in passing
the Act was to enforce private agreements into which parties had entered....’”) (quoting
Dean Witter Reynolds, Inc., 470 U.S. at 221).
22) We do not mean to suggest a holding that federal courts have the power to consolidate
arbitrations under Fed. R. Civ. P. 42(a). We simply are analogizing between the
Massachusetts arbitration consolidation statute and Rule 42(a), noting that when each is
applicable, contractual consent is not a prerequisite to ordering consolidation.
23) We obviously do not view the decision to arbitrate as implicitly rejecting consolidation in
addition to general, everyday litigation procedures. At least two courts apparently
disagree. See Weyerhaeuser, 743 F.2d at 637; Ore & Chemical Corp. v. Stinnes Interoil Inc., 606
F.Supp. 1510, 1513 (S.D.N.Y. 1985). Both refer to the provision in section four of the Act that a
court must enforce an arbitration agreement in accordance with its terms, and then quote
the following language from Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 (1974):
“An agreement to arbitrate before a specified tribunal is, in effect, a specialized kind of
forum-selection clause that posits not only the situs of suit but also the procedure to be
used in resolving the dispute.”
In Scherk, the issue before the Court was whether to give effect to an arbitration clause
providing for arbitration in Paris, France, or to allow an action to continue in federal court
in the United States. In making the above quoted statement, the Court simply was noting
that basic arbitration procedures differ from judicial ones – and it is only those informal
operational procedures that we believe a party affirmatively chooses when agreeing to an
arbitration clause.
24) Although the district court's finding that consolidation was appropriate was rendered
irrelevant by its conclusion that it lacked the power to consolidate, we see no reason to
remand the case for the court to reconsider the issue. The court expressly found in favor of
consolidation, and we think it inevitable that, upon remand on the same facts, the court
would simply enter a final judgment ordering consolidation. In the interest of efficiency, we
address the question at this juncture.
25) The district court is, of course, free to reconsider its finding on the propriety of
consolidation if factors not originally brought to its attention now convince it that
consolidation would be inappropriate.
26) Fed. R. Civ. P. 42(a) does not compel a contrary result. That procedural rule provides for
consolidation “when actions ... are pending before the court....”Id. Palpably, the two sets of
arbitration proceedings were not triable to, or pending before, the district court on the
merits. Accordingly, Rule 42(a) does not empower their consolidation. See Ore & Chemical
Corp., 606 F.Supp. at 1514-15 & n.3.
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part Three - International
Arbitration Awards', in Gary
B. Born , International
Commercial Arbitration:
Commentary and Materials
(Second Edition), 2nd edition
(© Kluwer Law International;
Kluwer Law International
2001) pp. 701 - 702
P "701"
KluwerArbitration
Part Three - International Arbitration Awards
Part Three International Arbitration Awards
The conclusion of most international arbitrations is marked by an arbitral award, disposing of
the parties' respective claims. The validity and enforceability of such an award is critical to the
international arbitral process and the parties' interests.
The following Chapters explore the recognition and enforcement of international arbitration
awards. Chapter 11 introduces the legal framework, vocabulary, and sources of international
and national law applicable to the enforceability of international arbitral awards. Among other
things, it discusses the jurisdictional scope and requirements of the New York and Inter-
American Conventions, which define what arbitration awards are subject to the Convention's
enforcement regime, and issues of forum selection, under the New York Convention and
otherwise, for actions to vacate or enforce international arbitral awards.
Chapter 12 examines the standards for recognizing and enforcing international arbitral awards.
It first discusses the presumptive obligation of national courts, under the New York and Inter-
American Conventions and most developed national arbitration legislation, to recognize and
enforce international arbitration awards. Next, Chapter 12 explores the various exceptions,
under the Convention and national arbitration statutes, to the general enforceability of
international arbitral awards.
Chapter 13 describes the procedural mechanisms which are available in U.S. courts for
vacating, confirming, and enforcing international arbitration awards. The chapter also
considers the enforceability of arbitral awards under the Inter-American Convention.
Finally, Chapter 14 discusses provisional measures in international arbitration. It considers the
power of arbitrators to make interim awards of provisional relief, the enforceability of such
awards, and the power of national courts to grant provisional measures in aid of an
international arbitration.
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.

Kluwer Arbitration is made available for personal use only. All content is protected by copyright and other intellectual property
laws. No part of this service or the information contained herein may be reproduced or transmitted in any form or by any means, or
used for advertising or promotional purposes, general distribution, creating new collective works, or for resale, without prior
written permission of the publisher.

If you would like to know more about this service, visit www.kluwerarbitration.com or contact our Sales staff at
sales@kluwerlaw.com or call +31 (0)172 64 1562.

KluwerArbitration

Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part Three : Chapter 11.
Recognition and
Enforcement of International
Arbitration Awards: Basic
Principles', in Gary B. Born ,
International Commercial
Arbitration: Commentary and
Materials (Second Edition),
2nd edition (© Kluwer Law
International; Kluwer Law
International 2001) pp. 703 -
778
KluwerArbitration
Part Three : Chapter 11. Recognition and Enforcement of
International Arbitration Awards: Basic Principles
11 Recognition and Enforcement of International Arbitration Awards: Basic
Principles (1)
The enforcement of international arbitration awards occurs within a complex legal framework.
This framework includes both international arbitration conventions and national arbitration
legislation.
This Chapter examines the basic international legal framework for the enforcement of
international arbitration awards. First, the Chapter briefly introduces the vocabulary and
sources of national and international law applicable to the enforcement of international
arbitral awards. Second, the Chapter examines the jurisdictional requirements of the New York
and Inter-American Conventions and of leading national arbitration statutes. Third, the
Chapter considers issues of forum selection, under the New York Convention and otherwise, for
actions to vacate or enforce international arbitral awards.
P "703"
P "704"
A. Introduction
Many international arbitral awards do not require either judicial enforcement or confirmation,
because they are voluntarily complied with. (2) Nevertheless, the ultimate test of any
arbitration proceeding is its ability to render an award which, if necessary, will be recognized
and enforced in relevant national courts. The recognition and enforcement of international
arbitral awards involve a potentially complex series of issues. In many cases, enforcement of
an award implicates the national law of the state where an award is made, the national law of
the state where enforcement is sought, and the provisions of applicable international
conventions or treaties. This legal regime, and the vocabulary it employs, is outlined below.
1. Avenues for Enforcing or Challenging Arbitral Awards
a. “Confirming” and “Vacating” International Arbitral Awards in the Place Where They Are Made
After an international arbitral award is made, most national arbitration statutes provide two
basic legal avenues which may be taken with respect to the award in the arbitral situs. First,
the prevailing party in the arbitration may commence proceedings in the national courts of the
arbitral situs to “confirm” the award (which will usually provide the basis for the entry of a
judgment of a local national court). (3) Thereafter, either the judgment can be enforced locally
(like a domestic judgment) or the judgment and the award can be taken to another state for
enforcement. (4)
Second, the unsuccessful party in the arbitration may commence proceedings, also in the
national courts of the arbitral situs, to “set aside,” “vacate,” or “annul” the award. (5) If
successful, such an action generally has the legal effect of nullifying the award, much the way
that an appellate decision vacates a trial court judgment. After an award is vacated, it cannot
be enforced locally and, in general, can be enforced outside the arbitral situs only with
difficulty. (6)
P "704"
P "705"
b. Obtaining “Recognition” or “Enforcement” of An Arbitral Award
If an arbitral award is not vacated, then there are two principal purposes to which it may be
put. First, the prevailing party may seek to “enforce” the award, either in the arbitral situs or in
a foreign court. (7) This will involve commencing legal proceedings, under local law, in which
the award provides the basis for coercively appropriating money or imposing other
consequences on the “award-debtor.” An award which is subject to the New York or Inter-
American Convention does not generally need to be confirmed in the arbitral situs before it
may be confirmed and enforced in other forums. (8) Often, however, an award must be
“confirmed” by a local court in a particular forum before it may be coercively enforced in that
forum. (9)
Second, a party to an arbitration may seek to have the arbitral award “recognized.” (10) This
will usually occur in judicial proceedings commenced by a party which unsuccessfully pursued
claims in an arbitration, seeking to relitigate claims or issues which were resolved by the
award. Most typically, a respondent who successfully defended against claims in an arbitration
will seek recognition of an award to preclude the disappointed claimant from relitigating its
claims. (11)
c. Other Avenues for Giving Effect to Arbitral Awards
In some instances, it is not possible for an arbitral award to be enforced as an award. This can
result from a failure to timely confirm it, (12) from formal defects, (13) or from valid substantive
grounds for resisting confirmation of the award. (14) Even in such cases, the award may
 nonetheless have limited legal effect under national law. For example, the award may be the
basis for a contract action under national law, or may be admissible as evidence in an action
on the merits of the parties' underlying dispute.
P "705"
P "706"
2. International Legal Framework For Enforcement of International Arbitral Awards
The enforcement of international arbitral awards is subject to a complex legal framework
derived from international and national sources. On the national level, as outlined below,
national arbitration statutes provide procedural mechanisms and substantive criteria for
vacating, confirming, and enforcing international arbitral awards. (15) On the international
level, also outlined below, the New York Convention, the Inter-American Convention, and other
bilateral and multilateral treaties address the recognition and enforcement of international
arbitral awards. (16)
a. National Arbitration Legislation
Most nations have enacted local arbitration legislation which provides for the confirmation or
vacation of arbitral awards made locally. (17) National arbitration statutes typically set forth
substantive standards and procedural avenues for confirming an award, as well as the grounds
for vacating awards made locally. (18) The provisions of Article 34 of the UNCITRAL Model Law
are a good example of this.
Likewise, as summarized elsewhere, national arbitration legislation contains provisions
governing the recognition and enforcement of arbitral awards. (19) These provisions set forth
the substantive grounds for enforcing, or denying enforcement to, arbitral awards. The
provisions of Article 36 of the UNCITRAL Model Law are an illustrative example of this. National
legislation often provides separate, somewhat differing, legal regimes for recognition of
domestic and international awards. (20)
b. International Arbitration Conventions
Equally relevant to the enforcement of international arbitral awards are international
arbitration conventions. Particularly significant in this regard is the New York Convention. A
principal purpose of the Convention was to make it easier to enforce an arbitral award made in
one country in other nations. (21) The drafting history of the New York Convention, and the clear
P "706" thrust of national court decisions applying the Convention, emphasize the drafters' desire to
P "707" make awards more readily enforceable than under the Geneva Convention, and less subject
to challenges based upon local law or public policy. (22)
As discussed below, where the New York Convention is applicable (i.e., where its “jurisdictional
requirements” are satisfied (23) ), it imposes a general obligation on signatory states to enforce
arbitral awards. (24) Article III of the Convention requires signatory states to recognize arbitral
awards made in other countries, subject to procedural requirements no more onerous than
those for domestic awards. Article III's presumption of enforceability is subject to important
jurisdictional limitations, set forth in Article I, and significant exceptions, set forth in Article V.
Finally, Article V of the Convention sets forth a limited set of grounds for nonrecognition of an
arbitral award. (25) Importantly, Article V's exceptions are exclusive; outside its country of
origin, recognition can be denied a Convention award only on one of the grounds contained in
Article V. (26) In light of all these features, national courts have emphasized the “general pro-
enforcement bias informing the Convention.” (27)
There is a significant limitation on the New York Convention's obligation to enforce arbitral
awards: according to most authorities, the obligation to recognize awards which is imposed by
Article III does not apply in actions to vacate (or annul) an arbitral award that are brought in a
forum permitted by the Convention for such actions. Thus, as discussed below, the Convention
has been held to permit actions to vacate an award to be brought in either the arbitral situs or
the country under whose laws the award was made. (28) In such a forum – sometimes referred
P "707" to as an award's “country of origin” – the Convention is generally held to permit an award to be
P "708" vacated for any reason whatsoever, including reasons not contained in Article V of the
Convention. (29) In the United States, for example, an action to vacate could be brought on any
ground permitted under §10 of the domestic FAA, even if one of Article V's exceptions to
enforceability did not apply. In other forums, outside the country of origin, an award cannot be
vacated, and can only be denied recognition if one of Article V's exceptions is satisfied. (30)
Aside from the New York Convention, other international conventions and treaties can have
important effects on the recognition and enforcement of international arbitral awards. The
Inter-American Convention establishes a legal regime paralleling the New York Convention
among the United States and many Latin American states. (31) The ICSID Convention
establishes a unique legal regime for the enforcement of arbitral awards involving investment
disputes. (32) Finally, bilateral treaties among many states facilitate the enforcement of
foreign arbitral awards. (33)
3. Overview of Recognition and Enforcement of Arbitral Awards Under Federal Arbitration Act
The recognition and enforcement of international arbitral awards in the United States is
governed primarily by federal law. The most important sources of federal law in this regard are
the New York Convention and the second chapter of the FAA. Also relevant are the first
(“domestic”) chapter of the FAA, together with the Inter-American Convention and the third
chapter of the FAA (which implements the Convention). Finally, U.S. state law also has
occasional relevance to the recognition and enforcement of international arbitral awards in
 the United States.
a. Limited Grounds for Vacating or Refusing to Confirm International Arbitral Awards Under U.S.
Law
U.S. courts have repeatedly held that the scope of judicial review of arbitral awards under the
FAA is extremely limited. (34) The FAA permits arbitral awards to be vacated, or denied
confirmation, only on a limited range of serious procedural, jurisdictional, or public policy
P "708" grounds. U.S. courts have uniformly concluded that the merits of the arbitrators' decision
P "709" cannot ordinarily be reviewed. (35) Likewise, the jurisdictional and procedural rulings of an
arbitral tribunal are entitled to substantial deference. (36)
The general obligation of U.S. courts under the Convention and the FAA to enforce arbitral
awards (and the limited exceptions to this obligation) is binding on U.S. state courts. State
laws providing broader substantive bases for non-recognition or vacation of awards are
virtually always preempted by federal law. (37)
b. Overview of Procedures for Enforcing or Challenging Arbitral Awards in the United States
Disputes over the enforceability of arbitral awards in U.S. courts arise in several distinct
procedural postures. These are summarized below.
First, a party that has obtained an award in its favor may request a U.S. court to “confirm” the
award. That generally is done by commencing an action in federal district court under §9, §207,
or §304 of the FAA. (38)
Second, a party that has had an award made against it may seek to “vacate” (or “set aside” or
“annul”) the award. That generally is accomplished by commencing an action to vacate the
award in federal district court under §10 of the FAA. (39)
Third, an arbitral award may have consequences in U.S. courts even if it has not been
confirmed. For example, it may be relied on in a civil litigation in a U.S. court on the merits of a
dispute where applicable rules of preclusion permit it to be invoked. (40) This is frequently
referred to as seeking “recognition” of the award. Alternatively, the award may be adduced as
evidence on particular issues.
i. Action to Confirm Arbitral Award
P "709" In the United States, an arbitral award is not a judgment of a court. (41) Unlike domestic
P "710" judgments, an arbitral award is not self-executing and cannot automatically be enforced
against the assets of a recalcitrant debtor. (42) Instead, judicial recognition (or confirmation) of
an arbitral award must be obtained in order to invoke coercive state enforcement mechanism.
(43) An action to confirm an arbitral award in the United States can be brought under §9, §207,
or §304 of the FAA.
If an arbitral award is confirmed by a U.S. court, the FAA provides that the award allows the
entry of a judgment of the confirming court, in terms identical to those of the award. The
judgment then has the same status and effect as any other U.S. civil judgment and may be
enforced as such. (44) In the United States, the resulting judgment can be enforced within the
forum as a domestic judgment; it can be enforced elsewhere in the United States under the
Full Faith and Credit Clause. (45)
If a party successfully resists confirmation of an award, the award will not be made a judgment
of the court. The award also will not be enforceable as a judgment in the jurisdiction where
confirmation was sought. But, unless the award is vacated, it will nonetheless continue to exist
and its confirmation or enforcement can be sought in other jurisdictions. Indeed, the award
may continue to be final and binding, notwithstanding its non-recognition. (46)
ii. Action to Vacate Arbitral Award
An action to vacate an arbitral award in the United States can be brought under §10 of the FAA.
The consequences of a judicial decision vacating an arbitral award differ significantly from
those of a decision refusing to recognize or confirm an arbitral award. If the action is
successful, then the award is “vacated” (or “annulled”); it ceases to have legal effect in the
forum and cannot subsequently be confirmed in the forum. (47) Moreover, as discussed
elsewhere, a properly vacated award arguably need not be enforced elsewhere under the New
York Convention (48) and, again arguably, cannot be enforced elsewhere. (49)
P "710" When a court vacates an arbitral award on one of the grounds (other than lack of an arbitration
P "711" agreement or non-arbitrability) set forth in §10, it may not also resolve the merits of the
parties' dispute. That dispute generally remains subject to the parties' underlying arbitration
agreement and therefore cannot be litigated (save where the award was vacated on the
grounds that no valid arbitration agreement covered the parties' dispute). (50)
iii. Consequences of Unconfirmed Award
An arbitral award need not be judicially confirmed in order to be final and binding, or to have
significant legal consequences, under U.S. law. (51) At a minimum, an unconfirmed arbitral
award “is a contract right that may be used as the basis for a cause of action.” (52)
Alternatively, it may be capable of being enforced at common law. And, an unconfirmed award
can provide the basis in national court litigation for a defense of res judicata or collateral
estoppel. (53)

B. Applicability of International Arbitration Conventions and National Arbitration

 Legislation to International Arbitral Awards
Critical to the recognition and enforcement of an international arbitration award is the
question of what (if any) international arbitration convention and what national arbitration
legislation is applicable to the award. Resolving these questions requires determining whether
an arbitral award: (a) arises from a “commercial” and “defined legal” relationship; (b) qualifies
as a “foreign,” “non-domestic,” or international award; (c) satisfies any applicable reciprocity
requirements; and (d) is “binding” or “final.” We examine each of these requirements below.
P "711"
P "712"
1. “Commercial” and “Defined Legal” Relationships
The New York and Inter-American Conventions, as well as many national arbitration statutes,
apply only to arbitration agreements and awards arising from “commercial” and “defined
legal” relationships. These requirements are discussed above. (54) In general, neither
requirement has presented significant obstacles to the applicability of the Convention.
2. “Foreign,” “Non-Domestic,” and “International” Awards (55)
Many international arbitration conventions and national arbitration statutes are applicable
only to “international” arbitral awards (as distinguished from purely domestic awards). As a
consequence, the applicability of the generally-favorable enforcement regimes of these
instruments will depend on characterization of an award's “international” status. (56) It is
important, therefore, to identify when an award will be deemed “foreign,” “non-domestic,” or
“international.”
The New York Convention applies only to so-called “foreign” and “non-domestic” arbitral
awards. Article I(1) provides that the Convention applies to arbitral awards that either: (1) are
“made” outside the country where enforcement is sought (i.e., a “foreign” award), or (2) are “not
considered as domestic awards” in the country where enforcement is sought (i.e., a “non-
domestic” award). The text of Article I(1) reads:
This Convention shall apply to the recognition and enforcement of arbitral awards made in the
territory of a State other than the State where the recognition and enforcement of such awards
are sought, and arising out of differences between persons, whether physical or legal. It shall
also apply to arbitral awards not considered as domestic awards in the State where their
recognition and enforcement are sought.
P "712"
P "713" Article I(1) raises important issues of interpretation in several related settings. (57) First, if
two nationals of State A (e.g., the United States) arbitrate an essentially local dispute outside
of State A (e.g., outside the United States), will the resulting award be “foreign” and subject to
the Convention in the courts of State A (e.g., in U.S. courts)? Second, when an arbitration in an
arbitral situs outside State A is conducted under the law of State A as the procedural law of the
arbitration, will the award be “domestic” in State A? Third, if an award is made in State A, in an
arbitration involving an essentially foreign dispute (e.g., between State B nationals, involving
conduct in State B), will the award be regarded as “non-domestic?” Finally, if an award made in
State A (e.g., the United States) is nonetheless “non-domestic,” may it be subject to an action
to vacate under local law (e.g., §10 of the FAA) – or is an action to vacate limited to Article V's
exceptions to enforcement? (58)
National arbitration legislation also applies differently depending on whether or not an award
is “international” or “foreign.” As discussed above, the UNCITRAL Model Law applies only to
“international commercial arbitration,” and Articles 34 and 35 of the Law set forth separate
(but similar) regimes for foreign and non-foreign arbitral awards. (59) Similarly, the Swiss Law
on Private International Law distinguishes between the treatment of “foreign” and other
arbitral awards. (60) The FAA has been interpreted as adopting a broadly similar distinction by
U.S. courts. (61)
The following materials explore the definitions of “foreign” and “non-domestic” awards under
international conventions and national arbitration legislation. Consider initially the excerpted
portions of the New York, Inter-American, and 1961 European Conventions, which define the
scope of each instrument. Second, review the excerpts from national arbitration statutes set
forth below, which determine the enforcement regime applicable to various categories of
arbitral awards. Next, consider the decision in Bergesen v. Joseph Muller Corp., (62) holding that
an award made in the United States can be “non-domestic,” in U.S. courts, for purposes of the
New York Convention. Also read the decision in Yusuf Ahmed Alghanim & Sons WLL v. Toys “R”
Us, Inc., (63) excerpted below, which explores some of the consequences resulting from the
Bergesen decision. Finally, consider Brier v. Northstar Marine Inc., (64) also excerpted below,
holding that an agreement between two U.S. nationals to arbitrate outside the United States
was not subject to the New York Convention.
P "713"
P "714"
NEW YORK CONVENTION
Article 1
[excerpted below at p. 987]
INTER-AMERICAN CONVENTION
Preamble & Article 1
[excerpted below at p. 995]
 1961 EUROPEAN CONVENTION ON INTERNATIONAL COMMERCIAL ARBITRATION
Article 1
[excerpted below at p. 981]
UNCITRAL MODEL LAW
Articles 1, 34, 35 & 36
[excerpted below at pp. 1012, 1019-21]
FEDERAL ARBITRATION ACT
9 U.S.C. §§9, 10, 202 & 304
[excerpted below at pp. 1000-01, 1003, 1004]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Articles 176, 190 & 194
[excerpted below at pp. 1033, 1035]
BERGESEN v. JOSEPH MULLER CORP.
710 F.2d 929 (2d Cir. 1983)
CARDAMONE, CIRCUIT JUDGE. The question before us on this appeal is whether the [New York]
Convention is applicable to an award arising from an arbitration held in New York between two
foreign entities.... The facts are undisputed and may be briefly stated. Sigval Bergesen, a
Norwegian shipowner, and Joseph Muller Corporation, a Swiss company, entered into three
P "714" charter parties in 1969, 1970 and 1971. The 1969 and 1970 charters provided for the
P "715" transportation of chemicals from the United States to Europe. The 1971 charter concerned
the transportation of propylene from the Netherlands to Puerto Rico. Each charter party
contained an arbitration clause providing for arbitration in New York, and the Chairman of the
American Arbitration Association was given authority to resolve disputes in connection with the
appointment of arbitrators.
In 1972, after disputes had arisen during the course of performing the 1970 and 1971 charters,
Bergesen made a demand for arbitration of its claims for demurrage and shifting and port
expenses. Muller denied liability and asserted counterclaims. The initial panel of arbitrators
chosen by the parties was dissolved because of Muller's objections and a second panel was
selected through the offices of the AAA. This panel held hearings in 1976 and 1977 and rendered
a written decision ... in favor of Bergesen, rejecting all of Muller's counterclaims save one. The
net award to Bergesen was $61,406.09 with interest.
Bergesen then sought enforcement of its award in Switzerland where Muller was based. For
over two years Muller successfully resisted enforcement. On December 10, 1981, shortly before
the expiration of the three-year limitations period provided in 9 U.S.C. §207, Bergesen filed a
petition in the U.S. District Court for the Southern District of New York to confirm the
arbitration award.... District Judge Charles S. Haight, Jr. confirmed Bergesen's award, holding
that the Convention applied to arbitration awards rendered in the United States involving
foreign interests. Judgment was entered awarding Bergesen $61,406.09, plus interest of
$18,762.01. Additionally, Bergesen received $8,462 for Muller's share of arbitrators' fees and
expenses which it had previously paid, together with interest of $2,253.63 on that amount.
On appeal from this $90,883.73 judgment, Muller contends that the Convention does not cover
enforcement of the arbitration award made in the United States because it was neither
territorially a “foreign” award nor an award “not considered as domestic” within the meaning of
the Convention. Muller also claims that the reservations adopted by the United States in its
accession to the Convention narrowed the scope of its application so as to exclude
enforcement of this award in United States courts, [and] that the statute implementing the
treaty was not intended to cover awards rendered within the United States.... Whether the
Convention applies to a commercial arbitration award rendered in the United States is a
question previously posed but left unresolved in this Court....
A proposed draft of the 1958 Convention which was to govern the enforcement of foreign
arbitral awards stated that it was to apply to arbitration awards rendered in a country other
than the state where enforcement was sought.... This proposal was controversial because the
delegates were divided on whether it defined adequately what constituted a foreign award. On
one side were ranged the countries of western Europe accustomed to civil law concepts; on the
other side were the eastern European states and the common law nations. For example,
several countries, including France, Italy and West Germany, objected to the proposal on the
P "715" ground that a territorial criterion was not adequate to establish whether an award was foreign
P "716" or domestic. These nations believed that the nationality of the parties, the subject of the
dispute and the rules of arbitral procedure were factors to be taken into account in
determining whether an award was foreign. In both France and West Germany, for example, the
nationality of an award was determined by the law governing the procedure. Thus, an award
rendered in London under German law was considered domestic when enforcement was
attempted in Germany, and an award rendered in Paris under foreign law was considered
foreign when enforcement was sought in France.
As an alternative to the territorial concept, eight European nations proposed that the
Convention “apply to the recognition and enforcement of arbitral awards other than those
considered as domestic in the country in which they are relied upon.” Eight other countries,
including the United States, objected to this proposal, arguing that common law nations would
 not understand the distinction between foreign and domestic awards. These latter countries
urged the delegates to adopt only the territorial criterion.
A working party composed of representatives from ten states to which the matter was referred
recommended that both criteria be included. Thus, the Convention was to apply to awards
made in a country other than the state where enforcement was sought as well as to awards not
considered domestic in that state. The members of the Working Party representing the western
European group agreed to this recommendation, provided that each nation would be allowed
to exclude certain categories of awards rendered abroad. At the conclusion of the conference
this exclusion was omitted, so that the text originally proposed by the Working Party was
adopted as Article I of the Convention.... [T]he Working Party's intent was to find a compromise
formula which would restrict the territorial concept. The final action taken by the Convention
appears to have had the opposite result, i.e., except as provided in paragraph 3, the first
paragraph of Article 1 means that the Convention applies to all arbitral awards rendered in a
country other than the state of enforcement, whether or not such awards may be regarded as
domestic in that state: “it also applies to all awards not considered as domestic in the state of
enforcement, whether or not any of such awards may have been rendered in the territory of
that state.” ...
With this background in mind, we turn to Muller's contentions regarding the scope of the
Convention. The relevant portion of the Convention, Article I, is set forth in the margin. (65) The
territorial concept expressed in the first sentence of Article I(1) presents little difficulty. Muller
correctly urges that since the arbitral award in this case was made in New York and
enforcement was sought in the United States, the award does not meet the territorial criterion.
P "716" Simply put, it is not a foreign award as defined in Article I(1) because it was not rendered
P "717" outside the nation where enforcement is sought.
Muller next contends that the award may not be considered a foreign award within the purview
of the second sentence of Article I(1) because it fails to qualify as an award “not considered as
domestic.” Muller claims that the purpose of the “not considered as domestic” test was to
provide for the enforcement of what it terms “stateless awards,” i.e., those rendered in the
territory where enforcement is sought but considered unenforceable because of some foreign
component. This argument is unpersuasive since some countries favoring the provision desired
it so as to preclude the enforcement of certain awards rendered abroad, not to enhance
enforcement of awards rendered domestically.
Additionally, Muller urges a narrow reading of the Convention contrary to its intended purpose.
The Convention did not define non-domestic awards. The definition appears to have been left
out deliberately in order to cover as wide a variety of eligible awards as possible, while
permitting the enforcing authority to supply its own definition of “non-domestic” in conformity
with its own national law. Omitting the definition made it easier for those states championing
the territorial concept to ratify the Convention while at the same time making the Convention
more palatable in those states which espoused the view that the nationality of the award was
to be determined by the law governing the arbitral procedure. We adopt the view that awards
“not considered as domestic” denotes awards which are subject to the Convention not because
made abroad, but because made within the legal framework of another country, e.g.,
pronounced in accordance with foreign law or involving parties domiciled or having their
principal place of business outside the enforcing jurisdiction. We prefer this broader
construction because it is more in line with the intended purpose of the treaty, which was
entered into to encourage the recognition and enforcement of international arbitration
awards. Applying that purpose to this case involving two foreign entities leads to the
conclusion that this award is not domestic....
We now turn to the argument that the implementing statute was not intended to cover awards
rendered within the United States. Section 202 of [the FAA,] which is entitled “Agreement or
award falling under the Convention,” provides in relevant part:
An agreement or award arising out of such a relationship which is entirely between citizens of
the United States shall be deemed not to fall under the Convention unless that relationship
involves property located aborad, envisages performance or enforcement abroad, or has some
other reasonable relation with one or more foreign states.
P "717" The legislative history of this provision indicates that it was intended to ensure that “an
P "718" agreement or award arising out of a legal relationship exclusively between citizens of the
United States is not enforceable under the Convention in [United States] courts unless it has a
reasonable relation with a foreign state.” H.R. Rep. No. 91-1181, 91st Cong., 2d Sess. 2, reprinted
in, 1970 U.S. Code, Cong. & Ad. News 3601, 3602. Inasmuch as it was apparently left to each state
to define which awards were to be considered non-domestic, Congress spelled out its
definition of that concept in §202. Had Congress desired to exclude arbitral awards involving
two foreign parties rendered within the United States from enforcement by our courts it could
readily have done so. It did not....
Muller's further contention that it could not have been the aim of Congress to apply the
Convention to this transaction because it would remove too broad a class of awards from
enforcement under the [FAA] is unpersuasive. That this particular award might also have been
enforced under the [FAA] is not significant. There is no reason to assume that Congress did not
intend to provide overlapping coverage between the Convention and the [FAA].... The judgment
is affirmed.
YUSUF AHMED ALGHANIM & SONS, WLL v. TOYS “R” US, INC.
126 F.3d 15 (2d Cir. 1997)
 MINER, CIRCUIT JUDGE. Appeal from a judgment entered in the United States District Court for
the Southern District of New York denying respondents' cross-motion to vacate or modify an
arbitration award and granting the petition to confirm the award. The [district] court found that
while the petition for confirmation was brought under the [New York] Convention, respondents'
cross-motion to vacate or modify the award was properly brought under the Federal
Arbitration Act, and thus those claims were governed by the [FAA's] implied grounds for
vacatur. Nonetheless, the court granted the petition to confirm the award, finding that
respondents' allegations of error in the arbitral award were without merit. For the reasons that
follow, we affirm.
In November of 1982, respondent-appellant Toys “R” Us, Inc. (collectively with respondent-
appellant TRU (HK) Limited, “Toys ‘R’ Us”) and petitioner-appellee Yusuf Ahmed Alghanim &
Sons, WLL (“Alghanim”), a privately owned Kuwaiti business, entered into a License and
Technical Assistance Agreement (the “agreement”) and a Supply Agreement. Through the
agreement, Toys “R” Us granted Alghanim a limited right to open Toys “R” Us stores and use its
trademarks in Kuwait and 13 other countries located in and around the Middle East (the
“territory”). Toys “R” Us further agreed to supply Alghanim with its technology, expertise and
assistance in the toy business. [Disputes arose between Toy “R” Us and Alghanim, leading the
former to terminate the agreement and contract with a new Kuwaiti distributor.] ...
P "718"
P "719"
On December 20, 1993, Toys “R” Us invoked the dispute-resolution mechanism in the
agreement, initiating an arbitration before the American Arbitration Association. Toys “R” Us
sought a declaration that the agreement was terminated on December 31, 1993. Alghanim
responded by counterclaiming for breach of contract....
On July 11, 1996, the arbitrator awarded Alghanim $46.44 million for lost profits under the
agreement, plus 9 percent interest to accrue from December 31, 1994. The arbitrator's findings
and legal conclusions were set forth in a 47-page opinion.
Alghanim petitioned the district court to confirm the award under the [New York] Convention.
Toys “R” Us cross-moved to vacate or modify the award under the FAA, arguing that the award
was clearly irrational, in manifest disregard of the law, and in manifest disregard of the terms
of the agreement. The district court concluded that “[t]he Convention and the FAA afford
overlapping coverage, and the fact that a petition to confirm is brought under the Convention
does not foreclose a cross-motion to vacate under the FAA, and the Court will consider [Toys “R”
Us's] cross-motion under the standards of the FAA.” By judgment entered December 20, 1996,
the district court confirmed the award, finding Toys “R” Us's objections to the award to be
without merit. This appeal followed....
Toys “R” Us argues that the district court correctly determined that the provisions of the FAA
apply to its cross-motion to vacate or modify the arbitral award. In particular, Toys “R” Us
contends that the FAA and the Convention have overlapping coverage. Thus, Toys “R” Us argues,
even though the petition to confirm the arbitral award was brought under the Convention, the
FAA's implied grounds for vacatur should apply to Toys “R” Us's cross-motion to vacate or
modify because the cross-motion was brought under the FAA. We agree that the FAA governs
Toys “R” Us's cross-motion.
Neither party seriously disputes the applicability of the Convention to this case and it is clear
to us that the Convention does apply. The Convention provides that it will apply
to the recognition and enforcement of arbitral awards made in the territory of a State other
than the State where the recognition and enforcement of such awards are sought, and arising
out of differences between persons, whether physical or legal. It shall also apply to arbitral
awards not considered as domestic awards in the State where their recognition and enforcement
are sought.
Convention Art. I(1) (emphasis added). The Convention does not define nondomestic awards.
See Bergesen, supra.
In Bergesen, we held “that awards ‘not considered as domestic’ denotes awards which are
P "719" subject to the Convention not because made abroad, but because made within the legal
P "720" framework of another country, e.g., pronounced in accordance with foreign law or involving
parties domiciled or having their principal place of business outside the enforcing
jurisdiction.” The Seventh Circuit similarly has interpreted §202 to mean that “any commercial
arbitral agreement, unless it is between two United States citizens, involves property located
in the United States, and has no reasonable relationship with one or more foreign states, falls
under the Convention.”Jain v. de Mere, 51 F.3d 686, 689 (7th Cir.), cert. denied, 516 U.S. 914.
The Convention's applicability in this case is clear. The dispute giving rise to this appeal
involved two nondomestic parties and one United States corporation, and principally involved
conduct and contract performance in the Middle East. Thus, we consider the arbitral award
leading to this action a non-domestic award and thus within the scope of the Convention.
Toys “R” Us argues that the district court properly found that it had the authority under the
Convention to apply the FAA's implied grounds for setting aside the award. We agree. Under the
Convention [sic], the district court's role in reviewing a foreign arbitral award is strictly limited:
The court shall confirm the award unless it finds one of the grounds for refusal or deferral of
recognition or enforcement of the award specified in the said Convention. 9 U.S.C. §207.
Enforcement may also be refused if “[t]he subject matter of the difference is not capable of
settlement by arbitration,” or if “recognition or enforcement of the award would be contrary to
the public policy” of the country in which enforcement or recognition is sought. These seven
 grounds are the only grounds explicitly provided under the Convention.
In determining the availability of the FAA's implied grounds for setting aside, the text of the
Convention leaves us with two questions: (1) whether, in addition to the Convention's express
grounds for refusal, other grounds can be read into the Convention by implication, much as
American courts have read implied grounds for relief into the FAA, and (2) whether, under
Article V(1)(e), the courts of the United States are authorized to apply United States procedural
arbitral law, i.e., the FAA, to nondomestic awards rendered in the United States. We answer the
first question in the negative and the second in the affirmative.
We have held that the FAA and the Convention have “overlapping coverage” to the extent that
they do not conflict. Bergesen; see 9 U.S.C. §208 (FAA may apply to actions brought under the
Convention “to the extent that [the FAA] is not in conflict with [9 U.S.C. §§201-208] or the
Convention as ratified by the United States”); Lander Co. v. MMP Inv., Inc., 107 F.3d 476, 481 (7th
Cir. 1997), cert. denied, – U.S. – (1997). However, by that same token, to the extent that the
Convention prescribes the exclusive grounds for relief from an award under the Convention,
that application of the FAA's implied grounds would be in conflict, and is thus precluded. See,
e.g., M & C Corp. v. Erwin Behr GmbH & Co., KG, 87 F.3d 844, 851 (6th Cir. 1996)....
P "720"
P "721"
There is now considerable caselaw holding that, in an action to confirm an award rendered in,
or under the law of, a foreign jurisdiction, the grounds for relief enumerated in Article V of the
Convention are the only grounds available for setting aside an arbitral award.... This conclusion
is consistent with the Convention's proenforcement bias. See, e.g., Scherk v. Alberto-Culver Co.,
supra. We join these courts in declining to read into the Convention the FAA's implied defenses
to confirmation of an arbitral award.
Although Article V provides the exclusive grounds for refusing confirmation under the
Convention, one of those exclusive grounds is where “[t]he award ... has been set aside or
suspended by a competent authority of the country in which, or under the law of which, that
award was made.” Convention Art. V(1)(e). Those courts holding that implied defenses were
inapplicable under the Convention did so in the context of petitions to confirm awards
rendered abroad. These courts were not presented with the question whether Article V(1)(e)
authorizes an action to set aside an arbitral award under the domestic law of the state in
which, or under which, the award was rendered. We, however, are faced head-on with that
question in the case before us, because the arbitral award in this case was rendered in the
United States, and both confirmation and vacatur were then sought in the United States.
We read Article V(1)(e) of the Convention to allow a court in the country under whose law the
arbitration was conducted to apply domestic arbitral law, in this case the FAA, to a motion to
set aside or vacate that arbitral award. The district court in Spector v. Torenberg, 852 F.Supp.
201 (S.D.N.Y. 1994), reached the same conclusion as we do now, reasoning that, because the
Convention allows the district court to refuse to enforce an award that has been vacated by a
competent authority in the country where the award was rendered, the court may apply FAA
standards to a motion to vacate a nondomestic award rendered in the United States.
Our conclusion also is consistent with the reasoning of courts that have refused to apply non-
Convention grounds for relief where awards were rendered outside the United States. For
example, the Sixth Circuit in M & C concluded that it should not apply the FAA's implied
grounds for vacatur, because the United States did not provide the law of the arbitration for
the purposes of Article V(1)(e) of the Convention. 87 F.3d at 849. Similarly, in International
Standard Electric Corp. v. Bridas etc., 754 F.Supp. 172 (S.D.N.Y. 1990), the district court decided
that only the state under whose procedural law the arbitration was conducted has jurisdiction
under Article V(1)(e) to vacate the award, whereas on a petition for confirmation made in any
other state, only the defenses to confirmation listed in Article V of the Convention are
available. 745 F.Supp. at 178.
This interpretation of Article V(1)(e) also finds support in the scholarly work of commentators on
the Convention and in the judicial decisions of our sister signatories to the Convention. There
appears to be no dispute among these authorities that an action to set aside an international
arbitral award, as contemplated by Article V(1)(e), is controlled by the domestic law of the
rendering state....
P "721"
P "722"
There is no indication in the Convention of any intention to deprive the rendering state of its
supervisory authority over an arbitral award, including its authority to set aside that award
under domestic law. The Convention succeeded and replaced the Geneva Convention. The
primary defect of the Geneva Convention was that it required an award first to be recognized in
the rendering state before it could be enforced abroad, the so-called requirement of “double
exequatur.” The Convention eliminated this problem by eradicating the requirement that a
court in the rendering state recognize an award before it could be taken and enforced abroad.
In so doing, the Convention intentionally “liberalized procedures for enforcing foreign arbitral
awards.”
Nonetheless, under the Convention, the power and authority of the local courts of the rendering
state remain of paramount importance. “What the Convention did not do ... was provide any
international mechanism to insure the validity of the award where rendered. This was left to
the provisions of local law. The Convention provides no restraint whatsoever on the control
functions of local courts at the seat of arbitration.” [Craig, Some Trends and Developments in the
Laws and Practice of International Commercial Arbitration, 30 Tex. Int'l L.J. 1, 11 (1995).] Another
commentator explained:
 Significantly, [Article V(1)(e)] fails to specify the grounds upon which the rendering State may
set aside or suspend the award. While it would have provided greater reliability to the
enforcement of awards under the Convention had the available grounds been defined in some
way, such action would have constituted meddling with national procedure for handling
domestic awards, a subject beyond the competence of the Conference.
Quigley, Accession by the United States to the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1070 (1961). From the plain language
and history of the Convention, it is thus apparent that a party may seek to vacate or set aside
an award in the state in which, or under the law of which, the award is rendered. Moreover, the
language and history of the Convention make it clear that such a motion is to be governed by
domestic law of the rendering state, despite the fact that the award is nondomestic within the
meaning of the Convention as we have interpreted it in Bergesen.
In sum, we conclude that the Convention mandates very different regimes for the review of
arbitral awards (1) in the state in which, or under the law of which, the award was made, and (2)
in other states where recognition and enforcement are sought. The Convention specifically
contemplates that the state in which, or under the law of which, the award is made, will be free
to set aside or modify an award in accordance with its domestic arbitral law and its full
P "722" panoply of express and implied grounds for relief. See Convention Art. V(1)(e). However, the
P "723" Convention is equally clear that when an action for enforcement is brought in a foreign state,
the state may refuse to enforce the award only on the grounds explicitly set forth in Article V of
the Convention.
BRIER v. NORTHSTAR MARINE INC.
1992 WL 350292 (D.N.J. 1992)
[excerpted above at pp. 121-24]
Notes on “Foreign,” “Non-Domestic” and “International” Awards
1. Applicability of New York Convention to “foreign” and “non-domestic” awards. Consider
Articles I and V of the New York Convention. What arbitral awards are subject to the
Convention? Any arbitral awards? Any arbitral awards made in another nation?
Compare Article I of the New York Convention with Article 1 of the 1961 European Convention.
How are the two instruments different?
What is the purpose of limiting the scope of the New York Convention and the 1961 European
Convention to certain categories of arbitrations and arbitral awards?
2. Scope of New York Convention under the Bergesen decision – an award made in the United
States can be subject to the Convention because it is “non-domestic.”Bergesen and Toys-R-Us
hold that an award made in the United States was nonetheless a “non-domestic” award under
Article I(1) of the Convention, and therefore subject to the Convention and its implementing
legislation. Several other lower U.S. courts have agreed that awards made in the United States
may be “non- domestic.” See Yusuf Ahmed Alghanim & Sons, WLL v. Toys “R” Us, Inc., 126 F.3d 15
(2d Cir. 1997), cert. denied, __ U.S. __ (1998); Lander Co. v. MMP Investments, Inc., 107 F.3d 476 (7th
Cir. 1997); Trans Chemical Ltd v. China Nat. Mach. Import & Export Corp., 978 F.Supp. 226 (S.D.
Tex. 1997); Dworkin-Cosell Interair Courier Services, Inc. v. Avraham, 728 F.Supp. 156 (S.D.N.Y.
1989); Transmarine Seaways Corp. v. Marc Rich & Co., AG, 480 F.Supp. 352 (S.D.N.Y. 1979)
(applying Convention to award made in New York, in case involving two non-U.S. parties). See
also Productos Mercantiles e Industriales, SA v. Faberge USA, Inc., 23 F.3d 41 (2d Cir. 1994)
(arbitral award made in United States can be subject to Inter-American Convention; citing
Bergesen with approval).
3. Lower U.S. court decisions holding that awards made in the United States cannot be “non-
domestic.” A few pre-Bergesen lower court decisions held that arbitral awards made in the
United States could not be “foreign” or “non-domestic” awards. Diapulse Corp. of America v.
Carba, Ltd, No. 3263 (S.D.N.Y. June 28, 1979) (award made in New York not subject to Convention
because it was not an “award not considered as domestic”); National Metal Converters, Inc. v.
I/S Stavborg, 500 F.2d 424 (2d Cir. 1974) (not applying Convention to award made in New York,
in case involving U.S. and foreign parties; noting disagreement among commentators). This
view is in error and no reported post-Bergesen decision appears to have adopted it.
4. Intended meaning of “non-domestic” award in Article I(1) of the Convention. Some
commentators have said that “the question what constitutes a non-domestic award within the
meaning of the New York Convention is one of the most complicated issues posed by this
Treaty.” van den Berg, When is an Arbitral Award Non-Domestic Under the New York Convention
of 1958?, 6 Pace L. Rev. 25, 26 (1985). As Bergesen suggests, the language of Article I(1) was a
compromise. During drafting of the Convention, various civil law states initially opposed a
territorial criteria that defined awards based on where they were made. In contrast, various
common law and Eastern European nations at first favored variations of the territorial
requirement of Article I(1)'s first clause. The final version of the Convention sought to bridge
these two views.
Preliminary drafts of the Convention adopted the “territorial” perspective and provided that it
would apply to “the recognition and enforcement of arbitral awards made in the territory of a
State other than the State in which such awards are relied upon.” U.N. Doc. E/2704 and Corr. 1,
reprinted in, 1 International Commercial Arbitration: New York Convention at III.A.1.7 (G. Gaja ed.
P "723" 1985). French, German, and other civil law delegates criticized this proposal, on the grounds
P "724" that:
If it was agreed that the place where the award was made should not be considered a
 determining factor ... whether an award was to be regarded as national [i.e., domestic] or
foreign could be made dependent on the nationality of parties, the subject of the dispute, or
the rules of procedure applied. The last seemed to constitute the most appropriate defining
factor. The nature, and hence the nationality, of an arbitral award would then be derived from
the rules of procedure under which it had been made. Moreover, it should be noted that those
rules depended to a large extent, at least in German law, on the will of the parties and, failing
that, on the arbitral body itself....
U.N. Doc. E/CONF.26/SR.4, reprinted in, 1 International Commercial Arbitration: New York
Convention at III.C. 16-17 (G. Gaja ed. 1985). The German delegate subsequently commented that
if two German parties conduct an arbitration in London, subject to German law as the curial
law, then, under German law, the award would not be foreign, but domestic. Id. at III.C.28. Other
delegates agreed, and a number of civil law states proposed the following amendment: “This
Convention shall apply to the recognition and enforcement of arbitral awards other than those
considered as domestic in the country in which they are relied upon.”Id. at III.B.1.2.
In response to these criticisms, a Working Group was established to draft a compromise
acceptable to all parties. The “compromise” was essentially the same as Article I(1) as finally
adopted:
This Convention shall apply to the recognition and enforcement of arbitral awards made in the
territory of a State other than the State where the recognition and enforcement of such awards
are sought, and arising out of disputes or differences between physical and legal persons. It
shall also apply to arbitral awards not considered as domestic awards in the State where the
recognition and enforcement are sought. Id. at III.B.4.2.
As others have observed, this was scarcely a compromise: “In fact, the compromise reached at
the New York Conference was in favour of the territorialists.” van den Berg, When is an Arbitral
Award Non-Domestic Under the New York Convention of 1958?, 6 Pace L. Rev. 25, 39 (1985). That is
because the non-territorial criteria for defining the Convention's application, contained in the
second sentence of Article I(1), was an extension of the Convention: in addition to the non-
territorial criteria added in the second sentence of Article I(1), the Convention was applicable,
through the first sentence of Article I(1), which was retained, to all awards made in foreign
countries. “[T]he New York Convention always applies to the recognition and enforcement of an
arbitral award made in another State ..., whilst it may, in addition, apply to the recognition and
enforcement or an arbitral award made in the State where the recognition and enforcement
are sought if such an award is considered non-domestic.”Id.
5. Rationale of Bergesen. Was Bergesen correctly decided? Should awards made in State A be
subject to the Convention in that State?
(a) No definition of “non-domestic” award in Convention. First, the Bergesen court reasoned
that the Convention simply “did not define non-domestic awards,” thereby leaving it to
member states to adopt their own definitions. Is that correct? Is there anything in the
Convention or its purposes that would forbid the United States from regarding awards
made in New York under U.S. arbitration law as non-domestic, and thus subjecting those
awards to the Convention in U.S. courts? What if the United States were to regard every
arbitral award as non-domestic? Would this undermine the Convention or adversely
affect other member states? How would such results follow from a nation's application of
the Convention's proenforcement standards to awards made within the State's territory?
Is not the real threat to the Convention the opposite: narrow national court definitions of
“foreign” and “non-domestic” awards that place inappropriately restrictive limits on the
Convention's scope? See the Indian Supreme Court's decision in National Thermal Power
Corporation, holding awards made outside India “domestic” in certain circumstances,
supra pp. 119-26 & infra pp. 744-61.
(b) How should “non-domestic” awards be defined? Assuming that the Convention permits the
broad definition of non-domestic awards adopted in Bergesen, is that a wise decision?
Should not U.S. courts be mindful of the legislative history and purpose of the Convention
in defining “non-domestic” awards? The Convention's legislative history strongly suggests,
as outlined above, that “non-domestic” awards were intended to be those that, while
made within a state's territory, were made pursuant to the arbitration law of another
P "724" country; an example, discussed above, would be two Germans arbitrating in Germany
P "725" with English law as the lex arbitri. See supra p. 723. Should U.S. law limit the
Convention's applicability to such “non-domestic” awards? Would doing so serve any of
the Convention's purposes?
 (c) Definition of “non-domestic” in §202 of the FAA. Second, after concluding that the
Convention left each signatory free to define “non-domestic,” the Bergesen court then
turned to §202 of the FAA for the U.S. definition of the term. Section 202 provides:
An agreement or award arising out of ... a [commercial] relationship which is entirely
between citizens of the United States shall be deemed not to fall under the Convention
unless that relationship involves property located abroad, envisages performance or
enforcement abroad, or has some other reasonable relation with one or more foreign
states. 9 U.S.C. §202.
See also H.R. Rep. No. 1181, 91st Cong., 2d Sess. 2, reprinted in, 1970 U.S. Code Cong. &
Admin. News 3601, 3602. Consider the Bergesen court's reliance on §202. Did Congress in
fact “spell out its definition” of a non-domestic award in §202, as Bergesen concluded?
Note that §202 does not affirmatively define the Convention's scope – at least not
expressly. Rather, it provides that the Convention will not apply to certain agreements
and awards. See supra pp. 125-26 for an explanation of Congress's purposes in enacting
§202, indicating that the section was intended to exclude certain domestic disputes from
the Convention's scope. Is §202 nonetheless relevant to fashioning a definition of “non-
domestic” awards under U.S. law? Are the Convention's goals furthered by adopting
Bergesen's reading of §202? What reading should be given to “non-domestic” under §202?
6. Standards for determining when awards “made” in the United States will be “non-domestic”
after Bergesen. As described above, Bergesen interprets §202 to define, for U.S. purposes, when
an award will be regarded as “non-domestic.” In applying the basic Bergesen rationale, the
exact scope of awards rendered in the United States that will be deemed “non-domestic”
under §202 is not entirely settled.
(a) Application of §202 in disputes between U.S. nationals. Section 202 of the FAA provides
that, if a U.S. arbitration involves only U.S. citizens, the Convention may be applicable,
but only if the parties' “relationship involves property located abroad, envisages
performance or enforcement abroad, or has some other reasonable relation with one or
more foreign states.” 9 U.S.C. §202 (1982). This “reasonable relationship” standard is not
particularly precise, even in cases involving U.S. citizens. Compare Lander Co. v. MMP Inv.,
Inc., 107 F.3d 476 (7th Cir. 1997) (award made in U.S., in international dispute between two
U.S. companies, is subject to New York Convention under §202); and Fuller v. Compagnie
des Bauxites de Guinee, 421 F.Supp. 938 (W.D. Pa. 1976) with Wilson v. Lignotock U.S.A., Inc.,
709 F.Supp. 797 (E.D.N.Y. 1989).
Section 202's “reasonable relationship” standard was derived from §1-105 of the Uniform
Commercial Code. See Foreign Arbitral Awards, S. Rep. No. 91-702, 91st Cong., 2d Sess. 6
(1970) (Appendix; Statement of Richard D. Kearney) (“The reasonable relationship
criterion is taken from the general provisions of the Uniform Commercial Code [§1-
105(1).]”). Section 1-105 suggests that the law chosen by a contractual choice-of-law clause
must be reasonably related to the parties' transaction. Precedent under §1-105 would
therefore presumably be relevant in construing §202, although no reported U.S. lower
court decisions have thusfar cited such authority.

(b) Application of §202 in disputes involving foreign nationals. If an arbitral award was made in
the United States in an arbitration that involved one or more foreign parties, the
application of the literal terms of §202 is unclear. At a minimum, however, it would
appear that no greater “reasonable relation with one or more foreign states” should be
required under §202 for foreign parties than that necessary to render the Convention
applicable to U.S. arbitrations involving only U.S. citizens. For applications of §202, see
Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434 (11th Cir. 1998)
(arbitral award made in the United States, under U.S. law, is a “non-domestic” award
under §202 if “one of the parties to the arbitration is domiciled or has its principal place
of business outside of the United States”); Lander Co. v. MMP Inv., Inc., 107 F.3d 476 (7th
Cir. 1997) (“This makes the language of section 202 critical. The section adopts the
provisions of the Convention for any arbitration agreement or arbitral award arising out of
a legal relationship, whether contractual or not, which considered as commercial,
including a transaction, contract, or agreement described in section 2 of this title – that
is, either a ‘maritime transaction or a contract evidencing a transaction involving
commerce,’ 9 U.S.C. §2 – provided only that if the relationship is entirely between U.S.
citizens, it must involve performance abroad or have some other reasonable relation with
a foreign country”); Dworkin-Cosell Interair Courier Services, Inc. v. Avraham, 728 F.Supp.
156 (S.D.N.Y. 1989).
P "725"
P "726"
7. Consequences under the New York Convention of classifying an award as “foreign” or “non-
domestic.” As we have seen, Article I(1) provides that the New York Convention applies to two
categories of arbitral awards: (i) “foreign” awards, which are made outside the nation where
enforcement of the award is sought; and (ii) “non-domestic” awards, which are “not considered
as domestic awards” in the nation where enforcement is sought. The consequences of a
conclusion that an award, which would otherwise be subject to the New York Convention, is
“foreign” or “non-domestic” can be significant.
 (a) “Foreign” award can be denied recognition only on grounds specified in Article V. As Toys-R-
Us explains, if an award is “foreign” in a particular state, it will ordinarily be subject to
non-recognition and non-enforcement in that state only if one of the exceptions set forth
in Article V of the Convention is applicable. See supra pp. 706-07 & infra pp. 792-93. In
contrast, as Toys-R-Us holds, an award that is not “foreign” can generally be denied
recognition on any grounds available under local law. See supra pp. 706-07 & infra pp. 791-
92. For example, if an award is “foreign” in State A, it may only be denied recognition in
State A courts if an Article V exception applies; in contrast, if the award is not “foreign,” it
may be vacated or denied confirmation on any grounds available under State A's law
(even if an Article V exception does not apply).
(b) “Non-domestic” awards can arguably be denied recognition only on the grounds specified in
Article V. A “non-domestic” award can arguably be denied recognition and enforcement
only if one of the substantive exceptions (other than Article V(1)(e)) set forth in Article V of
the Convention is applicable. As discussed below, a few lower U.S. courts have held that
“non-domestic” awards which are made in the United States can be vacated only on one
of the substantive grounds set forth in Article V, and not on other grounds available under
the domestic FAA. See infra pp. 726-28.
(c) “Non-domestic” awards can arguably be denied recognition on any grounds available under
domestic law of arbitral situs. On the other hand, it is also arguable that the Convention
permits a “non-domestic” award to be vacated on whatever grounds are available under
local law for the vacation of such awards. That is, there is a reasonable argument that the
Convention does not require a state to apply only Article V's substantive grounds for non-
recognition (i.e., grounds other than Article V(1)(e)) to awards which are made within the
state (i.e., the award is not “foreign”), but which the state regards as “non-domestic.” As
discussed below, Toys-R-Us and a number of other U.S. lower courts have adopted this
interpretation of the Convention. See infra pp. 727-28. See also Hebei Import & Export Corp.
v. Polytek Engineering Co., 14 Mealey's Int'l Arb. Rep. 3 (Feb. 1999) (Hong Kong Ct. App. 1999)
(New York Convention “distinguishes between proceedings to set aside an award in the
court of supervisory jurisdiction ... and proceedings in the court of enforcement.
Proceedings to set aside are governed by the law under which the award was made up or
the law of the place where it was made, while proceedings in the court of enforcement
are governed by the law of that forum”). In some nations, local law provides grounds for
vacating arbitral awards which are substantially broader than those available under
Article V. See infra pp. 784-95, 795-96.
8. Consequences under the FAA of classifying an award as “foreign” or “non-domestic” for
purposes of New York Convention. Classifying an arbitral award as “foreign” or “non-domestic”
has significant (and complex) consequences under the FAA in the United States.
(a) Applicability of procedural regime of chapter two of the FAA. As Bergesen illustrates, if an
award is “foreign” or “non-domestic,” then it may be enforced pursuant to §207 of the FAA.
Among other things, §207 provides an independent basis for federal subject-matter
jurisdiction, thereby ensuring a federal forum for enforcement. See infra pp. 884-85. In
contrast, chapter one of the FAA provides no similar grant. See infra p. 892. Moreover, as
was the case in Bergesen, the three-year statute of limitations period for confirming
awards under §207, rather than the one-year period under §9, would be applicable.
Similarly, the venue provisions of §207 would also apply. See infra pp. 890-91.
(b) Possibility under U.S. law of inconsistent statutory regimes to vacate and to confirm. As
Toys-R-Us illustrates, when an award that is “made” in the United States is deemed to be
“non-domestic,” it arguably becomes subject to both: (i) an action to vacate under §10 of
the FAA, see infra pp. 896-99; and (ii) an action to recognize and confirm the award under
the New York Convention and §207 of the FAA, see infra pp. 882-87. Section 10 of the FAA
permits actions to vacate awards “made” in a particular U.S. district to be brought in that
district, and sets out the grounds on which the award can be vacated. See infra pp. 896-99.
Section 207 of the FAA permits actions to confirm awards to which the Convention applies,
subject only to the exceptions set forth in Article V; nothing in the FAA's second chapter
provides a basis for vacating an award. Thus, in Tesoro Petroleum Corp. v. Asamera (South
Sumatra) Ltd, 798 F.Supp. 400 (W.D. Tex. 1992), the district court held that §10, but not the
P "726" FAA's second chapter, provides the basis for actions to vacate Convention awards. See
P "727" infra pp. 767-68.
Actions under §10 would ordinarily result in an award being vacated if one of §10's
statutory (or non-statutory) exceptions to confirmation was satisfied. At the same time,
actions under §207 would ordinarily result in an award being confirmed unless one of
Article V's exceptions to recognition was satisfied. Because the exceptions contained in
Article V and §10 are not identical, conflicting results could be possible. See infra p. 796.
The risk of conflicting results under §10 and §207 will usually not be momentous, because
the standards for vacating and enforcing an award under the FAA and the Convention are
not dramatically different. See infra pp. 795-797. Nevertheless, in particular cases, the
differences could be critical.
As noted above, and discussed in greater detail below, it is not clear whether a “non-
domestic” award “made” in the United States can be vacated on §10 grounds: there is
lower court authority supporting both the view that it can be and the opposing view that
any action to vacate a Convention award is limited by the substantive grounds for non-
recognition set forth in Article V. See infra pp. 726-28.
 (c) Possibility that no action can be brought under §10 to vacate “non-domestic” award made
in the United States. There is also an argument, albeit a difficult one, that §10 is not
available for actions to vacate Convention awards. Section 208 permits application of the
FAA's first chapter only to the extent consistent with the Convention. 9 U.S.C. §208.
Congress presumably omitted any provision concerning actions to vacate from the FAA's
second chapter with some measure of deliberation.
As discussed below, recently-enacted arbitration legislation in several nations (notably
Belgium and Switzerland) does not permit actions to vacate international awards made
locally, at least in certain circumstances. See infra pp. 763-68. If §208 and the Convention
are read to deny any right to vacate under §10, they arguably also preempt state statutes
permitting actions to vacate. The consequence of this interpretation would be that it
would be impossible to vacate a “non- domestic” award made in the United States.
Are the Convention's purposes furthered by excluding any right to vacate a Convention
award made in the United States? The consequences of excluding actions to vacate
Convention awards made in the United States would be significant. Confirmation of the
awards in the United States could be resisted, but only on Article V grounds (not on
broader §10 or state law grounds). The awards could not be vacated in the United States
and, as a result, would generally be final and enforceable as of right in other Convention
signatories (subject to Article V exceptions). Would this be wise?

9. Possibility of vacating a “non-domestic” New York Convention award, made in the United
States, under §10 of the FAA. As noted above, see supra pp. 725-26, authorities are divided over
the question whether a “non-domestic” award, made in the United States, is subject to an
action to vacate under §10 of the FAA, including on grounds not provided for non-recognition
under Article V of the Convention.
(a) Article III is only applicable to “foreign” and “non- domestic” awards. The requirement in
Article III of the Convention that member States “recognize arbitral awards as binding
and enforce them” will not apply unless an award is either “foreign” or “non-domestic”
within the meaning of Article I, in a State's courts. If Article I does not apply, then neither
does the Convention, and nothing in Articles III or V limits the grounds for vacating the
award. If an award is “foreign” or “non-domestic” under Article I, in a particular state, then
Article III does apply.
(b) Authorities holding that only Article V grounds are available in an action in the arbitral situs
to vacate a “non-domestic” award. Under one view of the Convention, more expansive
bases for non-recognition that may be available for domestic awards under domestic
arbitration statutes cannot be relied on in defense to an action to vacate or confirm a
non-domestic award under Article III. For example, if Article III applies, the “manifest
disregard” exception to enforcement, discussed at infra pp. 810-13, is arguably not
available (because it is not contained in Article V's exceptions to enforceability).
A number of authorities have concluded, usually without significant discussion, that only
Article V grounds are available in actions in the arbitral situs to vacate non-domestic
awards. See Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434 (11th
Cir. 1998) (only grounds enumerated in Article V of New York Convention may be basis for
vacating award subject to Convention, including “non-domestic” awards made in United
States); Lander Company, Inc. v. MMP Investments Inc., 107 F.3d 476 (7th Cir. 1997); Merill
Lynch, Pierce, Fenner & Smith, Inc. v. Lauer, 49 F.3d 323 (7th Cir. 1995) (Convention award
made in U.S. is subject to action to vacate only on grounds set forth in Convention);
Avraham v. Shigur Express Ltd, 1991 U.S. Dist. Lexis 12267 (S.D.N.Y. 1991) (applying Article V,
not §10); Fiat SpA v. Ministry of Finance and Planning, 1989 U.S. Dist. Lexis 11995 (S.D.N.Y.
1989) (“Since the Convention, as supplemented by the [FAA], applies to arbitration awards
P "727" rendered in the United States involving foreign interests, Article V(1)(c) shall apply ...
P "728" here”); Tesoro Petroleum Corp. v. Asamera (South Sumatra) Ltd, 798 F.Supp. 400 (W.D.
Tex. 1992); Brandeis Intsel Ltd v. Calabrain Chem. Corp., 656 F.Supp. 160, 167 (S.D.N.Y. 1987);
Kolkey, Attacking Arbitral Awards: Rights of Appeal and Review in International Arbitrations,
22 Int'l Law. 693, 699-700 (1988) (“in the case of a ‘non-domestic’ award rendered in the
United States, the grounds of ‘manifest disregard of the law’ to vacate the award would
be unavailable by which to challenge the award under the New York Convention”).
(c) Authorities holding that non-Article V grounds are available in an action in the arbitral situs
to vacate a “non-domestic” award. On the other hand, Toys-R-Us and other authorities
have concluded that the Convention (and §207) permit actions to vacate an award in the
arbitral situs on non-Article V grounds. The rationale of decisions permitting actions to
vacate on non-Article V grounds is complex. These authorities first observe that an
arbitral award is subject to an action to vacate under the Convention only in either the
place where it was “made” or under whose laws it was made. Trans Chemical Ltd v. China
Nat'l Machinery Import & Export Corp., 978 F.Supp. 226 (S.D. Tex. 1997) (award made in
United States may be non-domestic; if so, it is nonetheless subject to an action to vacate
under §9); International Standard Electric Corp. v. Bridas SA etc., 745 F.Supp. 172 (S.D.N.Y.
1990). These authorities go on to reason that the Bergesen conclusion that the award was
“non-domestic” does not affect the place where the award was “made”; in Bergesen, the
award was still “made” in New York, even though the award is “non-domestic.” Finally, and
less clearly, these authorities conclude that Article V(1)(e) of the Convention impliedly
permits actions to vacate an award in its country of origin on any grounds, including
grounds not specified in Article V of the Convention. See Toys-R-Us, supra; van den Berg,
When is an Arbitral Award Non-Domestic Under the New York Convention of 1958?, 6 Pace L.
Rev. 25, 55 (1985).
In Toys-R-Us, the Second Circuit expressly adopted the foregoing rationale. It held that a
“non-domestic” award, made in the United States, could be vacated on all of the grounds
permitted under the FAA for domestic awards, including manifest disregard. Other U.S.
courts have apparently adopted this analysis, holding that §10 grounds are available for
vacating a non-domestic award made in the United States. See Spector v. Torenberg, 852
F.Supp. 202 (S.D.N.Y. 1994) (applying §10 to non-domestic award made in United States);
C. T. Shipping Ltd v. DMI (U.S.A.) Ltd, 774 F.Supp. 146 (S.D.N.Y. 1991) (applying §10, not
Article V; no analysis).

(d) Authorities leaving open the question whether non-Article V grounds are available in an
action to vacate a “non-domestic” award. For U.S. decisions leaving open the question
whether FAA §10 standards for vacating an award are applicable to a “non-domestic”
award made in the United States, see Intercarbon Bermuda, Ltd v. Caltex Trading &
Transport Corp., 146 F.R.D. 64 (S.D.N.Y. 1993); Essex Cement Co. v. Italmare SpA, 763 F.Supp.
55, 56 (S.D.N.Y. 1991).
(e) Should a non-domestic award be subject to non-Article V actions to vacate in the arbitral
situs? What approach should national courts take to the debate described above (and
presented in Toys-R-Us)? Should domestic grounds for vacating an award be available in
actions challenging non-domestic awards made in the arbitral situs? As described below,
national arbitration statutes often permit arbitral awards to be challenged on grounds
that they are not available under Article V. For example, although §10's grounds are
similar to those of Article V, they permit challenges based directly on “manifest disregard
of law” and fraud. See infra pp. 810-13, 879-80. As a matter of principle, should domestic
FAA grounds for vacating an award be available?
Was Toys-R-Us correctly decided? If a “non-domestic” award can be vacated on domestic
grounds, then how is it different from a “domestic” award? If there is no difference, why
would the Convention's drafters have referred to separate categories of “domestic” and
“non-domestic” awards?
Recall the discussion above, explaining that “non-domestic” awards were principally (or
exclusively) intended to include awards made in State A under the procedural law of
State B. See supra pp. 723-24. Moreover, note that in this example State B would have the
authority under the Convention (Article V(1)(e)) to vacate the award. See supra pp. 706-07
& infra pp. 747-63. How does this affect analysis of the available grounds to vacate the
award in State A and State B?

10. When is an award “foreign” under the New York Convention? The Convention is also
applicable in a nation's courts if proceedings involve an award which is “foreign” in that nation.
When will an award be “foreign”? Note that an award which is “foreign” in one state need not be
“foreign” in other states. An award is “foreign” in a particular state when the award is “made” in
a different state (where it will not be “foreign”).
P "728" (a) Authorities holding that awards “made” outside the judicial enforcement forum are
P "729" “foreign.” Many authorities have interpreted Article I and §202 as applying the
Convention to all arbitral awards rendered outside the United States. In the words of one
commentator, the “Convention always applies to the recognition and enforcement of an
arbitral award made in another state..., whilst it may, in addition, apply to the recognition
and enforcement of an arbitral award made in the State where the recognition and
enforcement are sought if such an award is considered non-domestic.” van den Berg,
When is an Arbitral Award Non-Domestic Under the New York Convention of 1958?, 6 Pace L.
Rev. 25, 39 (1985) (emphasis added).
Numerous U.S. courts have adopted this view. E.g., Rhone Mediterranee Compania
Francese di Assicurazioni el Riassicurazioni v. Lauro, 555 F.Supp. 481 (D.V.I. 1982) (one U.S.
and one foreign party); Fertilizer Corp. of India v. IDI Mgt. Inc., 517 F.Supp. 948 (S.D. Ohio
1981) (same); Sumitomo Corp. v. Parakopi Compania Maritima, 477 F.Supp. 737 (S.D.N.Y.
1979), aff'd mem., 620 F.2d 286 (2d Cir. 1980) (two foreign parties); Ipitrade Int'l SA v. Federal
Republic of Nigeria, 465 F.Supp. 824 (D.D.C. 1978) (two foreign parties). See also Bergesen v.
Joseph Muller Corp., 710 F.2d 929 (2d Cir. 1983) (award not “foreign” because “it was not
rendered outside the nation where enforcement is sought”); Jones v. Sea Tow Services
Freeport NY, Inc., 828 F.Supp. 1002 (E.D.N.Y. 1993) (Convention applicable to agreement
between two U.S. citizens to arbitrate dispute occurring in U.S. waters in London under
English law).

(b) Authorities concluding that some awards made outside the judicial enforcement forum are
not “foreign.” In Bergesen, §202 was relied on to turn an award “made” in the United
States into a “non-domestic” award. Conversely, as Northstar Marine illustrates, §202 can
also be read to turn awards made outside the United States into “domestic” awards: the
statutory language of §202 provides that, in cases involving U.S. citizens, a “reasonable
relation” with a foreign state is required for an award to be subject to the Convention.
Northstar Marine involved enforcement of an arbitration agreement (rather than an
award). Under the Northstar Marine rationale, would an award made in England between
two U.S. parties be subject to the Convention in U.S. courts? Is the Northstar Marine
interpretation of §202 consistent with the Convention?
Similarly, in National Thermal Power Corporation v. The Singer Co., 7 Mealey's Int'l Arb.
Rep. C-1 (June 1992), excerpted below, the India Supreme Court held that an award made
in England was a domestic Indian award, not subject to the Convention, because it was
rendered pursuant to an arbitration agreement governed by Indian law: “An award is
‘foreign’ not merely because it is made in the territory of a foreign State, but because it is
made in such a territory on an arbitration agreement not governed by the law of
India.”See infra pp. 751-57.
Does Article I(1) permit nations to say that some awards made abroad are not “foreign”? If
so, what potential threats does this pose to the Convention?

11. When will an award made outside the judicial enforcement forum not be regarded as
“foreign,” in forum courts, for purposes of the New York Convention? Consider the explanation
in Northstar Marine for why an arbitral award made in England would not be “foreign” in the
United States. What exactly is the court's rationale? What types of agreements and awards
does the court's holding encompass? Suppose the parties had both been sophisticated
companies. Would the result have been any different?
Is the reasoning in Northstar Marine persuasive? Is it not a threat to the purposes of the New
York Convention? Suppose that a U.S. company's Indian subsidiary enters into a contract with
an Indian company, with an arbitration clause providing for arbitration in Switzerland. Should
the resulting award be deemed “foreign” in India? Does Northstar Marine jeopardize this?
12. No express “foreign” award requirement under the Inter-American Convention. The Inter-
American Convention does not contain any express limitation to “foreign” or “non-domestic”
awards. Does that mean that the Convention applies to all arbitral awards in the courts of
signatory states? Would this be sensible?
13. Applicability of Inter-American Convention to “international commercial arbitration.”
Consider the title and preamble to the Inter-American Convention. Do they limit the
Convention to “international” arbitral awards? See supra p. 124. How should “international”
awards be defined? Are precedents concerning “non-domestic” awards under the New York
Convention useful?
14. Scope of Inter-American Convention under §304 of the FAA. Consider §304 of the FAA. How
does it affect the scope of the Inter-American Convention in U.S. courts? Note that §304 makes
the Inter-American awards only if they were “made in the territory of a foreign state” that has
ratified the Convention. Is §304 consistent with the purposes of the Inter-American Convention?
P "729"
P "730"
Is §304 a better approach than that under the New York Convention? Suppose a Mexican
arbitrator renders an award in New York in a dispute between Peruvian and Brazilian nationals.
Should the Inter-American Convention apply?
15. Distinctions between “international” and non-international arbitrations in national
arbitration legislation. Consider Article 1 of the UNCITRAL Model Law and Article 176 of the
Swiss Law on Private International Law. Note that each statute is limited to arbitrations with an
 “international” character. What types of arbitrations does this exclude? Why? See also supra pp.
124-25.
16. Different enforcement regimes for “foreign” and “non-foreign” arbitral awards under
national arbitration legislation. Consider Articles 34, 35 and 36 of the UNCITRAL Model Law.
Compare Articles 190 and 194 of the Swiss Law on Private International Law.
Even outside the context of the New York Convention (and other international instruments), the
place where an arbitral award is made is important for enforcement purposes. In most
developed states, a arbitral award will only be subject to an action to vacate (i.e., set aside or
annul) in local courts if it was “made” within that state. See supra p. 706 & infra pp. 781-82. If an
award was “made” elsewhere (i.e., if it is “foreign”), then it will be subject only to legislative
provisions dealing with the recognition of “foreign” arbitral awards, such as Article 35 of the
UNCITRAL Model Law and Article 194 of the Swiss Law on Private International Law.
3. Reciprocity Requirements Under International Conventions and National Arbitration
Legislation
Reciprocity plays a role in many aspects of private international law. (66) That is less true with
respect to the enforcement of arbitral awards than in other contexts, but the principle of
reciprocity still has important applications in some contexts affecting international arbitration
awards.
As described above, the New York Convention permits contracting states to make reciprocity
reservations. (67) Article I(3) provides that contracting states may declare that they “will apply
the Convention, on the basis of reciprocity, to the recognition and enforcement of only those
awards made in the territory of another Contracting State.” In addition, Article XIV of the
Convention contains a separate, more general reciprocity provision: “A Contracting State shall
not be entitled to avail itself of the present Convention against other Contracting States except
to the extent that it is itself bound to apply the Convention.”
As we have seen, the United States and many other Convention signatories have made
reciprocity reservations. (68) The U.S. reservation provides that the United States will apply
the Convention, on the basis of reciprocity, to the recognition and enforcement of “only those
awards made in the territory of another Contracting State.” (69)
As discussed above, reciprocity under Article I(3) and the U.S. reciprocity reservation has been
P "730" determined by reference to the place where the arbitration is conducted and the award is
P "731" made, not by the parties' nationalities. (70) For example, assume that a company based in
State A (which has not ratified the New York Convention) arbitrates against a company based in
State B (which has ratified the Convention) and the arbitration is conducted (and the award is
made) in State C (which also has ratified the Convention, with a reciprocity reservation). In this
case, an award in favor of the State A company would ordinarily be enforceable in accordance
with the Convention in State C and other Convention signatories. Similarly, an award in favor of
the State B company would be enforceable in State C and other Convention signatories against
the State A company. But if an award, in favor of either company, were rendered in State A, it
would not be enforceable under the Convention (except in states that had not made
reciprocity reservations).
Other international instruments do not necessarily include a reciprocity limitation. That is
true, for example, with respect to the Inter-American Convention. (71) Similarly, national
arbitration legislation does not ordinarily contain any express reciprocity requirements
applicable to the enforcement of foreign arbitral awards.
The following materials explore the application of a reciprocity requirement to the
enforcement of arbitral awards. First, consider again Articles I(3) and XIV of the New York
Convention. Second, review the Inter-American Convention and §304 of the FAA. Third, consider
the excerpt from Fertilizer Corp. of India v. IDI Management Inc., arising from a dispute between
a U.S. and an Indian company. (72) In reading Fertilizer Corporation, reflect on whether the
United States' existing reciprocity reservation fulfils meaningful national purposes. Consider
also whether the reciprocity provision in Article XIV has different consequences than the U.S.
reciprocity reservation. Finally, reread the decision in National Iranian Oil Company.
NEW YORK CONVENTION
Articles I(3) & XIV
[excerpted below at pp. 987, 990]
INTER-AMERICAN CONVENTION
[excerpted below at pp. 995-7]
FEDERAL ARBITRATION ACT
9 United States Code §304
[excerpted below at p. 1004]
P "731"
P "732"
FERTILIZER CORP. OF INDIA v. IDI MANAGEMENT, INC.
517 F.Supp. 948 (S.D. Ohio 1981)
SPIEGEL, DISTRICT JUDGE. [Fertilizer Corporation of India (“FCI”) was a wholly-owned entity of
the Government of India; IDI Management, Inc. (“IDI”) was an Ohio corporation engaged in
designing complex fertilizer plants. IDI designed a plant near Bombay for FCI, pursuant to an
 agreement containing an ICC arbitration clause. Disputes arose and FCI sought arbitration;
proceedings were conducted in India and the panel issued a unanimous award in favor of FCI in
an amount of approximately $1.3 million. IDI refused to satisfy the award and FCI commenced
enforcement proceedings in federal district court in Ohio.] ...
IDI argues that India would not enforce the Nitrophosphate Award had it been rendered in the
United States in IDI's favor and that therefore the reciprocity between India and the United
States required by the Convention is absent. India has adopted various evasive devices, IDI
submits, to avoid enforcement of awards adverse to Indian parties. Moreover, Article I(3) of the
Convention states that contracting states may choose to apply the Convention only to legal
relationships considered “commercial” under the law of the acceding state, and may also
choose to apply the Convention only to awards made in another contracting state's territory.
Both India and the United States chose to adopt these restrictions. Citing Indian Organic
Chemicals, Ltd v. Chemtex Fibers, Inc., A.I.R. 1978 Bombay 106, IDI alleges that India has narrowly
defined the term “commercial” so as to exclude many or most legal relationships which would
be considered “commercial” in the normal sense of the word. IDI argues further that Article XIV
of the Convention sweeps broadly and, in effect, requires this Court to determine the extent to
which India is applying the Convention and to react in like manner.
FCI contends that the concept of reciprocity does not apply to the commercial reservation,
citing the fact that the phrase “on the basis of reciprocity” appears in the first sentence of
Article I(3), but does not appear in the second sentence, the “commercial” reservation.
Furthermore, it cites legislative history for the proposition that Article XIV does not apply at all
to Article I, which has its own reciprocity clause. In the alternative, if Article XIV does apply to
the entire Convention, it must be read literally. Article XIV says that a contracting state may
avail itself of the Convention only “to the extent that it is itself bound to apply the Convention”
(emphasis added). Whereas IDI reads “bound to apply” as “applies,” FCI urges a reading which
would allow a contracting state which had not, for example, adopted the “commercial”
reservation to do so when faced with an award rendered in a country which had adopted that
reservation. Under FCI's interpretation of reciprocity, all that is required, since the United
States has adopted the first reservation of Article I(3), is to determine that India is a signatory
P "732" to the Convention, and since the United States had adopted the second reservation, to
P "733" determine that the contract in question is commercial under the laws of the United States. If
more is required, FCI asserts that the contract would also be considered commercial by most
courts in India and that Chemtex is an aberration.
The Court is persuaded that the reciprocity required by the Convention is satisfied in this case.
With regard to the wording of Article I(3), it is an elementary rule of statutory construction that
where express language is used in one part of a statute, its commission from another part is
presumed to be deliberate. It is undisputed that India is a signatory to the Convention;
therefore, the reciprocity of the first sentence in question is satisfied. It is equally undisputed
that the contract between the parties is considered commercial under the laws of the United
States; thus, the requirement of the second sentence is met.
As to Article XIV, Leonard Quigley has said, “The adoption of this Article [XIV] gives states a
defensive right to take advantage of another state's reservations with regard to territorial,
federal or other provisions.” Quigley, Accession by the United States to the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1074
(1961). Quigley also mentions that this clause “presumably will also cover the case where the
courts of a State have placed a restrictive interpretation upon its obligations under the
Convention,” but we do not find this comment determinative. In any case, we are satisfied that
the Indian courts are not engaged in a devious policy to subvert the Convention by denying
non-Indians their just awards. [An arbitral award in favor of the U.S. company in a related case],
helps persuade us that the Indian judiciary is functioning in a responsible manner. Moreover,
FCI has cited other cases and arbitrations showing that Indian courts will enforce awards
against Indian parties and that Indian parties do arbitrate outside of India. As IDI itself has
counselled, United States courts should “construe exceptions narrowly lest foreign courts use
holdings against application of the Convention as a reason for refusing enforcement of awards
made in the United States.”
NATIONAL IRANIAN OIL CO. v. ASHLAND OIL, INC.
817 F.2d 326 (5th Cir. 1987)
[excerpted above at pp. 142-45]
Notes on Reciprocity Requirements
1. Reciprocity requirements under New York Convention. Consider Articles I(3) and XIV of the
New York Convention. Both provisions permit the imposition of reciprocity requirements on the
enforceability of arbitral awards. Why are states permitted to adopt a reciprocity
requirement? Consider the reasoning in NIOC. Is it persuasive?
2. Reciprocity reservations under the New York Convention. Article I(3) of the New York
Convention does not forbid the enforcement of foreign arbitral awards based upon a lack of
reciprocity. It merely permits states to deny recognition and enforcement to otherwise valid
arbitral awards based upon a lack of reciprocity.
The United States and many other Convention signatories have adopted reciprocity
reservations under Article I(3). See supra p. 730. Is this wise? Is it supportive of the international
arbitral process?
P "733"
P "734"
 3. Reciprocity under Article I(3) is based on where the arbitration award was “made.” As we have
seen, reciprocity with respect to arbitral awards under Article I(3) of the Convention has been
held to be determined by reference to the place where an arbitration is conducted and the
award is made, not to the parties' nationalities. See E.A.S.T., Inc. v. M/V Alaia, 876 F.2d 1168, 1172
(5th Cir. 1989) (“The principle of reciprocity is thus concerned with the forum in which the
arbitration will occur and whether that forum state is a signatory to the Convention – not
whether both parties to the dispute are nationals of signatory states.”); La Societe Nationale v.
Shaheen Natural Resources Co., 585 F.Supp. 57 (S.D.N.Y. 1983), aff'd, 733 F.2d 260 (2d Cir.), cert.
denied, 469 U.S. 883 (1984); Quigley, Convention on Foreign Arbitral Awards, 58 A.B.A.J. 821, 822
(1972) (“The Convention adopts a territorial, rather than national approach and may turn out to
be available in a case involving nationals and residents of nonmember states”). Compare Audi
NSU Auto Union AG v. Overseas Motors, Inc., 418 F.Supp. 982, 983 (E.D. Mich. 1976) (apparently
considering parties' nationalities).
For example, suppose an Iranian company arbitrates with a U.S. company and the arbitration
is conducted in Switzerland (which, like the United States, but unlike Iran, has ratified the
Convention). In this case, an award made in Switzerland in favor of the Iranian company would
ordinarily be enforceable in accordance with the Convention in the United States (and in other
Convention signatories). See Iran Aircraft Industries v. Avco Corp., 980 F.2d 141 (2d Cir. 1992) (New
York Convention applicable to award made in the Netherlands against U.S. company in favor of
Iranian company). Similarly, an award in favor of the U.S. company would be enforceable in
other Convention signatories against the Iranian company. Importantly, however, neither award
would be enforceable under the Convention in Iran.
If the above hypothetical arbitration were conducted in Iran (or another non-signatory to the
Convention), then the award would not be enforceable as a matter of right under the
Convention in the United States – because of the U.S. reciprocity reservation. See National
Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326 (5th Cir. 1987). Nor would the Iranian award be
enforceable under the Convention in other signatory states with a reciprocity reservation (even
if the award were in favor of the U.S. party). Note, however, that enforcement might still be
possible under local, non-Convention law – such as the FAA in the United States. See infra p.
882-96.
4. Rationale for reciprocity reservations under Article I(3). A reciprocity reservation presumably
rests on a judgment that it is both unjust and impolitic for a nation's courts to apply the
Convention's proenforcement provisions to an arbitral award made in a foreign country that
would not apply the Convention to enforce a local arbitral award: simply put, if “they” won't
enforce “our” awards, “we” won't enforce “theirs.” Why exactly is that so?
Consider the foregoing question from a U.S. perspective. What sorts of parties are most likely to
be the subject of enforcement actions in U.S. courts? The answer is generally (but not
necessarily) U.S. companies, which will be more likely than foreign companies to have
attachable assets in the United States. What sorts of companies are most likely to be the
subject of enforcement actions in the foreign country where the award was made? The answer is
probably that there is not any particular correlation between the nation where a foreign award
is made and the nationality of the losing party to the arbitration; England, Switzerland, France,
and other nations are routinely selected as arbitral situses by companies with no local
connection. Thus, the result of the U.S. reciprocity reservation is that awards made in
Switzerland and other Convention signatories will be entitled to reciprocity in the United
States, even: (a) if such Swiss awards are made in favor of entities from Libya, Iran, and other
countries not members of the Convention, (b) if such awards can therefore generally not be
enforced in the home jurisdictions of such companies, where they are most likely to have
assets, and (c) though enforcement of such awards in Switzerland will likely not be of practical
value to the U.S. company, because there is no particular reason to think that there will be
assets of nationals from non-member states there that can be enforced against.
Given all this, what purpose does the reciprocity reservation serve? Would it not be better to
adopt a reciprocity reservation defined by reference to the parties' nationalities? For example,
if Iran will not enforce a U.S. award (or the award of any other nation) under the Convention,
then the United States will not enforce an award in favor of an Iranian entity. Note that the
sometimes-maligned reciprocity exception to the enforcement of foreign judgments is
structured in this fashion. That is, foreign court judgments against a U.S. national are only
enforced in favor of a national of the foreign forum if the foreign forum's courts would recognize
U.S. judgments against citizens of the foreign forum. See Hilton v. Guyot, 159 U.S. 113 (1895); G.
Born, International Civil Litigation in United States Courts 951-55 (3d ed. 1996).
P "734" Would Article I(3) permit a reciprocity reservation defined on the basis of the parties'
P "735" nationalities? Should it? If so, could the United States and other countries change their
reciprocity reservations to focus on the parties' nationalities?
5. The reciprocity rule under Article XIV of the New York Convention. As we have seen, Article XIV
provides broadly that a “Contracting State shall not be entitled to avail itself of the present
Convention against other Contracting States except to the extent that it is bound to apply the
Convention.”
 (a) Who can invoke Article XIV? Putting aside what Article XIV means, who can enforce it and
where is it applicable? In particular, can a private litigant invoke the article in judicial
proceedings? The Fertilizer Corporation court appeared to assume that Article XIV could
be invoked by a private party in a national court. Note, however, that the article's
language arguably appears directed at the rights of signatory states against one another,
not at the rights of private parties. Some commentators have nonetheless concluded that
Article XIV applies in private litigation. Quigley, Accession by the United States to the
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards,
70 Yale L.J. 1049, 1074 (1961); A. van den Berg, The New York Convention of 1958 13-15 (1958).
Is this correct?
(b) Applicability of Article XIV's reciprocity provision to Article I's definition of awards subject to
Convention. Article I defines the awards that are subject to the Convention, including
Article III's enforcement obligation. As was argued in Fertilizer Corporation, Article I
contains a separate reciprocity provision and, as a consequence, Article XIV arguably
should not be read to apply to any of Article I's jurisdictional limitations. The Fertilizer
Corporation court rejected this view. See also A. van den Berg, The New York Convention of
1958 13-15 (1981). That appears to be correct.
(c) Possible interpretations of Article XIV. Article XIV is broadly drafted and there is
uncertainty as to its precise meaning. Assuming that the provision is available to private
parties in national court proceedings, consider the following possible applications:
(i) The United States regards antitrust claims as arbitrable, but Germany (let us assume)
does not; nevertheless, suppose that an arbitral tribunal sitting in Germany renders an
award against a U.S. company based on U.S. antitrust law and German antitrust law. Does
the reciprocity reservation allow U.S. courts to deny recognition because the award would
be unenforceable in Germany? McMahon, Implementation of the United Nations
Convention on Foreign Arbitral Awards in the United States, 2 J. Mar. L. & Comm. 735, 759
(1970); Quigley, Accession by the United States to the United Nations Convention on the
Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1074 (1961).
(ii) The United States treats natural resource agreements as “commercial,” but suppose
that State A does not. State A courts have therefore refused to enforce arbitration awards,
arising out of natural resource agreements, made in other signatory states against State A
government entities, on the grounds that they are not commercial. A tribunal in State A
issues an award in favor of a State A government corporation against a U.S. company
holding that it breached a natural resource agreement; must a U.S. court enforce the
award? See A. van Berg, The New York Convention of 1958 14-15 (1981). Compare G. Gaja,
Problems of Applicability of International Conventions on Commercial Arbitration, in
Commercial Arbitration – Essays in Memorium Eugenio Minoli 191, 215 (1974).
(iii) Swiss courts, let us assume, will not enforce arbitral awards for interest at punitive
rates. Suppose a tribunal makes an award in Switzerland for punitive interest in favor of a
Swiss company, and enforcement is sought in State B. State B ordinarily would enforce
such awards; must a State B court enforce the award?

(d) Possible application of Article XIV on basis of nationality. Reread Article XIV. Note that the
text of Article XIV differs from that of Article I(3)'s provision for reciprocity reservations;
specifically, Article XIV is not confined expressly to awards rendered in a foreign state's
territory. Note also that, under traditional principles of public international law, a nation
may espouse the rights of its nationals, and not others, when a foreign state acts in
violation of its international obligations towards them. See Restatement (Third) Foreign
Relations Law §§711-12, 901-02 (1987). Does that mean, in examples (i), (ii), and (iii) above,
that Article XIV's reciprocity exception would apply against the German, State A, and
State B companies even if the awards had been made in third countries? More broadly,
does Article XIV permit U.S. courts to refuse to enforce awards rendered in favor of
P "735" nationals of non-signatories to the Convention? Note the policy considerations supporting
P "736" such an interpretation. See supra p. 734.
(e) Article XIV held not to permit inquiry into foreign state's actual application of the
Convention. What interpretation of Article XIV does the Fertilizer Corporation court adopt?
The Fertilizer Corporation court appears to conclude that Article XIV only requires inquiry
into whether a foreign state has formally acceded to the Convention, not inquiry into
either the foreign state's reservations or its courts' interpretation of the Convention.
(f) Should Article XIV permit inquiry into a foreign state's actual application of Convention?
Suppose that it was clear that the courts of State A simply did not, as a practical matter,
honor State A's commitments under the Convention. Note that in the context of the
recognition of foreign judgments, U.S. courts inquire into the actual treatment, in
practice, of U.S. judgments by foreign courts. G. Born, International Civil Litigation in
United States Courts 951-55 (3d ed. 1996). Note also that enforcing arbitral awards in many
parts of the world is generally not possible – at least not in a fashion consistent with the
Convention's requirements. Given the purposes of the reciprocity reservation, why
shouldn't U.S. courts engage in at least some scrutiny of how foreign courts actually apply
the Convention? For one view, see R. von Mehren, The Enforcement of Arbitral Awards Under
Conventions and United States Law, 9 Yale J. W. Pub. Order 342, 352 (1983) (terming
Fertilizer Corporation “correct” because it discourages “needless litigation”).
6. Absence of provision for reciprocity reservation from Inter-American Convention. As discussed
above, there is no provision in the Inter-American Convention for reciprocity reservations. See
 supra p. 147. Why?
Note, however, that §304 of the FAA imposes a reciprocity limitation on the Inter-American
Convention in U.S. courts. Is this statutory limitation consistent with the Convention? Suppose
that a national of Columbia (which is a party to the Inter-American Convention) obtains an
arbitral award against a U.S. company in a state that is not a party to the Inter-American
Convention. Is the Convention applicable to enforcement of the award in U.S. courts? under
§304 of the FAA?
7. Does the absence of reciprocity affect recognition and enforcement under §9 of the domestic
FAA? A party can seek to enforce an arbitral award rendered in a non-Convention signatory
state in the United States under §9 of the FAA. In deciding whether to enforce the award under
§9, is it relevant that the award was made in a country that has not ratified the Convention?
Why or why not?
As discussed above, the common law rule in the United States in the context of enforcing
foreign court judgments was historically (and generally still is) that U.S. courts would only
enforce such judgments on the basis of reciprocity. G. Born, International Civil Litigation in
United States Courts 951 (3d ed. 1996); supra p. 734. Note also the determination of the
President and Congress that national interests in the global arena would be served by a U.S.
reciprocity reservation under Article I(3) of the Convention, as well as Congress's judgment in
enacting §304. Should these determinations about U.S. interests influence decisions under §9?
8. Absence of reciprocity requirement in national arbitration legislation. Consider Article 35 and
36 of the UNCITRAL Model Law. Compare Article 194 of the Swiss Law on Private International
Law. Do they impose any reciprocity requirement? Should they?
4. Requirements for a “Binding” or “Final” Award (73)
Under international arbitration conventions that preceded the New York Convention,
enforcement of foreign arbitral awards was generally required only if those awards were “final.”
That was true, for example, under the Geneva Convention of 1927, which only mandated
enforcement of “final” arbitral awards. (74) Moreover, the burden of establishing “finality” was
on the party seeking enforcement. (75) As a consequence, parties seeking to enforce foreign
P "736" arbitral awards were effectively required to follow a so-called “double exequatur” process. This
P "737" entailed obtaining judicial confirmation of the awards in the local courts of the places where
they were rendered (in order to prove their “finality”), and thereafter seeking judicial
enforcement abroad. (76)
One of the principal (and deliberate) innovations of the New York Convention was its
abandonment of the so-called “double exequatur” procedure, (77) which was widely perceived
as cumbersome and ineffective. (78) To accomplish this, the Convention shifted the burden of
proof to the party resisting the award. (79) In addition, the Convention specifically abandoned
the “finality” requirement. Instead, Article III of the Convention requires that “binding” awards
be enforced, while Article V(1)(e) permits non-recognition of an award if it is not “binding” or if
it has been set aside where it was made; similarly, Article VI of the Convention permits a
national court in which enforcement of an arbitral award is sought to defer action pending the
outcome of litigation to vacate the award in the place it was made. (80) Under these
provisions, once an award becomes “binding,” it is enforceable in any signatory state –
notwithstanding the fact that it has not been confirmed in the courts of the state where it was
made. (81)
Other international conventions impose somewhat different variations of “finality”
requirements on arbitral awards. For example, Article 4 of the Inter-American Convention
provides for the enforcement of arbitral awards which are “not appealable under the
applicable law or procedural rules.” (82) Similarly, bilateral treaties addressing issues of
international arbitration often provide for the enforceability of “final” arbitral awards. (83)
National arbitration legislation also frequently limits, either expressly or impliedly the
enforceability of arbitral awards to those which are “final.” That is true under the FAA, (84) and
(to a lesser extent) the UNCITRAL Model Law. (85)
P "737"
P "738"
The following materials explore various “finality” requirements. First, consider the excerpts
from the New York and Inter-American Conventions. Next, review the excerpts from the
UNCITRAL Model Law and Swiss Law on Private International Law. Finally, consider the excerpt
from Fertilizer Corporation of India v. IDI Management, Inc.
NEW YORK CONVENTION
Articles III, V(1)(e) & VI
[excerpted below at pp. 987, 988]
INTER-AMERICAN CONVENTION
Article 4
[excerpted below at p. 995]
UNCITRAL MODEL LAW
Articles 31-36
[excerpted below at pp. 1018-21]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
 Articles 190 & 192
[excerpted below at p. 1035]
FERTILIZER CORP. OF INDIA v. IDI MANAGEMENT, INC.
517 F.Supp. 948 (S.D. Ohio 1981)
SPIEGEL, DISTRICT JUDGE. [The facts of the case are excerpted above at pp. 731-32.] ... IDI's
fourth defense is that the [Award] is not enforceable because it is not binding within the
Convention's meaning. The Convention covers this point in Article V(1)(e) which provides for a
refusal to enforce if:
(e) the award has not yet become binding on the parties, or has been set aside or suspended
by a competent authority of the country in which, or under the law of which, that award was
made.
IDI argues that the award is not binding until it has been reviewed by an Indian court for errors
P "738" of law. The award is presently before the Indian courts for a ruling, among other things, on
P "739" whether the arbitrators could award consequential damages despite an express contract
clause to the contrary. While [IDI contends that] American courts review arbitration awards
only for errors which are totally irrational or in manifest disregard of law, Indian courts review
“speaking awards” for any error of law. IDI contends that this kind of review is one on the merits
and that it prevents any meaningful binding effect or finality.
FCI counters that under Indian law, both statutory and decisional, as well as under the ICC
Rules and under the parties' contract, an arbitral award is final and binding. They argue that
merely because an award has been challenged in an Indian court, its binding effect is not
destroyed, just as a district court decision is binding on the parties, even though it is
appealable, and a judgment may be executed unless the loser posts an appeal or supersedeas
bond. FCI maintains that the Convention itself distinguishes, in Article V and Article VI, between
a successful challenge and one that is merely pending....
[The district court reviewed the parties' agreement (which provided that all disputes will be
“finally” settled by arbitration), the 1955 and 1975 ICC Rules (which provided that arbitral
awards “shall be final”), and Indian law (which it understood to provide, albeit not
unequivocally, that “an award is binding on the parties when made”).] We find that the [Award]
is final and binding, for purposes of the Convention. Therefore, Article V(1)(e) does not apply to
prevent enforcement. We note the comment of Professor Gerald Aksen, General Counsel of the
American Arbitration Association:
The award will be considered ‘binding’ for the purposes of the Convention if no further recourse
may be had to another arbitral tribunal (that is, an appeals tribunal). The fact that recourse
may be had to a court of law does not prevent the award from being ‘binding.’ ... G. Aksen,
American Arbitration Accession Arrives in the Age of Aquarius, 3 Sw. U. L. Rev. 1, 11 (1971)....
[The court continued:] Article VI [of the New York Convention] provides:
If an application for the setting aside or suspension of the award has been made to a
competent authority referred to in article V(1)(e), the authority before which the award is
sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement
of the award and may also, on the application of the party claiming enforcement of the award,
order the other party to give suitable security.
This appears to be an unfettered grant of discretion; the Court has been unable to discover any
standard on which a decision to adjourn should be based, other than to ascertain that an
application to set aside or suspend the award has been made. Here, it is undisputed that IDI
has made such an application in India....
P "739" We believe it is important ... to consider the purpose of the Convention. The primary thrust of
P "740" the Convention is to make enforcement of arbitral awards more simple by liberalizing
enforcement procedures, limiting defenses, and placing the burden of proof on the party
opposing enforcement.... [The court noted that IDI had obtained an award in a related
arbitration against FCI, but that that award was also on appeal in India and that IDI had not
been able to recover.] [I]n order to avoid the possibility of an inconsistent result, this Court has
determined to adjourn its decision on enforcement of the [Award] until the Indian courts
decide with finality whether the award is correct under Indian law. FCI, of course, may apply to
this Court for suitable security, as provided by Article VI. When we are informed that the Indian
courts have reviewed the [Award] and rendered a decision, we will proceed to either grant or
deny enforcement based on that decision....
Notes on Finality of Arbitral Awards
1. New York Convention's requirement of a “binding” award. Consider Article III's text and the
court's analysis of the “binding” award requirement in Fertilizer Corporation. Why is it that the
award in Fertilizer Corporation was “binding” under Article V? Was it because that is what the
parties agreed, either expressly or by reference to ICC Rules? Is it because Indian law provided
that the award was binding? Is it because U.S. law deemed the award binding? Or is it for some
other reason?
2. Meaning of “binding” award under the New York Convention. What exactly does it mean for an
award to be “binding” under the Convention? Consider the following possibilities – an award is
“binding” when: (a) it is made by the arbitral tribunal, without regard to possible judicial or
other review under any foreign law; (b) it is made by the tribunal, provided that no internal
appellate review within the arbitration institution has been invoked; (c) it is made by the
 tribunal, and the time for seeking de novo judicial review of the merits of the award under
local law (in action action to vacate, set aside, or anul) in the place the award was made has
expired, or any application for such review has been denied; (d) it is made by the tribunal, and
the time for seeking limited judicial review under local law in the place the award was made
has expired, or any application for such review has been denied; (e) it is made by the tribunal,
and the award has been confirmed by a local court in the place the award was made; or (f) it is
made by the tribunal, and appellate review of any of the avenues of judicial review in
paragraphs (a)-(e) has been exhausted, or the time for doing so has expired. Which of these
interpretations is most consistent with the Convention's purposes? Which interpretation
reflects the requirements of the Geneva Convention (which, as noted above, the New York
Convention rejected)?
3. Relevance of law of arbitral situs to determining whether an award is “binding.” Like many
other things in international arbitration, determining whether an arbitral award is “binding”
raises choice of law issues. Whether or not an award is “binding” has often been thought to
require consideration of the law relating to judicial review of arbitral awards in the place
where the award was made. Thus, many authorities have made reference to the law of the
place where the award was made in determining whether or not it is binding. See Hugo Marom
Aviation Consultants, Ltd v. Recon/Optical, Inc., 1991 U.S. Dist. Lexis 8877 (E.D. Ill. 1991) (looking
to the “law of the country in which the arbitration is conducted”); Dworkin-Cosell Interair Courier
Services, Inc. v. Avraham, 728 F.Supp. 156 (S.D.N.Y. 1989); Spier v. Calzaturificio Tecnica, SpA, 663
F.Supp. 871 (S.D.N.Y. 1987); American Construction Machinery & Equipment Corp. v. Mechanised
Construction of Pakistan Ltd, 659 F.Supp. 426 (S.D.N.Y. 1987); Ipitrade International, SA v. Federal
Republic of Nigeria, 465 F.Supp. 824 (D.D.C. 1978); Fertilizer Corp. of India v. IDI Management, Inc.,
517 F.Supp. 948, 955-57 (S.D. Ohio 1981); Splosna Plovba of Piran v. Agrelak Steamship Corp., 381
F.Supp. 1368 (S.D.N.Y. 1974).
4. National court decisions holding awards “binding” even if they are subject to judicial action to
vacate in arbitral situs. Some authorities have concluded that a foreign arbitral award is
“binding” even if an action to vacate the award can still be brought in a court in the jurisdiction
where it was made; indeed, these authorities indicate that an award may be “binding” even if
it is subject to an action to vacate in the place where it was made. Fertilizer Corp. of India v. IDI
Mgt., 517 F.Supp. 948, 957-58 (S.D. Ohio 1981); Aksen, American Arbitration Accession Arrives in the
P "740"
P "741"
Age of Aquarius, 3 Sw. U.L. Rev. 1, 11 (1971) (“The fact that recourse may be had to a court of
law does not prevent the award from being binding.”); Judgment of 8 January 1995, XXII Y.B.
Comm. Arb. 789 (Swiss Federal Tribunal) (1997) (“Nor is it decisive that a request to have the
award set aside or suspended, even if it has suspensive effect, is pending,” citing Article VI).
Compare Dworkin-Cosell Interair Courier Services, Inc. v. Avraham, 728 F.Supp. 156 (S.D.N.Y. 1989);
Splosna Plovba of Piran v. Agrelak Steamship Corp., 381 F.Supp. 1368 (S.D.N.Y. 1974) (apparently
holding, in a non-Convention case, that award made in England was not binding until
confirmed by English court).
Under this view, it is entirely possible for a court in the country where an arbitration award was
made to vacate the award that has previously been enforced elsewhere by a court that chose
not to adjourn proceedings under Article VI. International Commercial Arbitration: New York
Convention §I.C.4 (G. Gaja ed. 1984). See also Von Engelbrechten v. Galvanoni & Nevy Bros., 300
N.Y.S.2d 239 (Civ. Ct. 1969), aff'd, 307 N.Y.S.2d 381 (Sup. Ct.), dismissed, 315 N.Y.S.2d 1033 (1970);
Landegger v. Bayerische Hypotheken und Wechsel Bank, 357 F.Supp. 692 (S.D.N.Y. 1972) (award
enforceable in New York “even if it were not final and enforceable’ in Germany”).
5. National lower court decisions suggesting that awards are “binding” even if they are vacated
in arbitral situs. Some national courts have concluded that arbitral awards can be binding and
may be enforced even if they would not be confirmed in the foreign forum where the award was
rendered. Yusuf Ahmed Alghanim & Sons, WLL v. Toys “R” Us, Inc., 126 F.3d 15 (2d Cir. 1997), cert.
denied, 118 S.Ct. 1042 (1998); Chromalloy Gas Turbine Corp. v. Arab Republic of Egypt, 939 F.Supp.
907 (D.D.C. 1996) (enforcing award after it had been vacated in arbitral situs); Rhone
Mediterranee etc. v. Achille Lauro, 555 F.Supp. 481 (D.V.I. 1982), aff'd, 712 F.2d 50 (3d Cir. 1983). Is
this sensible? What if an arbitral award is vacated by a court in the arbitral situs, and a court
elsewhere is asked to recognize or enforce the award? May it do so? Must it do so? See infra pp.
768-77.
6. Authorities holding awards “binding” if they are not subject to an action to vacate or annul. As
discussed above, most national arbitration statutes permit actions to vacate (or set aside)
arbitral awards made on national territory. See UNCITRAL Model Law Article 34; Swiss Law on
Private International Law Articles 190 & 194; FAA, 9 U.S.C. §10. An action to vacate must
ordinarily be brought within a defined (and usually very short) time period after the award is
made, and may entail some measure of judicial review of the merits of the arbitrators'
decision.
Some authorities have concluded that only the availability of judicial review on the merits of
the arbitrator's decision in an action to vacate in its country of origin prevents an award from
being binding:
In most cases, an award can be deemed binding and enforceable under the Convention as soon
as it is rendered. Those cases where it would not be binding would include specific cases where
the law of the home jurisdiction permits judicial appeal on the merits or the rules of the
arbitral institution permit review within the institution.
Craig, Uses and Abuses of Appeal From Awards, 4 Arb. Int'l 174, 187 (1988). See also Sanders, A
Twenty Years Review of the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, 13 Int'l Law. 269, 275 (1979); Paulsson, The Role of Swedish Courts in Transnational
Commercial Arbitration, 21 Va. J. Int'l L. 211, 238-39 (1981); General National Maritime Transport
 Co. v. Gotaverken Arendal Aktiebolag, Judgment of August 13, 1979 (Supreme Court of Sweden),
reprinted in, 21 Va. J. Int'l L. 244 (1981); Judgment of June 8, 1967, II Y.B. Comm. Arb. 234
(Landesgericht Bremen) (1977); Judgment of July 12, 1984, X Y.B. Comm. Arb. 487 (Dist. Ct. of
Amsterdam) (1985) (“An arbitral award is not binding if it is open to appeal on the merits before
a judge or an appeal arbitral tribunal”).
Note that these authorities apparently distinguish between de novo judicial review of the
merits of an award under local law – which will prevent the award from being “binding” – and
more limited judicial review (for example, along the lines permitted in an action to vacate by
the FAA) – which will not. Is this a sensible distinction? Is there any basis for it in the
Convention? In the text of Article VI? Given the proenforcement bias of the Convention, is it
unusual for judicial review of the merits of the arbitral decision to block enforcement abroad,
while more limited review does not? Note that, under the Convention, more limited review will
generally be available in the enforcing forum, as well as in the arbitral situs.
7. Authorities suggesting that awards are “binding” if they are not subject to arbitral review.
Some institutional arbitration rules provide for an appellate arbitral tribunal. As the quotation
excepted above from Professor Aksen in Fertilizer Corporation suggests, some authorities have
P "741" concluded that an award in “binding” unless it is subject to appellate review by an arbitral
P "742" tribunal. See also Oppetit, Le refus d'execution d'une sentence arbitrale etrangere dans le
cadre de la Convention de New York, 1971 Revue de l'Arbitrage 97, 101 (award is binding unless it
is subject to review by a second arbitral body).
8. Choice of law – need for award to be “binding” under law of the arbitral situs. In addition to
providing a mechanism for judicial review of an arbitral award, foreign law will address the
question whether the availability or pendency of such review prevents an award from being
“binding” under local law – i.e., when it can be enforced in local courts. Suppose that, although
either (a) de novo review on the merits, or (b) limited FAA-type review, is available in the
arbitral situs, foreign law regards the arbitral award as “binding” from the moment that the
arbitrators make it (and, for example, permits enforcement even if a judicial challenge
proceeds). Alternatively, suppose that foreign law will not regard the award as “binding” until
judicial review is complete. See Dworkin-Cosell Interair Courier Services, Inc. v. Avraham, 728
F.Supp. 156 (S.D.N.Y. 1989) (“finality is required where ... the law of the country in which the
arbitration is conducted requires finality”). What approach does the court in Fertilizer
Corporation take? Which approach is more consistent with the Convention?
9. Drafting history of Article V(1)(e) of New York Convention. The drafting history of the New York
Convention sheds some light on the meaning of a “binding” award. First, as discussed above,
the Convention's drafters plainly wished to dispense with the double exequatur procedure and
the finality requirement. See supra pp. 736-37. Second, a working party responsible for the
language that became Article V(1)(e) thought that an award would not be binding if “ordinary
means of recourse” were available against it. 22 U.N. ESCOR 13, U.N. Doc. E/CONF.26/SR.17
(1958). At least arguably, that formulation suggests that some sort of de novo review on the
merits must be available to preclude an award from being binding. On the other hand, the
formulation could suggest merely that any ordinary process of seeking to vacate an award –
through whatever means are available – would render it non-binding, while extraordinary
actions to reopen or set aside awards (such as actions based on after-discovered evidence)
would not. Which view is more consistent with the Convention and its purposes?
10. Possible relevance of nationalities of parties to determining whether an award is “binding.”
Is it relevant to consider the nationality of the parties in deciding whether an award in
“binding”? Suppose, for example, that arbitrators make an award in Sudan against a Sudanese
state-owned entity in favor of a French company, and that the Sudanese company and Attorney
General then challenge the award in Sudanese courts, which indicate that they will review the
award de novo; suppose further that the French company provides anecdotal evidence that
Sudanese courts are not independent in such a case. Is that relevant to a decision that the
award is binding?
11. Finality of arbitral awards under the Inter-American Convention. Consider Article 4 of the
Inter-American Convention. How does it compare with Article III of the New York Convention?
Which approach is preferable?
12. “Finality” under Friendship, Navigation, and Commerce treaties. Friendship, Navigation, and
Commerce treaties that deal with arbitration often provide for enforcement of arbitral awards
that are “final and enforceable under the laws of the place where rendered.” New York courts
have considered the enforceability in New York of awards rendered in Germany under the U.S.-
German FNC treaty. In Landegger v. Bayerische Hypotheken und Wechsel Bank, 357 F.Supp. 692
(S.D.N.Y. 1972), the district court reasoned that, under German law an award was not final and
enforceable until after a judicial hearing and exequatur in Germany – thereby effectively
imposing a double exequatur requirement under the treaty. (Nonetheless, the court enforced
the award, relying on New York law that permitted more liberal enforcement than that
provided for in the FNC treaty. See Von Engelbrechten v. Galvanoni and Nevy Brothers, 300
N.Y.S.2d 239 (N.Y. Civ. Ct. 1969), aff'd, 307 N.Y.S.2d 381 (App. Div. 1970).)
13. Finality under national arbitration statutes. Consider the provisions of the Swiss Law on
Private International and UNCITRAL Model Law, excerpted above. When are awards made
under each statute final? Note the three month time limit for applying to vacate an award
under Article 34(3) of the UNCITRAL Model Law. What is the status of an award before this
period elapses? After?
Note the provision in Article 190(1) of the Swiss Law on Private International Law that an award
is final when communicated to the parties. What is the status of an award after communication
 but before the time limit for an application to vacate has expired? If the answer to this
question is different from that under the UNCITRAL Model Law, why?
For discussion of the finality requirement of the FAA in the United States, see supra pp. 467-68.
P "742" 14. Article VI's provision for suspending enforcement proceedings pending conclusion of action
P "743" to vacate in Article V(1)(e) situs. Suppose that an award is made in Switzerland, under Swiss
law, and that it is subject to challenge by the losing party in Swiss courts; suppose further that,
while the action to annul or vacate is pending, the prevailing party seeks to enforce the
arbitration award in the United States (or elsewhere). Can the award properly be enforced in
the United States, and, if so, should it be? under the Convention, must it be?
(a) U.S. courts' predisposition for Article VI stays. Article VI of the Convention grants courts the
power to adjourn enforcement proceedings pending the resolution of actions to set an
award aside in its country of origin. As Fertilizer Corp. suggests, many U.S. courts have
found this an attractive alternative and have granted Article VI stays. Eurocar Italia Spa v.
Maiellano Tours Inc., 156 F.3d 316 (2d Cir. 1998); Rive, SA v. Briggs of Cancun, Inc., 2000 WL
98127 (E.D. La. 2000) (staying enforcement proceedings, but requiring security); Caribbean
Trading and Fidelity Corp. v. Nigerian National Petroleum Corp., 1990 U.S. Dist. Lexis 17198
(S.D.N.Y. 1990) (staying enforcement proceedings, but requiring security); Spier v.
Calzaturificio Tecnica SpA, 663 F.Supp. 871, 874 (S.D.N.Y. 1987) (staying enforcement
proceedings, but requiring security); Fertilizer Corp. of India v. IDI Mgmt, 517 F.Supp. 948
(S.D. Ohio 1981) (same); Hugo Marom Aviation Consultants, Ltd v. Recon/Optical, Inc., 1991
U.S. Dist. Lexis 8877 (E.D. Ill. 1991) (refusing to confirm award made in Israel because
applications were pending in Israeli courts to vacate and confirm award). See also
Hewlett-Packard Co. v. Berg, 61 F.3d 101 (1st Cir. 1995) (staying enforcement of Convention
award pending arbitration of alleged set-off claims in related arbitration). Compare
Ukrvneshprom State Foreign Economic Enterprise v. Tradeway, Inc., 1996 WL 107285 (S.D.N.Y.
1996) (denying stay). For a review of decisions from various jurisdictions under Article VI,
see Tupman, Staying Enforcement of Arbitral Awards Under the New York Convention, 3 Arb.
Int'l 209 (1987).
(b) Trial court's discretion under Article VI. Lower U.S. courts have held that Article VI grants
broad discretion to grant an adjournment of an enforcement action. Hewlett-Packard Co.
v. Berg, 61 F.3d 101, 106 (1st Cir. 1995); Caribbean Trading and Fidelity Corp. v. Nigerian
National Petroleum Corp., 1990 U.S. Dist. Lexis 17198 (S.D.N.Y. 1990), Spier v. Calzaturificio
Tecnica SpA, 663 F.Supp. 871 (S.D.N.Y. 1987); Fertilizer Corp. of India v. IDI Mgt., 517 F.Supp.
948 (S.D. Ohio 1981).
For an appellate decision reversing a lower court refusal to stay enforcement and
discussing how the trial court's discretion should be exercised, see Europcar Italia SpA v.
Maiellano Tours Inc., 156 F.3d 316 (2d Cir. 1998) (listing factors relevant to decision to stay
enforcement action pending outcome of action to vacate in arbitral situs: general
objectives of arbitration, characteristics and status of foreign proceedings to vacate,
standard of judicial review in foreign proceedings, balance of hardship).

(c) Wisdom of granting Article VI stay. Although granting an adjournment under Article VI may
be an attractive alternative, is it a wise exercise of discretion? Does it depend on what
bases are available in the foreign arbitral forum for vacating the award? Suppose that a
foreign court commences de novo review proceedings of a foreign arbitral award,
rendered in favor of a U.S. claimant against a local, state-affiliated entity. Should U.S.
courts postpone enforcement against the foreign entity while the foreign court retries the
substance of the parties' dispute?
Does the desirability of an Article VI adjournment depend on the likelihood that the
foreign court will vacate the award? Caribbean Trading and Fidelity Corp. v. Nigerian
National Petroleum Corp., 1990 U.S. Dist. Lexis 17198 (S.D.N.Y. 1990); A. van den Berg, The
New York Convention of 1958 380-81 (1981) (Article VI “implies that the respondent has the
burden of giving some summary proof that the award is tainted by a defect which is likely
to cause its setting aside in the country of origin”).
Does the wisdom of adjournment depend on the balance of hardship suffered by each of
the parties as a result of an adjournment? Tupman, Staying Enforcement of Arbitral Awards
Under the New York Convention, 3 Arb. Int'l 209, 222 (1987) (only factors extraneous to the
likelihood that the award will be vacated should be considered).

15. Effect of agreement that arbitration award shall be “final.” The rules of many arbitration
institutions provide that the arbitrators' award shall be final and binding upon the parties.
UNCITRAL Rules Article 32(2) (“shall be final and binding on the parties”); ICC Rules Article 28(6)
(“Every award shall be binding on the parties.... the parties undertake to carry out any Award
without delay and shall be deemed to have waived their right to any form of recourse insofar
as such waiver can validly be made.”) As Fertilizer Corp. illustrates, contractual provisions
sometimes say the same thing. What effect do such agreements have on the question whether
an award is “final” or “binding” under the New York Convention? Do they make an award
“binding” the moment it is made, regardless whether avenues of judicial review are available?
P "743"
P "744"
16. Effect of agreements excluding judicial review of arbitral awards. Suppose that an
arbitration agreement provides:
Any arbitral award made pursuant to the Article X shall not be subject to challenge or action to
 vacate, and each party expressly waives any rights to challenge or seek to vacate such award.
What effect does such an exclusion agreement have on a court's substantive review power?
Does it prohibit review of an award for issues such a procedural irregularity, arbitrator bias, or
public policy?
(a) National legislation permitting exclusion agreements. Consider Article 192 of the Swiss Law
on Private International Law. Note the grounds as to which an action to vacate may be
excluded. Is this wise? Is it appropriate to permit private parties to delegate to a private
decision-maker power to resolve their dispute, and then to exclude any judicial review of
the resulting decision?
Note the limited circumstances, under Article 192(1), in which an exclusion agreement is
enforceable. What is the reason for these limits? Are they appropriate? Compare the
similar provisions which exist under Belgian law, see infra pp. 764-66.

(b) Exclusion agreements under the FAA. U.S. courts have not addressed the issue with much
care, but, a number of decisions have permitted parties to challenge an arbitral award on
the grounds set forth in the Convention or the FAA, notwithstanding their agreement that
the arbitrators' award shall be “final.” See Iran Aircraft Industries v. Avco Corp., 980 F.2d
141 (2d Cir. 1992) (provision in Iran-U.S. Claims Tribunal agreement that awards are “final
and binding” does not “bar consideration of the defenses to enforcement provided for in
the Convention”); Aerojet-General Corp. v. American Arbitration Association, 478 F.2d 248,
251-52 (9th Cir. 1973) (provision that award is “final and binding” held not to preclude
limited judicial review). Accord Fotochrome, Inc. v. Copal Co., 517 F.2d 512, 519 (2d Cir. 1975)
(by implication); International Standard Electric Corp. v. Bridas Sociedad Anonima
Petrolera, 745 F.Supp. 172 (S.D.N.Y. 1990) (considering Convention defenses to “final”
award); Sesotris, SAE v. Transportes Navales, SA, 727 F.Supp. 737, 741 (D. Mass. 1989)
(denying enforcement to “final” award); Al Haddad Bros. Enterprises, Inc. v. M/S AGAPI, 635
F.Supp. 205 (D. Del. 1986) (considering Convention defenses to “final and binding” award).
(c) Should exclusion agreements be enforceable? Is it sensible to conclude that a party's
agreement that an award is “final” forbids it from challenging the award? Are the defenses
to enforcement in the Convention – for example, for public policy, non-arbitrability, and
due process – appropriately subject to waiver. Should all of the various exceptions
available under the Convention be equally “non-waivable,” or are some more susceptible
of private agreement than others? Compare the freedom of parties to waive judicial
review of arbitral awards under the Swiss and Belgian arbitration statutes, excerpted
below, infra pp. 764-66.
(d) Arbitration agreements providing for heightened judical review of arbitral award. Some
arbitration agreements (particularly in the United States) provide for heightened judicial
review of arbitral awards. For example, such agreements may provide for judicial review
on the same grounds as a trial court judgment or for errors of law or fact. See infra p. 814.
We discuss elsewhere the enforceability (and wisdom) of such provisions. Assuming that
they are enforceable, what effect do such provisions have the question whether an award
is “binding”?

C. Forum Selection Issues in Actions to Confirm or Vacate International Arbitration

Awards
The enforcement of international arbitral awards can raise significant forum selection and
procedural issues. A party which obtains an international arbitral award in its favor must
consider where it can most effectively enforce the award. Conversely, the party against whom
the award has been made should determine where it can, or can best, mount a challenge. This
Chapter examines the jurisdictional and other constraints on actions both to confirm and to
vacate arbitral awards. It also examines the consequences which flow, when an award is
vacated in one nation, in other nations.
P "744"
P "745"
1. International Conventions Limiting Forums for Confirming or Vacating International Arbitral
Awards
a. No International Limits on Forums For Seeking Recognition or Enforcement of International
Arbitral Awards
In general, international arbitration conventions do not limit the forums where enforcement or
recognition of an international arbitral award may be sought. That is true under the New York
Convention, as well as under other international instruments relevant to the arbitral process.
As we have seen, a fundamental objective of the New York Convention was ensuring the widest
possible enforceability of international arbitral awards. (86) Among other things, the
Convention specifically overturned the historic “double exequatur” practice, which required
confirmation of the award in the arbitral situs. (87) Consistent with this objective, nothing in the
Convention limits the places in which a party may seek to confirm and enforce an arbitral
award in its favor. (88) The same is true of the Inter-American Convention and bilateral
arbitration treaties.
b. International Limits on Forums for Vacating an International Arbitral Award
A party seeking to vacate or annul an arbitral award also faces forum selection issues. One
option for the losing party after an unfavorable award is made is to do nothing: the award-
 debtor can await an enforcement action by the award-holder and resist the award in that
action. But that action has significant disadvantages. Among other things, it cedes control of
forum-selection to the adverse party, presents an unattractive posture in subsequent
enforcement proceedings, may result in time bars to objections to the award, and may not
satisfy the client's view that the arbitral award is unjust and should be vigorously attacked.
Two other points are even more important. First, as we have seen, vacating an award is usually
more beneficial (to the award-debtor) than successfully resisting confirmation. If an award is
vacated, it will often be difficult to rely on the award in other jurisdictions, while an award that
is merely denied recognition can ordinarily be taken elsewhere for enforcement. (89)
P "745"
P "746"
Second, an action to vacate an award in its country of origin is generally not held to be limited
by the exceptions contained in Article V of the New York Convention, but can be grounded on
any basis available under domestic law for vacating an arbitral award. (90) In contrast, a
defense to an action to recognize an award outside its country of origin is subject to these
exceptions. (91)
For these reasons, disappointed award-debtors will frequently seek affirmatively to challenge
the arbitral award, most often in an action to vacate (or set aside) the award. In doing so, they
will of course need to consider first what nations are possible forums for an action to vacate. As
noted above, and as discussed below, it is widely concluded that the New York Convention
limits the fora in which an action to vacate an award may be commenced to: (a) the country “in
which ... that award was made,” and (b) the country “under the law of which ... that award was
made.” (92) The Inter-American Convention contains similar provisions. (93)
c. Overview of Forum Selection Issues Affecting Enforcement of Arbitral Awards Under New York
Convention
The “model” procedure for judicial actions to confirm or vacate an award under the New York
Convention is straightforward. If the award is made in State A, under the laws of State A, it will
be subject to an action to vacate in State A (but not elsewhere). (94) An action to confirm the
award can be brought in State A, but need not be; actions to confirm and enforce the award
can also be brought in other nations where local law permits such actions. The action to vacate
in State A can be based on any ground available under State A's laws, without regard to the
Convention's exceptions. But defenses to actions to confirm and enforce the award in courts
outside State A are limited to the bases for non-recognition set forth in the Convention.
P "746" In practice, this model is not always adhered to, and even when it is, difficulties can result. The
P "747" interpretation of Article V(1)(e) rests, of course, primarily in the hands of national courts.
Whether or not the courts of a particular nation will interpret the Convention as permitting
them to entertain an action to vacate will, in the first instance, be decided by those local
courts. An inevitable consequence is the risk of inconsistent judgments in different nations,
either because local courts ignore the Convention or interpret it in divergent ways. (95)
In some circumstances, national courts will refuse to obey the Convention's limitations on the
fora for vacating arbitral awards, and will purport to vacate awards “made” in other countries
“under” foreign law. (96) At the same time, enforcement proceedings may be proceeding in
“proper” fora. Alternatively, actions to confirm and to vacate an award may simultaneously be
prosecuted in different countries, both of them proper. In each case, the potential for
inconsistent judgments will arise, and national courts may be required to decide what effect to
give both to an arbitral award and the judgments of other national courts dealing with the
award. (97) Finally, national courts may issue antisuit injunctions or other orders intended to
foreclose foreign proceedings that are perceived to interfere with local jurisdiction.
d. Selected Materials Concerning International Limits on Forums For Actions to Vacate or
Confirm Arbitral Awards
The following materials illustrate the forum selection issues that can arise in actions to vacate
or enforce arbitral awards under the New York Convention and other international arbitration
conventions. The excerpt from International Standard Electric Corp. v. Bridas SA (98)
demonstrates how Article V(1)(e) of the New York Convention has been interpreted by U.S. (and
foreign) courts as limiting the forums in which actions to vacate arbitral awards can be brought.
In contrast, the excerpt from National Thermal Power Corporation v. The Singer Company (99)
illustrates the potential, under the Convention, for bringing actions to vacate in a place other
than the arbitral situs. Finally, reread Union of India v. McDonnell Douglas Corporation,
excerpted above, which illustrates the reluctance of national courts to permit foreign courts to
vacate awards made locally.
P "747"
P "748"
INTERNATIONAL STANDARD ELECTRIC CORPORATION v. BRIDAS SOCIEDAD ANONIMA PETROLERA,
INDUSTRIAL Y COMERCIAL
745 F.Supp. 172 (S.D.N.Y. 1990)
CONBOY, DISTRICT JUDGE. In this action, the parties seek, on the one side, to vacate a foreign
arbitration award, and, on the other, to enforce that award pursuant to an international
convention. Petitioner, International Standard Electric Corporation (“ISEC”), is a wholly owned
subsidiary of the International Telephone and Telegraph Company (“ITT”). Respondent Bridas
Sociedad Anonima Petrolera, Industrial Y Comercial (“Bridas”) is a corporation organized and
doing business in Argentina.... [ITT] conducted its international business through ISEC, [which]
in turn controlled more than 50% of the Argentine telecommunications market through its
 wholly owned subsidiary, Compania Standard Electric Argentina S.A. (“CSEA”). In 1978, ISEC
offered, and Bridas accepted 25% participation in CSEA for $7.5 million. The parties entered
into a Shareholders Agreement (the “Agreement”) on May 7, 1979 to control the terms of their
arrangement. Chapter 11 of the Agreement provides that “[a]ll disputes connected to this
Agreement ... shall be settled or finally decided by one or more arbitrators appointed by the
International Chamber of Commerce in accordance with the Rules of Conciliation and
Arbitration.” Chapter 8 of the Agreement provides that the Agreement would be “governed by
and construed under and in accordance with the laws of the State of New York.”
On April 17, 1985 Bridas filed with the International Chamber of Commerce (“ICC”) in Paris a
Request for Arbitration and Summary of Complaint.... Mexico City was designated [by the ICC
International Court of Arbitration] as the place of the arbitration, and pursuant to Article 9(2) of
the ICC Rules, each party was directed to pay one half of the ICC advance on costs of $190,000....
On July 24, 1986, ISEC filed “Objections to Jurisdiction” with the Arbitral Panel, asserting lack of
jurisdiction over three of the four claims set forth in Bridas' complaint. On August 19 and 20,
1986 the Arbitral Panel conducted a hearing in Mexico City, heard argument on the
jurisdictional question, and in conjunction with the parties drafted the Terms of Reference,
which were then signed by the parties....
[After various procedural manoeuvres, hearings and extensive briefing,] the Panel, in
accordance with the rules which require the advance review and approval by the ICC
International Court of Arbitration, signed the final Award, which was released and issued to the
parties on January 16, 1990. The Arbitral Award (“Award”) ... awarded Bridas damages of
$6,793,000 with interest at 12%, compounded annually, from March 14, 1985. Bridas was also
granted $1 million in legal fees and expenses plus $400,000 for the costs of the arbitration.
P "748" On February 2, 1990, ISEC filed a petition in this Court to vacate and refuse recognition and
P "749" enforcement of the Award. Respondent Bridas has cross-petitioned to dismiss ISEC's petition
to vacate on the grounds that this Court lacks subject matter jurisdiction to grant such relief
under the Convention.... Bridas further cross-petitions to enforce the Award pursuant to Article
III of the Convention.
We will first address the question of whether, under the binding terms of the New York
Convention, we lack subject matter jurisdiction to vacate a foreign arbitral award. The situs of
the Award in this case was Mexico City, a location chosen by the ICC Court of Arbitration
pursuant to rules of procedure explicitly agreed to by the parties. Since the parties here are an
American Company and an Argentine Company, it is not difficult to understand why the
Mexican capital was selected as the place to conduct the arbitration.
Bridas argues that, under the New York Convention, only the courts of the place of arbitration,
in this case the Courts of Mexico, have jurisdiction to vacate or set aside an arbitral award.
ISEC argues that under the Convention both the courts of the place of arbitration and the
courts of the place whose substantive law has been applied, in this case the courts of the
United States, have jurisdiction to vacate or set aside an arbitral award.
Under Article V(1)(e) of the Convention, “an application for the setting aside or suspension of
the award” can be made only to the courts or the “competent authority of the country in which,
or under the law of which, that award was made.” (Emphasis added). ISEC argues that “the
competent authority of the country ... under the law of which [the] award was made,” refers to
the country the substantive law of which, as opposed to the procedural law of which, was
applied by the arbitrators. Hence, ISEC insists that since the arbitrators applied substantive
New York law, we have jurisdiction to vacate the award.
ISEC cites only one case to support this expansive reading of the Convention, Laminoirs-
Trefileries-Cableries de Lens v. Southwire Co., 484 F.Supp. 1063 (N.D. Ga. 1980). That case,
however, did not involve a foreign award under the Convention, and did not implicate the
jurisdictional question here raised, since there the parties' substantive and procedural choice
of law, and the situs of the arbitration were both New York. It seems plain that the Convention
does not address, contemplate or encompass a challenge to an award in the courts of the state
where the award was rendered, since the relation of the courts to the arbitral proceeding is not
an international, but a wholly domestic one, at least insofar as the Convention is concerned.
Whether such an arbitration would be considered international because of the parties'
nationalities under the Federal Arbitration Act, is irrelevant.
Bridas has cited ... American Construction Machinery & Equipment Corp. v. Mechanised
Construction of Pakistan Ltd, 659 F.Supp. 426 (S.D.N.Y.), aff'd, 828 F.2d 117 (2d Cir. 1987), cert.
denied, 484 U.S. 1064 (1988), as authority against the ISEC position. This case involved a dispute
between a Cayman Islands Company and a Pakistani company, arguably controlled by
Pakistani substantive law and arbitrated in Geneva. Judge Keenan was asked to decline
P "749" enforcement of the award on the ground that a challenge to it was pending in the courts of
P "750" Pakistan. He ruled that “[t]he law under which this award was made was Swiss law because
the award was rendered in Geneva pursuant to Geneva procedural law.” 659 F.Supp. at 429
(emphasis added). This analysis was expressly affirmed in the Court of Appeals....
Our Circuit has set forth a brief history of the Convention in an enforcement, as distinguished
from a jurisdictional, case under the Convention in Parsons & Whittimore Overseas Co. v. Societe
Generale De L'Industrie Du Papier (RAKTA), 508 F.2d 969, 973 (2d Cir. 1974), and in general terms
has recognized that the basic thrust of the Convention was to limit the broad attacks on foreign
arbitral awards that had been authorized by the predecessor Geneva Convention of 1927....
We conclude that the phrase in the Convention “[the country] under the laws of which that
award was made” undoubtedly referenced the complex thicket of the procedural law of
arbitration obtaining in the numerous and diverse jurisdictions of the dozens of nations in
 attendance at the time the Convention was being debated. Even today, over three decades
after these debates were conducted, there are broad variations in the international
community on how arbitrations are to be conducted and under what customs, rules, statutes or
court decisions, that is, under what “competent authority.” Indeed, some signatory nations
have highly specialized arbitration procedures, as is the case with the United States, while
many others have nothing beyond generalized civil practice to govern arbitration....
This view is confirmed by Professor van den Berg to the effect that the language in dispute
reflects the delegates' practical insight that parties to an international arbitration might
prefer to equalize travel distance and costs to witnesses by selecting as a situs forum A,
midpoint between two cities or two continents, and submit themselves to a different
procedural law by selecting the arbitration procedure of forum B.
The “competent authority” as mentioned in Article V(1)(e) for entertaining the action of setting
aside the award is virtually always the court of the country in which the award was made. The
phrase “or under the law of which” the award was made refers to the theoretical case that on
the basis of an agreement of the parties the award is governed by an arbitration law which is
different from the arbitration law of the country in which the award was made.
A. van den Berg, The New York Arbitration Convention of 1958 350 (Kluwer 1981) (emphasis
added)....
It is clear, we believe, that any suggestion that a Court has jurisdiction to set aside a foreign
award based upon the use of its domestic, substantive law in the foreign arbitration defies the
logic both of the Convention debates and of the final text, and ignores the nature of the
international arbitral system.... Decisions of foreign courts deciding cases under the Convention
P "750" uniformly support the view that the clause in question means procedural and not substantive
P "751" (i.e., in most cases contract) law. See the Affidavit of Professor George A. Bermann of
Columbia Law School, sworn to June 18, 1990 at 22-29 (“Bermann Aff.”), citing for this proposition
and discussing rulings of [six countries.]
Finally, we should observe that the core of petitioner's argument, that a generalized
supervisory interest of a state in the application of its domestic substantive law (in most
arbitrations the law of contract) in a foreign proceeding, is wholly out of step with the universal
concept of arbitration in all nations. The whole point of arbitration is that the merits of the
dispute will not be reviewed in the courts, wherever they be located. Indeed, this principle is
so deeply imbedded in American, and specifically, federal jurisprudence, that no further
elaboration of the case law is necessary. That this was the animating principle of the
Convention, that the Courts should review arbitrations for procedural regularity but resist
inquiry into the substantive merits of awards, is clear from the notes on this subject by the
Secretary-General of the United Nations. Accordingly, we hold that the contested language in
Article V(1)(e) of the Convention, “... the competent authority of the country under the law of
which, [the] award was made” refers exclusively to procedural and not substantive law, and
more precisely, to the regimen or scheme of arbitral procedural law under which the
arbitration was conducted, and not the substantive law of contract which was applied in the
case. In this case, the parties subjected themselves to the procedural law of Mexico. Hence,
since the situs, or forum of the arbitration is Mexico, and the governing procedural law is that
of Mexico, only the courts of Mexico have jurisdiction under the Convention to vacate the
award. ISEC's petition to vacate the award is therefore dismissed.
NATIONAL THERMAL POWER CORPORATION v. THE SINGER COMPANY
7 Mealey's Int'l Arb. Rep. C1
(Supreme Court of India June 1992)
THOMMEN, JUSTICE. The National Thermal Power Corporation (“NTPC”) appeals from the
judgment of the Delhi High Court ... dismissing the NTPC's application to set aside an interim
award made at London by a tribunal constituted by the International Court of Arbitration of the
International Chamber of Commerce (“ICC Court”) in terms of the contract made at New Delhi
between the NTPC and the respondent – the Singer Company (“Singer”) – for the supply of
equipment, erection and commissioning of certain works in India. The High Court held that the
award was not governed by the [Indian] Arbitration Act, 1940; the arbitration agreement on
which the award was made was not governed by the law of India; the award fell within the
ambit of the Foreign Awards (Recognition and Enforcement) Act, 1961 (Act 45 of 1961) (the
Foreign Awards Act); [and] London being the seat of arbitration, English Courts alone had
jurisdiction to set aside the award....
P "751"
P "752"
The NTPC and the Singer entered into two formal agreements dated 17.8.1982 at New Delhi. The
General Terms and Conditions of Contract dated 14.2.81 (the “General Terms”) are expressly
incorporated in the agreements and they state:
the laws applicable to this Contract shall be the laws in force in India. The Courts of Delhi shall
have exclusive jurisdiction in all matters arising under this Contract. (7.2).
The General Terms deal with the special responsibilities of foreign contractors ... [Clause 27(7)
provides:]
27.7. In the event of foreign Contractor, the arbitration shall be conducted by three arbitrators,
one each to be nominated by the Owner and the Contractor and the third to be named by the
President of the International Chamber of Commerce, Paris. Save as above all Rules of
Conciliation and Arbitration of the International Chamber of Commerce shall apply to such
arbitrations. The arbitration shall be conducted at such places as the arbitrators may
 determine.
In respect of an Indian Contractor, sub-clauses 6.2 of clause 27 says that the arbitration shall be
conducted at New Delhi in accordance with the provisions of the Arbitration Act, 1940. It reads:
27.6.2. The arbitration shall be conducted in accordance with the provisions of the Indian
Arbitration Act, 1940 or any statutory modification thereof. The venue of arbitration shall be
New Delhi, India.
The General Terms further provide: “the Contract shall in all respects be construed and
governed according to Indian laws.” (32.3). The formal agreements which the parties executed
on 17.8.82 contain a specific provision for settlement of disputes. Article 4.1 provides:
4.1. Settlement of Disputes: It is specifically agreed by and between the parties that all the
differences or disputes arising out of the contract or touching the subject matter of the
contract, shall be decided by process of settlement and arbitration as specified in clause 26.0
and 27.0 excluding 27.6.1 and 17.6.2, of the General Conditions of the Contract....
[T]he dispute which arose between the parties was referred to an Arbitral Tribunal constituted
in terms of the rules of arbitration of the ICC Court (“ICC Rules”). In accordance with Article 12 of
those Rules, the ICC Court chose London to be the place of arbitration.... The award was made
in London as an interim award in an arbitration between the NTPC and a foreign contractor on
a contract governed by the law of India and made in India for its performance solely in India.
P "752"
P "753"
The fundamental question is whether the arbitration agreement contained in the contract is
governed by the law of India so as to save it from the ambit of the Foreign Awards Act (100) and
attract the provisions of the Arbitration Act, 1940. Which is the law which governs the
agreement on which the award has been made? ...
As regards the governing law of arbitration, Dicey [& Morris, Conflict of Laws] says:
Rule 58. – (1) The validity, effect and interpretation of an arbitration agreement are governed
by its proper law.
(2) The law governing arbitration proceedings is the law chosen by the parties, or, in the
absence of agreement, the law of the country in which the arbitration is held.
The principle in Rule 58, as formulated by Dicey, has two aspects – (a) the law governing the
arbitration agreement, namely, its proper law; and (b) the law governing the conduct of the
arbitration, namely, is procedural law. The proper law of the arbitration agreement is normally
the same as the proper law of the contract. It is only in exceptional cases that it is not so even
where the proper law of the contract is expressly chosen by the parties. Where, however, there
is no express choice of the law governing the contract as a whole, or the arbitration agreement
as such, a presumption may arise that the law of the country where the arbitration is agreed to
be held is the proper law of the arbitration agreement. But that is only a rebuttable
presumption. See Dicey, Vol. 1, p. 539; Whitworth Street Estates (Manchester) Ltd v. James Miller
& Partners Ltd, 1970 AC 583, 607, 612 and 616.
The validity, effect, and interpretation of the arbitration agreement are governed by its proper
law. Such law will decide whether the arbitration clause is wide enough to cover the dispute
between the parties. Such law will also ordinarily decide whether the arbitration clause binds
the parties even when one of them alleges that the contract is void, or voidable or illegal or
that such contract has been discharged by breach or frustration. The proper law of arbitration
will also decide whether the arbitration clause would equally apply to a different contract
between the same parties or between one of those parties and a third party.
The parties have the freedom to choose the law governing an international commercial
arbitration agreement ... as well as the procedural law governing the conduct of the
arbitration.... Where there is no express choice of the law governing the contract as a whole, or
the arbitration agreement in particular, there is, in the absence of any contrary indication, a
presumption that the parties have intended that the proper law of the contract as well as the
P "753" law governing the arbitration agreement are the same as the law of the country in which the
P "754" arbitration is agreed to be held. On the other hand, where the proper law of the contract is
expressly chosen by the parties, as in the present case, such law must, in the absence of an
unmistakable intention to the contrary, govern the arbitration agreement which, though
collateral or ancillary to the main contract, is nevertheless a part of such contract.
Whereas, as stated above, the proper law of arbitration (i.e., the substantive law governing
arbitration) determines the validity, effect, and interpretation of the arbitration agreement,
the arbitration proceedings are conducted, in the absence of any agreement to the contrary, in
accordance with the law of the country in which the arbitration is held. On the other hand, if
the parties have specifically chosen the law governing the conduct and procedure of
arbitration, the arbitration proceedings will be conducted in accordance with that law so long
as it is not contrary to the public policy or the mandatory requirements of the law of the
country in which the arbitration is held. If no such choice has been made by the parties,
expressly or by necessary implication, the procedural aspect of the conduct of arbitration (as
distinguished from the substantive agreement to arbitrate) will be determined by the law of
the place or seat of arbitration. Where, however, the parties have, as in the instant case,
stipulated that the arbitration between them will be conducted in accordance with the ICC
Rules, those rules, being in many respects self-contained or self-regulating and constituting a
contractual code of procedure, will govern the conduct of the arbitration, except insofar as
they conflict with the mandatory requirements of the proper law of arbitration, or of the
procedural law of the seat of arbitration. See the observation of Kerr, LJ, in Bank Mellat v.
 Helliniki Techniki SA, (1983) 3 All E.R. 428. To such an extent the appropriate courts of the seat of
arbitration, which in the present case are the competent English courts, will have jurisdiction
in respect of procedural matters concerning the conduct of arbitration. But the overriding
principle is that the courts of the country whose substantive laws govern the arbitration
agreement are the competent courts in respect of all matters arising under the arbitration
agreement, and the jurisdiction exercised by the courts of the seat of arbitration is merely
concurrent and not exclusive and strictly limited to matters of procedure. All other matters in
respect of the arbitration agreements fall within the exclusive competence of the courts of the
country whose laws govern the arbitration agreement.
The proper law of the contract in the present case being expressly stipulated to be the laws in
force in India and the exclusive jurisdiction of the courts in Delhi in all matters arising under
the contract having been specifically accepted, and the parties not having chosen expressly or
by implication a law different from the Indian law in regard to the agreement contained in the
arbitration clause, the proper law governing the arbitration agreement is indeed the law in
force in India, and the competent courts of this country must necessarily have jurisdiction over
all matters concerning arbitration. Neither the rules of procedure for the conduct of arbitration
contractually chosen by the parties (the ICC Rules) nor the mandatory requirements of the
procedure followed in the courts of the country in which the arbitration is held can in any
manner supersede the overriding jurisdiction and control of the Indian law and the Indian
courts.
P "754"
P "755"
This means, questions such as the jurisdiction of the arbitrator to decide a particular issue or
the continuance of an arbitration or the frustration of the arbitration agreement, its validity,
effect, and interpretation are determined exclusively by the proper law of the arbitration
agreement, which, in the present case, is Indian law. The procedural powers and duties of the
arbitrators, as for example, whether they must hear oral evidence, whether the evidence of one
party should be recorded necessarily in the presence of the other party, whether there is a
right of cross-examination of witnesses, the special requirements of notice, the remedies
available to a party in respect of security for costs or for discovery etc. are matters regulated
in accordance with the rules chosen by the parties to the extent that those rules are applicable
and sufficient and are not repugnant to the requirements of the procedural law and practice of
the seat of arbitration. The concept of party autonomy in international contracts is respected
by all systems of law so far as it is not incompatible with the proper law of the contract or the
mandatory procedural rules of the place where the arbitration is agreed to be conducted or
any overriding public policy....
An award rendered in the territory of a foreign State may be regarded as a domestic award in
India where it is sought to be enforced by reason of Indian law being the proper law governing
the arbitration agreement in terms of which the award was made. The Foreign Awards Act,
incorporating the New York Convention, leaves no room for doubt on the point.... A “foreign
award,” as defined under the Foreign Awards Act, 1961 means an award made on or after
11.10.1960 on differences arising between persons out of legal relationships, whether
contractual or not, which are considered to be commercial under the law in force in India. To
qualify as a foreign award under the Act, the award should have been made in pursuance of an
agreement in writing for arbitration to be governed by the [New York Convention] and not to be
governed by the law of India. Furthermore, such an award should have been made outside
India in the territory of a foreign State notified by the Government of India as having made
reciprocal provisions for enforcement of the Convention. These are the conditions which must
be satisfied to qualify an award as a “foreign award” (§2 read with §9).
An award is “foreign” not merely because it is made in the territory of a foreign State, but
because it is made in such a territory on an arbitration agreement not governed by the law of
India. An award made on an arbitration agreement governed by the law of India, though
rendered outside India, is attracted by the saving clause in §9 of the Foreign Awards Act and is,
therefore, not treated in India as a “foreign award.” A “foreign award” is (subject to §7)
recognised and enforceable in India “as if it were an award made on a matter referred to
arbitration in India” (§4)....
Section 7 of the Foreign Awards Act, in consonance with Article V of the New York Convention
which is scheduled to the Act, specifies the conditions under which recognition and
enforcement of a foreign award will be refused at the request of a party against whom it is
invoked. A foreign award will not be enforced in India if it is proved by the party against whom
it is sought to be enforced that [one of the exceptions in Article V of the New York Convention
applies.]
P "755"
P "756"
The Foreign Awards Act contains a specific provision to exclude its operation to what may be
regarded as a “domestic award” in the sense of the award having been made on an arbitration
agreement governed by the law of India, although the dispute was with a foreigner and the
arbitration was held and the award was made in a foreign State. Such an award necessarily
falls under the Arbitration Act, 1940, and is amenable to the jurisdiction of the Indian Courts
and controlled by the Indian system of law just as in the case of any other domestic award,
except that the proceedings held abroad and leading to the award were in certain respects
amenable to be controlled by the public policy and the mandatory requirements of the law of
the place of arbitration and the competent courts of that place....
Significantly, London was chosen as the place of arbitration by reason of Article 12 of the ICC
Rules which reads:
 The place of arbitration shall be fixed by the International Court of Arbitration, unless agreed
upon by the parties.
The parties had never expressed their intention to choose London as the arbitral forum, but, in
the absence of any agreement on the question, London was chosen by the ICC Court as the
place of arbitration. London has no significant connection with the contract or the parties
except that it is a neutral place and the Chairman of the Arbitral Tribunal is a resident there,
the other two members being nationals of the United States and India respectively....
The arbitration clause must be considered together with the rest of the contract and the
relevant surrounding circumstances. In the present case, as seen above, the choice of the place
of arbitration was, as far as the parties are concerned, merely accidental in so far as they had
not expressed any intention in regard to it and the choice was made by the ICC Court for
reasons totally unconnected with either party to the contract. On the other hand, apart from
the expressly stated intention of the parties, the contract itself, including the arbitration
agreement contained in one of its clauses, is redolent of India and matters Indian. The
disputes between the parties under the contract have no connection with anything English, and
they have the closest connection with Indian laws, rules and regulations. In the circumstances,
the mere fact that the venue chosen by the ICC Court for the conduct of arbitration is London
does not support the case of Singer on the point. Any attempt to exclude the jurisdiction of the
competent courts and the laws in force in India is totally inconsistent with the agreement
between the parties.
In sum, it may be stated that the law expressly chosen by the parties in respect of all matters
arising under their contract, which must necessarily include the agreement contained in the
arbitration clause, being Indian law and the exclusive jurisdiction of the courts in Delhi having
been expressly recognised by the parties to the contract in all matters arising under it, and the
contract being most intimately associated with India, the proper law of arbitration and the
P "756" competent courts are both exclusively Indian, while matters of procedure connected with the
P "757" conduct of arbitration are left to be regulated by the contractually chosen rules of the ICC to
the extent that such rules are not in conflict with the public policy and the mandatory
requirements of the proper law and of the law of the place of arbitration. The Foreign Awards
Act, 1961 has no application to the award in question which has been made on an arbitration
agreement governed by the law of India.
The Tribunal has rightly held that the “substantive law of the contract is Indian law.” The
Tribunal has further held “the laws of England govern procedural matters in the arbitration.” All
substantive rights arising under the agreement including that which is contained in the
arbitration clause are, in our view, governed by the laws of India. In respect of the actual
conduct of arbitration, the procedural law of England may be applicable to the extent that the
ICC Rules are insufficient or repugnant to the public policy or other mandatory provisions of
the laws in force in England. Nevertheless, the jurisdiction exercisable by the English courts
and the applicability of the laws of that country in procedural matters must be viewed as
concurrent and consistent with the jurisdiction of the competent Indian courts and the
operation of Indian laws in all matters concerning arbitration in so far as the main contract as
well as that which is contained in the arbitration clause are governed by the laws of India.
The Delhi High Court was wrong in treating the award in question as a foreign award. The
Foreign Awards Act has no application to the award by reason of the specific exclusion
contained in section 9 of that Act. The award is governed by the laws in force in India, including
the Arbitration Act, 1940. Accordingly, we set aside the impugned judgment of the Delhi High
Court and direct that Court to consider the appellant's application on the merits in regard to
which we express no views whatsoever....
UNION OF INDIA v. MCDONNELL DOUGLAS CORPORATION
[excerpted above at pp. 422-26]
Notes on International Limits on Actions to Vacate or Confirm Arbitral Awards
1. Authorities concluding that Articles V(1)(e) and VI of the New York Convention limit available
fora for vacating arbitral award. Article V(1)(e) of the New York Convention permits a court in
one signatory state to deny recognition to an award that has been vacated or annulled in
either: (a) the country in which the award was “made,” or (b) the country “under the laws of
which” the award was “made.” Similarly, Article VI of the Convention permits a national court to
stay proceedings to enforce an arbitral award if an application to vacate it is pending before
the “competent authority referred to in Article V(1)(e).”
Nothing in Articles V and VI, or the remainder of the Convention, expressly requires that actions
to vacate an award be brought only in these two fora. Nonetheless, Bridas held that the effect
of these two Articles and the overall enforcement scheme of the Convention was to limit the
fora for actions to vacate. Similarly, commentators and other national courts have generally
concluded that the Convention impliedly forbids actions to vacate an award except in the
country where is was “made” or “under the laws of which” it was made. See van den Berg, When
P "757" is an Arbitral Award Non-Domestic Under the New York Convention of 1958?, 6 Pace L. Rev. 25, 41
P "758" (1985) (“the court of the country in which, or under the law of which, the award is made ... is
exclusively competent to entertain the action for setting aside the award. A foreign court may
not entertain such an action.”); Park, Judicial Controls in the Arbitral Process, 5 Arb. Int'l 230, 256-
58 (1989); Tupman, Staying Enforcement of Arbitral Awards Under the New York Convention, 3 Arb.
Int'l 209, 210 n.6 (1987); Yusuf Ahmed Alghanim & Sons, WLL v. Toys “R” Us, Inc., 126 F.3d 15 (2d
Cir. 1997), cert. denied, __ U.S. __ (1998); Lander Co. v. MMP Investments, Inc., 107 F.3d 476 (7th Cir.
1997); M & C Corp. v. Erwin Behr GmbH, 87 F.3d 844, 851 (6th Cir. 1996) (dicta); SA Mines, Minerais
et Metaux v. Mechema, Ltd, VII Y.B. Comm. Arb. 316 (1982) (Brussels Court of Appeals Oct. 14,
 1980); Maatschappij voor Industriele Research en Ontwikkeling BV v. Henri Lievremont and M.
Cominassi, XII Y.B. Comm. Arb. 480 (1987) (France May 25, 1983); II Y.B. Comm. Arb. 242 (1977)
(Germany Feb. 12, 1976); Cominco France SA v. Soguiber SL, VIII Y.B. Comm. Arb. 408 (1983) (Spain
March 24, 1982); Laconian Maritime Enterprises Ltd v. Agromai Lineas Ltd, XIV Y.B. Comm. Arb. 693
(1989) (South Africa August 27, 1985); Judgment of 24 November 1993, XXI Y.B. Comm. Arb. 617
(Luxembourg Cour Superieure de Justice) (1996) (setting aside application can be made only in
“the country of rendition” of award); Judgment of 24 November 1994, XXI Y.B. Comm. Arb. 635
(Rotterdam Rechtbank) (1996) (“as the arbitral awards have been rendered in Israel, the Israeli
courts have exclusive jurisdiction over an application for setting aside”).
Does the Indian Supreme Court's opinion in National Thermal Power Corporation (“NPTC”) reject
this interpretation of the Convention? Do Articles V(1)(e) and VI in fact support the Bridas
interpretation? Are the policies of the Convention served by limiting the forums in which an
action to vacate can be brought? Are the policies sufficiently strong to warrant reading into the
Convention an implied limit on national court jurisdiction? What would be the consequences if
no such limit were implied?
2. Article V(1)(e) of the New York Convention – identifying the nation “under the laws of which”
an award was “made.” As we have seen, Article V(1)(e) permits non-recognition of an award that
has been set aside or suspended by the competent authority in the country “under the laws of
which” the award was “made.” Article VI permits deferral of enforcement proceedings if a
similar action to vacate has been commenced. See Fertilizer Corp. of India v. IDI Management,
517 F.Supp. 948 (S.D. Ohio 1981); supra pp. 742-43. It is important, therefore, to be able to
determine “under [whose] laws” an award was made.
As discussed above, international arbitrations inevitably involve the application of a variety of
different national laws, including: (a) the substantive law governing the parties' underlying
dispute (in Bridas, New York; in NTPC, Indian); (b) the law governing the parties' arbitration
agreement (in Bridas, not identified; in NTPC, purportedly Indian, but, under most conflicts
rules, probably English); (c) the law governing the arbitration proceedings (in Bridas,
apparently Mexican; in NTPC, purportedly both English and Indian); and (d) the choice of law
rules for selecting the foregoing laws. See supra pp. 41-45. To which of these various laws does
Article V(1)(e) refer?
(a) Authorities holding that an award is made “under” the procedural law governing the
arbitration. Interpreting the second limb of Article V(1)(e), Bridas correctly holds that this
clause refers to the arbitration law of the arbitral situs – that is, to the procedural law of
the arbitration (also termed the curial law or lex arbitri). The Convention's drafting
history clearly supports this conclusion. See supra pp. 723-24.
In most cases, the procedural law governing the arbitration will be the law of the country
where the award is made. See supra pp. 430-31. The Union of India decision reflects this
strong presumption that the procedural law of the arbitration will be the law of the
arbitral situs. As we have seen, however, the procedural law of the arbitration is not
invariably the law of the place where the arbitral proceedings are conducted. Hearings
may be conducted in one place, solely for convenience, with the award being made
elsewhere. See supra p. 427.
Alternatively, the parties may agree that the law of some country other than the arbitral
situs should govern the proceedings. See supra pp. 427-28. That is what the court rejected
in Union of India. Among other things, it also is arguably what the Indian Supreme Court
held had occurred in NTPC.
Suppose the parties in Bridas had agreed, for example, that the arbitration was to be
conducted in Mexico subject to New York arbitration law. Where then, according to the
Bridas opinion, could actions to vacate have been brought? Where, in this hypothetical,
would the court's rationale in NTPC permit an action to vacate to be brought?

(b) Authorities holding that an award is made “under” the law governing the arbitration
agreement. Why did the NTPC court conclude that the arbitral award could be vacated in
India? Note the court's conclusion that “the overriding principle is that the courts of the
country whose substantive laws govern the arbitration agreement are the competent
P "758" courts in respect of all matters arising under the arbitration agreement.” More important,
P "759" note the court's reliance on §9(b) of the Indian Foreign Awards Act 1961, providing that
“any award made on an arbitration agreement governed by the law of India” shall be
subject to actions to vacate under domestic Indian law.
The NTPC court's rationale, and the so-called “savings provision” of §9(b), have been
vigorously criticized:
[This is an] example[] of parochial overreaching by a national legal system. It is hoped
that the trend will be reversed in India, and not copied elsewhere. For now, India stands
alone in this respect; no other legal system has adopted such an aggressively
nationalistic posture.
Paulsson, The New York Convention's Misadventures in India, 7 Mealey's Int'l Arb. Rep. (June
1992). Is that criticism warranted? Why shouldn't the law governing the arbitration
agreement be the law “under which” an award is made for purposes of Article V(1)(e)? Is
the procedural law governing the arbitration any better suited, or more clearly indicated
by Article V(1)(e)?
 (c) No authority holding that an award is made “under” the substantive law governing the
parties' dispute. Bridas rejected the argument that an award is made “under” the law of
the country whose substantive law governs the parties' dispute. Other authorities also
reject that interpretation. See supra pp. 723-24. Is that sensible? Why shouldn't courts of
the country whose law governed the parties' substantive rights be competent to vacate
awards disposing of those rights? Won't those courts be best-qualified to review the
substance of the tribunal's decisions?
(d) New York Convention constraints on national law definitions of when an award is made
“under” national law. The Bridas court holds that Article V(1)(e) – not merely U.S. law –
provides that an award is made “under” the procedural law governing the arbitration.
According to this rationale, other New York Convention signatory states must also reach
the same conclusion as that in Bridas. Does the Convention's language in fact require such
a result? Is there any reference to the procedural law governing the arbitration in Article
V(1)(e)?
Does the Convention dictate what choice of law rules must be applied in determining
what the procedural law governing the arbitration is? If not, does Article V(1)(e) in fact
provide meaningful limits on the places an action to vacate can be pursued?

(e) Is NTPC consistent with the Convention? Is the NTPC rationale – that an award can be
vacated in the country whose law governs the arbitration agreement – permitted by the
Convention? Is the rationale of NTPC consistent with that in Bridas?
Is the result in NTPC – as opposed to the rationale – consistent with Bridas? Consider the
parties' agreement in NTPC – expressly subjecting the contract to Indian law and, more
importantly, accepting the “exclusive” jurisdiction of Indian courts. These factors do not
dictate a conclusion that Indian law was the procedural law governing the arbitration,
“under” which the award was made; note the length to which the Union of India court went
to avoid a conclusion that a foreign procedural law had been selected. But the parties'
agreement in NTPC would appear to permit a decision that Indian law was the procedural
law governing the arbitration. If the court's analysis in NTPC had relied simply upon the
parties' “agreement” on Indian law as the procedural law, would it be objectionable?
Alternatively, why isn't the parties' acceptance of the exclusive jurisdiction of the Indian
courts a sufficient basis for the Indian court's decision in NTPC?

(f) What nation's courts should be competent to entertain actions to vacate an award? Is it
sensible to interpret Article V(1)(e) as assigning authority to vacate awards to the courts
of: (i) the nation whose law provided the procedural law governing the arbitration; (ii) the
nation whose substantive law governs the parties' underlying dispute; or (iii) the nation
whose law governs the parties' arbitration agreement?
What makes the procedural law governing the arbitration a reasonable interpretation of
Article V(1)(e)? In Bridas, for example, the award was based on an application of New York
substantive law to the merits of the parties' dispute? Would it not make most sense for a
New York judge to provide such judicial review of an award as the Convention permits?
Consider the bases set forth in Article V of the Convention, and in developed arbitration
legislation (such as Article 34 of the UNCITRAL Model Law), for vacating arbitral awards.
Do these bases concern matters of procedure or of substance? Do they concern the
existence of an arbitration agreement? Given the types of review contemplated by the
Convention, and most developed arbitration statutes, what nation's courts should have
the authority to vacate an award?
Is it more sensible, as NTPC holds, to permit courts of the nation whose law governs the
arbitration agreement to entertain actions to vacate? Note that claims relating to the
P "759" validity and scope of the parties' arbitration agreement are important exceptions under
P "760" Article V and most developed arbitration laws (e.g., UNCITRAL Model Law Article 34;
FAA, 9 U.S.C. §10). Would it not be wise to permit the courts of the nation whose law
governs the arbitration agreement to consider such claims?
Consider the vast disparities in analysis and results in decisions selecting the law
governing an arbitration agreement. See supra pp. 95-117. Compare NTPC and Union of
India. If Article V(1)(e) refers to the law governing the arbitration agreement, does it allow
essentially unfettered discretion at the choice of law stage?
(g) Identifying the nation “under the laws of which” an award is made. Why was the award in
Bridas made “under” Mexican law? Did the parties have anything to do with Mexico? Did
their contract select Mexican law? Is Mexico renowned as an arbitration center? In fact,
Mexico became the arbitral situs solely because the ICC International Court of Arbitration
picked it, as contemplated by the ICC Rules when parties have not selected an arbitral
situs. Is that a sufficient basis for according Mexican courts the substantial, and unique,
review powers that Bridas produces? Consider the following:
[A] large number of international arbitrations ... have nothing to do with the home
jurisdiction, except that they use conference rooms in the home jurisdiction's Hilton
hotel. The arbitration involves no national of the home jurisdiction, involves no direct
financial impact on the home jurisdiction, and applies a substantive law foreign to the
home jurisdiction. In the case where the arbitration institution chooses the venue, the
seat of arbitration is not even a conscious choice of the parties.
Craig, Uses and Abuses of Appeal from Awards, 4 Arb. Int'l 174, 191 (1988). See Hirsch, The
Place of Arbitration and the Lex Arbitri, 4 Arb. J. 43, 46-7 (1979) (“when the ICC Court of
Arbitration determines the place of arbitration, it is unfortunately not clear that it really
wants to choose the lex arbitri”).
Compare the result in NTPC. Should the award there have been deemed to be made
“under” English or Indian law? Note that England became the arbitral situs as a result of
the ICC's decision.

3. Article V(1)(e) of the New York Convention – place where an award is “made.” Under Article
V(1)(e), an action to vacate an award may be entertained in the country where the award is
“made.” It is, therefore, important to determine where an award has been “made.” Although
this seems like a simple inquiry, that isn't always so.
(a) Where is an award “made?” Is an award “made” where the arbitration hearings are
conducted? Note that leading institutional arbitration rules permit, and that it is very
common for, hearings to be held, for the convenience of the arbitrators and parties, at a
place other than the situs of the arbitration selected in the arbitration agreement. See
supra p. 429.
Is an award “made” where the award is signed? What if there are three arbitrators and
they sign the award in different places? Is an award “made” where the arbitrators say that
the award is made? What if they say it is made somewhere the parties never
contemplated? Is an award made where the parties agree it will be made? What if it isn't
signed there?

(b) Authorities deciding where an award is “made” under national arbitration legislation.
Different national laws may define the place where an award was “made” differently. For
an English decision on where an award is “made,” see Hiscox v. Outhwaite [1991] 2 W.L.R.
1321 (award “made” in France, where arbitrator inadvertently signed it, even though
arbitral situs was in England, proceedings were held in London, and English law governed
proceedings). For commentary, see Mann, Where is an Award “Made”?, 1 Arb. Int'l 107 (1985)
(“an award is ‘made’ at the place at which the arbitration is held, i.e., the arbitral seat. It
is by no means necessarily identical with the place or places where hearings are being
held or where the parties or the arbitrators reside. It is rather the place fixed in the
contract or the submission or the minutes of the hearing or is found to be the central
point of the arbitral proceedings.”); Hirsch, The Place of Arbitration and the Lex Arbitri, 4
Arb. J. 43, 46 (1979).
Consider Articles 176 and 189-193 of the Swiss Law on Private International Law. What do
these sections provide with respect to the place where an award is made? Where is the
“seat of the arbitration,” referred to in Article 176(1)?
 (c) Lower U.S. court precedent deciding where an award is “made” for purposes of the FAA. A
number of lower U.S. courts have considered where an award is made for purposes of §§9
and 10 of the FAA. Most U.S. courts have concluded that an award is made where the
arbitral hearings were held – even if the award is signed elsewhere. See McGregor &
P "760" Werner, Inc. v. Motion Picture Laboratory etc., 806 F.2d 1003 (11th Cir. 1986) (award “made”
P "761" where “the arbitration hearings were held rather than the district within which the
arbitration award was signed and mailed”); Motion Picture Laboratory etc. v. McGregor &
Werner, Inc., 804 F.2d 16 (2d Cir. 1986) (award deemed “made” where hearings were held,
even though signed, sealed, and mailed from elsewhere: “Unless the courts recognize a
clear rule about laying venue where the arbitration is held, venue would be left simply to
the serendipity of the arbitrator's choice of the place where he will sign and mail his
decision.”); Central Valley Typographical Union No. 46 v. McClatchy Newspapers, 762 F.2d
741 (9th Cir. 1985) (“placing primary reliance on where the arbitration was held” rather
than where award is mailed or drafted); T & R Enter. Inc. v. Continental Grain Co., 613 F.2d
1272, 1279 (5th Cir. 1980) (award may be deemed “made” where proceedings were held,
even though it was signed elsewhere); City of Naples v. Prepakt Concrete Co., 490 F.2d 182,
184 (5th Cir.) (award “made” where arbitration hearings were held), cert. denied, 419 U.S.
843 (1974).
As described earlier, supra p. 429, arbitral hearings are often conducted (for the parties'
convenience) at places other than the arbitral situs agreed by the parties. Under the U.S.
rule concerning the place where an award is “made,” what effect does this have?

(d) Institutional arbitration rules' treatment of where an award is “made.” Note that leading
institutional arbitration rules require that an arbitral award be “made” at the arbitral
situs (i.e., the place selected by the parties or tribunal as the seat of the arbitration). See
UNCITRAL Rules Article 16(4); AAA International Rules Article 32(4). The ICC Rules provide
that the award shall be deemed to be made at the place of the arbitration. ICC Rules
Article 25(3).
(e) Can an award be “made” in several places? When arbitration hearings are held for
convenience in several countries or when the arbitrators (being of different nationalities)
sign the award in different countries, where is the award made? Is the award “made” in
each of those countries – and thus subject to an action to vacate in each of them?
The smooth functioning of the international arbitration regime would be ill-served by
such a conclusion: an arbitral award should be deemed to be “made” in only one place.
See Hirsch, The Place of Arbitration and the Lex Arbitri, 4 Arb. J. 43, 46 (1979); Mann, Where is
an Award “Made”?, 1 Arb. Int'l 107, 108 (1985) (“If there are three arbitrators who hold an
arbitration in London, but meet in Paris to consider their award, and sign it at their
respective residences, viz, New York, Geneva, and Tokyo, the award should be treated as
‘made’ in London, even if the each arbitrator has indicated the place where he has signed
it.”).

(f) New York Convention constraints on national definitions of where an award is “made.”
Suppose that a nation adopts an expansive definition of the circumstances in which an
award will be deemed “made” within its territory – and therefore will be subject to an
action to vacate there. For example, suppose that a state concludes that any award
dealing with tangible or intangible property located in the state will be deemed to be
“made” within the state. Suppose the NTPC court had said the award was made in India
because of the choice of Indian law. Does the Convention forbid such definitions? Which
Article? If the Convention does not forbid such definitions, what is the point of its
limitations on the places where an action to vacate can be entertained?
4. Awards subject to action to vacate in two places under the New York Convention. Under
Article V(1)(e) of the New York Convention, an award can apparently be challenged either in the
country where it was made, or in the country under whose procedural laws the arbitration was
conducted. As we have seen, these can be different countries. See NTPC, supra; Naviera
Amazonic Peruana SA v. Compania International de Seguros del Peru [1988] Lloyd's Rep. 116
(“There is ... no reason in theory which precludes parties to agree that an arbitration shall be
held at a place or in country X but subject to the procedural laws of Y.”).
If an award is made in State A, under the laws of State B, then are challenges permitted under
Article V(1)(e) in both countries? What if the two states where actions to vacate are made reach
different results? What should a third country, asked to enforce the award, do?
The court in Union of India labored hard to avoid interpreting the parties' agreement as
selecting a procedural law different from that of the arbitral situs. Underlying the court's
analysis was the view that “absurd” results would follow from applying a “foreign” procedural
law to govern the arbitration. Particularly troubling is the risk of concurrent judicial jurisdiction
(and potentially inconsistent rulings) over the confirmation and annulment of awards; of
course, similar risks exist with respect to other issues (such as provisional relief, discovery,
security for costs, and appointment of arbitrators). The existence of two concurrent national
legal regimes and court systems is an invitation to multiplicitous litigation, inconsistent
rulings, and confusion. One of the significant advantages which international arbitration
promises is that it avoids these ills.
P "761"
P "762"
For an argument that Article V(1)(e) permits only actions to vacate in the arbitral situs or the
country “under” whose law the award was made, but not both, see M. Rubino-Sammartano,
 International Arbitration Law 501-02 (1993). What does NTPC suggest about an English court's
power to vacate the award in that case?
5. Responses to actions to vacate in forums other than those permitted in Article V(1)(e).
Suppose that the NTPC rationale was applied in a case where the parties' agreement did not
suggest that Indian law was the procedural law of the arbitration – and that the sole basis for
an action to vacate in India was the applicability of Indian law (under Indian conflicts rules) to
the parties' arbitration agreement. Under Bridas and most other authorities, the New York
Convention would not permit Indian courts to entertain an action to vacate in these
circumstances. What could the party resisting involvement of the Indian courts do in the
foregoing hypothetical?
(a) Action to confirm in arbitral situs. One course of action would be to seek to confirm the
arbitral award in the arbitral situs (in NTPC, England). If successful, the judgment could be
used both to demonstrate the finality of the award and as an independent basis for
recovery (or defense). See supra pp. 704-05. Whether the arbitral situs would confirm the
award in these circumstances would depend upon local law. Note that the utility of this
course would depend upon where the parties possessed unencumbered assets that would
be exposed, respectively, to the award or judgments of the arbitral situs or other forums.
(b) Antisuit injunction. In the foregoing hypothetical, another course of action would be to
seek an antisuit injunction from the courts of the arbitral situs against the pursuit of an
action to vacate the award elsewhere. Again, the availability of such relief would depend
on local law in the forum where the antisuit injunction is sought.
In the United States, antisuit injunctions against participation in foreign litigation are
rarely issued. U.S. courts require a showing that the foreign litigation: (a) is duplicative
and vexatious; (b) evades U.S. public policy; or (c) threatens the lawful jurisdiction of U.S.
courts. See G. Born, International Civil Litigation in United States Courts 475-90 (3d ed.
1996). At least as to arbitrations conducted in the United States, a plausible argument
could be made that an action to vacate a “U.S.” award in a non-Article V(1)(e) forum could
be enjoined on some or all of the foregoing grounds. See supra pp. 406-07 for discussion of
U.S. decisions considering whether to enjoin foreign litigation of arbitrable claims.
In The Western Co. v. Oil and Natural Gas Comm. of India, XIII Y.B. Comm. Arb. 473 (1988)
(April 3, 1986 High Court of Bombay), the Indian party against whom an arbitral award was
rendered (in India) sought to vacate the award in Indian courts, at the same time that the
American prevailing party sought to enforce the award in U.S. courts. In addition to
seeking to vacate the award, however, the unsuccessful party also asked the Indian courts
to enjoin the prevailing party from prosecuting the U.S. enforcement proceeding. On
appeal, the Indian courts granted that relief on the theory that the unsuccessful party
might be irreparably injured if the U.S. court permitted enforcement and the Indian
courts subsequently vacated the award. The decision is criticized in Tupman, Staying
Enforcement of Arbitral Awards Under the New York Convention, 3 Arb. Int'l 209, 217-8 (1987).
Are there circumstances in which a national court should enjoin foreign enforcement
proceedings pending local judicial review of an award made locally?
Some commentators have suggested that a court-ordered injunction restraining
enforcement of an award, pending an application to vacate the award in the arbitral
sites, would violate Article III of the New York Convention, A. Samuel, Jurisdictional
Problems in International Commercial Arbitration 307-09 (1989). Is this view persuasive?

(c) Litigation on the merits. In the hypothetical outlined above, another possible course of
action would be to commence litigation on the merits of the underlying dispute in a
national court, relying on the improper action to vacate the arbitral award in a forum
prohibited by the Convention as a waiver of arbitration. See supra pp. 239-42.
(d) Rulings by arbitral tribunal. It may be possible to obtain rulings from the arbitral tribunal
that discourage resort to improper judicial fora. Note that in NTPC the tribunal had found
that English law was the curial law; query what would have occurred if the tribunal had
also concluded that the parties' arbitration agreement was governed by English law.
Alternatively, could the party whose award was vacated, in an improper forum, assert a
claim before the arbitral tribunal for damages occasioned by the wrongful action to
P "762" vacate? Note that any new award would doubtless itself be vacated in the improper
P "763" judicial forum, but might be enforceable in the arbitral situs and elsewhere.
(e) Resisting enforcement of judgment. If an improper judicial forum vacates an award and/or
issues a judgment on the merits of the parties' dispute, those judgments can be resisted.
See G. Born, International Civil Litigation in United States Courts 935-86 (3d ed. 1996). It
follows from the basic structure of the Convention, recognized in Bridas and the other
authorities cited above, that national courts should ignore judicial proceedings to vacate
an award in places outside the arbitral situs, both in deciding whether an award is final
and in applying Article VI. For an example, see American Construction Machinery & Equip.
Corp. v. Mechanised Construction of Pakistan Ltd, 659 F.Supp. 426 (S.D.N.Y. 1987) (refusing
to give effect to Pakistani judgment purporting to vacate award made in Geneva). (The
only exception to this is where the parties have agreed to a procedural law for the
arbitration of a country other than the arbitral situs. If this occurs, then Articles V(1)(e)
and VI permit the state whose procedural law was chosen to consider actions to vacate
the award.)
 6. Possible limits under Inter-American Convention on available fora for vacating arbitral award.
Consider Article 5(1)(e) and 6 of the Inter-American Convention. Do they permit an argument
that the Inter-American Convention imposes the same limits on an action to vacate arbitral
awards as the New York Convention?
7. Mechanisms for enforcing international limits on forums for vacating arbitral awards.
International limits on the forums in which an award can be challenged are enforceable in (at
least) three ways.
(a) Refusal to entertain action to vacate. A national court can refuse to entertain an action to
vacate on the grounds that the New York Convention (or another international instrument)
denies it jurisdiction. That occurred in Bridas and in the Delhi High Court's decision in
NTPC. See also M & C Corp. v. Erwin Behr GmbH, 87 F.3d 844, 851 (6th Cir. 1996). This is the
most effective way to enforce the Convention's fora restrictions, but it relies on the
willingness of national courts to abstain from exercising jurisdiction. As the Indian
Supreme Court's decision in NTPC illustrates, that does not always happen.
(b) Refusal to recognize foreign judgment vacating award. International limits on the
available forums for actions to vacate can also be enforced if a state where enforcement
of an award is sought refuses to recognize a foreign court's judgment purporting to vacate
the award on the grounds that the foreign court lacked jurisdiction to do so under the
Convention. For example, in NTPC, if the Indian trial court vacated the arbitral award,
English or other courts might disregard the Indian judgment (if they conclude it is not
consistent with the Convention). See infra pp. 774-777 for a discussion whether national
courts should refuse to recognize such judgments.
(c) Antisuit injunctions against improper actions to vacate. A court in one country can issue an
antisuit injunction enjoining a party from prosecuting an action to vacate an arbitral
award in a nation in which the New York Convention (or another international instrument)
does not permit to vacate the award. For example, in NTPC, an English court might have
enjoined the parties from proceeding with the Indian action to vacate. See supra pp. 406-
07, 762.

2. National Law Limits on Forums for Confirming or Vacating an International Arbitral Award
a. National Law Limits on Forums For Seeking Recognition or Enforcement of International
Arbitral Awards
As discussed above, neither the New York Convention nor other international arbitration
instruments limit the forums in which an award-creditor may seek recognition or enforcement
of an arbitral award. What does limit the places where international arbitral awards can be
enforced, however, are practical obstacles and national law. As with the enforcement of foreign
P "763" judgments, the bottom line in many efforts to enforce arbitral awards is the location of
P "764" identifiable, unencumbered assets of the adverse party: where they are found, the action
will often be brought. (101) Locating the debtor's assets can often be a major enterprise,
requiring specialized professional assistance. As a practical matter, the nation in which the
award-debtor is incorporated or domiciled will often be the place – perhaps the only place –
where its assets are located. Alternatively, many international businesses will have assets on
deposit with financial institutions in leading international banking centers (New York, London,
Switzerland).
In some cases, the award-debtor may have substantial assets in several different places, and
the award-holder will have the opportunity of choosing where to seek enforcement. That
opportunity requires selecting the most advantageous available forum or forums (102) in which
to enforce the award. There has been, broadly speaking, a general trend towards greater
enforceability of international arbitral awards in recent decades. (103) Nevertheless, very
significant differences persist, particularly outside the highly industrialized world, (104) and
the prospects of successfully enforcing an arbitral award vary significantly from country to
country.
An award-creditor must also consider whether particular nations will be willing to entertain a
given enforcement action. Specifically, some countries may impose jurisdictional, forum non
conveniens, or other limits on actions to confirm arbitral awards. In one well-known case, for
example, Swiss courts refused to confirm an arbitral award made in Switzerland, in a case
involving non-Swiss parties, on the grounds that the award against a foreign state lacked
sufficient connection with Switzerland to be enforced there. (105) More recently, a U.S.
appellate court dismissed on forum non conveniens grounds an action in the United States to
enforce a Finnish arbitral award against a Finnish company. (106) Other nations can require
significant jurisdictional contacts between the award-debtor and the enforcement forum, can
impose time limits on actions to confirm, or otherwise restrict enforcement actions.
b. National Law Limits on Forums for Seeking to Vacate International Arbitral Awards
P "764" Actions to vacate international arbitral awards also raise forum selection issues under national
P "765" law. Even if the New York Convention permits a country to entertain an action to vacate an
arbitral award, that nation's local law may not provide for such an action. Arbitration
legislation in some countries grants local courts jurisdiction over actions to vacate
international arbitral awards only in very limited circumstances. For example, until recently
amended, Article 1717 of the Belgian Judicial Code (excerpted below) limited the power of
Belgian courts to entertain actions to vacate international arbitral awards made in Belgium in
cases involving foreign parties.
 BELGIAN JUDICIAL CODE
Article 1717(4) (prior to 1999 amendments)
Courts of Belgium may hear a request for annulment only if at least one of the parties to the
dispute decided by the award is either a physical person having Belgian nationality or
residence, or a legal entity created in Belgium or having a Belgian branch or other seat of
operation.
BELGIAN JUDICIAL CODE
Article 1717(4) (as amended in 1999)
The parties may, through an express declaration in the arbitration agreement or through a
later agreement, exclude any action for the annulment of an arbitrator's award when neither of
them is either a natural person with a Belgian citizenship or a residence in Belgium, or a legal
person having its main establishment or having a branch there.
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Articles 190 & 192
[excerpted below at p. 1035]
UNCITRAL MODEL LAW
Articles 1, 6, 34, 35 & 36
excerpted in below at pp. 1012, 1013, 1020-21]
FEDERAL ARBITRATION ACT
§§9 & 10
[excerpted below at pp. 1000-01]
P "765"
P "766"
Notes on National Law Limits on Forums For Enforcing or Vacating Arbitral Awards
1. National arbitration legislation limiting availability of actions to vacate international arbitral
awards. Consider the Belgian (both versions) and Swiss arbitration legislation excerpted
above. Suppose that a Russian and an Argentine company arbitrate under ICC Rules in Belgium
or Switzerland, and the Russian company is blatantly denied either notice of the proceedings
or an opportunity to present its case; or suppose the Argentine company bribes the arbitrator.
If the award is made in Belgium, would Article 1717 have permitted Belgian courts, prior to 1999,
to entertain an action to vacate or annul the award? What effect do the 1999 amendments have
on this result?
If the award in the foregoing hypothetical is made in Switzerland, under what circumstances
would Swiss courts entertain an action to vacate the award? Under the Swiss statute, what
grounds for vacating an award may be waived?
2. National arbitration legislation permitting actions to vacate international arbitral awards. In
contrast to the Belgian legislation excerpted above, most national arbitration statutes permit
actions on a range of grounds to vacate international arbitral awards “made” within the forum
state. Consider Article 34 of the UNCITRAL Model Law and §10 of the FAA. In particular, note
both: (a) the category of awards which national courts can vacate; and (b) the grounds on which
an award may be vacated. See also NTPC, supra pp. 751-57.
3. Reasons for national arbitration legislation limiting actions to vacate. What were the
legislative motivations for enacting the Belgian and Swiss arbitration statutes which forbid
local judicial review of substantial categories of international arbitral awards made in Belgium
and Switzerland? In part, the objective is reflected in national court decisions, discussed
above, limiting the grounds for vacating arbitral awards under the FAA and New York
Convention: the parties bargained for arbitration and should be bound by the tribunal's
decision except in exceptional cases.
On the other hand, consider the views in Park, Judicial Controls in the Arbitral Process, 5 Arb.
Int'l 230, 232-33, 256 (1989): “There has been a scramble among Western European nations to
accommodate their arbitration laws to what they perceive to be the consumers' tastes, thereby
attracting a greater share of the fees that go to lawyers and arbitrators at the place of the
proceeding.” The same authority reports that England's 1979 enactment of a revised arbitration
act was accompanied by an estimate in Parliament that the reform would bring England
approximately $1 billion in lawyers' and arbitrators' fees. 392 Parl. Deb., HL (5th series) 99
(1978). Less cynically, do not the Belgian and Swiss statutes do good (in addition to well)? Do
they not further enhance the ability of international arbitration to resolve commercial
disputes efficiently and definitively?
4. Desirability of access to judicial review in arbitral forum. Most national laws provide for
judicial review, through an action to vacate, of arbitral awards made within national borders.
See Berger, The Modern Trend Towards Exclusion of Recourse Against Transnational Arbitral
Awards: A European Perspective, 12 Fordham Int'l L. J. 605 (1989). The Belgian and Swiss statutes
are atypical in their insulation of arbitral awards from judicial review. Is it wise to forbid
essentially all access to local courts to vacate awards made locally?
Consider the following: Judicial review of arbitral awards is a necessary “bulwark against
corruption, arbitrariness, bias, ... and ... sheer incompetence, in relation to acts and decisions
with binding legal effect for others. No one having the power to make legally binding decisions
 in this country should be altogether outside and immune from this system.” Kerr, Arbitration
and the Courts: The UNCITRAL Model Law, 34 Int'l & Comp. L.Q. 1, 15 (1985). See also Mann,
Private Arbitration and Public Policy, 1985 Civil Justice Q. 257 (1985); Craig, Uses and Abuses of
Appeal From Awards, 4 Arb. Int'l 174, 198-202 (1988) (“the concept of a non-reviewable award
attracts the kind of contempt that was felt some years ago for divorces from Las Vegas or
Chihuahua”).
Are these comments fair? If sophisticated companies decide that they wish to forego any
appellate review, why should that wish be frustrated? Is the limited judicial review available
under most national arbitration legislation likely to prevent “wrong” decisions?
5. Consequences in national courts of foreign arbitral situs's courts' refusal to entertain action
to vacate. What are the consequences of the refusal of an arbitral forum to consider an action
P "766" to vacate an award? Suppose that a blatantly unfair arbitral proceeding produces a
P "767" substantial damages award against the respondent. If he cannot challenge the award in the
arbitral forum, what alternatives are open to the respondent? Suppose that a U.S. company
wishes to challenge an award made against it in Belgium, where Belgian courts will not hear an
action to vacate Can an action to vacate the award be brought under the FAA in the United
States? See supra pp. 757-58. Should the unavailability of judicial review in the arbitral forum
affect the interpretation of Article V(1)(e)'s limits on fora for seeking to vacate the award?
Suppose that an unfair arbitral proceeding produces an award of no liability against the
respondent. What options are open to the claimant to obtain redress if the arbitral forum will
not consider an action to annul?
6. “A-national” arbitrations. As described above, some commentators have vigorously urged
that an arbitration award may be “detached” from the law of any particular nation. See
generally supra p. 433; A. van den Berg, The New York Convention of 1958 28-51 (1981) (describing
debate).
Some proponents of “a-national” awards contemplate the enforcement of awards without the
necessity, or apparently opportunity, for judicial review in an action to vacate in any national
forum. See Paulsson, Arbitration Unbound: Award Detached From the Law of its Country of Origin,
30 Int'l & Comp. L. Q. 358 (1981); Goldman, Les conflits de lois dans l'arbitrage international de
droit privé, 1963 Recueil des Cours 380.
Others have questioned the enforceability of a-national awards under the New York
Convention. van den Berg, Non-Domestic Arbitral Awards Under the 1958 New York Convention, 2
Arb. Int'l 191, 213 (1986). Compare Ministry of Defense v. Gould, Inc., 887 F.2d 1357 (9th Cir. 1989)
(“we conclude that an award need not be made ‘under a national law’ for a court to entertain
jurisdiction over its enforcement pursuant to the Convention”); Lewis, What Goes Around Comes
Around: Can Iran Enforce Awards of the Iran-U.S. Claims Tribunal in the United States?, 26 Colum.
J. Trans. L. 515 (1988).
7. Where can an action to vacate under §10 of the FAA be brought? Section 10 of the FAA
provides that the “United States district court in and for the district wherein the award was
made” can vacate the award in specified circumstances. Under §10, actions to vacate arbitral
awards are subject to stringent limits.
(a) Lower U.S. court decisions holding that actions to vacate awards under FAA §10 can only be
brought in the district where the award was made. Lower courts have struggled with the
question whether §10's reference to the district court where the award was made are
exclusive. Some U.S. courts have concluded that the reference is exclusive and that an
action to vacate an award under the FAA can only be commenced in the district where the
award was made. See infra p. 898. Is this sensible? Are there circumstances in which
actions to vacate should be capable of being brought elsewhere? Suppose a U.S.
company wishes to vacate a patently biased award made in Bulgaria or the Sudan. Why
shouldn't §10 be available?
(b) Lower U.S. court decisions holding that an action to vacate under §10 can be brought in the
district where adverse party seeks to confirm the award. Some courts have also held that
when a party seeks to confirm an award in a district other than the one where it was
made, the party resisting enforcement can move to vacate in that district. See infra p.
898. Is that a sensible result? Is it consistent with the New York Convention? See Jamaica
Commodity Trading Co. v. Connell Rice & Sugar Co., 1991 U.S. Dist. Lexis 8976 (S.D.N.Y. 1991).
(c) Lower U.S. court decisions holding that an action to vacate under §10 can be brought in the
district that issued order compelling arbitration. Several lower U.S. courts have held that
an award may be vacated in the district where an order compelling arbitration under §4
was issued. See infra p. 898. Is this a sensible rule? Is it consistent with the Convention?
(d) No basis under FAA for vacating awards made outside United States, but “under” U.S. law. As
discussed above, Article V(1)(e) of the Convention permits actions to vacate an award to
be brought in the country “under” whose law the award was made (that is, as the court
held in Bridas, supra pp. 757-59, the procedural law governing the arbitration). Suppose an
arbitration is conducted outside the United States, with the parties expressly selecting
the FAA (or the law of a U.S. state) as the procedural law governing the arbitration. Does
the FAA provide a basis to vacate the award? Nothing in the FAA's express language
suggests an affirmative response to this question. Is this a sensible result? (Note that
some lower U.S. courts have held that actions to vacate arbitral awards can (and must) be
brought in state courts, when the parties have agreed to arbitrate under state law. See
infra p. 900-01.) Is it possible to read Chapter 2 of the FAA as incorporating and giving
effect to the Convention's permission for an action to vacate?
 (e) Basis under FAA for vacating arbitral awards resolving federal statutory claims. As
P "767" described above, U.S. securities, antitrust, and other statutory claims are arbitrable. See
P "768" supra pp. 247-95. Suppose an arbitral tribunal makes an award outside the United
States wrongly rejecting U.S. antitrust claims. Is the award subject to an action to vacate
under the FAA? If it is not, then the wrongly-decided award might be enforced outside the
United States without any U.S. court ever reviewing the tribunal's award. Is there
anything, however, in the language of §10 to suggest a U.S. court could vacate the award?
Note the Supreme Court's confidence in Mitsubishi Motors Corp. v. Soler Chrysler
Plymouth, Inc., 473 U.S. 614 (1985), supra p. 279, that U.S. courts could review awards
concerning U.S. antitrust claims. Is it sufficient that such review occur when (and if) an
action to enforce the award is brought in the United States?
8. Actions to vacate awards under chapter two of the FAA. Lower U.S. courts have reached
divergent results in actions to vacate awards under chapter two of the FAA.
(a) Lower U.S. court decisions holding that there is no basis under chapter two of the FAA for
actions to vacate awards subject to Convention. In Tesoro Petroleum Corp. v. Asamera
(South Sumatra) Ltd, 798 F.Supp. 400 (W.D. Tex. 1992), an action to vacate a Convention
award, made in New York, was brought in Texas. The district court dismissed the action,
reasoning that chapter 2 of the FAA does not provide a basis for actions to vacate awards
subject to the Convention. Hence, the sole basis for such an action is §10 of the domestic
FAA, which requires compliance with §10's venue and time limitations. Under §10, the
court reasoned, an action to vacate can generally only be brought in the district where
the award was made. See supra pp. 709-10, 767 & infra pp. 897-98.
The Tesoro decision is significant because of its conclusion that chapter 2 of the FAA does
not provide for actions to vacate arbitral awards. As a consequence, the federal subject-
matter jurisdiction provided for by chapter 2 is not available in an action to vacate. As
discussed elsewhere, infra p. 892, §9 of the FAA does not contain an independent grant of
federal subject-matter jurisdiction. Thus, under Tesoro, it may be difficult, at least where
alienage, diversity, or FSIA jurisdiction are not present, to pursue an action to vacate an
international arbitral award in U.S. federal court.
Is it sensible to hold, like the court did in Tesoro, that §§203 and 207 of the FAA do not
provide a basis for an action in federal court to vacate an award falling under the
Convention? Would not the goals of the Convention and chapter two of the FAA be
furthered by permitting federal court jurisdiction over actions to vacate Convention
awards?

(b) Lower U.S. court decisions holding that actions to vacate awards subject to the Convention
may be brought under chapter two of the FAA. In contrast to Tesoro, two other district
courts have apparently concluded that actions to vacate awards do fall under the
Convention and chapter two of the FAA. In Jamaica Commodity Trading Co. v. Connell Rice
& Sugar Co., 1991 U.S. Dist. Lexis 8976 (S.D.N.Y. 1991), the court permitted a party to move
to vacate an award subject to the Convention, in response to an action to confirm the
award. The court refused to incorporate §10's three-month limitation into the second
chapter of the FAA via §208, relying on the Convention's longer, three-year period (versus
one year under the FAA) in which to enforce arbitral awards, and the fact that “under the
Convention a party may raise one of the grounds for vacating an award at any time during
the three-year period in opposition to a motion to confirm.”
In another decision, P.T. Reasuransi Umum Indonesia v. Evanston Ins. Co., 1992 U.S. Dist.
Lexis 19753 (S.D.N.Y. 1992), the district court entertained an action to vacate a Convention
award under both §10 and §201. The court did not refer to Tesoro.

(c) Should Convention awards be subject to actions to vacate under chapter two of the FAA?
Arguably, because there is no specific authority under the FAA's second chapter to vacate
Convention awards, such awards cannot be vacated under the FAA and can only be
subject to actions to vacate in state court. The better approach is to treat §10 as fully
applicable to awards under the Convention (through §208) and to allow federal subject
matter jurisdiction under §203 in actions to vacate. That would guarantee a federal forum
for actions to vacate Convention awards, which furthers the purposes of the Convention's
second chapter and is consistent with the availability of federal fora in closely-related
actions to confirm under §207.
9. Forum selection within the United States if actions to vacate Convention awards can be
brought under the FAA's second chapter. Assume that Tesoro is wrong, and that federal subject-
matter jurisdiction does exist for an action to vacate an award under chapter 2 of the FAA. Does
it necessarily follow in Tesoro that the action to vacate would have properly been brought in
Texas?
Consider §208, which provides that chapter 1 of the FAA applies in actions under chapter 2, “to
P "768" the extent that chapter is not in conflict with this chapter or the Convention as ratified by the
P "769" United States.” Does that incorporate §10's venue requirements? Alternatively, would a §1404
transfer analysis permit transfer of the action to vacate to New York?
10. Forum non conveniens defense to action to enforce arbitral award. There is little authority
on the availability of a forum non conveniens defense to actions to enforce arbitral awards in a
particular national forum. For one U.S. exception, see Melton v. Oy Nautor AB, 161 F.3d 13 (9th
Cir. 1998) (dismissing action in United States to enforce arbitral award, made in Finland against
 Finnish defendant, on forum non conveniens grounds). Does Article V of the New York
Convention permit forum non conveniens defenses to Convention awards? Is an inconvenient
forum one of the grounds for refusing to recognize an award under Article V?
3. Consequences of Vacating An International Arbitral Award
It is rare for international arbitral awards to be vacated, either in the courts of the arbitral
situs or otherwise. If an award is vacated, however, challenging questions arise as to the
consequences of the national court judgment vacating the award and to the continued legal
effects of the award itself. In particular, must courts in foreign states recognize either the
judgment vacating the award or the vacated award? Alternatively, can a foreign court recognize
either the judgment or the award?
Excerpted below is the decision in Chromalloy Gas Turbine Corp. v. Arab Republic of Egypt. (107)
There, a U.S. court recognized an arbitral award made in Egypt against the Arab Republic of
Egypt – notwithstanding the fact that an Egyptian court had subsequently vacated the award.
Although very poorly-reasoned, the U.S. court's opinion arguably reaches a sound result. At a
minimum, the decision illustrates some of the issues arising when international arbitral awards
are vacated by a national court.
CHROMALLOY GAS TURBINE CORPORATION v. ARAB REPUBLIC OF EGYPT
939 F.Supp. 907 (D.D.C. 1996)
JUNE L. GREEN, DISTRICT JUDGE. This matter is before the Court on the Petition of Chromalloy
Aeroservices, Inc., (“CAS”) to Confirm an Arbitral Award, and a Motion to Dismiss that Petition
filed by the Arab Republic of Egypt (“Egypt”), the defendant in the arbitration. This is a case of
first impression. The Court grants Chromalloy Aeroservices' Petition to Recognize and Enforce
the Arbitral Award, and denies Egypt's Motion to Dismiss, because the arbitral award in
question is valid, and because Egypt's arguments against enforcement are insufficient to allow
this Court to disturb the award.
P "769"
P "770"
This case involves a military procurement contract between a U.S. corporation, Chromalloy
Aeroservices, Inc., and the Air Force of the Arab Republic of Egypt. On June 16, 1988, Egypt and
CAS entered into a contract under which CAS agreed to provide parts, maintenance, and repair
for helicopters belonging to the Egyptian Air Force. On December 2, 1991, Egypt terminated the
contract by notifying CAS representatives in Egypt. On December 4, 1991, Egypt notified CAS'
headquarters in Texas of the termination. On December 15, 1991, CAS notified Egypt that it
rejected the cancellation of the contract “and commenced arbitration proceedings on the
basis of the arbitration clause contained in Article XII and Appendix E of the Contract.” Egypt
then drew down CAS' letter of guarantee in an amount totaling some $11,475,968.
On February 23, 1992, the parties began appointing arbitrators, and shortly thereafter,
commenced a lengthy arbitration. On August 24, 1994, the arbitral panel ordered Egypt to pay
to CAS the sums of $272,900 plus 5 percent interest from July 15, 1991, (interest accruing until the
date of payment), and $16,940,958 plus 5 percent interest from December 15, 1991 (interest
accruing until the date of payment). The panel also ordered CAS to pay Egypt the sum of
606,920 pounds sterling, plus 5 percent interest from December 15, 1991 (interest accruing until
the date of payment).
On October 28, 1994, CAS applied to this Court for enforcement of the award. On November 13,
1994, Egypt filed an appeal with the Egyptian Court of Appeal, seeking nullification of the
award. On March 1, 1995, Egypt filed a motion with this Court to adjourn CAS' Petition to enforce
the award. On April 4, 1995, the Egyptian Court of Appeal suspended the award, and on May 5,
1995, Egypt filed a Motion in this Court to Dismiss CAS' petition to enforce the award. On
December 5, 1995, Egypt's Court of Appeal at Cairo issued an order nullifying the award....
Egypt argues that this Court should deny CAS' Petition to Recognize and Enforce the Arbitral
Award out of deference to its court. CAS argues that this Court should confirm the award
because Egypt “does not present any serious argument that its court's nullification decision is
consistent with the New York Convention or United States arbitration law.”...
A party seeking enforcement of a foreign arbitral award must apply to an order confirming the
award within three years after the award is made. 9 U.S.C. §207. The award in question was
made on August 14, 1994. CAS filed a Petition to confirm the award with this Court on October
28, 1994, less than three months after the arbitral panel made the award. CAS' Petition includes
a “duly certified copy” of the original award as required by Article IV(1)(a) of the [New York]
Convention, translated by a duly sworn translator, as required by Article IV(2) of the
Convention, as well as a duly certified copy of the original contract and arbitration clause, as
required by Article IV(1)(b) of the Convention. 9 U.S.C. §201 note. CAS' Petition is properly before
this Court.
This Court must grant CAS' Petition to Recognize and Enforce the arbitral “award unless it finds
P "770" one of the grounds for refusal ... of recognition or enforcement of the award specified in the ...
P "771" Convention.” 9 U.S.C. §207. Under the Convention, “[r]ecognition and enforcement of the
award may be refused” if Egypt furnishes to this Court “proof that..[t]he award has ... been set
aside ... by a competent authority of the country in which, or under the law of which, that award
was made.” Convention, Article V(1) & V(1)(e) (emphasis added), 9 U.S.C. §201 note. In the
present case, the award was made in Egypt, under the laws of Egypt, and has been nullified by
the court designated by Egypt to review arbitral awards. Thus, [this] Court may, at its
discretion, decline to enforce the award. (108)
 While Article V provides a discretionary standard, Article VII of the Convention requires that,
“[t]he provisions of the present Convention shall not ... deprive any interested party of any right
he may have to avail himself of an arbitral award in the manner and to the extent allowed by
the law ... of the count[r]y where such award is sought to be relied upon.” 9 U.S.C. §201 note
(emphasis added). In other words, under the Convention, CAS maintains all rights to the
enforcement of this Arbitral Award that it would have in the absence of the Convention.
Accordingly, the Court finds that, if the Convention did not exist, the [FAA] would provide CAS
with a legitimate claim to enforcement of this arbitral award. See 9 U.S.C. §§1-14.
Under the laws of the United States, arbitration awards are presumed to be binding, and may
only be vacated by a court under very limited circumstances [set forth in 9 U.S.C. §10.] ...
[Additionally, a]n arbitral award will also be set aside if the award was made in “‘manifest
disregard’ of the law.”First Options of Chicago v. Kaplan, 514 U.S. 938 (1995). “Manifest disregard
of the law may be found if [the] arbitrator[s] understood and correctly stated the law but
proceeded to ignore it.”Kanuth v. Prescott, Ball & Turben, Inc., 949 F.2d 1175, 1179 (D.C. Cir.
1991)....
In the present case, the language of the arbitral award that Egypt complains of reads:
The Arbitral Tribunal considers that it does not need to decide the legal nature of the contract.
It appears that the Parties rely principally for their claims and defenses, on the interpretation
of the contract itself and on the facts presented. Furthermore, the Arbitral Tribunal holds that
the legal issues in dispute are not affected by the characterization of the contract.
... [T]he arbitrators in the present case made a procedural decision that allegedly led to a
misapplication of substantive law. After considering Egypt's arguments that Egyptian
administrative law should govern the contract, the majority of the arbitral panel held that it
did not matter which substantive law they applied – civil or administrative. At worst, this
decision constitutes a mistake of law, and thus is not subject to review by this Court.
P "771" In the United States, “[w]e are well past the time when judicial suspicion of the desirability of
P "772" arbitration and of the competence of arbitral tribunals inhibited the development of
arbitration as an alternative means of dispute resolution.”Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 626-27 (1985). In Egypt, however, “[i]t is established that
arbitration is an exceptional means for resolving disputes, requiring departure from the
normal means of litigation before the courts, and the guarantees they afford.” (Nullification
Decision [of the Egyptian Court] at 8.) Egypt's complaint that, “[t]he Arbitral Award is null under
Arbitration Law, ... because it is not properly ‘grounded’ under Egyptian law,” reflects this
suspicious view of arbitration, and is precisely the type of technical argument that U.S. courts
are not to entertain when reviewing an arbitral award.
The Court's analysis thus far has addressed the arbitral award, and, as a matter of U.S. law, the
award is proper. The Court now considers the question of whether the decision of the Egyptian
court should be recognized as a valid foreign judgment.
As the Court stated earlier, this is a case of first impression. There are no reported cases in
which a court of the United States has faced a situation, under the Convention, in which the
court of a foreign nation has nullified an otherwise valid arbitral award. This does not mean,
however, that the Court is without guidance in this case. To the contrary, more than twenty
years ago, in a case involving the enforcement of an arbitration clause under the FAA, the
Supreme Court held that:
An agreement to arbitrate before a specified tribunal is, in effect, a specialized kind of forum-
selection clause ... The invalidation of such an agreement ... would not only allow the
respondent to repudiate its solemn promise but would, as well, reflect a parochial concept
that all disputes must be resolved under our laws and in our courts. Scherk, 417 U.S. at 519.
In Scherk, the Court forced a U.S. corporation to arbitrate a dispute arising under an
international contract containing an arbitration clause. In so doing, the Court relied upon the
FAA, but took the opportunity to comment upon the purposes of the newly acceded-to
Convention:
The delegates to the Convention voiced frequent concern that courts of signatory countries in
which an agreement to arbitrate is sought to be enforced should not be permitted to decline
enforcement of such agreements on the basis of parochial views of their desirability or in a
manner that would diminish the mutually binding nature of the agreements ... [W]e think that
this country's adoption and ratification of the Convention and the passage of Chapter 2 of the
United States Arbitration Act provide strongly persuasive evidence of congressional policy
consistent with the decision we reach today.
The Court finds this argument equally persuasive in the present case, where Egypt seeks to
repudiate its solemn promise to abide by the results of the arbitration.
... Article XII of the contract requires that the parties arbitrate all disputes that arise between
P "772" them under the contract. Appendix E, which defines the terms of any arbitration, forms an
P "773" integral part of the contract. The contract is unitary. Appendix E to the contract defines the
“Applicable Law Court of Arbitration.” The clause reads, in relevant part:
It is ... understood that both parties have irrevocably agreed to apply Egypt (sic) Laws and to
choose Cairo as seat of the court of arbitration. The decision of the said court shall be final and
binding and cannot be made subject to any appeal or other recourse.
This Court may not assume that the parties intended these two sentences to contradict one
another, and must preserve the meaning of both if possible. Egypt argues that the first quoted
sentence supersedes the second, and allows an appeal to an Egyptian court. Such an
 interpretation, however, would vitiate the second sentence, and would ignore the plain
language on the face of the contract. The Court concludes that the first sentence defines choice
of law and choice of forum for the hearings of the arbitral panel. The Court further concludes
that the second quoted sentence indicates the clear intent of the parties that any arbitration
of a dispute arising under the contract is not to be appealed to any court. This interpretation,
unlike that offered by Egypt, preserves the meaning of both sentences in a manner that is
consistent with the plain language of the contract. The position of the latter sentence as the
seventh and final paragraph, just before the signatures, lends credence to the view that this
sentence is the final word on the arbitration question. In other words, the parties agreed to
apply Egyptian Law to the arbitration, but, more important, they agreed that the arbitration
ends with the decision of the arbitral panel.
The Court has already found that the arbitral award is proper as a matter of U.S. law, and that
the arbitration agreement between Egypt and CAS precluded an appeal in Egyptian courts. The
Egyptian court has acted, however, and Egypt asks this Court to grant res judicata effect to that
action....
The U.S. public policy in favor of final and binding arbitration of commercial disputes is
unmistakable, and supported by treaty, by statute, and by case law. The [FAA] “and the
implementation of the Convention in the same year by amendment of the Federal Arbitration
Act,” demonstrate that there is an “emphatic federal policy in favor of arbitral dispute
resolution,” particularly “in the field of international commerce.”Mitsubishi [Motors Corp.] v.
Soler Chrysler-Plymouth, 473 U.S. 614, 631 (1985). A decision by this Court to recognize the
decision of the Egyptian court would violate this clear U.S. public policy.
Egypt argues that by choosing Egyptian law, and by choosing Cairo as the situs of the
arbitration, CAS has for all time signed away its rights under the Convention and U.S. law. This
argument is specious. When CAS agreed to the choice of law and choice of forum provisions, it
waived its right to sue Egypt for breach of contract in the courts of the United States in favor of
final and binding arbitration of such a dispute under the Convention. Having prevailed in the
chosen forum, under the chosen law, CAS comes to this Court seeking recognition and
P "773" enforcement of the award. The Convention was created for just this purpose. It is untenable to
P "774" argue that by choosing arbitration under the Convettion, CAS has waived rights specifically
guaranteed by that same Convention. As a final matter, Egypt argues that, “Chromalloy's use of
[A]rticle VII [to invoke the FAA] contradicts the clear language of the Convention and would
create an impermissible conflict under 9 U.S.C. §208,” by eliminating all consideration of
Article V of the Convention. As the Court has explained, however, Article V provides a
permissive standard, under which this Court may refuse to enforce an award. Article VII, on the
other hand, mandates that this Court must consider CAS' claims under applicable U.S. law.
Article VII of the Convention provides that:
The provisions of the present Convention shall not ... deprive any interested party of any right
he may have to avail himself of an arbitral award in the manner and to the extent allowed by
the law ... of the count[r]y where such award is sought to be relied upon.
9 U.S.C. §201 note. Article VII does not eliminate all consideration of Article V; it merely
requires that this Court protect any rights that CAS has under the domestic laws of the United
States. There is no conflict between CAS' use of Article VII to invoke the FAA and the language of
the Convention ...
Notes on the Consequences of Vacating an International Arbitral Award
1. Consequences of national court decisions vacating an international arbitral award or refusing
to recognize an international arbitral award. As noted above, significantly different
consequences may flow from: (i) a national court's refusal to enforce an international arbitral
award, and (ii) a national court's decision setting aside or vacating the award. See supra pp.
704-11.
(a) Consequences of national court decision refusing to recognize an arbitral award. If an award
is denied recognition in a national court, it nonetheless remains a “binding” award. It can
be taken to other jurisdictions, and efforts can be made to enforce it anew. No judicial act
has purported to “vacate” or “annul” the award. For example, a court may deny
recognition to an award on forum non conveniens or lack of jurisdiction grounds (supra pp.
766-68) or on grounds of local public policy (infra pp. 815-32). In neither case would the
court's decision affect the underlying validity of the award or imply that it should not be
recognized elsewhere. See K. Berger, International Economic Arbitration 652 (1993).
(b) Consequences of national court decision vacating an arbitral award. If an award is
“vacated” or “annulled,” then it ceases to have legal effect (at least under the laws of the
state where it was vacated), just as an appellate court decision vacates a trial court
judgment. Moreover, if other nations recognize the vacation or annulment of the award,
then the award is neither “binding” nor even existent, and can no longer be enforced.
2. National court decisions recognizing international arbitral awards which were vacated by a
national court in the place they were made. There is little judicial precedent on the question
whether a nation may enforce an international arbitral award that was vacated in the place
where it was rendered. Consider the facts and procedural history in Chromalloy. The underlying
arbitral award was made in Egypt and then vacated by an Egyptian court. Nonetheless, the
prevailing party successfully enforced the vacated award in the United States.
Other national courts have also recognized foreign arbitral awards which had been vacated in
the arbitral situs. See Omnium de Traitement et de Valorisation v. Hilmarton, XXII Y.B. Comm.
 Arb. 696 (Cour de Cassation (France) 1997) (holding that vacated award may be enforced);
Norsolor v. Pabalk, Judgment of 9 October 1984 (Cass. Civ. France), XI Y.B. Comm. Arb. 484 (1986)
(suggesting that award annulled at arbitral seat may be enforceable elsewhere); Judgment of 14
January 1997, XXII Y.B. Comm. Arb. 691 (Paris Cour d'Appel) (1997) (recognizing Egyptian award,
despite Egyptian court decision vacating award).
P "774"
P "775"
3. National court decisions refusing to recognize awards vacated in arbitral situs. A few national
courts have declined to enforce arbitral awards that were refused confirmation in the place
where they were made. Berardi v. Clair, VII Y.B. Comm. Arb. 319 (1982) (declining to enforce
award made in Switzerland against French defendant after award was vacated as “arbitrary” by
Swiss court); Judgment of August 13, 1979, 1980 Rev. de L'Arbitrage 555 (Sup. Ct. Sweden).
4. Does the New York Convention require a national court to recognize an arbitral award that
has been vacated in the arbitral situs? Was the court in Chromalloy required by the New York
Convention to recognize the vacated Egyptian arbitral award? What did the Chromalloy court
conclude? Consider Article V(1)(e) of the Convention. Does Article V(1)(e) not clearly apply to the
Egyptian award and the action which vacated it, and thereby except the award from the
Convention's enforcement obligation?
When Article V(1)(e) refers to an award being vacated by a “competent authority,” what does it
mean? Is there any doubt that the Egyptian court was a “competent authority”? Does the fact
that an Egyptian court apparently reviews awards on the merits mean that it is not a
“competent authority”? What if the Egyptian court applied stricter standards of review to
awards made by foreign arbitrators than by Egyptian arbitrators? to awards made in favor of
foreign companies than to those made in favor of Egyptian companies?
Suppose that a court with no connection to the Chromalloy dispute (e.g., Canada) had
purported to vacate the arbitral award made in Egypt. Would the Canadian court be a
“competent authority”?
5. Does the New York Convention permit a national court to recognize an arbitral award that has
been vacated in the arbitral situs? In Chromalloy, the Arab Republic of Egypt argued that the
New York Convention forbid the U.S. court (or any other national court) from recognizing the
vacated Egyptian arbitral award. How did the Chromalloy court dispose of this argument? Note
the court's comment that it had “discretion” to recognize, or not to recognize, the award.
What is the argument that the Convention forbids recognition of an award which has been
vacated in the arbitral situs? Note the language of Article V(1), whose English version provides
that “[r]ecognition and enforcement of the award may be refused” in certain circumstances.
Does this not clearly imply that recognition “may” also be granted, even if an exception
applies?
Note, however, that there are differences between the English and French versions of Article
V(1). Arguments that the Convention forbids recognition of a vacated arbitral award rely on the
French text of the Convention, and its arguable suggestion that an award must be denied
recognition if one of Article V(1)'s exceptions applies. The French version provides, in effect,
that “[r]ecognition and enforcement of the award will not be refused ... unless.” Both versions
are equally authoritative. See supra p. 21. For an analysis of the linguistic consequences, see
Paulsson, May or Must Under the New York Convention: An Exercise in Syntax and Linguistics, 14
Arb. Int'l 227 (1998).
6. How should the New York Convention be interpreted insofar as vacated awards are
concerned? What interpretation of the New York Convention should be adopted with respect to
the recognition of arbitral awards which have been vacated in the arbitral situs?
Commentary is divided. Compare Smit, A-National Arbitration, 63 Tulane L. Rev. 629, 641 (1989)
(“the Convention does not ... impose an obligation to refuse enforcement [when an award has
been set aside where it was made]; on the contrary, it leaves the court in the second state free
to grant recognition”); Paulsson, Arbitration Unbound: Award Detached From the Law of Its
Country of Origin, 30 Int'l & Comp. L. Q. 358, 373 (1981) (“one country might allow enforcement of
an award even if it has been set aside in its country of origin”); Lastenouse, Why Setting Aside An
Arbitral Award Is Not Enough to Remove It from the International Scene, 16 J. Int'l Arb. 25 (1999)
(enforcement of vacated award possible); van den Berg, When is an Arbitral Award Non-
domestic Under the New York Convention of 1958?, 6 Pace L. Rev. 25, 41-42 (1985) (“if the arbitral
award has been set aside in the country of origin, foreign courts are bound by that decision. In
that case, they must refuse recognition and enforcement of the award”); Paulsson,
Delocalization of International Commercial Arbitration: When and Why it Matters, 32 Int'l &
Comp. L. Q. 53, 59 (1983).
In contrast, consider the following:
Once a venue or a governing law is selected, the convention gives to it a primacy with regard to
the validity of an award. If an award is rendered, let us say, in Switzerland and is nullified
under Swiss law, nothing should be enforceable in any other jurisdiction. However, if the award
is rendered in Switzerland but enforcement is refused in France where the award debtor has
P "775" property, the French judgment should have no effect outside of France, even if it explicitly
P "776" bases itself on a ground of nullity which would have nullified the award erga ommes had it
been rendered in a primary jurisdiction. The award creditor may still seek enforcement
simultaneously or sequentially in any other jurisdiction which is party to the convention. The
critical difference, then, is radius of effects. As opposed to the nullification of the hypothetical
award in Switzerland, a nullification in France has no effect beyond France.... For a control
system like that established in the New York Convention to work, the primary and secondary
 assignments must be mandatory. Because of the language in the English text of the convention,
the control system has appeared to some to be optional rather than imperative: “recognition
and enforcement of the award may be refused” but may be refused “only” if there is proof of a
defect, as detailed by the convention. The French text of the convention, which is equally
authentic, suggest that the control system is mandatory. The Spanish text is even more clearly
mandatory. This particular textual discrepancy between equally authentic languages is not
uncommon in multilingual treaties, for the discretionary power intended and expressed in
English by “may” is difficult to convey in French and Spanish, and the combination of “may ...
only,” which is, at once, permissive and restrictive, is not easily rendered in many other
languages....
M. Reisman, Systems of Control in International Adjudication and Arbitration 115-16 (1992).
Contrary to this analysis, the correct view is that the Convention facilitates the recognition of
foreign arbitral awards and does nothing to prevent nations from recognizing awards even if
they are not obliged by the Convention to do so and even if other countries choose not to. Thus,
among other things, Article V's exceptions permit, but do not require, non-recognition. Article
VII of the Convention confirms this.
What policies would be served by forbidding recognition of an award which has been vacated
in its country of origin? Consider the facts in Chromalloy. How would the international arbitral
process be strengthened by forbidding national courts from recognizing the award made in
Egypt?
7. Exercise of “discretion” to recognize vacated arbitral award under New York Convention.
Assume, as the Chromalloy court held, that the New York Convention neither forbids nor
requires recognition of an arbitral award that has been vacated in the arbitral situs. What
standards, if any, then guide a national court in deciding whether or not to recognize the
vacated award? Note that the Chromalloy court apparently held that it had “discretion” to
recognize the Egyptian award. Does a national court have unfettered “discretion” to recognize,
or not to recognize, the award? What sources of law might provide standards for recognizing
vacated awards? Does anything in the Convention provide such standards? Does local national
arbitration legislation (such as the FAA) do so?
Consider the facts in Chromalloy. Suppose that the Arab Republic of Egypt had won the
arbitration, the U.S. investor had sought to vacate the arbitral award in Egyptian courts, and
the Egyptian courts had vacated the award. Should the U.S. court recognize the vacated award
in these circumstances? Suppose that the grounds for vacating the award in Egyptian courts in
Chromalloy were identical to those available under the FAA or UNCITRAL Model Law.
Suppose that a Swiss court vacates an award made in a dispute between a Japanese and a
Mexican company, on the grounds of procedural irregularity. Should a U.S. court recognize the
award? Suppose that the Egyptian court in Chromalloy had relied on procedural irregularities
in vacating the award.
8. Practical difficulties in enforcing arbitral award vacated in arbitral forum. As a practical
matter, if an award is vacated where it was made, enforcement elsewhere will often be very
difficult. Park, The Lex Loci Arbitri and International Commercial Arbitration, 32 Int'l & Comp. L.
Q. 21, 27 (1983) (writing before Chromalloy, author “knows of no award enforced after explicit
annulment where rendered”); Craig, Uses and Abuses of Appeals From Awards, 4 Arb. Int'l 174,
175-77 (1988) (“in practice it would be extraordinary that an enforcement court abroad would
give effect to an award annulled in its home jurisdiction”). Contra Judgment of the Court of
Appeal of Rouen of 13 November 1984, 1985 Rev. Arb. 115. Note that national law concepts of
collateral estoppel, res judicata, or issue preclusion would be relevant in most nations if
enforcement is sought after an award has been vacated in the arbitral forum.
9. Possibilities for enforcing award vacated in arbitral forum. There may be special
circumstances in which it would be clearly appropriate for a court to enforce an arbitral award
that had been vacated by a court in the place where it had been made. Consider the following
possibilities. First, bilateral or other treaties may impose an obligation to enforce the award.
The 1961 European Convention on International Commercial Arbitration applies to disputes
P "776" between nationals of different signatories; the European Convention obliges signatory states to
P "777" enforce arbitral awards, except where they have been vacated for specified reasons. Where
an award in a dispute between nationals of signatory states is vacated in a country on a basis
not recognized in the European Convention, the obligation to enforce would remain. Other
treaties (including bilateral agreements) may impose analogous obligations.
Second, a court in the arbitral forum that vacates an arbitral award may be manifestly corrupt,
biased, or arbitrary (although proving this is very difficult). In those circumstances, enforcing
an award that had been vacated would be entirely appropriate. Park, The Lex Loci Arbitri and
International Commercial Arbitration, 32 Int'l & Comp. L. Q. 21, 29 (1983). What if there is dispute
about whether the arbitral tribunal was corrupt or arbitrary?
Finally, and less clearly, suppose that the arbitral forum's courts are wholly neutral, but that
local law (as in Chromalloy) permits unfettered judicial review of the merits of of arbitral
awards; a local court reviews the arbitrators' decision on the merits and simply reaches a
different conclusion about the law and facts. Should a third country enforce the award? Is it
obliged to? or is the award no longer “binding” after it is vacated? Is it relevant that the parties
agreed, expressly or impliedly, to arbitration in a place with broad judicial review? Is it
relevant that the New York Convention would not permit non-recognition of an unvacated
award for the reason relied on by the court that vacated the award? What if the enforcing court
thought that the court that vacated the arbitral award (not the arbitral tribunal) was probably
right in its resolution of the dispute? What if the court that vacated the award relied on a
 ground that was contrary to the public policy of the enforcing court?
10. Consequences of a decision in the arbitral forum refusing to vacate arbitral award. Suppose
that the arbitral forum refuses, after entertaining an annulment action, to vacate an arbitral
award. What consequences should this refusal have in subsequent actions to enforce the award
in other jurisdictions? For example, suppose that in Chromalloy a court in the arbitral forum
(Egypt) had rejected arguments concerning arbitrator misconduct or excess of authority, and
confirmed the award. What effect should this have in an action to enforce the award in the
United States when the same arguments are raised as Article V exceptions?
In negotiations leading to the New York Convention, the International Chamber of Commerce
submitted drafts that would have required enforcement of an award unless it had been set
aside in the country of origin. Sanders, I Y.B. Comm. Arb. 214 (1976); Paulsson, Arbitration
Unbound: Award Detached From the Law of its Country of Origin, 30 Int'l & Comp. L. Q. 358, 373-74
(1981). The Convention did not, of course, expressly adopt that rule. What effect, if any, does
that refusal have on issues of preclusion?
P "777"

References
1) For commentary, see Berglin, The Application in United States Court of the Public Policy
Provision of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards,
4 Dickinson J. Int'l L. 167 (1986); Craig, Uses and Abuses of Appeals From Awards, 4 Arb. Int'l
174 (1988); Harnik, Recognition and Enforcement of Foreign Arbitral Awards, 31 Am. J. Comp.
L. 703 (1983); Lalive, Transnational (or Truly International) Public Policy and International
Arbitration (in P. Sanders, Comparative Arbitration Practice and Public Policy in Arbitration,
at 257-318 (1987)); Pisar, The United Nations Convention on Foreign Arbitral Awards, 33 S. Cal.
L. Rev. 14 (1959); Quigley, Accession by the United States to the United Nations Convention
on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049 (1961);
Sanders, A Twenty Years Review of the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, 13 Int'l Law. 269 (1979); Springer, The United Nations Convention on
the Recognition and Enforcement of Foreign Arbitral Awards, 3 Int'l Law. 320 (1969); Tupman,
Staying Enforcement of Arbitral Awards Under the New York Convention, 3 Arb. Int'l 209
(1987); von Mehren, The Enforcement of Arbitral Awards Under Conventions and United
States Law, 9 Yale J. World Pub. Order 343 (1983); van den Berg, When is an Arbitral Award
Non- Domestic Under the New York Convention of 1958?, 6 Pace L. Rev. 25 (1985); Comment,
International Commercial Arbitration Under the United Nations Convention and the
Amended Federal Arbitration Statute, 47 Wash. L. Rev. 441 (1972); Note, Judicial Review of
Arbitration Awards on the Merits, 63 Harv. L. Rev. 681 (1950); Note, Manifest Disregard of the
Law in International Commercial Arbitrations, 28 Colum. J. Trans. L. 449 (1990); Note, The
Public Policy Defense to Recognition and Enforcement of Foreign Arbitral Awards, 7 Cal. W.
Int'l L.J. 228 (1977).
2) See Lalive, Enforcing Awards, in ICC, 60 Years of ICC Arbitration 317, 319 (1984) (voluntary
compliance with ICC awards exceeds 90%); Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d
Cir. 1984).
3) See, e.g., UNCITRAL Model Law Article 35; 9 U.S.C. §9; Swiss Law on Private International
Law Article 193.
4) Alternatively, the award can be sought to be enforced in another state even without first
being confirmed in the arbitral situs. See infra pp. 736-43, 768-77.
5) See, e.g., 9 U.S.C. §10; UNCITRAL Model Law Article 34; Swiss Law on Private International
Law Article 190.
6) See infra pp. 768-77.
7) As with national court judgments, G. Born, International Civil Litigation in United States
Courts 936 (3d ed. 1996), the “enforcement” of an arbitral award refers to the
implementation of coercive measures by national courts or other governmental
authorities to effectuate the award.
8) As discussed below, the New York Convention abolished the so-called “double exequator”
requirement which existed under the Geneva Protocol and Geneva Convention. See infra
pp. 736-37.
9) See New York Convention Articles III & IV.
10) Again like national court judgments, G. Born, International Civil Litigation in United States
Courts 936 (3d ed. 1996), the “recognition” of an arbitral award refers to the decision of a
national court (or comparable body) to give preclusive effect to the arbitrator's
disposition of the parties' claim. See Restatement (Second) Judgments §84 (1982); infra pp.
913-14.
11) The preclusive effects of arbitral awards are discussed below. See infra pp. 913-18.
12) See infra pp. 888-89.
13) See infra pp. 783-84.
14) See infra pp. 795-96.
15) See infra pp. 706, 708-11.
16) See infra pp. 706-08.
17) E.g., 9 U.S.C. §9.
18) See infra pp. 779-83.
19) See supra pp. 30-34 & infra pp. 705-11, 781-95.
20) Compare 9 U.S.C. §§1-16 with 9 U.S.C. §§201-208.
21) See supra pp. 20-22.
22) See A. van den Berg, The New York Convention of 1958 6-10, 264-74 (1981); Sanders, A Twenty
Years' Review of the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, 13 Int'l Law. 269 (1979); Bergesen v. Joseph Muller Corp., 710 F.2d 928, 932 (2d Cir.
1983) (“intended purpose” of Convention is “to encourage the recognition and
enforcement of international arbitration awards”); Parsons & Whittemore Overseas Co. v.
Societe Generale De L'Industrie du Papier, 508 F.2d 969, 973 (2d Cir. 1974) (Convention's
“basic thrust was to liberalize procedures for enforcing foreign arbitral awards”).
23) See infra pp. 711-44.
24) See infra pp. 779-95.
25) See infra pp. 795-96.
26) See infra pp. 757-58, 792-93, 809-10.
27) Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys “R” Us, Inc., 126 F.3d 15, 22 (2d Cir. 1997);
Ministry of Defense of the Islamic Republic of Iran v. Gould, Inc., 969 F.2d 764, 770 (9th Cir.
1992); Parsons & Whittemore Overseas Co. v. Societe Generale de L'Industrie du Papier, 508
F.2d 969, 973 (2d Cir. 1974). See also Management & Technical Consultants SA v. Parson-
Jurden Int'l Corp., 820 F.2d 1531, 1533 (9th Cir. 1987); Matter of the Arbitration of Overseas
Cosmos, Inc., 1997 WL 757041, *2 (S.D.N.Y. 1997); Matter of the Arbitration Between
Intercarbon Bermuda, Ltd, 146 F.R.D. 64, 72 (S.D.N.Y. 1993); Compagnie Des Bauxites de
Guinee v. Hammermills, Inc., 1992 WL 122712, *3 (D.D.C. 1992); Biotronik etc. v. Medford
Medical Instrument Co., 415 F.Supp. 133, 136-37 (D.N.J. 1976); International Standard Elec.
Corp. v. Bridas SA etc., 745 F.Supp. 172, 176 (S.D.N.Y. 1990) (“basic thrust of the Convention
was to limit the broad attacks on foreign arbitral awards” available under Geneva
Convention).
28) New York Convention Article V(I)(e); infra pp. 747-63.
29) See A. van den Berg, The New York Convention of 1958 20 (1981) (Convention not applicable
to action to vacate in Article V(1)(e) forum); infra pp. 757-58.
30) See infra pp. 792-93.
31) See supra pp. 23-24.
32) See supra pp. 24-26.
33) See supra pp. 26-27.
34) See infra pp. 791-93, 809-12.
35) See infra pp. 809-10. The only significant exception is the “manifest disregard” rule, which
permits non-recognition of arbitral awards which deliberately and substantially reject
applicable law. See infra pp. 810-13.
36) See infra pp. 842-43, 853-54.
37) See infra pp. 893, 898-99. The only potential caveat arises from the Supreme Court's
decision in Volt Information Sciences, Inc. v. Board of Trustees, 489 U.S. 468 (1989). If the
parties' agreement contains a choice-of-law clause that incorporates a state arbitration
statute, then it arguably also incorporates the substantive standards under state law for
vacating an arbitral award. If so, it is not clear whether the FAA preempts such standards.
Cf. St. Luke's Hospital v. SMS Computer Systems, Inc., 785 F.Supp. 1243 (E.D. Mich. 1991)
(suggesting it does not).
38) 9 U.S.C. §§9, 207 & 304; infra pp. 882-95. State law may also provide the basis for an action
to confirm an arbitral award. See infra pp. 900-01.
39) As discussed below, neither the second or third chapter of the FAA contains express
provisions for vacating arbitral awards. See infra pp. 767-68, 899-900. As a result, the
availability of actions to vacate under the FAA's second and third chapters is unsettled;
some lower courts have suggested that §10 of the FAA or state law must be used to vacate
Convention awards. See infra pp. 767-68, 896-99, 900-01.
40) See infra pp. 913-18.
41) A foreign arbitral award “may not itself be treated as a foreign money
judgment.”Fotochrome, Inc. v. Copal Co., Ltd, 517 F.2d 512 (2d Cir. 1975). See infra p. 903.
42) Sentry Life Ins. Co. v. Board, 759 F.2d 695, 698 (9th Cir. 1985); Tamari v. Conrad, 522 F.2d 778,
781 (7th Cir. 1977) (“An arbitrator's award is not self-executing.”).
43) 9 U.S.C. §9.
44) 9 U.S.C. §13 (The judgment so entered shall have the same force and effect, in all respects,
as, and be subject to all the provisions of law relating to, a judgment in an action; and it
may be enforced as if it had been rendered in an action in the court in which it is
entered.”); Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d Cir. 1984).
45) Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d Cir. 1984).
46) See infra pp. 740-41.
47) Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d Cir. 1984).
48) New York Convention Article V(1)(e); infra pp. 768-77.
49) See infra pp. 768-77. As a practical matter, if an award is vacated in the arbitral forum, it is
unlikely that it will be recognized and enforced elsewhere. Nevertheless, although it
occurs infrequently, even if an arbitral award is vacated in the arbitral situs, it arguably
can still be enforced in other states. See infra pp. 768-77.
50) United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 40 n.10 (1987) (“Even in the very
rare instances when an arbitrator's procedural aberrations rise to the level of affirmative
misconduct, as a rule the court must not foreclose further proceedings by settling the
merits according to its own judgment of the appropriate result, since this step would
improperly substitute a judicial determination for the arbitrator's decision that the
parties bargained for.... Instead, the court should simply vacate the award, thus leaving
open the possibility of further proceedings if they are permitted under the terms of the
agreement. The court also has the authority to remand for further proceedings when this
step seems appropriate.”); Foster v. Turley, 808 F.2d 38, 42-43 (10th Cir. 1986) (“the court
may not then decide the merits of the controversy”); Ormsbee Dev. Co. v. Grace, 668 F.2d
1140, 1147 (10th Cir.), cert. denied, 459 U.S. 838 (1982); Diapulse Corp. of Am. v. Carba, Ltd,
626 F.2d 1108, 1110 (2d Cir. 1980) (“does not license the district court to substitute its
judgment for that of the arbitrators”).
51) See Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d Cir. 1984); Oriental Commercial &
Shipping Co. v. Rosseel NV, 1991 WL 135940 (S.D.N.Y. 1991).
52) Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d Cir. 1984); E.A. Bromund Co. v. Exportadora
Affonso de Alburquerque, 110 F.Supp. 502, 503 (S.D.N.Y. 1953).
53) See infra pp. 913-18.
54) See supra pp. 148-53.
55) For commentary on the Convention's applicability to “foreign” arbitral awards, see
Contini, International Commercial Arbitration, 8 Am. J. Comp. L. 283, 292-94 (1959);
Deshpande, Jurisdiction Over “Foreign” and “Domestic” Awards in the New York Convention,
7 Arb. Int'l 123 (1991); Feldman, An Award Made in New York Can be a Foreign Arbitral Award,
39 Arb. J. 14 (1984); Fraser Davidson, Where Is An Arbitral Award Made? 41 Int'l & Comp. L.Q.
637 (1992); Love, Arbitration, 15 J. Mar. L. & Com. 134 (1984); Phillips, Recognition of Foreign
Arbitral Awards: The Second Circuit Provides a Hospitable Forum, 10 Brooklyn J. Int'l L. 489
(1984); Reymond, Where Is an Arbitral Award Made? 108 L. Q. Rev. 1 (1992); Schneider, Le lieu
où la jurisprudence est rendue, 9 A.S.A. Bulletin 279 (1991); Timmons, Where is an Arbitration
Award Made and What are the Consequences?, 58 Arb. 124 (1992); van den Berg, When is an
Arbitral Award Non-Domestic Under the New York Convention of 1958?, 6 Pace L. Rev. 25
(1985).
56) Similarly, it is only these categories of awards that are subject to the procedural and
other provisions of national arbitration statutes implementing the Convention. In the
United States, this implementing legislation is the second chapter of the FAA, which
provides a generally-favorable procedural regime for actions relating to Convention
awards. See infra pp. 882-87.
57) For a detailed discussion on the legislative history of the Convention, focusing on the
category of awards to which the Convention applies, see van den Berg, When is an Arbitral
Award Non-Domestic Under the New York Convention of 1958?, 6 Pace L. Rev. 25, 32-38
(1985).
58) The Inter-American Convention contains no express analogue to Article I(1) of the New
York Convention. See infra p. 729.
59) See UNCITRAL Model Law Articles 1, 34, 35; infra p. 729.
60) Swiss Law on Private International Law Articles 190, 194.
61) See infra pp. 725-28.
62) 710 F.2d 928 (2d Cir. 1983).
63) 126 F.3d 15 (2d Cir. 1997), cert. denied, 118 S.Ct. 1042 (1998).
64) 1992 WL 350292 (D.N.J. 1992).
65) “This Convention shall apply to the recognition and enforcement of arbitral awards made
in the territory of a State other than the State where the recognition and enforcement of
such awards are sought, and arising out of differences between persons, whether physical
or legal. It shall also apply to arbitral awards not considered as domestic awards in the
State where their recognition and enforcement are sought.”
66) See supra p. 140.
67) See supra pp. 140-42. Similarly, the Geneva Convention of 1927 was applicable only to
awards made in other contracting states.
68) See supra pp. 140-41.
69) 9 U.S.C.A. §201. The complete text of the U.S. reservation is reproduced at supra p. 140.
70) See supra p. 146 & infra pp. 733-35.
71) See supra p. 147 & infra pp. 735-36.
72) India is a party to the New York Convention.
73) A. van den Berg, The New York Convention of 1958 333 (1981); Firth, The Finality of Foreign
Arbitral Awards, 25 Arb. J. 1 (1970); Craig, Uses and Abuses of Appeal From Awards, 4 Arb. Int'l
174, 187 (1988); Tupman, Staying Enforcement of Arbitral Awards Under the New York
Convention, 3 Arb. Int'l 209 (1987).
74) Convention on the Execution of Foreign Arbitral Awards, see Article 1(2)(d), Geneva,
September 26, 1927, 92 L.N.T.S. 302 (1929-1930).
75) See supra pp. 706-07 & infra pp. 736-37.
76) Article 1(d) of the Geneva Convention required enforcement only of “final” awards, which
the courts of a number of member states interpreted as requiring judicial confirmation or
leave for enforcement in the nation where the award was made. See A. van den Berg, The
New York Arbitration Convention of 1958 333-37 (1981).
77) Eliminating the double exequatur procedure was one of the key objectives of the
Convention's drafters. See Quigley, Accession by the United States to the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L. J.
1049, 1054 (1961). See also U.N. Doc. E/Con.26/SR.3 (1958), reprinted in, 1 International
Commercial Arbitration: New York Convention §III.C.9, III.C.12-12 (G. Gaja ed. 1984)
(comments by Mr. Holleaux of France and Mr. Haight of the ICC); Oriental Commercial &
Shipping Co. v. Rosseel, NV, 1991 WL 135940 (S.D.N.Y. 1991) (“Under the Convention, it is no
longer necessary to seek leave to enforce in the rendering jurisdiction; the party seeking
to enforce an award may proceed directly to the jurisdiction in which it wishes to enforce
the award....”).
78) Lorenzen, Commercial Arbitration – Enforcement of Foreign Awards, 45 Yale L.J. 39, 64-65
(1935); Craig, The Uses and Abuses of Appeals From International Arbitration Awards, 1987
Private Investors Abroad – Problems and Solutions in International Business §14.01
(Southwestern Legal Foundation).
79) A. van den Berg, The New York Convention of 1958 338 (1981) (“the party against whom
enforcement is sought has to prove that the award has not become binding”).
80) See infra pp. 742-43.
81) See infra pp. 739-42.
82) Inter-American Convention Article 4.
83) See infra p. 742.
84) See infra p. 742.
85) See infra pp. 742.
86) See supra pp. 20-23, 706-07.
87) See supra pp. 20-23, 706-07.
88) See A. van den Berg, The New York Convention of 1958 264-69 (1981); Indocomex Fibres Pte.,
Ltd v. Cotton Co. Int'l, Inc., 916 F.Supp. 721 (W.D. Tenn. 1996) (rejecting argument that award
made under Rules of Liverpool Cotton Association is enforceable solely in English courts;
interpreting forum selection clause with respect to enforcement as non-exclusive). Of
course, the Convention only affirmatively facilitates the enforcement of an award in
nations that have ratified the Convention. Moreover, the Convention permits reciprocity
reservations, which can render it inapplicable to awards made in states that have not
ratified the Convention. See supra pp. 730-36.
89) See infra pp. 768-77.
90) See supra pp. 706-07 & infra pp. 781-82. As discussed above, some commentators have
concluded that, whenever an award is subject to the Convention. Article I(1) limits the
substantive grounds for challenging the award to those set forth in Article V. For example,
if an award is made in New York under Indian procedural law, it would be a “foreign”
award in India, a “non-domestic” award in New York, and subject to an action to vacate in
either place – but only under Article V's exceptions. See supra pp. 726-28 & infra pp. 792-
93; Kolkey, Attacking Arbitral Awards: Rights of Appeal and Review in International
Arbitration, 22 Int'l Law. 693 (1988); Paulsson, The New York Convention's Misadventures in
India, 7 Mealey's Int'l Arb. Rep. 18 (June 1992).
As we have seen, however, other authorities disagree, reasoning that application of the
Convention to a “non-domestic” or “foreign” award does not preclude an action to vacate,
contemplated by Articles V(1)(e) and VI, on any ground, in its country of origin. See A. van
den Berg, The New York Convention of 1958 19-27 (1981). See supra pp. 726-28.
91) See supra pp. 706-07 & infra pp. 792-93.
92) See New York Convention Articles V(1)(e) and VI; supra pp. 706-07, 725-29 & infra pp. 757-58.
93) Inter-American Convention Article 5(1)(e).
94) See supra pp. 706-07, 725-29 & infra pp 757-58. If the award is made in State A, but under
the laws of State B, it will be subject to an action to vacate in State B (and, perhaps, also
in State A). See infra pp. 757-58.
95) See infra pp. 759-61, discussing potentially divergent interpretations of where an award is
“made” and “under” what laws it is made.
96) See, e.g., National Thermal Power Corp. v. The Singer Company, 7 Mealey's Int'l Arb. Rep. C-1
(June 1992).
97) See supra pp. 736-44 discussing when an award is “final” and the availability of stays of
enforcement under Article VI.
98) 745 F.Supp. 172 (S.D.N.Y. 1990).
99) 7 Mealey's Int'l Arb. Rep. C1 (Supreme Court of India June 1992).
100) [India has ratified the New York Convention, which is implemented by the Indian “Foreign
Awards Act.” Section 9 of that Act contains a “savings clause,” which excepts certain
awards from the Act's coverage. Section 9 provides that “[n]othing in this Act shall ... apply
to any award made on an arbitration agreement governed by the law of India.” Author.]
101) Coercive state measures to enforce both arbitral awards and judgments are subject to
territorial limits: a nation generally cannot apply its enforcement measures to assets
located outside its territory. See G. Born, International Civil Litigation in United States
Courts 935-36 (3d ed. 1996).
102) Nothing in the Convention prevents an award-creditor from seeking simultaneously to
enforce its award in several different forums. Of course, national court decisions in one
jurisdiction may have preclusive effect under local law in other jurisdictions.
103) See supra pp. 21-22, 778-82. See also Park, Judicial Controls in the Arbitral Process, 5 Arb.
Int'l 230 (1989); Berger, The Modern Trend Towards Exclusion of Recourse Against
Transnational Arbitral Awards: A European Perspective, 12 Fordham Int'l L. J. 605 (1989);
Paulsson, Arbitration Unbound in Belgium, 2 Arb. Int'l 68 (1986).
104) See supra pp. 791-93.
105) Libya v. Libyan Am. Oil Co., 20 Int'l Legal Mat. 151 (Swiss Federal Tribunal).
106) Melton v. Oy Nautor AB, 161 F.3d 13 (9th Cir. 1998).
107) 939 F.Supp. 907 (D.D.C. 1996). For commentary on Chromalloy, see Sampliner, Enforcement
of Nullified Foreign Arbitral Awards – Chromalloy Revisited, 14 J. Int'l Arb. 141 (1997);
Paulsson, Rediscovering the N.Y. Convention: Further Reflections on Chromalloy, 12 Mealey's
Int'l Arb. Rep. 20 (April 1997); Schwartz, A Comment on Chromalloy: Hilmarton à
l'americaine, 14 J. Int'l Arb. 2 (1997); Lastenouse, Why Setting Aside an Arbitral Award Is Not
Enough to Remove It From the International Scene, 16 J. Int'l Arb. 25 (1999).
108) The French language version of the Convention (which the Court notes is not the version
codified by Congress), emphasizes the extraordinary nature of a refusal to recognize tn
award: “Recognition and enforcement of the award will not be refused ... unless ...”
(emphasis in the original).
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part Three : Chapter 12.
Validity of International
Arbitration Awards', in Gary
B. Born , International
Commercial Arbitration:
Commentary and Materials
(Second Edition), 2nd edition
(© Kluwer Law International;
Kluwer Law International
2001) pp. 779 - 880
P "779" subject to procedural requirements no more onerous than those applicable to domestic
P "780" awards. Article III provides:
P "780" Convention awards, and then incorporates Article V's exceptions by reference: “The court shall
P "781" confirm the award unless it finds one of the grounds for refusal or deferral of recognition or
KluwerArbitration
Part Three : Chapter 12. Validity of International Arbitration
Awards
12 Validity of International Arbitration Awards
This Chapter discusses the substantive standards applicable to the recognition and
enforcement of international arbitral awards. First, the Chapter discusses the presumptive
obligation of national courts, under most international instruments and developed national
arbitration statutes, to recognize and enforce international arbitral awards. Second, the
Chapter discusses the various exceptions under international and national authorities to the
presumptive enforceability of arbitral awards.
A. Presumptive Obligation To Recognize International Arbitration Awards
Most developed international arbitration regimes impose a presumptive obligation to
recognize international arbitral awards. That is true of the New York Convention, the Inter-
American Convention, and most other international arbitration instruments. Likewise, most
developed national arbitration statutes presumptively require the recognition of international
arbitral awards, subject only to specifically-identified exceptions.
1. Presumptive Obligation Under New York and Inter-American Conventions to Recognize
International Arbitral Awards
As detailed above, the New York Convention was designed principally to facilitate the
recognition and enforcement of foreign arbitral awards. (1) Article III of the Convention imposes
a general obligation on signatory states to recognize arbitral awards made in other countries,
Each contracting state shall recognize arbitral awards as binding and enforce them in
accordance with the rules of procedure of the territory where the award is relied upon, under
the conditions laid down in the following articles. There shall not be imposed substantially
more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral
awards to which the Convention applies than are imposed on the recognition or enforcement of
domestic arbitral awards.
Several aspects of the Convention give special force to the obligation imposed by Article III
and underscore its drafters' goal of facilitating transnational enforcement of arbitral awards.
Most importantly, the New York Convention presumes the validity of awards and places the
burden of proving invalidity on the party opposing enforcement. (2) Moreover, as noted above,
awards are not subject to “double exequatur” and need not be confirmed in the arbitral situs
before enforcement can be sought abroad. (3) In addition, as Article III expressly provides,
signatory states may not impose procedural requirements that are more onerous than those
applicable to domestic arbitral awards. (4)
The Inter-American Convention contains provisions that are substantially similar to the New
York Convention. (5) Article 4 imposes a presumptive obligation to recognize arbitral awards
that are subject to the Convention, while Article 5 sets forth an exclusive list of exceptions to
this general requirement.
2. Presumptive Obligation to Recognize Foreign Arbitral Awards Under National Arbitration
Legislation
Most developed national arbitration statutes also treat foreign arbitral awards as
presumptively valid. Articles 35 and 36 of the UNCITRAL Model Law provide that-foreign
arbitration awards shall be recognized, save where specified exceptions apply. (6) Article 194
of the Swiss Law on Private International Law adopt the same approach. (7) Other developed
national arbitration statutes are similar. (8)
In the United States, §207 of the FAA restates the obligation imposed by Article III to enforce
enforcement of the award specified in the said Convention.” (9) Thus, where an award made
outside the United States is covered by the Convention, U.S. courts have generally concluded
that they must recognize the award, subject only to Article V's exceptions; other grounds for
resisting awards, whether under §10 of the FAA or at common law, may not be relied upon. (10)
3. Presumptive Obligation to Confirm International Arbitral Awards Under National Arbitration
Legislation
The treatment of the recognition of foreign arbitral awards under developed national
arbitration legislation is roughly paralleled by the treatment of the confirmation or annulment
of international arbitral awards. Most developed national arbitration statutes also treat
international arbitral awards as presumptively valid in actions to vacate or confirm such
awards.
 As discussed above, most national arbitration legislation (and the New York and Inter-
American Conventions) treat the confirmation or setting aside of an arbitral award differently
from the recognition of a foreign arbitral award. (11) Most importantly, there is substantial
authority to the effect that the New York (and Inter-American) Convention limit the grounds for
denying recognition to a foreign award to those set forth in Article V, while no such limits are
imposed in actions to set aside or vacate an arbitral award. (12) Despite this, many developed
national arbitration statutes adopt similar (but not identical) approaches to the presumptive
validity of arbitral awards in both cases.
Article 34 of the UNCITRAL Model Law provides for the presumptive validity of international
arbitral awards, (13) subject only to specified exceptions which are substantially identical to
those in Article 36 of the UNCITRAL Model Law (dealing with recognition of foreign awards). (14)
Similarly, Article 190 of the Swiss Law on Private International Law provides for setting aside an
international arbitral award made in Switzerland on grounds parallel to those in Article V of
the New York Convention. (15) Likewise, the domestic FAA in the United States reflects a strong
presumption in favor of the enforceability of arbitral awards. Section 9 of the FAA provides:
P "781" If the parties in their agreement have agreed that a judgment of the court shall be entered
P "782" upon the award made pursuant to the arbitration, and shall specify the court, then at any
time within one year after the award is made any party to the arbitration may apply to the
court so specified for an order confirming the award, and thereupon the court must grant such
an order unless the award is vacated, modified, or corrected as prescribed in Section 10 and 11
of this title.... (16)
Sections 10 and 11 of the FAA set forth exceptions to the confirmation of arbitral awards which
are broadly similar (but not identical) to those in Article V of the New York Convention. U.S.
courts have consistently interpreted §9 in a pro-enforcement fashion:
The purpose of arbitration is to permit a relatively quick and inexpensive resolution of
contractual disputes by avoiding the expense and delay of extended court proceedings.
Accordingly, it is a well-settled proposition that judicial review of an arbitration award should
be, and is, very narrowly limited. (17)
In contrast, some jurisdictions adopt different, less favorable standards for the recognition of
international arbitration awards. Particularly in states that have historically been distrustful of
international arbitration, international arbitral awards are often not presumptively valid, or
are subject to expansive powers of judicial review. For example, arbitral awards are subject in
some states to judicial review on the same grounds as court judgments, (18) while in other
states, foreign arbitral awards are simply not entitled to recognition. (19) And, even in some
developed states, the merits of an arbitrator's decision may be reviewed (with broad
deference to his conclusions) in an action to vacate or confirm. (20)
P "782"
P "783"
4. Proof of Foreign Arbitral Awards
a. Proof of Arbitral Award Under New York and Inter-American Conventions
The New York Convention sets forth, in Article IV, requirements of formal proof that must be
satisfied in order to obtain the advantage of the Convention's provisions concerning
enforceability of arbitral awards. The party seeking enforcement must provide: (a) the duly
authenticated original arbitration award or a duly certified copy thereof; and (b) the original
arbitration agreement or a duly certified copy thereof. Additionally, if the award and/or
agreement are not in the official language of the country in which enforcement is sought, an
official or sworn translation must be provided. These documents must be filed, together with
an application for recognition and enforcement of the award, with a “competent authority” in a
signatory state. National courts have generally rejected efforts needlessly to complicate these
requirements. (21)
If the foregoing materials are properly filed, and if it is shown that the award is subject to the
Convention, then a prima facie case has been established for recognition of the award. The
burden of proof then shifts to the party resisting enforcement to show that the award falls
within one of Article V's exceptions. (22)
b. Proof of Arbitral Award Under National Arbitration Legislation
Like the Convention, most national arbitration statutes contain provisions regarding proof of an
arbitral award. Article 35(2) of the UNCITRAL Model Law requires parties seeking to enforce an
P "783" arbitral award to provide the original award and arbitration agreement, or “duly certified”
P "784" copies thereof. (23) Somewhat less simply, §13 of the FAA requires a party seeking to confirm,
modify or correct an arbitral award to file (a) the arbitration agreement; (b) any selection or
appointment of any “additional arbitrator”; (c) each “written extension of the time ... within
which to make the award”; (d) the award; and (e) notices, affidavits, and other papers “used
upon an application to confirm, modify, or correct the award,” plus each court order upon such
application. (24) Other national arbitration statutes adopt broadly similar approaches. (25)
5. Selected Materials on Presumptive Obligation to Recognize International Arbitral Awards
Excerpted below are selected materials on the presumptive obligation, imposed by most
international arbitration instruments and developed national arbitration statutes, to recognize
foreign and international arbitral awards. First, review Articles III, V, and VI of the New York
Convention, Articles 4 and 5 of the Inter-American Convention, and Article IX of the 1961
European Convention on International Commercial Arbitration. Second, consider Articles 34, 35,
 and 36 of the UNCITRAL Model Law, §§9, 10, and 207 of the FAA, Articles 190 and 194 of the Swiss
Law on Private International Law, and Articles 1502 and 1504 of the New Code of Civil Procedure
in France, and §§69 and 103 of the English Arbitration Act, 1996. Third, compare Article 758 of
the Argentina National Code of Civil and Commercial Procedure, Articles 273 and 274 of the 1969
Iraqi Civil Procedure Code, and the decision of the Indonesian Supreme Court in Navigation
Maritime Bulgare v. P.T. Nizwar. (26) Finally, read the excerpt from Parsons & Whittemore
Overseas Co. v. Societe Generale de L'Industrie du Papier. (27)
NEW YORK CONVENTION
Articles III, V & VI
[excerpted below at pp. 987, 988]
INTER-AMERICAN CONVENTION
Articles 4 & 5
[excerpted below at pp. 995-6]
P "784"
P "785"
UNCITRAL MODEL LAW
Articles 34, 35 & 36
[excerpted below at pp. 1019-21]
1961 EUROPEAN CONVENTION ON INTERNATIONAL COMMERCIAL ARBITRATION
Article IX
[excerpted below at p. 984]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Articles 190 & 194
[excerpted below at p. 1035]
FEDERAL ARBITRATION ACT
§§9, 10, & 207
[excerpted below at pp. 1000-01, 1003]
NEW CODE OF CIVIL PROCEDURE OF FRANCE
Articles 1502 and 1504
1502. A decision granting recognition or enforcement to an award is subject to appeal in the
following cases:
(1) If the arbitral tribunal ruled when there was not arbitration agreement or on the basis of
an agreement which was null and void or expired;
(2) If the arbitral tribunal was irregularly formed or if the sole arbitrator was irregularly
appointed;
(3) If arbitral tribunal ruled without conforming itself to the terms of reference which was
entrusted to it;
(4) When the principle of basic procedural justice (contradiction) has not been observed;
(5) If recognition or enforcement is contrary to French international public policy.
1504. An arbitral award rendered in France in matters of international arbitration can be
challenged by an action to annul the award on the basis of the grounds provided for in article
1502.
P "785"
P "786"
The order granting enforceability to this award is not subject to any means of recourse.
However, the action to annul an award entails as a matter of law, within the limits of the court's
jurisdiction, recourse against the ruling of the judge for enforcement matters or his
jurisdictional divestiture.
ARGENTINA NATIONAL CODE OF CIVIL AND COMMERCIAL PROCEDURE
I.C.C.A. Int'l Handbook on Comm. Arb. Supp. 3
Article 758. All means of recourse available against court decisions can be raised against an
arbitral award, if not waived in the terms of reference.
CIVIL PROCEDURE CODE OF IRAQ LAW NO. 83 OF 1969
Articles 273 & 274
273. When the arbitral award is presented to the court of original jurisdiction for confirmation,
a party may seek to set aside the award or the court itself may set it aside in the following
circumstances:
4) If the award is made without written evidence or is based on an invalid agreement or if it
exceeds the scope of the agreement.
 5) If the award violates a rule of public policy or morals or any specific arbitration rule laid
down in this Code.
6) If any of the grounds for retrial exists.
7) If there is a material error in the award or in the proceeding which affects the validity of
the award.
274. The court may either confirm the award or set it aside wholly or partially, and if it sets
aside the award wholly or partially it may refer the matter back to the arbitrators to remedy
any deficiency in the arbitral award, or it may itself resolve the dispute if the matter is
suitable for resolution.
ENGLISH ARBITRATION ACT, 1996
Sections 69 & 103
69.-(1) Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon
notice to the other parties and to the tribunal) appeal to the court on a question of law arising
out of an award made in the proceedings.
An agreement to dispense with reasons for the tribunal's award shall be considered an
agreement to exclude the court's jurisdiction under this section.
P "786"
P "787"
(2) An appeal shall not be brought under this section except
(a) with the agreement of all the other parties to the proceedings, or
(b) with the leave of the court.
The right to appeal is also subject to the restriction in section 70(2) and (3).
(3) Leave to appeal shall be given only if the court is satisfied -
(a) that the determination of the question will substantially affect the rights of one or more
of the parties,
(b) that the question is one which the tribunal was asked to determine,
(c) that, on the basis of the findings of fact in the award -
(i) the decision of the tribunal on the question is obviously wrong, or
(ii) the question is one of general public importance and the decision of the tribunal is
at least open to serious doubt, and
(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just
and proper in all the circumstances for the court to determine the question.
(4) An application for leave to appeal under this section shall identify the question of law to be
determined and state the grounds on which it is alleged that leave to appeal should be
granted.
(5) The court shall determine an application for leave to appeal under this section, without a
hearing unless it appears to the court that a hearing is required.
(6) The leave of the court is required for any appeal from a decision of the court under this
section to grant or refuse leave to appeal.
(7) On an appeal under this section the court may be order -
(a) confirm the award,
(b) vary the award,
(c) remit the award to the tribunal, in whole or in part, for reconsideration in the light of the
court's determination or,
(d) set aside the award in whole or in part.
The court shall not exercise its power to set aside an award, in whole or in part, unless it is
satisfied that it would be inappropriate to remit the matters in question to the tribunal for
reconsideration.
(8) The decision of the court on an appeal under this section shall be treated as a judgment of
the court for the purposes of a further appeal. But no such appeal lies without the leave of the
court which shall not be given unless the court considers that the question is one of general
importance or is one which for some other special reason should be considered by the Court of
Appeal.
103-(1) Recognition or enforcement of a New York Convention award shall not be refused except
in the following cases.
(2) Recognition or enforcement of the award may be refused if the person against whom it is
invoked proves -

P "787" (a) that a party to the arbitration agreement was (under the law applicable to him) under
P "788" some incapacity;
 (b) that the arbitration agreement was not valid under the law to which the parties subjected
it or, failing any indication thereon, under the law of the country where the award was
made;
(c) that he was not given proper notice of the appointment of the arbitrator or of the
arbitration proceedings or was otherwise unable to present his case;
(d) that the award deals with a difference not contemplated by or not falling within the
terms of the submission to arbitration or contains decisions on matters beyond the scope
of the submission to arbitration (but see subsection (4));
(e) that the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties or, failing such agreement, with the law of
the country in which the arbitration took place;
(f) that the award has not yet become binding on the parties, or has been set aside or
suspended by a competent authority of the country in which, or under the law of which, it
was made.
(3) Recognition or enforcement of the award may also be refused if the award is in respect of a
manner which is not capable of settlement by arbitration, or if it would be contrary to public
policy to recognize or enforce the award.
(4) An award which contains decisions on matters not submitted to arbitration may be
recognized or enforced to the extent that it contains decisions on matters submitted to
arbitration which can be separated from those on matters not so submitted.
(5) Where an application for the setting aside or suspension of the award has been made to
such a competent authority as is mentioned in subsection (2)(f), the court before which the
award is sought to be relied upon may, if it considers it proper, adjourn the decision on the
recognition or enforcement of the award.
It may also on the application of the party claiming recognition or enforcement of the award
order the other party to give suitable security.
NAVIGATION MARITIME BULGARE v. P.T. NIZWAR
XI Y.B. Comm. Arb. 508 (1986)
(Supreme Court of Indonesia Aug. 20, 1984)
On 12 July 1978, in an arbitration in London brought by Navigation Maritime Bulgare of Bulgare
(“NMB”) against P.T. Nizwar of Indonesia, a sole arbitrator awarded NMB $72,576.39 plus interest
of 7.5 per cent year from 1 January 1975 until date of payment, and arbitration costs of UK £250.
When Nizward refused to pay the award, NMB applied to the Central Jakarta District Court to
enforce the award. On 10 June 1981, the District Court ordered P.T. Nizwar to pay the award.
Nizwan appealed to the Indonesian Supreme Court.
1. The Court began its analysis by stating that, as a general rule, foreign judgments and foreign
arbitral awards cannot be enforced in Indonesia unless a treaty requires enforcement. It then
P "788" took up the question of whether Indonesia was bound by the 1927 Geneva Convention on the
P "789" execution of foreign arbitral awards, and concluded that it was not. The Court reasoned that
although the Dutch Government acceded to the 1927 Convention on behalf of the Netherlands
Indies in 1931, and although Art. 5 of the Agreement on Transitional Measures of 1949
(containing the terms upon which Indonesia obtained independence) provides that Indonesia
will be bound by all international agreements entered into by the Dutch Government on behalf
of the Netherlands Indies, nevertheless new principles of international law respecting State
succession have emerged since World War II with the result that Indonesia is no longer bound
by treaties acceded to during the colonial times.
2. The Court then addressed the question of whether Indonesia is bound by the 1958 New York
Convention, and concluded that it was not. While acknowledging that Indonesia ratified the
New York Convention in 1981, the Court stated that in accordance with Indonesian practice it is
still necessary for the Government to promulgate implementing regulations concerning
whether a request to enforce a foreign award should be made to a District Court (and if so,
which District Court) or whether such request should be made directly to the Supreme Court for
a determination as to whether the award is contrary to the Indonesian legal order. Pending
promulgation of such implementing regulations, Indonesian courts cannot enforce foreign
arbitral awards.
PARSONS & WHITTEMORE OVERSEAS CO. v. SOCIETE GENERALE DE L'INDUSTRIE DU PAPIER
508 F.2d 969 (2d Cir. 1974)
J. JOSEPH SMITH, CIRCUIT JUDGE. Parsons & Whittemore Overseas Co., Inc., (“Overseas”), an
American corporation, appeals from the entry of summary judgment ... on the counter-claim by
Societe Generale de L'Industrie du Papier (“RAKTA”), an Egyptian corporation, to confirm a
foreign arbitral award holding Overseas liable to RAKTA for breach of contract.... Jurisdiction is
based on 9 U.S.C. §203, which empowers federal district courts to hear cases to recognize and
enforce foreign arbitral awards.... We affirm the district court's confirmation of the foreign
award.
In November 1962, Overseas consented by written agreement with RAKTA to construct, start up
and, for one year, manage and supervise a paperboard mill in Alexandria, Egypt. The Agency
for International Development (“AID”), a branch of the United States State Department, would
finance the project by supplying RAKTA with funds with which to purchase letters of credit in
 Overseas' favor. Among the contract's terms was an arbitration clause which provided a means
to settle differences arising in the course of performance, and a “force majeure” clause, which
excused delay in performance due to causes beyond Overseas' reasonable capacity to control.
Work proceeded as planned until May 1967. Then, with the Arab-Israeli Six Day War on the
P "789" horizon, recurrent expressions of Egyptian hostility to Americans – nationals of the principal
P "790" ally of the Israeli enemy – caused the majority of the Overseas work crew to leave Egypt. On
June 6, the Egyptian government broke diplomatic ties with the United States and ordered all
Americans expelled from Egypt except those who would apply and qualify for a special visa.
Having abandoned the project for the present with the construction phase near completion,
Overseas notified RAKTA that it regarded this postponement as excused by the force majeure
clause. RAKTA disagreed and sought damages for breach of contract. Overseas refused to settle
and RAKTA, already at work on completing the performance promised by Overseas, invoked the
arbitration clause. Overseas responded by calling into play the clause's option to bring a
dispute directly to a three-man arbitral board governed by the rules of the International
Chamber of Commerce. [The tribunal issued a preliminary award, which recognized Overseas'
force majeure defense as good only during the period from May 28 to June 30, 1967, and a final
award in March, 1973: Overseas was held liable to RAKTA for $312,507.45 in damages for breach
of contract and $30,000 for RAKTA's costs; additionally, the arbitrator's compensation was set
at $49,000, with Overseas responsible for three-fourths of the sum.]
Subsequent to the final award, Overseas in the action here under review sought a declaratory
judgment to prevent RAKTA from collecting the award out of a letter of credit issued in RAKTA's
favor by Bank of America at Overseas' request. The letter was drawn to satisfy any “penalties”
which an arbitral tribunal might assess against Overseas in the future for breach of contract.
RAKTA contended that the arbitral award for damages met the letter's requirement of
“penalties” and counter-claimed to confirm and enter judgment upon the foreign arbitral
award. Overseas' defenses to this counterclaim, all rejected by the district court, form the
principal issues for review on this appeal....
Both the legislative history of Article V, and the statute enacted to implement the United
States' accession to the Convention are strong authority for treating as exclusive the bases set
forth in the Convention for vacating an award. On the other hand, the [FAA], specifically 9 U.S.C.
§10, has been read to include an implied defense to enforcement where the award is in
“manifest disregard” of the law. Wilko v. Swan, 346 U.S. 427, 436 (1953). This case does not
require us to decide, however, whether this defense stemming from dictum in Wilko, supra,
obtains in the international arbitration context. For even assuming that the “manifest
disregard” defense applies under the Convention, we would have no difficulty rejecting the
appellant's contention that such “manifest disregard” is in evidence here. Overseas in effect
asks this court to read this defense as a license to review the record of arbitral proceedings for
errors of fact or law – a role which we have emphatically declined to assume in the past and
reject once again. “[E]xtensive judicial review frustrates the basic purpose of arbitration, which
is to dispose of disputes quickly and avoid the expense and delay of extended court
proceedings.”Saxis Steamship Co. [v. Multifacs Int'l Traders, 375 F.2d 577, 582 (2d Cir. 1967).]
Insofar as this defense to enforcement of awards in “manifest disregard” of law may be
cognizable under the Convention, it, like the other defenses raised by the appellant, fails to
provide a sound basis for vacating the foreign arbitral award....
P "790"
P "791"
Notes on Presumptive Obligation to Recognize International Arbitration Awards
1. Basis under New York Convention for presumptive obligation to recognize Convention awards.
What precisely is the textual basis under the New York Convention for concluding that foreign
arbitral awards must presumptively be recognized? Consider the text of Article III of the
Convention. Does it require that arbitral awards must be recognized, subject only to Article V
exceptions? Or does Article III only impose a “national treatment” standard, requiring that
foreign arbitral awards be treated no less favorably than domestic awards? What if domestic
arbitral awards are subject to searching judicial review in a particular state? Does Article III
permit similar judicial review of foreign arbitral awards?
Consider Article V of the Convention. Does it impose a presumptive obligation to recognize
foreign arbitral awards, subject only to Article V's exceptions? Where exactly does the text of
Article V impose such a requirement?
What is the rationale for treating Convention awards as presumptively valid and enforceable?
It this wise? What are the costs and benefits of such an approach?
Compare Article IX of the 1961 European Convention. What approach does it take to the
presumptive enforceability of foreign arbitral awards?
2. Basis under Inter-American Convention for presumptive obligation to recognize Convention
awards.What is the textual basis for the presumptive obligation imposed by the Inter-
American Convention to recognize arbitral awards? Consider the text of Articles 4 and 5. Does
Article 5 require the recognition and enforcement of Convention awards, subject only to its
enumerated exceptions? Compare Article 5 with Article V of the New York Convention.
3. Basis under national arbitration legislation for presumptive validity of foreign arbitral
awards. Consider how the UNCITRAL Model Law, the FAA, and the Swiss Law on Private
International Law treat international arbitral awards in both actions to recognize foreign
awards and actions to vacate or confirm awards. What do each of these statutes require with
respect to the recognition or confirmation of international arbitral awards? Are such awards
presumptively valid and enforceable?
 4. National arbitration legislation denying foreign arbitral awards presumptive validity.Not all
national arbitration legislation recognizes the presumptive validity of foreign arbitral awards.
Consider Article 758 of the Argentine Code of Civil and Commercial Procedure and Articles 273
and 274 of the Iraqi Code of Civil Procedure. How do they compare with the UNCITRAL Model
Law and the FAA?
Consider the possibilities for enforcing foreign arbitral awards in Indonesia, as detailed in the
1984 Indonesian Supreme Court decision in Navigation Maritime Bulgare v. P.T. Nizwar. Note
that, absent a treaty obligation, no foreign arbitral award was at the time enforceable in
Indonesia. Note also the Indonesian Supreme Court's apparent eagerness to avoid a conclusion
that the New York Convention was applicable.
5. Differing standards under most national arbitration statutes for actions to vacate domestic
arbitral awards and actions to enforce foreign arbitral awards.As discussed above, most
developed national arbitration legislation provides differing standards of judicial review for
actions to vacate and actions to enforce arbitral awards. See supra pp. 780-82. Compare, in this
regard, Articles 34, 35, and 36 of the UNCITRAL Model Law. Also compare Articles 190 and 194 of
the Swiss Law on Private International Law.
Recall that the New York Convention imposes limits on the judicial forums in which actions to
vacate Convention awards may be bought. See supra pp. 757-59. Specifically, an action to
vacate, on either Article V or non-Article V grounds, can be brought only in the nation where the
award was “made” or “under the laws” of which the award was made. See supra pp. 757-59.
6. Substantive bases for vacating international arbitral awards under national arbitration
legislation. Different national arbitration statutes provide different bases for vacating
international arbitral awards.
(a) National arbitration legislation providing limited grounds for vacating international arbitral
awards. Most developed national arbitration statutes provide for only limited judicial
review of international arbitral awards made within the nation's borders. For example,
consider the substantive grounds for vacating awards which are available under Article 34
of the UNCITRAL Model Law and Article 190 of the Swiss Law on Private International Law.
Are the bases for an action to vacate limited generally to those available under the
P "791" Convention to resist enforcement of an award? The FAA is similar, although, as we will see,
P "792" there are several differences between §10's bases for vacating an award and Article V's
exceptions to enforceability. See infra pp. 793, 809.
(b) National arbitration legislation permitting more extensive grounds for vacating
international arbitral awards. In contrast, some national arbitration legislation continues
to permit far-reaching judicial review of international arbitral awards in actions to vacate
awards made locally. For example, the Argentine and Iraqi arbitration statutes
(excerpted above) permit actions to vacate on any ground available for review of a trial
court judgment. Recall also the extensive judicial review that was available in Egyptian
courts in the Chromalloy case. See supra pp. 771-72. For an overview of the bases available
under various national laws for actions to annul or vacate arbitral awards, see Kolkey,
Attacking Arbitral Awards: Rights of Appeal and Review in International Arbitrations, 22 Int'l
Law. 693 (1988).
Even in more developed jurisdictions, somewhat broader judicial review of arbitral
awards is often available in actions to vacate or confirm than in actions to vacate or
confirm than in actions to recognize a foreign award. For example, in the United States,
international arbitral awards have been held subject to review for “manifest disregard of
law” under §10 of the FAA, while foreign arbitral awards are ordinarily not subject to such
review. See infra pp. 797-814. Likewise, §69 of the English Arbitration Act, 1996, permits
judicial review of awards made in England which are “obviously wrong” or of “general
public importance” an “open to serious doubt.”

7. Appropriate bases for actions to vacate an international arbitral award.What bases should be
available for an action to vacate an international arbitral award? Compare the Argentine
legislation with the FAA and UNCITRAL Model Law. Is it appropriate to provide no judicial
review? to provide de novo judicial review? What sort of review will best serve the international
arbitration process? See Craig, Uses and Abuses of Appeal From Awards, 4 Arb. Int'l 174, 192
(1988) (due process review is appropriate).
8. Exclusivity of grounds for non-recognition enumerated in New York Convention.The Parsons &
Whittemore court raises, but does not decide, the question whether the Convention's
enumerated defenses are the exclusive grounds for resisting enforcement of a foreign arbitral
award outside its country of origin.
Consider the text of Article V(1), and its statement that recognition of an award may be refused
“only” if certain showings are made. Compare Article III and its statement that “there shall not
be imposed substantially more onerous conditions ... on the recognition or enforcement of
arbitral awards to which this Convention applies than are imposed on the recognition or
enforcement of domestic arbitral awards.” Does Article III mean that the New York Convention
only requires signatory states to accord Convention awards the same treatment that they
afford to domestic awards? Do either Article III or V clearly provide that the Article V grounds
for non-recognition are exclusive?
Most authorities have interpreted Article V of the Convention as setting forth the exclusive
ground for non-recognition. See Paulsson, The New York Convention in International Practice -
The Problems of Assimilation, reprinted in W. Reisman, W. Craig, W. Park, & J. Paulsson,
 International Commercial Arbitration 1258 (1997) (“The Convention imposes a clear obligation on
member states to enforce awards, if various conditions [set forth in Article IV] are fulfilled.... If
the conditions are fulfilled, the award must be enforced unless one of the grounds for refusal of
enforcement [set forth in Article V] exists.”); Yusuf Ahmed Alghanim & Sons, W.L.L. v. Toys “R” Us,
Inc., 126 F.3d 15 (2d Cir. 1997), cert. denied, 118 S.Ct. 1042 (1998); Parsons & Whittemore Overseas
Co. v. Societe General de L'Industrie du Papier, 508 F.2d 969 (2nd Cir. 1974); Judgment of 25
January 1996, XXII Y.B. Comm. Arb. 643 (Court of First Instance, Brussels) (1997) (“Article V ...
enumerates limitatively the grounds for refusal of recognition and enforcement of an award”);
Judgment of 24 November 1993, XXI Y.B. Comm. Arb. 617 (Luxembourg Court Superieure de
Justice) (1996) (Article V specifies exclusive basis for denying recognition of foreign awards);
Judgment No. 8469 of 11 July 1992, XXII Y.B. Comm. Arb. 715 (Italian Supreme Court 1992) (1997).
9. Exclusivity of grounds for non-recognition enumerated in New York Convention under national
arbitration legislation.Are the grounds for non-recognition of an arbitral award enumerated in
Article V of the New York Convention exclusive under the terms of leading national arbitration
statutes? Consider the UNCITRAL Model Law. Compare the Swiss Law on Private International
Law and Section 103 of the English Arbitration Act, 1996.
10. Exclusivity of grounds for non-recognition enumerated in New York Convention under FAA. In
the United States, the language of the second chapter of the FAA clearly provides that only the
Convention's defenses will be recognized. See 9 U.S.C. §207 (“The court shall confirm the award
P "792" unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the
P "793" award specified in the [New York] Convention.”). See also Management & Technical
Consultants SA v. Parsons-Jurden International Corp., 820 F.2d 1531, 1533 (9th Cir. 1987);
Fotochrome, Inc. v. Copal Co., 517 F.2d 512, 518 (2d Cir. 1975); Compagnie des Bauxites de Guinee v.
Hammermills, Inc., 1992 WL 122712 (D.D.C. May 29, 1992); National Oil Corp. v. Libyan Sun Oil Co.,
733 F.Supp. 800, 813 (D. Del. 1990); La Societe Nationale etc. v. Shaheen Natural Resources Co.,
585 F.Supp. 57 (S.D.N.Y. 1983); Ipitrade Int'l v. Federal Republic of Nigeria, 465 F.Supp. 824 (D.D.C.
1978); Biotronik etc. v. Medford Medical Instrument Co., 415 F.Supp. 133 (D.N.J. 1976).
Should U.S. courts recognize additional defenses to enforcement under the Convention which
are sometimes available in domestic U.S. actions – notably, manifest disregard of law and an
inconvenient arbitral forum? See supra pp. 605-07 & infra p. 809. Could either of these defenses
be fit within any of the Convention's enumerated defenses? Note that courts in other nations
will be influenced by U.S. decisions expanding the grounds for non-enforcement of awards
under the Convention, raising the possibility of spiralling disregard for the Convention's
objective of ensuring the enforceability of arbitral awards.
11. Burden of proof of exception to Convention's presumption of enforceability of award. One of
the central purposes of the New York Convention was to shift the burden of proof to parties
resisting enforcement of an arbitral award: “While the Geneva Convention [of 1927] placed the
burden of proof on the party seeking enforcement of a foreign arbitral award and did not
circumscribe the range of available defenses to those enumerated in the Convention, the 1958
Convention clearly shifted the burden of proof to the party defending against enforcement and
limited his defenses to seven set forth in Article V.”Parsons & Whittemore, 508 F.2d at 973.
Consistent with this pro-enforcement purpose, national courts have repeatedly held that the
party resisting recognition and enforcement of an award bears the burden of showing that one
of the Convention's exceptions is applicable. See Judgment of 29 October 1993, XX Y.B. Comm.
Arb. 628 (Supreme Court of Queensland) (1995) (“the onus is upon the party opposing such an
order” enforcing a Convention award); Rosseel NV v. Oriental Commercial Shipping (UK) Ltd, XVI
Y.B. Comm. Arb. 615 (English High Court 1990) (1991) (“the burden rests squarely on a
respondent, who resists enforcement, to prove the existence of one of the grounds of refusal”);
Judgment of 14 April 1983, XII Y.B. Comm. Arb. 502 (Geneva Court of Appeal) (1987) (“the New York
Convention shifts the burden of proof by placing it on the defendant”); Judgment of 7 June 1995,
XXII Y.B. Comm. Arb. 727 (1997) (Supreme Court of Italy) (same); Judgment of 25 January 1996, XXII
Y.B. Comm. Arb. 643 (Court of First Instance, Brussels) (1997) (“the party against whom [the
award] is invoked bears the burden of proof of the existence of one or more of such grounds for
refusal”); Judgment of 22 February 1992, XVIII Y.B. Comm. Arb. 433 (1993) (Supreme Court of Italy)
(same); Ministry of Defense of Islamic Republic of Iran v. Gould, Inc., 887 F.2d 1357, 1364 n.11 (9th
Cir. 1989), cert. denied, 494 U.S. 1016 (1990); Imperial Ethiopian Government v. Baruch-Foster
Corp., 535 F.2d 334, 336 (5th Cir. 1976); Compagnie des Bauxites de Guinee v. Hammermills, Inc.,
1992 WL 122712 (D.D.C. 1992); National Oil Corp. v. Libyan Sun Oil Co., 733 F.Supp. 800, 813 (D. Del.
1990).
12. Applicability of New York Convention's enforcement regime in national courts.Consider again
the Indonesian decision in Navigation Maritime Bulgare v. P.T. Nizwar. Why was the New York
Convention's enforcement regime not applicable to the arbitral award in question? Note that
the applicability of the New York Convention (and other international arbitration conventions)
in particular national courts will depend ultimately on local law (and local judges). In some
states (like Indonesia in 1984), this means that national legislation must be enacted
implementing the Convention, even after it has been ratified by the state in question.
Consider the practical importance of the question whether or not the New York Convention's
enforcement regime was applicable in Navigation Maritime. What rules of enforceability
applied to the award in question if the Convention was applicable? If it was not?
13. Exclusivity of defenses to enforceability of award enumerated in §10 of the FAA.The plain
language of §§9 and 10 suggest that the FAA provides the exclusive basis for resisting
enforcement of a domestic arbitral award in the United States. U.S. courts also occasionally
remark that the FAA's exceptions are exclusive. See Foster v. Turley, 808 F.2d 38 (10th Cir. 1986);
Corey v. New York Stock Exchange, 691 F.2d 1205, 1211-13 (6th Cir. 1982). These generalizations
 are not entirely accurate. As discussed below, a variety of common law grounds for resisting
enforcement of an award under the FAA have been recognized. These include manifest
disregard, public policy, and non-arbitrability. See infra pp. 795-96.
14. Burden of proof of exception to FAA's general presumption of enforceability of award.As
P "793" under the New York Convention, it is settled that a party seeking to vacate an award under §10
P "794" of the FAA bears a heavy burden of proof. See Advest, Inc. v. McCarthy, 914 F.2d 6, 9 (1st Cir.
1990); O.R. Securities v. Professional Planning Ass'n, 857 F.2d 742, 748 (11th Cir. 1988); Foster v.
Turley, 808 F.2d 38 (10th Cir. 1986); Saxis S.S. Co. v. Multifacs Int'l Traders, Inc., 375 F.2d 577, 582
(2d Cir. 1967).
15. Requirements under national arbitration statutes for reasoned awards.In a number of
countries, national law requires that arbitrators give reasons for their award. A. van den Berg,
The New York Convention of 1958 380-81 (1981); Carbonneau, Rendering Arbitral Awards with
Reasons: The Elaboration of a Common Law of International Transactions, 23 Colum. J. Trans. L.
579 (1985). Compare Judgment of 24 November 1994, XXI Y.B. Comm. Arb. 635 (Rotterdam
Rechtbank) (1996) (unreasoned award enforced where parties did not request reasons) and
Inter-Arab Investment Guarantee Corp. v. Banque Arabe et Internationale d'Investissements, XXII
Y.B. Comm. Arb. 643 (Belgian Cour d'Appel 1997) (1997) (rejecting objections to allegedly
unreasoned foreign arbitral award, on grounds that law of judicial enforcement forum
(requiring reasoned awards) was not applicable to foreign awards and that requirement for
reasoned award was not a principle of public policy) with Mutual Shipping Corp. v. Bayshore
Shipping Co. 1 W.L.R. 625 (1985) (unreasoned award held contrary to English public policy).
Consider Article 189(2) of the Swiss Law on Private International Law and Article 31(2) of the
UNCITRAL Model Law. What do they provide with respect to the tribunal's obligation to explain
in writing the reasons for its award? Similarly, Article VIII of the European Convention of 1961
provides that the parties “shall be presumed to have agreed that reasons shall be given for the
award,” except where: (a) they “expressly declare” to the contrary or (b) they “have assented to
an arbitration procedure under which it is not customary to give reasons for awards” and
neither party requests reasons.
Why does national law require a reasoned award? Is this consistent with efforts to encourage
and facilitate arbitration as a means of dispute-resolution? How? See Carbonneau, Rendering of
Awards With Reasons: The Elaboration of a Common Law of International Transactions, 23 Colum.
J. Trans. L. 579 (1985).
The traditional rule under English common law was that unreasoned awards were enforceable.
See Bingham, Reasons and Reasons for Reasons: Differences Between A Court Judgment and An
Arbitral Award, 4 Arb. Int'l 141, 145 (1988). Is this approach preferable to the U.S. rule?
Even in states that require reasoned awards when local law is the curial law, unreasoned
awards will usually be enforced if permitted under a foreign curial law that applied to a
particular proceeding. A. van den Berg, The New York Convention of 1958 381 n.412 (citing
authorities) (1981); Inter-Arab Investment Guarantee Corp. v. Banque Arabe et Internationale
d'Investissements, XXII Y.B. Comm. Arb. 643 (Belgian Cour d'Appel 1997) (1997). Should a U.S.
court enforce an unreasoned award, made in a foreign country under a foreign curial law
requiring a reasoned award? If an unreasoned award will be vacated because of the
requirement of the parties' agreement or institutional arbitration rules, then shouldn't foreign
law provide the same basis?
16. No requirement under U.S. law that arbitrators render reasoned awards.In the United States,
domestic arbitral practice was historically not to issue reasoned awards. Under U.S. domestic
arbitration law, including the FAA, unreasoned awards are enforceable (at least where
institutional rules or the parties' agreement do not require a reasoned award). United
Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593 (1960) (“Arbitrators have no
obligation to the court to give reasons for their award”); Bernhardt v. Polygraphic Co. of America,
Inc., 350 U.S. 198, 204 n.4 (1956); Eljer Mfg. Inc. v. Kowin Dev. Corp., 14 F.3d 1250 (7th Cir. 1994) (“an
arbitrator is simply not required to state the reasons for his decision”); A. G. Edwards & Sons,
Inc. v. McCullough, 967 F.2d 1401 (9th Cir. 1992) (no requirement under FAA for reasoned award),
cert. denied, 113 S.Ct. 970 (1993); Antwine v. Prudential Bache Securities, Inc., 899 F.2d 410, 412 (5th
Cir. 1990); Virgin Islands Nursing Ass'n etc. v. Schneider, 668 F.2d 221 (3d Cir. 1981) (rejecting
argument that court should “exercise [its] supervisory power to enunciate a new requirement
that arbitrators file written opinions, or, at least, findings of fact”); Kurt Orban Co. v. Angeles
Metal Systems, 573 F.2d 739 (2d Cir. 1978).
17. Requirement in parties' agreement or institutional arbitration rules for reasoned award.As
noted above, leading institutional rules applicable to international arbitrations require
reasoned awards. See UNCITRAL Rules Article 32(3); ICC Rules Article 25(2); LCIA Rules Article
26(1).
Failure by a tribunal to provide a reasoned award, when the parties' arbitration agreement so
requires, is grounds under the FAA for vacating the award. Western Employers Ins. Co. v. Jefferies
& Co., 958 F.2d 258 (9th Cir. 1992).
P "794"
P "795"
B. Grounds for Refusing to Recognize International Arbitral Awards in National
Courts
Although the New York Convention and many national arbitration statutes establish a general
presumption that international arbitral awards must be recognized, these sources also
contemplate non-recognition of awards in specified circumstances. In general, the Convention
 and leading national arbitration statutes provide for non-recognition on the same, fairly-
limited substantive grounds. (28) These grounds are: (a) lack of jurisdiction; (b) procedural
irregularities; (c) bias or misconduct of the arbitral tribunal; (d) public policy; and (e) non-
arbitrability. In addition, some nations permit other grounds for challenging awards, including
substantive errors in the arbitrators decision on the merits.
1. Overview of Grounds for Refusing to Recognize International Arbitral Awards Under Leading
International Arbitration Conventions
The presumption of enforceability, established in Articles III and V of the New York Convention
and other leading international arbitration conventions, is subject to a number of exceptions.
Those exceptions are set forth in Articles V and VI of the Convention and, at least in theory, are
extremely limited. In summary, they are:
1. The award was rendered pursuant to an arbitration agreement that was invalid because,
under the applicable law, the parties lacked capacity to make the agreement or the
agreement was itself invalid. (29)
2. The losing party was not given proper notice of the appointment of the arbitrator or of the
arbitration proceedings or was otherwise unable to present his case. (30)
3. The arbitral award deals with a difference not contemplated by or not falling within the
terms of the submission to arbitration. (31)
P "795" 4. The composition of the arbitral panel or the panel's procedures violated either the
P "796" parties' agreement or the law of the arbitral forum. (32)
5. The arbitral award is either not yet “binding” or has been set aside or suspended “by a
competent authority of the country in which, or under the law of which, that award was
made.” (33)
6. The subject matter of the parties' dispute is not capable of settlement by arbitration, or is
“non-arbitrable,” under the law of the enforcing nation. (34)
7. Recognition or enforcement of the arbitral award would be contrary to the public policy of
the enforcing nation. (35)
8. Where an application has been made to a court or other competent authority of the
“country in which, or under the law of which, that award was made,” then the court where
enforcement is sought “may, if it considers it proper, adjourn the decision on the
enforcement of the award....” (36)

2. Overview of Grounds for Refusing to Recognize International Arbitral Awards Under National
Arbitration Legislation
The presumption that international arbitral awards are enforceable, established by leading
national arbitration statutes, is subject to various exceptions. These exceptions broadly
parallel those of the New York and Inter-American Conventions, with significant local variations
in some instances.
Articles 34 and 36 of the UNCITRAL Model Law provides that a foreign arbitral award may be
denied confirmation or recognition on grounds largely identical to those of Article V of the New
York Convention. Other national arbitration statutes, including Articles 190 and 194 of the Swiss
Law on Private International Law and §§10 and 207 of the FAA, are similar. (37)
In contrast, as discussed above, some national arbitration statutes permit more expansive
judicial review in actions to enforce foreign arbitral awards. In some jurisdictions, foreign
arbitral awards are subject to the same judicial review as judicial judgments. (38) In others,
local courts are authorized to review de novo the substantive and procedural aspects of the
arbitrators' decisions. (39)
P "796"
P "797"
3. Judicial Review of the Merits of International Arbitral Awards (40)
Neither the New York Convention nor the Inter-American Convention contains any exception
permitting non-enforcement of an arbitral award simply because the arbitrators got their
decision wrong. (41) Likewise, the 1961 European Convention does not permit non-recognition of
an arbitral award based on a court's disagreement with the arbitrator's substantive decisions.
Like leading international arbitration treaties, most developed national arbitration statutes
omit any provision for judicial review of the merits of an arbitrator's award in an action to
enforce. For example, Articles 34 and 36 of the UNCITRAL Model Law and Articles 190 and 194 of
the Swiss Law on Private International Law make no provision for denying recognition based
upon an erroneous decision on the merits.
Similarly, in the United States, the text of the FAA contains no exception for “substantive
errors.” Indeed, the rhetoric of U.S. judicial review emphatically rejects the notion of judicial
review of the merits of arbitral awards. U.S. courts routinely avow that even egregious mistakes
of law and fact by the arbitrators are not a basis for refusing to enforce an arbitral award. As
early as 1855, the U.S. Supreme Court held that:
If the award is within the submission, and contains the honest decision of the arbitrators, after
a full and fair hearing of the parties, a court of equity will not set it aside for error, either in law
or fact. A contrary course would be a substitution of the judgment of the chancellor in place of
the judges chosen by the parties, and would make an award the commencement, not the end,
 of litigation. (42)
P "797" Contemporary U.S. decisions (43) are even more deferential to arbitrators' decisions on issues
P "798" of law and fact. (44) Lower U.S. courts have repeatedly interpreted the FAA as reflecting
strong federal policies favoring the enforcement of arbitral awards and as foreclosing virtually
all judicial review of the merits of arbitral awards. (45)
Despite the strong policies against judicial review of arbitral decisions, few judges are happy
with enforcing what they are convinced is a plainly wrong decision. Perhaps inevitably, some
national courts have adopted rules which permit judicial refusals to enforce arbitral awards for
egregious mistakes in a limited range of cases. This is particularly true in actions to confirm or
vacate arbitral awards (as distinguished from actions to recognize foreign arbitral awards).
As noted above, §69 of the English Arbitration Act provides for a measure of judicial review of
the merits of an arbitrator's award made in England. (46) Section 69 limits this review to cases
where the award is either “obviously wrong” or has broad public importance and is “open to
serious doubt.” (47) This right of judicial review is subject to exclusion by the parties'
agreement. (48)
In the United States, courts have fashioned a doctrine – referred to as “manifest disregard of
law” – that allows non-confirmation of certain arbitral awards under §10 of the FAA that are
obviously and demonstrably wrong. The “manifest disregard of law” formula derives from dicta
in Wilko v. Swan, where the U.S. Supreme Court remarked that “[i]n unrestricted submissions ...
the interpretations of the law by the arbitrators, in contrast to manifest disregard are not
subject, in the federal courts, to judicial review for error in interpretation.” (49) Some lower
courts have observed rightly that the Wilko comment is “ungrammatical in structure” and
“unnecessary to the [Wilko] decision,” (50) while others have remarked that the standard is “not
easily defined.” (51)
P "798"
P "799"
The materials excerpted below illustrate the approach of national courts to judicial review of
the merits of an international arbitrator's decisions. First, consider the excerpts from the New
York and Inter-American Convention and various national arbitration statutes. Second, read
the excerpt from I/S Stavborg v. National Metal Converters, Inc., (52) which illustrates the
treatment of manifest disregard claims by most U.S. federal courts in actions to vacate under
the FAA. Also consider the New York Court of Appeal's decision in Granite Worsted Mills, Inc. v.
Aaronson Cowery Ltd, which reflects a less deferential approach to judicial review of the merits
of arbitral awards. (53) Finally, read the excerpt from Parsons & Whittemore Overseas Co. v.
Societe Generale de L'Industrie du Papier, (54) a leading example of the pro-enforcement bias of
U.S. judicial decisions involving foreign arbitral awards under the New York Convention.
NEW YORK CONVENTION
Articles III, V, & VI
[excerpted below at pp. 987, 988]
INTER-AMERICAN CONVENTION
Articles 4 and 5
[excerpted below at pp. 995-6]
UNCITRAL MODEL LAW
Articles 34, 35 & 36
[excerpted below at pp. 1019-21]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 194
[excerpted below at p. 1035]
FEDERAL ARBITRATION ACT
§§9, 10, & 207
[excerpted below at pp. 1000-01, 1003]
P "799"
P "800"
ARGENTINA NATIONAL CODE OF CIVIL AND COMMERCIAL PROCEDURE
I.C.C.A. Int'l Handbook on Comm. Arb. Supp. 3
[excerpted above at p. 786]
CIVIL PROCEDURE CODE OF IRAQ LAW NO. 83 OF 1969
Articles 273 & 274
[excerpted above at p. 786]
ENGLISH ARBITRATION ACT, 1996
Section 69
[excerpted above at pp. 786-88]
PARSONS & WHITTEMORE OVERSEAS CO. v. SOCIETE GENERALE DE L'INDUSTRIE DU PAPIER
 508 F.2d 969 (2d Cir. 1974)
[excerpted above at pp. 789-91]
I/S STAVBORG v. NATIONAL METAL CONVERTERS, INC.
500 F.2d 424 (2d Cir. 1974)
OAKES, CIRCUIT JUDGE. National Metal Converters, Inc., appeals from an order entered August 2,
1973, by the district court granting I/S Stavborg's motion to confirm a 2-1 arbitration award
made May 3, 1973, in New York City. Appellant raises [the issue] whether the decision of the
majority of the arbitrators should be reversed on grounds of its being either “clearly erroneous”
or “manifestly in disregard” of the applicable law. [N]ot without some doubt, [we] affirm the
award.
On August 8, 1972, appellant, as charterer, agreed to charter a vessel owned by appellee to
transport bulk scrap steel from Bath, Maine, to Bilboa, Spain. Clause 37 of the contract of
charter party entered into by the parties, governing the arbitration of disputes, reads as
follows:
Any and all differences and disputes of whatsoever nature arising out of this Charter, shall be
put to arbitration in the City of NEW YORK pursuant to the Laws relating to arbitration there in
force, before a board of three persons consisting of one arbitrator to be appointed by the
Owners [appellee], one by the Charterers [appellant], and one by the two so chosen.
P "800"
P "801"
The decision of any two of the three on any point or points shall be final.
After the steel had arrived in Spain, a dispute arose concerning the payment of freight due
under the charter party agreement; this dispute was submitted to arbitration in New York City.
Both parties apparently agreed to submit the dispute to arbitration under clause 37, as no
court action was brought to enforce that clause. Both parties appointed one arbitrator. Both
parties agreed (presumably because the two appointed arbitrators were unable to agree) to
the appointment of a third arbitrator by the district court below and accepted that court's
appointee. Both parties participated fully in the arbitration itself, including the submission of
briefs, calling of witnesses and presenting of argument to the arbitrators. After an award for
appellee had been handed down, appellant petitioned the district court to modify or vacate
that award pursuant to 9 U.S.C. 9....
Appellant's ... claims may be stated variously that the arbitrators' decision was “clearly
erroneous,” or was “in manifest disregard of the applicable law,” or amounted to a
“reformation” of the charter party agreement here in issue is clearly a matter of federal
maritime law, “the charter party is merely a contract, subject in general to all the rules and
requirements of contract law.” G. Gilmore & C. Black, The Law of Admiralty 172 (1957)....
The facts surrounding the voyage itself were not in dispute before the arbitrators. The vessel,
owned by appellee, left Bath, Maine, on or about August 17, 1972, carrying 4,091.95 long tons of
bulk scrap steel. The steel was consigned to one Rosal, “F.O.B. stowed vessel.” Under the
charter party, freight was due to be paid by August 24, 1972, with Rosal having the initial
obligation to pay the freight. Rosal did not pay the freight by that date, nor had it been paid at
the time of arbitration. The parties agree that the balance of the unpaid freight is $32,742.61.
The vessel arrived at Bilboa, Spain, on or about August 27, 1972. Discharge of the cargo
commenced on August 28, 1972. Under date of August 30, 1972, some hours prior to the
completion of the discharge of the cargo, the president of appellant charterer wrote its broker
a letter and enclosed a check to cover freight “as good faith of our guarantee in the event
freight payment is not received from Rosal....” At some point prior to completion of the cargo
discharge on August 31, 1972, the charterer requested that the discharge be discontinued
because of Rosal's failure to pay the freight.
Rosal's failure to pay was a fact known or that should have been known to the owner appellee
because a typewritten addition to the charter party stated “Freight to be paid to Den Norske
Creditbank, Stavanger, Norway, account O. H. Meling [appellee].”
In dispute below, then, was the responsibility for the payment of freight in a situation where
the consignee, Rosal, had failed to make it. Appellant contended that it was the intent of the
parties that the charterer was obligated to pay only to the extent the owner was unable to
P "801" obtain payment by exercise of its lien. Appellant relies on clause 8 of the charter party, which
P "802" reads in pertinent part as follows:
Owners [appellee] shall have a lien on the cargo for freight ... Charterers [appellant] also
remain responsible for freight ..., but only to such extent as the Owners have been unable to
obtain payment thereof by exercising the lien on the cargo.
The clear import of this clause, taken alone, is that appellant remained responsible for
payment of freight only to the extent that the appellee was unable to recoup freight by means
of execution of the lien it held on the cargo. As a practical matter, this clause would cast the
burden of taking affirmative action to secure payment of the freight due upon the only party to
the agreement guaranteed to have a representative at the scene where the cargo is discharged
(the owner's ship's captain). Despite this clause, the owner, aware of the fact that the freight
was not prepaid and that the consignee was “initially obligated to pay the freight,” did not
seek to obtain payment by exercise of its lien on the cargo.
Appellee argues, and the majority of the arbitrators apparently found, that clause 1 of the
charter party contradicts clause 8 and therefore the true intent of the parties must be
 otherwise ascertained. Clause 1 in pertinent part reads as follows:
Freight to be telegraphically remitted to Owners by Messrs. Rosal E. Madrid, the Receivers.
Charterers to remain fully responsible for fulfilment of charter party.
The arbitral majority speaks of “contradictions” in the charter party (presumably between
clauses 1 and 8) and goes on to point out that “under Spanish law the master may not delay
unloading the cargo because the freight has not been paid. He must complete discharge and
then, if he desires, he can petition the Court to put the cargo under lien.” (55) But Spanish law,
which would permit a lien to arise after discharge apparently even in the absence of a charter
party agreement to that effect, is not at all inconsistent with clause 8.
The arbitral majority then went on to inquire whether the master, after discharge, should have
complied with clause 8 (by instituting lien proceedings in the Spanish courts) “in the face of a
bill of lading which stated the freight had been paid?” In light of their previous finding that
both parties were quite aware that the freight had not been prepaid, see note 4 supra, we fail
to see any relevance the bill of lading might have to the obligation of appellee under clause 8.
(56) As we view it, the majority, in effect, read clause 8 out of the charter party.
P "802"
P "803"
It seems rather anomalous, but had the arbitral majority failed to render a written opinion in
this case, our ability – ignoring the question of our power – to review that decision would be
greatly limited. See Sobel v. Hertz, Warner & Co., 469 F.2d 1211, 1214-15 (2d Cir. 1972). (57) Indeed,
the AAA apparently discourages the practice of written arbitral opinions in order to insulate
the arbitral process from any judicial review. Faced, however, with a reasoned opinion that is,
in our view, clearly erroneous both in logic and result, we are confronted with the question
whether it is nevertheless our obligation under the [FAA] to affirm the award.
As was stated in Sobel, “the extent of an arbitrator's obligation to explain his award is
necessarily related to the scope of judicial review of it.” 469 F.2d at 1214. The Sobel court did
not go so far as to say that where arbitrators voluntarily submit written opinions, they subject
themselves to more thorough review by the courts; review in the federal courts is still governed
by the provisions of the [FAA], 9 U.S.C. §§10 & 11. (58) Appellant's briefs before this court
significantly contain not so much as a passing reference to 9 U.S.C. §10, which is the only
provision of the Act which is relevant to our scope of review. That section ... exhausts the
grounds upon which the district court, or this court on appeal, may disturb the arbitral award.
Appellants do not advance any colorable claim under subsections (a), (b) or (c); we are left to
consider whether their claim falls under subsection (d).
Appellant argues that an arbitral award may be modified if that award either “manifestly
disregards the law,” citing Wilko v. Swan, 346 U.S. 427 (1953), or is “irrational,” citing this court's
per curiam decision in Marcy Lee Manufacturing Co. v. Cortley Fabrics Co., 354 F.2d 42 (1965), in
which the panel referred to federal law as being the same as New York law on the subject....
[T]his court, citing simultaneously both the Wilko majority and dissenting opinions on the point,
embraced the “manifest disregard” test, saying, however, that it is an “exception” that must be
P "803" “severely limited.” See Trafalgar Shipping Co. v. International Milling Co., 401 F.2d 568, 573 (2d
P "804" Cir. 1968); Saxis Steamship Co. v. Multifacs International Traders, Inc., 375 F.2d 577, 582 (2d Cir.
1967).
Illustrative of the difficulty inferior courts are having in “attempts to define manifest
disregard’” is our own Sobel v. Hertz, Warner & Co.. The Sobel court noted that it “is a truism
that an arbitration award will not be vacated for a mistaken interpretation of law ...,” citing
Wilko v. Swan to that effect. The court then said, “But if the arbitrators simply ignore the
applicable law, the literal application of a manifest disregard’ standard should presumably
compel vacation of the award.” But perhaps the rubric “manifest disregard” is after all not to
be given independent significance; rather it is to be interpreted only in the context of the
specific narrow provisions of 9 U.S.C. §§10 & 11, as Chief Judge Clark's opinion for this court
indicated in Amicizia Societa Navegazione v. Chilean Nitrate & Iodine Sales Corp., 274 F.2d 805,
808 (2d Cir.), cert. denied, 363 U.S. 843 (1960). Judge Clark there said that “the misapplication ...
of ... rules of contract interpretation does not rise to the statute of a manifest disregard’ of
law.” He also indicated doubt as to the current validity at that time of the Wilko dictum –
“manifest disregard” by the “But cf.” citation to the only subsequent Supreme Court case to
address this subject, Bernhardt v. Polygraphic Co. of America, 350 U.S. 198 (1956). In Bernhardt,
the Court negated the possibility of applying a non-statutory, “manifest disregard” standard to
a case like the one before us when it stated, citing this court's own decision in The Hartbridge,
62 F.2d 72 (1932), cert. denied, 288 U.S. 601 (1933), that “Whether the arbitrators misconstrued a
contract is not open to judicial review.”Bernhardt v. Polygraphic Co. of America, 350 U.S. at 203
n.4.
Our Marcy Lee Manufacturing Co., says that the New York law is that “as long as arbitrators
remain within their jurisdiction and do not reach an irrational result, they may fashion the law
to fit the facts before them’ and their award will not be set aside because they erred in the
determination or application of the law....” 354 F.2d at 43. Even under this test, if it is indeed
“the same” as the federal law, as the Marcy court may have indicated, however, the result here
remains the same, for even though erroneous the arbitral majority here was not irrationally so.
All of appellant's claims here reduce to the proposition that the arbitrators misconstrued the
contract. The arbitral majority justified reading clause 8 out of the charter party by considering
clause 1 to conflict with it and then by placing heavy reliance on the August 30 letter from
appellant's president, supra, which seemed to acknowledge that appellant was responsible for
the freight given Rosal's failure to pay. In a court of law, this evidence would probably not have
been properly admitted if, as we feel to be the case, the intent of the parties were made
 abundantly clear from within the four corners of the charter party. Even if admitted it should
have been entitled to little or no weight since the letter was delivered when the discharge was
almost complete and the check accompanying the letter was to be held in escrow pending
P "804" effort by the owner to secure payment from the consignee. We see no basis, however, to reverse
P "805" the award even though it is based on a clearly erroneous interpretation of the contract.
Whatever arbitrators' mistakes of law may be corrected, simple misinterpretations of contracts
do not appear one of them.
MANSFIELD, CIRCUIT JUDGE, DISSENTING. I must respectfully dissent. I agree with Judge Oakes'
statement that a majority of the arbitrators have “read Clause 8 out of the charter party.”
However, I cannot agree with his conclusion that appellant's claims here “reduce to the
proposition that the arbitrators misconstrued the contract” and that the arbitrators' decision,
which he concedes to be “clearly erroneous,” was based upon a “misinterpretation of the
contract.”
As I see it, we are not confronted here with a mere error of law or misconstruction of an
agreement, which would be insufficient to justify judicial intervention, see Saxis S.S. Co. v.
Multifacs International Traders, Inc., 375 F.2d 577, 582 (2d Cir. 1967); Amicizia Societa Navegazione
v. Chilean Nitrate and Iodine Sales Corp., 274 F.2d 805 (2d Cir. 1960) (construction of contract
term “double rigged”), but with a decision which manifestly disregards the clear and
unambiguous terms of the controlling contract from which the arbitrators' powers are drawn,
and which finds no basis in the provisions of that contract or elsewhere. Such conditions
mandate our intervention. Wilko v. Swan, 346 U.S. 427 (1953); United Steelworkers v. American
Mfg. Co., 363 U.S. 564, 597 (1960); H.K. Porter Co. v. United Saw, File & Steel Prod. Workers, 333
F.2d 596 (3d Cir. 1964).
The pertinent provisions of the charter party contract are crystal clear and there is no conflict
between them. Clause 8 plainly and unambiguously provides that “Charterers shall also remain
responsible for freight ... but only to such extent as the Owners have been unable to obtain
payment thereof by exercising the lien on the cargo.” There is not the slightest conflict between
this specific obligation and the Charterer's general duty, as set forth in Clause 1 of the contract,
“to remain fully responsible for fulfilment of charter party.” The charter party obviously
obligated the charterer to perform various obligations, including payment of freight according
to the terms and conditions of Clause 8, and other specific duties according to the terms of
other paragraphs of the agreement (e.g., stowage of cargo, payment of demurrage, wharfage,
literage, subletting, lay days, etc.).
The Charterer here assumed full responsibility for fulfilment of the charter party, including the
obligation to pay the freight upon the owner's compliance with Clause 8, and the Owner
obligated itself first to seek payment “by exercising the lien on the cargo.” The Owner clearly
failed to perform this latter obligation, which was a condition precedent to its exacting
payment from the Charterer. The Owner should either have obtained payment of the freight
from the consignee prior to or at the time of discharge or, upon completing discharge, have
petitioned the court for an order placing the cargo under lien. It did neither. Its failure to
perform its obligation was not excused by the existence of the Charterer's August 30, 1972 letter
to its broker enclosing a check for the freight, since the letter, aside from its not being part of
the contract between the parties, was to be held in escrow pending the Owner's fulfilment of its
obligation to secure payment from the consignee.
P "805"
P "806"
Although we are obligated to avoid frustrating the purpose of arbitration, which is to resolve
disputes quickly and inexpensively by minimizing judicial review or interference, we may not
go so far as to countenance a wholly baseless and irrational award. To do so would be to deny
due process. Our guideline was well stated by the Supreme Court in United Steel Workers,
where it said:
Nevertheless, an arbitrator is confined to interpretation and application of the collective
bargaining agreement; he does not sit to dispense his own brand of industrial justice. He may
of course look for guidance from many sources, yet his award is legitimate only so long as it
draws its essence from the collective bargaining agreement. When the arbitrator's words
manifest an infidelity to this obligation, courts have no choice but to refuse enforcement of the
award. 363 U.S. at 597.
Since the arbitrators' award fails to draw its essence from the charter party contract and is
wholly baseless and irrational, I would reverse the decision of the district court and direct the
entry of judgment vacating the award.
GRANITE WORSTED MILLS, INC. v. ARONSON COWEN, LTD
25 N.Y.2d 451 (1969)
BURKE, JUDGE. Granite Worsted Mills, Inc. (“Seller”) made two sales of certain cloth goods to
Aaronson Cowen, Ltd (“Buyer”) to be used in the manufacture of sport coats. In each case, sales
agreements were employed which included broad arbitration clauses and clauses which
limited the buyer's damages for defective goods. Paragraph 12 of each of the sales agreements
contained the following language: “ARBITRATION. Any controversy or claim arising out of or
relating to this contract shall be settled by arbitration.”
With respect to the goods delivered pursuant to each of the sales agreements, the buyer
complained to the seller that there were defects and thereafter filed a demand for arbitration
of the dispute according to the terms of the sales agreements. The total purchase price for the
goods shipped under both agreements was less than $ 1,000 but the buyer's demand for
damages amounted to more than $ 7,000. Paragraph 6 of each of the sales agreements
 provided as follows: “DEFECTIVE GOODS.... Buyer shall not be entitled to claim or recover
consequential damages for defective goods (whether the defect be latent or otherwise), nor for
manufacturing, processing or selling expenses or for the loss of contemplated use or profits;
and in all events Buyer's damages shall not exceed the difference in value on date of delivery
between goods specified and goods actually delivered.” (Emphasis added.) The parties
P "806" proceeded to arbitration and the arbitrator made an award in the amount of $ 3,780.51. The
P "807" Seller moved ... to vacate the award ... on the ground that the arbitrator had exceeded his
powers in granting damages in excess of the total sales price of the goods, the maximum
allowable under paragraph 6 of the sales agreements which limited the buyer's damages to the
difference in value between the goods specified and the goods actually delivered. The buyer
cross-moved to confirm the award and resisted the motion to vacate by contending that the
arbitrator had refused to apply the damage limitations contained in paragraph 6 “in light of
trade and industry practice.” [The lower court] granted the motion to vacate the award and
denied the cross motion to confirm on the ground that the arbitrator had exceeded his powers
since a “[d]amage limitation may not be disregarded if to do so would result in making a new
contract and imposing an additional obligation.” The Appellate Division reversed ... and held
that, in light of the broad arbitration clause, it could not be said that the arbitrator had
exceeded his powers. Justice Steuer dissented on the ground that the arbitrator, in awarding
the buyer consequential damages, was not making an “interpretation” of the contract but, in
disregarding its express terms, was in effect making a new contract for the parties with
obligations which neither party had contracted for....
[A] mere error committed by the arbitrator as to questions of fact or law is insufficient to
establish that excess of power necessary to vacate the award. Matter of Wilkins, 169 N.Y. 494;
Matter of Dembitzer, 3 A.D.2d 211; Matter of Campe Corp., 275 App. Div. 634. The mere statement
of that rule does not, however, resolve the issue tendered for decision in the present case. That
issue, simply stated, is whether, when an arbitrator makes an award which on its face and
without express mention of the fact ignores an express provision of the contract limiting
damages, he is guilty of “mere error” or whether he has in fact exceeded his powers.... [I]n
Matter of Deering Milliken & Co., 4 A.D.2d 652, aff'd, 4 N.Y.2d 956, the sales agreements ...
contained a clause expressly limiting damages to the difference in value between the goods as
delivered and the goods as specified and excluded any recovery of consequential damages by
the buyer. The seller sought to vacate the arbitrators' award upon the ground that they had
exceeded their powers by including consequential damages in the award to the buyer. Special
Term's order vacating the award was reversed by the Appellate Division, which held that the
“mere possibility” that the award exceeded the arbitrators' powers by virtue of the inclusion of
consequential damages excluded by the contract was an insufficient basis upon which to
vacate the award. The award in that case did not indicate how the amount awarded had been
computed and it was not apparent from the award itself or from the record that the arbitrators
had in fact included consequential damages.
Taken together, those two decisions indicate that, where it is clear from the face of the award
itself or from an examination of the computations made by the arbitrator that the arbitrator
has included an element of damages specifically excluded by the contract pursuant to which
he obtained his very authority to act, he exceeds his powers under the contract and the award
thus made must be vacated upon proper application. In the present case, the award itself
P "807" demonstrates that the arbitrator ignored the provision of the contract providing a formula for
P "808" the computation of the buyer's damages and specifically excluding consequential damages
since the award amounted to more than $3,700 whereas the total purchase price for both sales
was only $984.
The indication in the majority opinion in the Appellate Division that the arbitrator may have
refused to apply the damage limitation clause because be found it to be “unconscionable” is
based, as that opinion also recognizes, on pure speculation since it is conceded that the bases
for the award are “unknown.” The sole indication in the record is the self-serving statement
made in Aaronson's affidavit at Special Term that arbitrators uniformly refuse to enforce such
damage limitation clauses, which does not establish that this arbitrator, in making this award,
made such a determination. On a motion to vacate such an award, finding that the arbitrator
has indeed refused to enforce such a clause cannot be made upon a record silent as to that
question. There is no doubt that an arbitrator, if he so decides, may indeed refuse to enforce
such a damage limitation clause on the ground of unconscionability or on other grounds and
today's decision does not in any way limit that power. What is required, however, is that the
award indicate that he has in fact deliberately and intentionally exercised that power so that
judicial review can proceed without the need for speculation as to what has in fact occurred in
the arbitral tribunal. Since the award in this case is insufficient in this respect, it can only be
concluded that the arbitrator has exceeded his powers in making it and the order of the
Appellate Division reversing that of Special Term and confirming the award should be reversed
and the matter remitted to the arbitrator for further proceedings in accordance with this
opinion.
BREITEL, J., DISSENTING. [I]t is quite clear, as the Appellate Division majority held, that the
arbitrators were doing no more than interpreting and applying the agreement before them.
Because it was possible for the arbitrators to have found the consequential damage clause
unconscionable, it cannot be said that their construction was so perverse as to amount to
misconduct. Their award is beyond judicial review, but because this or any other court might
agree with their view of the consequential damage clause, but because no court may say that a
rational tribunal, especially one endowed with equitable powers, could not reach the same
conclusion as did the arbitrators. And, of course, arbitrators in both a special remedial and
general substantive sense have such broad powers.
 If is difficult, of course, to resist the temptation to look over the shoulders of the arbitrators, as
it is also difficult to envisage as reasonable any system of interpretation that does not conform
to one's own. Nevertheless, arbitration is an alternative forum governed to a large extent by its
own principles, and not limited by the rules of evidence, the rules of law, or even the canons of
construction in the reading of documents. In Matter of Spectrum Fabrics Corp., 285 App. Div. 710,
714, aff'd, 309 N.Y. 709, it was said: “When parties agree to arbitrate, they agree to waive the
rules of evidence and the inexorable application of substantive rules as well. This may not
always be wise, but it is within the powers of the contracting parties, and it is the import and
essence of an arbitration agreement. It distorts the purpose of arbitration for courts to censor
the issues that arbitrators may consider before the courts will permit an arbitration to
proceed.” Accordingly, I dissent....
P "808"
P "809"
Notes on Judicial Review of Merits of Arbitrators' Award
1. No provision under New York and Inter-American Conventions for non-recognition of foreign
arbitral award based on judicial review of merits of arbitrator's decision. Consider the bases for
refusing to recognize foreign or non-domestic arbitral awards set forth in Article V of the New
York Convention and Article 5 of the Inter-American Convention. Do any of the exceptions set
forth in Article V and Article 5 expressly permit non-recognition of an award based on an error
in an arbitrator's decision? For example, does either Article provide for non-recognition of an
award because the arbitral tribunal misread the parties' contract, misjudged critical
testimony, or misunderstand applicable law?
2. U.S. decisions suggesting that manifest disregard defense is available in action to recognize
Convention award. Note that the Supreme Court's decision in Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 638 (1985), reasons that “substantive review at the award-
enforcement stage [must] remain minimal.” Both the substance of the sentence and the use of
the word “remain” suggest that at least some sort of review of the substance of the arbitrators'
ruling is permitted. For lower court decisions apparently recognizing the manifest disregard
exception under the Convention, see Office of Supply, Government of the Republic of Korea v.
New York Navigation Co., 496 F.2d 377, 379-80 (2d Cir. 1972); Jamaica Commodity Trading Co. v.
Connell Rice & Sugar Co., 1991 U.S. Dist. Lexis 8976 (S.D.N.Y. July 3, 1991); American Construction
Machinery & Equipment Corp. v. Mechanised Construction of Pakistan Ltd, 659 F.Supp. 426
(S.D.N.Y. 1987).
Despite Mitsubishi, lower U.S. courts have generally concluded that the Convention does not
permit non-recognition of a Convention award for manifest disregard of law. Yusuf Ahmed
Alghanim & Sons, W.L.L. v. Toys “R” Us, Inc., 126 F.3d 15 (2d Cir. 1997), cert. denied, 118 S.Ct. 1042
(1998); M & C Corp. v. Erwin Behr GmbH, 87 F.3d 844, 851 (6th Cir. 1996) (Convention's exclusive
grounds for relief “do not include miscalculations of fact or manifest disregard of the law”);
Saudi Iron & Steel Co. v. Stemcor USA Inc., 1997 WL 642566 (S.D.N.Y. 1997); Avraham v. Shigur
Express Ltd, 1991 U.S. Dist. Lexis 12267 (S.D.N.Y. 1991); International Standard Electric Corp. v.
Bridas Sociedad Anonima Petrolera, 745 F.Supp. 172, 181-82 (S.D.N.Y. 1990); Brandeis Intsel Ltd v.
Calabrian Chem. Corp., 656 F.Supp. 160 (S.D.N.Y. 1987) (“In my view, the ‘manifest disregard’
defense is not available under Article V of the Convention or otherwise to a party ... seeking to
vacate an award of foreign arbitrators based upon foreign law.”); Ipitrade International SA v.
Federal Republic of Nigeria, 465 F.Supp. 824, 826 (D.D.C. 1978).
For decisions applying the “manifest disregard” standard to international arbitral decisions
that are not subject to the New York Convention, see Northrop Corp. v. Triad Int'l Mktg, 811 F.2d
1265, 1269 (9th Cir.), cert. denied, 108 S.Ct. 261 (1987); Ludwig Honold Mfg Co. v. Fletcher, 405 F.2d
1123 (3d Cir. 1969); San Martine Compagnia de Navegacion v. Saguenay Terminals, Ltd, 293 F.2d
796, 801 (9th Cir. 1961). See generally Note, Manifest Disregard of the Law in International
Commercial Arbitration, 28 Colum. J. Trans. L. 449 (1990); Comment, International Commercial
Arbitration Under the United Nations Convention and the Amended Federal Arbitration Statute, 47
Wash. L. Rev. 441 (1972).
3. Rationale for excluding erroneous substantive decision by arbitrator as basis for non-
recognition of arbitral award under Convention. What is the rationale for excluding substantive
errors in an arbitral award as a potential basis for non-recognition of a Convention award?
What are the costs and benefits of such an approach? If you were drafting the New York or
Inter-American Convention, would you include errors in the arbitrators' decision as a ground for
non-recognition? Why?
4. Judicial review of arbitrator's decision in action to recognize foreign arbitral award under
national arbitration legislation. Consider the excerpts from leading national arbitration
legislation. What does each statute provide with respect to judicial review of the merits of an
arbitral tribunal's award? Consider Article 758 of the Argentine National Code of Civil and
Commercial Procedure and Articles 273 and 274 of the Iraqi Code of Civil Procedure. Contrast
Article 36 of the UNCITRAL Model Law, §207 of the FAA, Article 194 of the Swiss Law on Private
International Law, and Section 103 of the English Arbitration Act, 1996.
 (a) No judicial review of arbitrators' substantive decision in action to recognize foreign arbitral
award. In many developed trading states, the substantive merits of an arbitrator decision
are not subject to judicial review. That is, an error in the arbitrators' decision is not
ordinarily a basis for denying recognition to a foreign award. Consider in this regard
Article 194 of the Swiss Law on Private International Law. See Judgment of 8 January 1995,
XXII Y.B. Comm. Arb. 789 (Swiss Federal Tribunal) (1997) (“The appellant forgets that the
enforcement court does not decide as an appellate instance; the merits of an award
P "809" cannot be reviewed under the cover of public policy.”); Judgment of 24 November 1993, XXI
P "810" Y.B. Comm. Arb. 617 (Luxembourg Cour Superieure de Justice) (1996) (“The New York
Convention does not provide for any control on the manner in which the arbitrators
decide the merits, with as the only reservation, the respect of international public policy.
Even if blatant, a mistake of fact or law, if made by the arbitral tribunal is not a ground
for refusal of enforcement of the tribunal's award”); Inter-Arab Investment Guarantee Corp.
v. Banque Arabe et Internationale d'Investissements, XXII Y.B. Comm. Arb. 643 (Belgian Cour
d'Appel 1997) (1997) (“The Court shall not examine the reasoning [of the arbitrators] as an
appellate court. The examination of incoherent and contradictory reasoning belongs to
an appellate jurisdiction ...”); Judgment No. 8469 of 11 July 1992, XXII Y.B. Comm. Arb. 715
(Italian Supreme Court 1992) (1997) (“The New York Convention does not take into
consideration a review of the merits in case of default”); Shenzhen Nan Da Industrial Trade
United Co. v. FM Int'l Ltd, XVIII Y.B. Comm. Arb. 377 (Supreme Court of Hong Kong 1991)
(“what Mr. Chan is effectively attempting to do is to appeal on the merits ... In my
judgment, unless Mr. Chan can establish one of the New York Convention grounds ... his
ground of opposition must fail”). What is the rationale for this approach? Is it wise?
(b) Full judicial review of arbitrators' substantive decision in action to recognize foreign arbitral
award. In a number of other states, arbitral awards are subject to varying degrees of
judicial scrutiny of the merits of the arbitrators' substantive decision. Consider Article 758
of the Argentine Code of Civil and Commercial Procedure and Articles 273 and 274 of the
Iraqi Code of Civil Procedure. Why shouldn't an arbitral award be subject to the same
appellate review as a first instance court decision? Are arbitrators more likely than
judges to reach fair results? What costs would result from this sort of judicial review of
international arbitral awards?
5. Judicial review of arbitrators' decision under national arbitration legislation in action to
confirm or vacate arbitral award. As discussed above, when an arbitral award is made in a
state, it will generally be subject to an action to vacate in that state on any grounds available
under local law – even if the award is a Convention award. See supra pp. 707, 757-58.
(a) No judicial review of arbitrators' substantive decision in action to confirm or vacate award.
Consider Articles 34 of the UNCITRAL Model Law and Article 190 of the Swiss Law on
Private International Law. What do they provide with respect to judicial review of the
substantive merits of an arbitrator's ruling?
(b) Full judicial review of arbitrator's substantive decision in action to confirm or vacate award.
Compare Article 758 of the Argentine Code of Civil and Commercial Procedure and Articles
273 and 274 of the Iraqi Code of Civil Procedure. Note that both provisions contemplate
review of arbitral awards on the same grounds as national court judgments. Recall the
similar approach of the Egyptian courts in Chromalloy. See supra pp. 768-77.
(c) Limited judicial review of arbitrators' substantive decision. As discussed below, arbitral
awards made in the United States are generally subject to actions to vacate if the
arbitrators' decision was in “manifest disregard of law.” See infra pp. 810-13. Compare §69
of the English Arbitration Act, 1996. Note that it contemplates a degree of judicial review
of international (but not foreign) arbitral awards. Contrast the standards and approach of
§69 to the “manifest disregard” test.
6. What standard of judicial review of arbitrators' substantive decision in international award is
appropriate in actions to confirm or vacate? Consider the various approaches of national
legislation to judicial review of arbitrators' decisions in actions to confirm or vacate. Which
approach is preferable with respect to international arbitral awards? Why? Does it matter what
the parties' nationalities are? What the substantive law is (i.e., is it that of the arbitral situs)?
Why?
7. “Manifest disregard” in the United States under the FAA. As discussed above, U.S. courts have
fashioned a “manifest disregard of law” doctrine under the domestic FAA, which permits
domestic arbitral awards to be vacated if they depart sufficiently from the clear dictates of
applicable law. The “manifest disregard of law” formula derives from dicta in Wilko v. Swan,
where the Supreme Court remarked that “[i]n unrestricted submissions ... the interpretations of
the law by the arbitrators, in contrast to manifest disregard are not subject, in the federal
courts, to judicial review for error in interpretation.” 346 U.S. at 436-37. Wilko's principal
holding (which involved the arbitrability of certain federal securities law claims) was expressly
overruled in Rodriguez De Quijas v. Shearson/American Express, Inc., 109 S.Ct. 1917 (1989) and
some lower U.S. courts have questioned whether the manifest disregard exception still
survives. Rostad & Rostad Corp. v. Investment Management & Research, Inc., 923 F.2d 694, 697
(9th Cir. 1991). One lower court observed rightly that the Wilko comment is “ungrammatical in
structure” and “unnecessary to the [Wilko] decision,” I/S Stavborg v. National Metal Converters,
Inc., 500 F.2d 424, 430 n.13 (2d Cir. 1974), while others have remarked that the standard is “not
easily defined,” San Martine Compania de Navegacion, SA v. Saguenay Terminals Ltd, 293 F.2d
P "810" 796, 801 n.4 (9th Cir. 1961). Nonetheless, it appears very likely that the manifest disregard
P "811" exception is so deeply-entrenched in domestic U.S. law that it cannot be abandoned. See First
 Options of Chicago, Inc. v. Kaplan, 514 U.S. 939 (1995).
8. U.S. lower court decisions questioning availability of manifest disregard defense under FAA. A
few U.S. lower courts have questioned whether a manifest disregard defense is available under
the first chapter of the FAA (the text of which lacks any reference to the defense). See Baravati
v. Josephthal, Lyon & Ross, Inc., 28 F.3d 704 (7th Cir. 1994) (“We can understand neither the need
for the formula nor the role that it plays in judicial review of arbitration (we suspect more –
that it is just words). If it is meant to smuggle review for clear error in by the back door, it is
inconsistent with the entire modern law of arbitration.... There is enough confusion in the law.
The grounds for setting aside arbitration awards are exclusively stated in the statute. Now that
Wilko is history, there is no reason to continue to echo its gratuitous attempt at non statutory
supplementation”); Rostad & Rostad Corp. v. Investment Management & Research, Inc., 923 F.2d
694, 697 (9th Cir. 1991); O.R. Securities v. Professional Planning Assoc., 857 F.2d 742, 746 (11th Cir.
1988); MSP Collaborative Developers v. Fidelity & Deposit Co., 596 F.2d 247, 251 (7th Cir. 1979).
These decisions do not appear to survive First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938
(1995), see supra pp. 82, 93.
9. Federal law defines manifest disregard exception and standards of deference to arbitrators'
decision under domestic FAA. The “manifest disregard” exception is a rule of federal
substantive law, defining the scope of judicial deference to domestic arbitral awards in the
United States under the FAA. This level of judicial deference is necessary in order to further the
arbitral process and the purposes of the FAA.
Granite Worsted was a state court decision, applying state law. In cases involving awards that
are subject to either the Conventions or the FAA, U.S. state law rules permitting more intensive
review of the merits of arbitral awards than available under federal law are preempted. That is
clearly true in federal court and is almost as clear in state courts. Victrix Steamship Co. v. Salen
Dry Cargo AB, 825 F.2d 707, 712 (2d Cir. 1987); I/S Stavborg v. National Metal Converters, Inc., 500
F.2d 424, 429-30 (2d Cir. 1974); C.T. Shipping, Ltd v. DMI (U.S.A.) Ltd, 774 F.Supp. 146, 149 (S.D.N.Y.
1991); Marley v. Drexel Burnham Lambert, Inc., 556 F.Supp. 333 (S.D. Tex. 1983); Lee v. Dean Witter
Reynolds, Inc., 594 So.2d 783 (Fla. Ct. App. 1992); Moss v. Prudential-Bache Securities, Inc., 581
A.2d 1138 (Del. Sup. 1990); Hilton Constr. Co. v. Martin Mechanical Contractors, Inc., 308 S.E.2d
830 (Ga. 1983).
10. “Manifest disregard of law” under the FAA not established by proof of erroneous decision.
Under U.S. lower court decisions, “manifest disregard of law” is universally held to require
more than an erroneous statement of applicable law or an erroneous interpretation of the
parties' agreement. See ARW Exploration Corp. v. Aquirre, 45 F.3d 1455, 1462 (10th Cir. 1995) (“the
standard of review of arbitral awards is among the narrowest known to the law”); Jenkins v.
Prudential-Bache Securities, Inc., 847 F.2d 631, 634-35 (10th Cir. 1988); Northrup Corp. v. Triad
International Marketing, SA, 811 F.2d 1265 (9th Cir.), cert. denied, 484 U.S. 914 (1987); Merrill
Lynch, Pierce, Fenner & Smith v. Bobker, 808 F.2d 930, 933 (2d Cir. 1986); E.I. DuPont de Nemours
& Co. v. Grasseli Employees Independent Ass'n, 790 F.2d 611, 614 (7th Cir.), cert. denied, 107 S.Ct.
186 (1986) (award must be confirmed even if arbitrator “clearly misinterpreted” contract); Stroh
Container Co. v. Delphi Industries, Inc., 783 F.2d 743, 751 (8th Cir. 1986); National Oil Corp. v.
Libyan Sun Oil Co., 733 F.Supp. 800 (D. Del. 1990) (“A mere error of law would not, however, be
sufficient grounds to refuse recognition of the award.”); Restatement (Third) Foreign Relations
Law of the United States §488 comment a (1987).
11. Standards of judicial review under the FAA's “manifest disregard” exception. Although it is
easy to say what “manifest disregard” is not, it is harder to say what it is. Different courts have
given a range of divergent interpretations to the manifest disregard exception. As one Court of
Appeals said, “[t]his standard of judicial review has taken on various hues and colorations in its
formulations ...”Advest, Inc. v. McCarthy, 914 F.2d 6, 9 (1st Cir. 1990).
(a) Lower U.S. court decisions holding that manifest disregard requires showing arbitrator
ignored applicable law. In most U.S. jurisdictions, the manifest disregard standard
requires a showing either that the arbitrators ignored the applicable law, or were aware
of the content of governing law, but refused to apply it. Folkways Music Publishers Inc. v.
Weiss, 989 F.2d 108 (2d Cir. 1993); Robbins v. Day, 954 F.2d 679, 683 (11th Cir. 1992); Carte
Blanche (Singapore) Pte., Ltd v. Carte Blanche International Ltd, 888 F.2d 260, 265 (2d Cir.
1989); San Martine Compania de Navegacion v. Saguenay Terminals, Ltd, 293 F.2d 796, 801
(9th Cir. 1961) (“manifest disregard of the law must be something beyond and different
from a mere error in the law or failure on the part of the arbitrators to understand or
apply the law”).
(b) Rationale for narrow manifest disregard rule. Consider Judge Mansfield's dissent in I/S
P "811" Stavborg and the decision in Granite Worsted. Are they not persuasive? Where an arbitral
P "812" tribunal clearly misinterprets the parties' agreement, or applicable law, should
national courts nonetheless lend their coercive powers to enforcement of the tribunal's
award? In which case – I/S Stavborg or Granite Worsted – do you think the parties honestly
felt justice was done?
Even if occasional injustice results, is either no, or an extremely narrow, manifest
disregard rule nevertheless necessary to the effective functioning of the arbitration
process? According to one court, “[a]rbitration awards are subject to very limited review
in order to avoid undermining the twin goals of arbitration, namely, settling disputes
efficiently and avoiding long and expensive litigation.”Folkways Music Publishers v. Weiss,
989 F.2d 108, 111 (2d Cir. 1993). Recall the particular objectives and benefits of arbitration
in international commercial disputes. See supra pp. 7-11. How would those objectives and
benefits be affected by national court review of the merits of arbitrators' decisions?
 (c) Lower U.S. court decisions holding that manifest disregard can be established by showing
award is irrational. Much like Granite Worsted, some courts have at least suggested that an
award that is irrational and without factual basis may be vacated. Ainsworth v. Kurnick,
960 F.2d 939 (11th Cir. 1992) (vacating arbitral award as arbitrary and capricious after
concluded that there was no rational legal theory justifying arbitrator's conclusion);
Raiford v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 1410, 1411 (11th Cir. 1990);
Tacoma Minn. Co. v. Local Union No. 1269 etc., 896 F.2d 745 (3d Cir. 1990); Storer
Broadcasting Co. v. American Federation of Television & Radio Artists, 600 F.2d 45 (6th Cir.
1979), cert. denied, 454 U.S. 1099 (1981); Swift Indus., Inc. v. Botany Indus., Inc., 466 F.2d
1125, 1131 (3d Cir. 1972); Shearson Lehman Brothers, Inc. v. Hedrich, 639 N.E.2d 228 (Ill. App.
1994) (vacating on manifest disregard grounds because “arbitrators impermissibly
ignored the unambiguous contract language”).
Other decisions have suggested that demonstrably wrong decisions need not be
recognized. Merrill Lynch, Pierce, Fenner & Smith v. Bobker, 808 F.2d 930, 933 (2d Cir. 1986)
(error on “well-defined, explicit, and clearly applicable” point of law “must have been
obvious and capable of being readily and instantly perceived by the average person
qualified to serve as an arbitrator”).

(d) Virtually no review of arbitrators' factual findings. U.S. courts have generally declined to
inquire at all into the correctness of the arbitrators' factual conclusions. In United
Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 39 (1987), for example, the Court
remarked:
No dishonesty is alleged; only improvident, even silly fact finding is claimed. This is
hardly a sufficient basis for disregarding what the agent appointed by the parties
determined to be the historical facts.
See Galindo v. Stoody Co., 793 F.2d 1502, 1511 (9th Cir. 1986); Western Elec. Co. v.
Communication Equip. Workers, 554 F.2d 135, 138 (4th Cir. 1977) (because there were “some
facts to support [the] arbitration award,” the award was confirmed notwithstanding
arbitrators' application of incorrect burden of proof); South East Atlantic Shipping Ltd v.
Garnac Grain Co., 356 F.2d 189, 192 (2d Cir. 1966); American Ins. Co. v. Messinger, 401
N.Y.S.2d 36, 40 (1977).
(e) Practical realities of challenging merits of arbitrators' decision under the FAA. The
differences in verbal formulations of the manifest disregard standard, described in the
preceding notes, seldom have dispositive practical importance. Under any formulation,
U.S. courts are extremely reluctant to entertain challenges to awards based upon defects,
including serious defects, in the tribunal's reasoning or factual findings. Nevertheless, a
convincing demonstration that the award was irrational and unjust will likely pose a
significant obstacle to enforcement in any jurisdiction.
For some of the very few U.S. decisions finding the manifest disregard standard satisfied,
see Ainsworth v. Skurnick, 960 F.2d 939 (11th Cir. 1992); Shearson Lehman Brothers, Inc. v.
Hedrich, 639 N.E.2d 228 (Ill. App. 1994) (vacating on manifest disregard grounds because
“arbitrators impermissibly ignored the unambiguous contract language”); Granite Worsted
Mills, Inc. v. Aaronson Cowen, Ltd, 25 N.Y.2d 451 (1969).

12. Manifest disregard of federal statutory protections. As discussed above, many federal (and
state) statutory claims are arbitrable under U.S. law. See supra pp. 280-82. When the
arbitrators interpret federal statutes – for example, the antitrust or securities law – what level
of judicial review is appropriate? For detailed discussion of the issue, see supra pp. 279, 292-93.
13. Manifest disregard of foreign law. Suppose that the substantive law applied by the
arbitrators is not the law of the judicial enforcement forum. Should that affect the willingness
P "812" of a national court either to apply the manifest disregard exception or their analysis
P "813" thereunder? As a practical matter, most national courts will be less assertive in interpreting
foreign law and thus in concluding that arbitral tribunals have manifestly disregarded foreign
law. See Brandeis Intsel Ltd v. Calabrian Chem. Corp., 656 F.Supp. 160 (S.D.N.Y. 1987). Note that
I/S Stavborg involved a dispute governed by Spanish law.
14. Difficulty of establishing manifest disregard in the absence of a reasoned award. How can
“manifest disregard of law” be established without an arbitral opinion? Consider the following:
Obviously, a requirement that arbitrators explain their reasoning in every case would help to
uncover egregious failures to apply the law to an arbitrated dispute. But such a rule would
undermine the very purpose of arbitration, which is to provide a relatively quick, efficient and
informal means of private dispute settlement.
Sobel v. Hertz, Warner & Co., 469 F.2d 1211, 1214 (2d Cir. 1972). See also Raiford v. Merrill Lynch,
Pierce, Fenner & Smith, 903 F.2d 1410, 1413 (11th Cir. 1990) (“We could conceivably vacate the
award and recommit the case to the arbitration panel for a statement of reasons for its award.
With such a statement, the district court ... could more actively review the award.... However,
[a]rbitration proceedings are summary in nature to effectuate the national policy favoring
arbitration’”); Pyle v. Securities U.S.A., Inc., 758 F.Supp. 638 (D. Colo. 1991) (rejecting manifest
disregard defense because party challenging award did not produce transcript of hearing); R.
Coulson, Business Arbitration – What You Need to Know 29 (3d ed. 1986) (reasoned awards are
“dangerous because they identify targets for the losing party to attack”).
Where no reasoned award is made, then reviewing courts generally will uphold the award if any
rational basis for it can be posited. Robbins v. Day, 954 F.2d 679, 684 (11th Cir. 1992); Koch Oil, SA
 v. Transocean Gulf Oil Co., 751 F.2d 551 (2d Cir. 1985) (“we must accept the [unreasoned, lump
sum] award without attempting an analysis of the arbitrators' purported reasoning process”);
Chasser v. Prudential-Bache Securities, 703 F.Supp. 78, 79 (S.D. Fla. 1988).
Is it wise to permit unreasoned awards? Is it appropriate to render unreasoned awards
deliberately to frustrate judicial review? What benefits do reasoned awards provide, both for
the arbitrators, the parties, and the arbitral process? For a thoughtful analysis, see Bingham,
Reasons and Reasons for Reasons: Differences Between A Court Judgment and An Arbitral Award, 4
Arb. Int'l 141, 145 (1988).
15. Judicial review of relief ordered by tribunal. Under most developed national arbitration
regimes, arbitrators have broad discretion in fashioning relief. For example, it is said that
“arbitrators have broad powers to grant relief that a court could not.”Avraham v. Shigur Express
Ltd, 1991 U.S. Dist. Lexis 12267 (S.D.N.Y. Sept. 4, 1991). See United Steelworkers of America v.
Enterprise Wheel & Car Corp., 363 U.S. 593, 597 (1960); Chameleon Dental Products, Inc. v. Jackson,
925 F.2d 223, 226 (7th Cir. 1991); Anderman/Smith Co. v. Tennessee Gas Pipeline Co., 918 F.2d 1215,
1219 (5th Cir. 1990), cert. denied, 111 S.Ct. 2799 (1991); Resilient Floor etc. v. Welco Mfg. Co., 542
F.2d 1029 (8th Cir. 1976).
(a) Power of arbitrators to order injunctive relief under the FAA. U.S. courts have upheld
arbitration awards that require injunctive or equitable relief, provided that the parties'
agreement, or the institutional rules that it incorporates, supply some basis for inferring
such authority. See infra pp. 924-26; Island Creek Coal Sales Co. v. City of Gainesville, 729
F.2d 1046, 1049 (6th Cir. 1984) (“The Agreement here does not provide any specific
limitations on the power of arbitrators under Rule 43 [of the AAA Rules, granting that
power to award “any remedy or relief which the arbitrator deems just and equitable”],
and we are required to give deference to the arbitrators' interpretation of the Rule and
Agreement unless they have clearly exceeded their authority.”); Sperry International
Trade, Inc. v. Israel, 689 F.2d 301 (2d Cir. 1982); Staklinski v. Pyramid Elec. Co., 160 N.E.2d 78,
79 (N.Y. 1959) (“The power of an arbitrator to order specific performance in an appropriate
case has been recognized from early times”).
(b) Examples of injunctive relief ordered by arbitrators. Among other things, lower courts have
upheld awards that require: (i) a company to stop using its name and to transfer certain
patents and other intellectual property rights, Engis Corp. v. Engis Ltd, 800 F.Supp. 627
(N.D. Ill. 1992); (ii) specific performance of a contract to take delivery of coal, Island Creek
Coal Sales Co. v. City of Gainesville, 729 F.2d 1046, 1049 (6th Cir. 1984) (relying on Rule 43 of
AAA Rules); (iii) specific performance of a contract to deliver cotton, Marion
Manufacturing Co. v. Long, 588 F.2d 538 (6th Cir. 1978); (iv) a party to draw on proceeds of
letter of credit, Sperry International Trade, Inc. v. Israel, 689 F.2d 301, 306 (2d Cir. 1982); (v)
staged payments of a damages award, Carte Blanche (Singapore) Pte. Ltd v. Carte Blanche
Int'l, Ltd, 888 F.2d 266 (2d Cir. 1989); (vi) an interim payment into an escrow account as
P "813" security for a final award, Pacific Reinsurance Mgt. Corp. v. Ohio Reinsurance Corp, 935 F.2d
P "814" 1019 (9th Cir. 1991), but see Swift Indus. Inc. v. Botany Indus, Inc., 466 F.2d 1125 (3d Cir.
1972); and (vii) fixed prices for disputed products for one year and an obligation to obtain
the tribunal's approval for future charges, Anderman/Smith Operating Co. v. Tennessee Gas
Pipeline Co., 918 F.2d 1215 (5th Cir. 1990), cert. denied, 111 S.Ct. 2799 (1991).
(c) Challenging relief ordered by arbitrator on jurisdictional grounds. The relief ordered by an
arbitrator can potentially be challenged on the grounds that it exceeds the arbitrator's
authority. See infra pp. 849-59.
16. No right under FAA to discovery into arbitrator's reasoning or motives. Although the Federal
Rules of Civil Procedure are applicable to actions to confirm or vacate an arbitral award under
the FAA, see infra pp. 903-04, lower U.S. courts have consistently refused to permit parties to
take discovery from arbitrators concerning their reasoning or motives in arriving at an award.
Fukaya Trading Co. v. Eastern Maritime Corp., 322 F.Supp. 278, 279-80 (S.D.N.Y. 1971); Gramling v.
Food Machinery and Chem. Corp., 151 F.Supp. 853 (W.D.S.C. 1957). Compare Continental Materials
Corp. v. Gaddis Mining Co., 306 F.2d 952 (10th Cir. 1962) (permitting discovery where arbitrator's
bills to parties indicated he had delegated decision to third party). See also Gearhardt v.
Cadillac Plastics Group, Inc., 140 F.R.D. 349 (S.D. Ohio 1992) (refusing to permit discovery into
arbitrator's mental state, on grounds that, even if arbitrator suffered from senile dementia, his
award could not be challenged on this ground).
17. Arbitration agreements providing for heightened judicial scrutiny of award. Although it
happens rarely, parties sometimes agree to more exacting judicial scrutiny of the arbitrators'
award than that provided for by the FAA. Smit, Contractual Modification of the Scope of Judicial
Review of Arbitral Awards, 8 Am. Rev. Int'l Arb. 147 (1997); Ware, “Opt- In” for Judicial Review of
Errors of Law Under the Revised Uniform Arbitration Act, 8 Am. Rev. Int'l Arb. 263 (1997); Rau,
Contracting Out of the Arbitration Act, 8 Am. Rev. Int'l Arb. 225 (1997).
 (a) Enforceability of arbitration agreements providing for heightened judicial review under the
FAA. U.S. courts have generally enforced provisions providing for heightened judicial
review of arbitral awards and performed the review contemplated by the parties'
agreement. La Pine Technology Corp. v. Kyocera Corp., 130 F.3d 884 (9th Cir. 1997); Gateway
Technologies, Inc. v. MCI Telecommunications Corp., 64 F.3d 993 (5th Cir. 1995) (“Because
these parties contractually agreed to expand judicial review, their contractual provision
supplements the FAA's default standard of review”; “the FAA does not prohibit parties who
voluntarily agree to arbitration from providing contractually for more expansive judicial
review of the award”); Fils et Cables D'Acier de Lens v. Midland Metals Corp., 584 F.Supp.
240 (S.D.N.Y. 1984) (“the court shall have the power to review (1) whether the findings of
fact rendered by the arbitrator are, on the entire record of said arbitration proceeding,
supported by substantial evidence, and (2) whether as a matter of law based on said
findings of fact, the award should be affirmed, modified or vacated.”).
Is it wise to permit heightened judicial review of arbitral awards? If that is what the
parties agreed, what policies are offended by an agreement on heightened judicial
review?
Does the FAA (especially §§9 and 10) permit heightened judicial review of arbitral
awards? Does the statutory scheme leave room for judicial review as tailored by the
parties in their arbitration agreement? Consider the forceful dissent in La Pine Technology
Corp. v. Kyocera Corp., 130 F.3d 884 (9th Cir. 1997).

(b) Reluctance of U.S. courts to interpret arbitration agreement as imposing heightened

standard of judicial review. On the other hand, U.S. courts are rightly reluctant to interpret
an arbitration agreement as imposing a higher standard of review. International
Telepassport Corp. v. USFI, Inc., 89 F.3d 82 (2d Cir. 1996) (refusing to interpret arbitration
agreement as imposing heightened standard of judicial review of arbitral awards).
(c) Possible unenforceability of arbitration agreements providing for heightened judicial review.
Outside the United States, the enforceability of arbitration agreements providing for
heightened judicial review of arbitral awards may be open to substantial challenge under
local law. Does the New York Convention bear on the issue – in either direction? How?
18. Judicial deference to arbitrators' conflict of laws decisions. National courts have generally
accorded conflict of laws rulings by arbitrators substantial deference. See supra pp. 541-42. For
two of the few exceptions, see Buques Centroamericanos, SA v. Reinadora Costarricense de
Petroleos SA, 1989 U.S. Dist. Lexis 5429 (S.D.N.Y. 1989); American Construction Machinery &
Equipment Corp. v. Mechanised Construction of Pakistan Ltd, 659 F.Supp. 426 (S.D.N.Y.), aff'd, 828
F.2d 117 (2d Cir. 1987), cert. denied, 484 U.S. 1064 (1988).
P "814"
P "815"
4. Awards Contrary to Public Policy (59)
One of the most significant, and most controversial, bases for refusing to enforce an
international arbitral award is the “public policy” exception. The public policy exception is set
forth expressly in Article V(2)(b) of the New York Convention, which provides that recognition
and enforcement of an award “may” be refused if it would “be contrary to the public policy of
that country” – i.e., the country “where recognition and enforcement [of the award] is sought.”
The Inter-American Convention contains a substantially similar provision in Article 5(2)(b). (60)
National arbitration legislation uniformly permits the non-recognition of arbitral awards
because they violate public policy, also variously termed “ordre public” or “good morals.” (61)
For example, Article 36(1) of the UNCITRAL Model Law provides an arbitral award may be
denied recognition if enforcement of the award “would be contrary to the public policy of this
State.” Likewise, Article 190(2) of the Swiss Law on Private International Law provides that an
award may be set aside if it “is incompatible with public policy.”
P "815" In the United States, the first chapter of the FAA does not contain an express public policy
P "816" exception. (62) Nevertheless, it is well-settled that awards that are contrary to public policy
will not be enforced under the FAA by U.S. courts. (63) According to the U.S. Supreme Court, this
doctrine “is a specific application of the more general doctrine, rooted in the common law,
that a court may refuse to enforce contracts that violate law or public policy.” (64)
Under both the Convention and national law, the public policy defense has given rise to
challenging questions. First, the appropriate source of public policy standards in international
matters is not clear. As we explore below, in cases under the Convention, national courts and
commentators have looked variously to international standards and national law, without
arriving at any consensus. (65)
Second, even when a source of legal authority is agreed upon, the public policy exception is
unpredictable and expansive. As first-year conflicts teachers around the world invariably
recite, public policy is an unruly horse that carries its rider to unpredictable destinations. (66)
Partially in reaction to this, courts in many developed jurisdictions have taken very restrictive
views of public policy. Indeed, some authorities have characterized public policy as the last
refuge of those without plausible legal arguments. (67) In the United States, the U.S. Supreme
Court has emphasized even in domestic matters that a public policy cannot be derived from
“general considerations of supposed public interest,” but must be based upon explicit and
clearly-defined “laws and legal precedents.” (68)
Third, there is uncertainty surrounding the authority of an arbitrator, as distinguished from a
 court, to consider issues of public policy in arriving at an award. The tribunal's power is
ultimately derived from the parties' contract and, arguably, is limited to interpreting the
contract. In the words of one early U.S. Supreme Court decision, the arbitrator has no
P "816" general authority to invoke public laws that conflict with the bargain between the parties.... If
P "817" an arbitral decision is based ‘solely upon the arbitrator's view of the requirements of
enacted legislation,’ rather than on an interpretation of the collective-bargaining agreement,
the arbitrator has ‘exceeded the scope of the submission,’ and the award will not be enforced.
(69)
Although this traditional view of the arbitral process, and the arbitrator's powers, is
inconsistent with contemporary international arbitration law and practice, (70) it continues to
influence analysis in some quarters.
Fourth, national courts have only begun to consider whether and when foreign public policies
will be relevant to their recognition and enforcement of an international arbitral award. As
public law claims become more common in arbitration, however, national courts will
increasingly be required to consider whether to enforce an award permitting or not penalizing
conduct occurring in a foreign state that is inconsistent with fundamental public policies and
laws of that state. (71)
The decision in Parsons & Whittemore Overseas Co. v. Societe Generale de L'Industrie du Papier,
excerpted below (and elsewhere), illustrates the application of the Convention's public policy
defense. Also consider the decision in Laminoirs-Trefileries-Cableries de Lens, SA v. Southwire
Co., which is one of the few cases in which a U.S. court has refused to enforce a foreign arbitral
award under the Convention on public policy grounds. Finally, consider the court's decision in
Northrop Corp. v. Triad International Marketing, which presents the difficult question of whether
and when a national court should give effect to foreign public policies. (72)
NEW YORK CONVENTION
Article V(2)(b)
[excerpted below at p. 988]
INTER-AMERICAN CONVENTION
Article 5(2)(b)
[excerpted below at p. 996]
UNCITRAL MODEL LAW
Article 36(1)(a)
[excerpted below at pp. 1020-21]
P "817"
P "818"
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 190(2)
[excerpted below at pp. 1035]
PARSONS & WHITTEMORE OVERSEAS CO. v. SOCIETE GENERALE DE L'INDUSTRIE DU PAPIER
508 F.2d 969 (2d Cir. 1974)
J. JOSEPH SMITH, CIRCUIT JUDGE. [The facts of the case are excerpted at supra pp. 789-91.]
Article V(2)(b) of the Convention allows the court in which enforcement of a foreign arbitral
award is sought to refuse enforcement, on the defendant's motion or sua sponte, if
“enforcement of the award would be contrary to the public policy of [the forum] country.” The
legislative history of the provision offers no certain guidelines to its construction. Its precursors
in the Geneva Convention and the 1958 Convention's ad hoc committee draft extended the
public policy exception to, respectively, awards contrary to “principles of the law” and awards
violative of “fundamental principles of the law.” In one commentator's view, the Convention's
failure to include similar language signifies a narrowing of the defense. Contini, [International
Commercial Arbitration,] 8 Am. J. Comp. L. 283, 304. On the other hand, another noted authority
in the field has seized upon this omission as indicative of an intention to broaden the defense.
Quigley, Accession by the United States to the United Nations Convention on the Recognition and
Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1070-71 (1961).
Perhaps more probative, however, are the inferences to be drawn from the history of the
Convention as a whole. The general pro-enforcement bias informing the Convention and
explaining its supersession of the Geneva Convention points toward a narrow reading of the
public policy defense. An expansive construction of this defense would vitiate the Convention's
basic effort to remove preexisting obstacles to enforcement.... Additionally, considerations of
reciprocity – considerations given express recognition in the Convention itself – counsel courts
to invoke the public policy defense with caution lest foreign courts frequently accept it as a
defense to enforcement of arbitral awards rendered in the United States. We conclude,
therefore, that the Convention's public policy defense should be construed narrowly.
Enforcement of foreign arbitral awards may be denied on this basis only where enforcement
would violate the forum state's most basic notions of morality and justice. Cf. 1 Restatement
(Second) Conflict of Laws §117 comment c, at 340 (1971); Loucks v. Standard Oil Co., 224 N.Y. 99,
111 (1918).
P "818" Under this view of the public policy provision in the Convention, Overseas' public policy
P "819"
P "819" defense may easily be dismissed. Overseas argues that various actions by United States
officials subsequent to the severance of American-Egyptian relations – most particularly, AID's
withdrawal of financial support for the Overseas-RAKTA contract – required Overseas, as a loyal
American citizen, to abandon the project. Enforcement of an award predicated on the
feasibility of Overseas' returning to work in defiance of these expressions of national policy
would therefore allegedly contravene United States public policy. In equating “national” policy
with United States “public” policy, the appellant quite plainly misses the mark. To read the
public policy defense as a parochial device protective of national political interests would
seriously undermine the Convention's utility. This provision was not meant to enshrine the
vagaries of international politics under the rubric of “public policy.” Rather, a circumscribed
public policy doctrine was contemplated by the Convention's framers and every indication is
that the United States, in acceding to the Convention, meant to subscribe to this supranational
emphasis. Cf. Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974). To deny enforcement of this
award largely because of the United States' failing out with Egypt in recent years would mean
converting a defense intended to be of narrow scope into a major loophole in the Convention's
mechanism for enforcement. We have little hesitation, therefore, in disallowing Overseas'
proposed public policy defense.
Article V(2)(a) authorizes a court to deny enforcement, on a defendant's or its own motion, of a
foreign arbitral award when “[t]he subject matter of the difference is not capable of settlement
by arbitration under the law of that [the forum] country.” ... Overseas' argument, that “United
States foreign policy issues can hardly be placed at the mercy of foreign arbitrators ‘who are
charged with the execution of no public trust’ and whose loyalties are to foreign interests,”
plainly fails to raise [a] substantial ... issue of arbitrability. The mere fact that an issue of
national interest may incidentally figure into the resolution of a breach of contract claim does
not make the dispute not arbitrable. Rather, certain categories of claims may be non-
arbitrable because of the special national interest vested in their resolution. Furthermore,
even were the test for non-arbitrability of an ad hoc nature, Overseas' situation would almost
certainly not meet the standard, for Overseas grossly exaggerates the magnitude of the
national interest involved in the resolution of its particular claim. Simply because acts of the
United States are somehow implicated in a case one cannot conclude that the United States is
vitally interested in its outcome. Finally, the Supreme Court's decision in favor of arbitrability
in a case far more prominently displaying public features than the instant one, Scherk v.
Alberto-Culver Co., compels by analogy the conclusion that the foreign award against Overseas
dealt with a subject of arbitrable under United States law.... We therefore affirm the district
court's confirmation of the award.
P "819"
P "820"
LAMINOIRS-TREFILERIES-CABLERIES DE LENS, SA v. SOUTHWIRE COMPANY
484 F.Supp. 1063 (N.D. Ga. 1980)
TIDWELL, DISTRICT JUDGE.... Southwire, a Georgia corporation which manufactures cable
products, and [Laminoirs-Trefileries-Cableries de Lens (“LTCL”)], French societe anonyme which
manufactures steel wire and rope, entered into a purchase agreement in 1974, whereby LTCL
agreed to manufacture and sell, and Southwire agreed to buy, galvanized steel wire.... The
price to be paid by Southwire was to be determined and adjusted according to a formula
based on the world market price of steel wire.... Said purchase agreement contained an
arbitration clause, and also contained a governing law clause, stating that the agreement
would be governed by the laws of Georgia insofar as these laws are in accordance with French
laws.
Disputes arose.... Pursuant to the arbitration clause in the contract, LTCL demanded arbitration
before an international tribunal in accordance with [ICC Rules.] ... On February 8, 1979, the
arbitrators made a partial arbitral award, which accepted LTCL's [claims]; order Southwire to
pay LTCL the aggregate amount of underpayments caused by [Southwire's breach] (plus
interest at the French legal rate); found in favor of Southwire [on certain counterclaims]; [and]
reserved judgment on [other counterclaims] and the costs of the arbitration. The parties
thereafter settled the [remaining counterclaim], and ... the tribunal entered a further arbitral
award, confirming settlement of [the remaining counterclaim and allocating costs.] Southwire
filed a state court action in Georgia, seeking vacation of the awards, which was removed to this
court by LTCL. LTCL also filed a separate suit seeking confirmation of the awards....
The arbitral award of interest [was attacked by Southwire] on several grounds. The arbitrators
concluded, in response to LTCL's argument, that the French legal rate of interest (on judgments)
should apply. The French statute relied upon by the tribunal was not specifically pleaded nor
formally introduced into evidence, however. In their award, the tribunal merely states what the
French law is and applies it. LTCL argues that the arbitrators took judicial notice of the French
statute; Southwire argues that absent notice to it that French law would be relied upon,
judicial notice was inappropriate.
The Court disagrees with Southwire's assertions. First of all, the contract's governing law clause
contained a provision that the contract would be governed by Georgia law to the extent that it
was in accordance with French law. The fact that this clause was cited by the Terms of
Reference for arbitration should have, in and of itself, put Southwire on notice that French law
had a potential bearing on the outcome of the case, thus precluding any issue of “unfair
surprise”. See Rule 44.1, Fed.R.Civ.P., Notes of Advisory Committee. While Southwire now
P "820" contends that the tribunal misconstrued the governing law clause as applicable to interest
P "821" rate determination, Southwire argued before the arbitrators that interest “should be
assessed in accordance with Georgia law,” and in support of such contention itself referred the
arbitrators to its pleadings, “concerning the application of Georgia law to the entire
 interpretation of the contract.”
It was provided in the Terms of Reference for arbitration that the “arbitrators shall proceed
and decide on the record.” However, it has been held that arbitrators may draw on their own
personal knowledge in making an award. See Bernhardt v. Polygraphic Co., 350 U.S. 198 n.4
(1955), citing American Almond Products Co. v. Consolidated Pecan Sales, 144 F.2d 448 (2d Cir.
1944).... The Court therefore concludes that the manner in which the amount of interest payable
was determined by the arbitrators is not grounds for vacation under 9 U.S.C. §§10(c) or (d).
It is also contended that the award of interest should not be enforced as being usurious and
against public policy. In making their award, the arbitrators determined that under the French
law, the applicable annual rate for the time periods in question should be 10.5% and 9.5%
(depending upon the date of maturity of the underpaid invoice), “increasing to fifteen and a
half percent and fourteen and a half percent respectively after two months from the date of
notification of the award.”
Article V(2)(b) of the [New York] Convention provides that enforcement of an award may be
refused if such enforcement would be contrary to the public policy of the country where
enforcement is sought. However, enforcement of foreign arbitral awards may be denied on this
basis only where enforcement would violate the forum country's most basic notions of morality
and justice. Parsons & Whittemore Overseas Co. v. Societe Generale De L'Industrie Du Papier
(RAKTA), 508 F.2d 969, 974 (2d Cir. 1974).
While the exaction of usury (“... [taking] a greater sum for the use of money than the lawful
interest.” Ga. Code Ann. §57-102) has been characterized by the Georgia Supreme Court as
“odious, illegal, and immoral,”First Federal Savings & Loan Assoc. of Atlanta v. Norwood Realty
Co., 93 S.E.2d 763 (1956), the arbitrators concluded that the Georgia legal rate (7% per annum
where the rate is not named in the contract, see Ga. Code Ann. §57-101 (1979)) was not
applicable under the governing law clause. In Georgia, rates of interest of 9.5% and 10.5% are
not prohibited per se – the legal rate may be as high as 10.5% per annum where the parties
agree to such in writing, Ga. Code Ann. §57-101 (1979); the rate of interest on a principal sum
exceeding $3,000 loaned to a profit corporation may be set without limit by the parties in
writing, Ga. Code Ann. §57-118 (1979); interest rates on loans of $100,000 or more are limited
only by the agreement of the parties in writing, Ga. Code Ann. §57-119. The existence of these
statutes sufficiently convinces the Court that the exaction of interest rates of 9.5% and 10.5%
per annum are not such as would violate this country's or this state's most basic notions of
morality and justice. See Parsons & Whittemore Overseas Co., 508 F.2d at 974. We cannot have
trade and commerce in world markets and international waters exclusively on our terms,
governed by our laws, and resolved in our courts. Scherk, 417 U.S. at 519.
P "821"
P "822"
In applying the French law, however, the arbitrators held that the interest rates assessed
should rise 5% per annum after two months from the date of the award, to rates of 14.5% and
15.5% per annum, respectively. (The French statute relied upon provides: “In the case of a
judgment, the rate of legal interest shall be increased by 5 points upon the expiration of a
period of two months from the day on which the court decision has become enforceable, even
if only provisionally.” French Law No. 75-619, July 11, 1975.)
An award of interest is made so that a person wrongfully deprived of the use of his money
should be made whole for his loss. Miller v. Robertson, 266 U.S. 243, 257-8 (1924); Samincorp v.
S.S. Rivadeluna, 277 F.Supp. 943, 944 (D. Del. 1967). A penalty, on the other hand, is a sum of
money which the law exacts by way of punishment for doing something that is prohibited or
omitting to do something that is required to be done. In re Denver & R.G.W.R. Co., 27 F.Supp. 983
(D. Colo. 1939). The law does not lightly impose penalties. United States v. Murphy, 326 F.2d 191
(2d Cir. 1963). A foreign law will not be enforced if it is penal only and relates to the punishing
of public wrongs as contradistinguished from the redressing of private injuries. Southern
Railway Co. v. Decker, 62 S.E. 678 (1908); Sherman & Sons Co. v. Bitting, 105 S.E. 848 (1921).
Agreements to pay fixed sums as damages plainly without reasonable relation to any probable
damage which may follow will not be enforced. Kothe v. R.C. Raylor Trust, 280 U.S. 224, 226
(1930).
The Court concludes that the imposition of an additional 5% interest by the arbitrators in
accordance with the French statute is penal rather than compensatory, and bears on
reasonable relation to any damage resulting from delay in recovery of the sums awarded.
Therefore, that portion of the award which purports to assess the rates of interest at 14.5% and
15.5% will not be enforced or recognized by this Court. 9 U.S.C.A. §201, Article V(2)(b), [New York
Convention]. The rates of 9.5% and 10.5%, as imposed by the arbitrators, will continue to accrue
until the date of Judgment....
NORTHROP CORP. v. TRIAD INTERNATIONAL MARKETING SA
811 F.2d 1265 (9th Cir. 1987)
BROWNING, JUDGE. In October 1970 Northrop and Triad entered into a ‘Marketing Agreement,’
under which Triad became Northrop's exclusive marketing representative [for certain
armaments] in return for commissions on sales. Northrop made substantial sales to Saudi
Arabia and paid Triad a substantial part of the commissions due under the Marketing
Agreement. On September 17, 1975, the Council of Ministers of Saudi Arabia issued Decree No.
1275, prohibiting the payment of commissions in connection with armaments contracts.
Northrop ceased paying commissions to Triad [which protested and then sought arbitration
under AAA rules.]
P "822"
P "823"
P "823"
[The Marketing Agreement contained a choice of law clause, which provided “The validity and
construction of this Agreement shall be governed by the laws of the State of California.” The
arbitrators relied on the choice of law clause and rejected Northrop's argument that Saudi
Decree No. 1275 rendered the Marketing Agreement unenforceable. Northrop pressed the
argument on appeal, and the Ninth Circuit responded as follows.] Northrop also argues that if
the Saudi Decree did not excuse performance of the Marketing Agreement under California
[law], the choice-of-law clause in the Agreement should be set aside and the Saudi Decree
should be applied directly to invalidate the Marketing Agreement under the principle
announced in Restatement (Second) Conflict of Laws §187(2)(b) (1971). However, choice-of-law
and choice-of-forum provisions in international commercial contracts ... should be enforced
absent strong reasons to set them aside.... We agree with the arbitrators that the general
principle of conflicts Northrop cites is not sufficient standing alone to overcome the strong
policy consideration announced in Scherk and Bremen....
Northrop's argument that the courts should decline to enforce the Marketing Agreement
because it conflicts with the public policy Saudi Arabia announced in Decree No. 1275 flies in
the face of the parties' agreement that the law of California, and not Saudi Arabia, would
determine the validity and construction of the contract. Northrop has cited no California
regulation, statute, or court decision demonstrating that enforcement of a contract to pay
commissions to a marketing representative is contrary to the public policy of California,
whether such commissions are illegal under the law of a foreign state or are not.
Northrop's most substantial argument is that the public policy reflected in Decree No. 1275 was
also the policy of the United States Department of Defense. In its opinion the district court said
“it is clear [the Department of Defense] wished to conform its policy precisely to that
announced by Saudi Arabia.” ... To justify refusal to enforce an arbitration award on grounds of
public policy, the policy “must be well defined and dominant.” The Saudi Arabian policy the
Department of Defense arguably adopted was neither. It is clear the Department wished to
accommodate Saudi Arabian interests and sensibilities. It is also clear, however, that the
Department was interested in encouraging sales to Saudi Arabia of American manufactured
military equipment, and considered the efforts of Triad critical to that end.... [The district court
concluded that commissions on weapons were flatly prohibited,] but even if we were to agree,
we could not say on this record the policy the Department adopted was “well-defined and
dominant.” The district court's refusal to enforce the arbitrators' decision on the ground that it
conflicted with the policy of the Department of Defense was, therefore, unwarranted.
Notes on Public Policy Exception to Enforceability of International Arbitral Awards
1. Public policy exception under New York and Inter-American Conventions. One of the most
P "823" commonly invoked defenses to the New York and Inter-American Conventions' requirements for
P "824" enforcement of arbitral awards involves the exception for cases where “the recognition or
enforcement of the award would be contrary to the public policy of [the country asked to
enforce the award].”
The Conventions' public policy exception derives in part from historic common law treatment
of foreign judgments. See G. Born, International Civil Litigation in United States Courts 939-41,
974-86 (3d ed. 1996). Civil law nations have long recognized comparable “ordre public”
exceptions to the enforceability of foreign judgments. More generally, most private
international law treaties and domestic legislation, contain “public policy” exceptions.
Bermann, Public Law in the Conflict of Laws, 34 Am. J. Comp. L. 157 (Supp. 1986); Paulsen &
Sovern, “Public Policy” in the Conflict of Laws, 56 Colum. L. Rev. 969 (1956); Simson, The Public
Policy Doctrine in Choice of Law: A Reconsideration of Older Themes, 1974 Wash. U.L.Q. 391;
Lorenzen, Territoriality, Public Policy and Conflict of Laws, 33 Yale L.J. 736 (1924). These various
public policy exceptions in different private international law contexts serve to protect the
fundamental legal and other precepts of relevant legal regimes. See Ackermann v. Levine, 788
F.2d 830 (2d Cir. 1986); Loucks v. Standard Oil Co., 224 N.Y. 99, 110 (1918).
The public policy exception in Article V(2)(b) and Article 5(2)(b) derive more directly from
Article 1 of the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards, which
provided for enforcement only if the award was “not contrary to the public policy or to the
principles of law of the country in which it is sought to be relied upon.” Similarly, as the
Whittemore court observes, early drafts of the New York Convention allowed enforcement of an
award to be denied if the award violated “fundamental principles of the law.” That basis for
non-recognition was eventually omitted, however, confining Article V(2)(b) of the New York
Convention to “public policy.” In modifying the Geneva Convention's exception the New York
Convention's drafters sought to limit “the scope of the public policy clause as far as possible.”
P. Sanders, International Commercial Arbitration 323 (1959); A. van den Berg, The New York
Convention of 1958 361-68 (1981) (quoting statement of the Chairman of Working Party No. 3, U.N.
Doc. E/CONF.26/SR. 17). Compare Quigley, Accession by the United States to the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 70 Yale L.J. 1049, 1071
n.93 (1961) (concluding that Article V(2)(b) expanded public policy defense).
Consider Article IX of the 1961 European Convention. Does it contain a public policy exception?
What explains this?
2. Public policy exception under national arbitration legislation. Consider Article 36(b)(2) of the
UNCITRAL Model Law and Article 190(2) of the Swiss Law on Private International Law. How does
each statute deal with the public policy exception to the recognition of international arbitral
awards? What differences are there between the two provisions?
3. Rationale for public policy exception. What is the rationale for the public policy exception to
the enforceability of foreign arbitral awards? Is such an exception necessary? Consider Article
 IX of the 1961 European Convention. What are the costs of a public policy exception?
4. Narrow interpretation of public policy exception in many developed trading states. The
drafters of the New York Convention narrowed the public policy exception in Article V(b)(2)
because they feared that it would be invoked to frustrate the Convention's basic objective of
fostering the enforceability of international arbitral awards. A. van den Berg, The New York
Convention of 1958 360-61, 366 (1981). That risk was thought to be particularly great given the
wide disparities among national legal systems and public policies.
Nevertheless, as the U.S. decision in Parsons & Whittemore indicates, most national court
decisions in developed jurisdictions have refused to invoke the public policy exception to
deny recognition to an international arbitral award. See Judgment of 8 January 1995, XXII Y.B.
Comm. Arb. 789 (Swiss Federal Tribunal) (1997) (“The appellant forgets that the enforcement
court does not decide as an appellate instance; the merits of an award cannot be reviewed
under the cover of public policy.”); Judgment of 24 November 1993, XXI Y.B. Comm. Arb. 617
(Luxembourg Cour Superieure de Justice) (1996) (“public policy is only to be considered in its
attenuated form, and is less demanding than it would have been if the same rights had been
acquired in Luxembourg”); Judgment No. 93Da 53054 of 14 February 1995, XXI Y.B. Comm. Arb. 612
(Korean Supreme Court) (rejecting challenge to award based on alleged public policy violation
where arbitrators applied statute of limitations longer than that applicable in enforcement
forum (Korea)); Judgment of 11 January 1978, IV Y.B. Comm. Arb. 266 (Landesgericht
Zweibruecken 1979) (refusing to vacate award on public policy grounds where arbitral tribunal
allegedly erred in choice of law analysis); Judgment of 14 July 1995, XXI Y.B. Comm. Arb. 643
(Hertogenbusch Gerechtshof) (1996) (rejecting public policy challenge to award based on
P "824"
P "825"
alleged inconsistency with judicial decree in related matter); Judgment of 10 December 1993,
XXII Y.B. Comm. Arb. 753 (High Court of Kuala Lumpur) (1997) (rejecting challenge to award based
on alleged violation of Malaysian public policy against trading with Israel; concluding policy
not implicated by award); Judgment No. 1056 of 29 September 1995, XXII Y.B. Comm. Arb. 111
(Singapore High Court) (1997) (rejecting public policy challenge to award); Judgment of 15 May
1986, Neue Juristische Wochenschrift, 26 November 1986, at 3027 (Bundesgerichtshof, Germany)
(refusing to deny recognition to foreign arbitral award made by sole arbitrator; rejecting
argument that public policy required permitting each party to nominate an arbitrator);
Judgment of 10 April 1985, XI Y.B. Comm. Arb. 510 (1986) (Corte di Appello of Brescia) (rejecting
public policy challenge to foreign arbitral award).
5. Applications of public policy exception under Article V(2)(b) by U.S. lower courts. The Parsons
& Whittemore and Triad courts construed Article V(2)(b)'s public policy exception narrowly to
apply only where enforcement would violate the forum state's “most basic notions of morality
and justice.” 508 F.2d at 974. The courts' reasoning illustrates two basic trends in U.S. decisions
applying the New York Convention.
(a) Narrow interpretation of public policy defense by U.S. courts. First, as noted elsewhere, U.S.
courts have strongly favored the enforcement of international arbitral awards, based on
the general federal policy of encouraging arbitration of international commercial
disputes. Citing this general approach, a number of U.S. lower courts have adopted very
narrow views of Article V(2)(b)'s public policy exception. E.g., Waterside Ocean Nav. Co. v.
International Nav., 737 F.2d 150 (2d Cir. 1984) (public policy defense not implicated by
claims of false testimony before arbitral tribunal); Bergesen v. Joseph Muller Corp., 710
F.2d 928 (2d Cir. 1983); Fotochrome, Inc. v. Copal Co., 517 F.2d 512 (2d Cir. 1975); National Oil
Corp. v. Libyan Sun Oil Co., 733 F.Supp. 800, 819 (D. Del. 1990); McDonnell Douglas Corp. v.
Denmark, 607 F.Supp. 1016 (E.D. Mo. 1985); La Societe Nationale v. Shaheen Natural
Resources Co., 585 F.Supp. 57 (S.D.N.Y. 1983), aff'd, 733 F.2d 260 (2d Cir.), cert. denied, 105
S.Ct. 251 (1984); Konkar Indomitable Corp. v. Fritzen Schiffsagentur und Bereederungs-
GmbH, No. 80 Civ. 3230 (S.D.N.Y. May 1, 1981) (failure to apply U.S. law to govern dispute
not a violation of public policy); Fertilizer Corp. of India v. IDI Mgt, 517 F.Supp. 948 (S.D.
Ohio 1981); Antco Shipping Co. v. Sidermar, SpA, 417 F.Supp. 207, 215-17 (S.D.N.Y. 1976). See
also Comment, The Public Policy Defense to Recognition and Enforcement of Foreign
Arbitral Awards, 7 Cal. W. Int'l L.J. 228 (1977) (“the courts have given the public policy
defense so narrow a construction that it now must be characterized as a defense without
meaningful definition”).
This narrow interpretation of Article V(2)(b) is consistent with restrictive applications of
public policy as a defense to enforcement of arbitration agreements under Article II. See
supra pp. 243-95.

(b) Analogous common law interpretations of public policy exception. U.S. courts generally
interpret exceptions to enforcement under the FAA and Convention in accord with similar
common law and state statutory exceptions applicable to enforcing foreign court
judgments. That is illustrated by the citation of the Restatement (Second) Conflict of Laws
and Loucks v. Standard Oil in Parsons & Whittemore and elsewhere. Is this appropriate?
Does enforcement of arbitral awards involve different considerations from the
enforcement of foreign court judgments? Does the drafting history of the Convention
suggest a desire to narrow traditional “public policy” analysis?
6. Wisdom of narrow interpretation of Article V(2)(b). Should national courts be more forceful in
protecting national interests and public policies under the Convention? Compare the more
expansive treatment of the public policy defense by U.S. (and foreign) courts in the contexts of
forum selection clauses, choice of law clauses, and the recognition and enforcement of foreign
judgments. G. Born, International Civil Litigation in United States Courts 414-30, 655-56, 661-63,
974-86 (3d ed. 1996). See generally Bermann, Public Law in the Conflict of Laws, 34 Am. J. Comp.
 L. 157 (Supp. 1986); Derains, Public Policy and the Law Applicable to the Dispute in International
Arbitration, in Comparative Arbitration Practice and Public Policy in Arbitration 227 (P. Sanders
ed. 1986); Barry, Application of the Public Policy Exception to the Enforcement of Foreign Arbitral
Awards Under the New York Convention: A Modest Proposal, 51 Temple L.Q. 832 (1978). What
effect would this have on the international arbitral process?
7. National court decisions holding that an award violates applicable public policy under Article
V(2)(b). Although the clear weight of authority reaches contrary results, a few national court
decisions have invoked the public policy exception to deny recognition to a foreign arbitral
award. The Southwire court concluded, for example, that imposition of 5% excess interest
(above and beyond otherwise applicable market interest rates under foreign law) was violative
of applicable U.S. public policy.
When national courts have invoked public policy it has usually been on due process-related
P "825" grounds. For some of the few examples of national court decisions refusing to enforce
P "826" international arbitral awards on public policy grounds, see Judgment of April 3, 1975, II Y.B.
Comm. Arb. 241 (1977) (Oberlandesgericht of Hamburg) (refusing to enforce award because of
AAA's failure to forward letter from claimant to respondent); Judgment of June 10, 1976, IV Y.B.
Comm. Arb. 258 (1979) (Oberlandesgericht of Cologne) (refusing to enforce award because of
refusal of Copenhagen Arbitration Committee for Grain and Feed Stuff Trade (under
institutional rules) to reveal arbitrators' names to parties); Audi-NSU Auto Union AG v. Adelin
Petit & Cie, V Y.B. Comm. Arb. 257 (Belgian Cour de Cassation June 28, 1979); Judgment of May 11,
1983, X Y.B. Comm. Arb. 421 (1985) (Oberster Gerichtshof) (requiring trial court to consider
whether Austrian law relating to illegal margin sales precluded enforcement of award);
Judgment of 26 May 1994, XXIII Y.B. Comm. Arb. 754 (Bezirksgericht Affoltern am Albis 1994)
(1998) (arbitration clause selecting one party's lawyer (who also drafted contract) is contrary to
Swiss public policy and arbitrator's award will not be recognized.); Judgment of 12 July 1985, XI
Y.B. Comm. Arb. 502 (High Court of Dehli) (1986) (refusing to enforce foreign arbitral award on
grounds that it violated Indian public policy, by imposing liability for breach of Indian foreign
exchange controls; Transmarine Seaways Corp. v. Marc Rich & Co., 480 F.Supp. 352 (S.D.N.Y. 1979)
(“public policy” exception would apply to awards pursuant to arbitration agreements obtained
by duress); Victrix S.S. Co. v. Salen Dry Cargo AB, 825 F.2d 709 (2d Cir. 1987); (default award
against a bankrupt party not enforced because payment of the award from the debtor's estate
would conflict with a U.S. public policy of giving effect to a Swedish bankruptcy proceedings for
the equitable distribution of the estate's assets).
Does Southwire reach a persuasive conclusion? Is it consistent with the decisions in Parsons &
Whittemore and Triad? Did the French rule concerning the legal rate of interest payable on
certain obligations really violate “basic notions of morality and justice”? Note that French law
deliberately imposes rates of interest in excess of market rates on post-award amounts, in
order to encourage payment of amounts found owing. Other countries do the same. Is that such
a peculiar and offensive idea?
8. Source of public policy standards under Article V(2)(b) – domestic or international? From what
legal sources are standards of public policy derived in cases under Article V(2)(b)? Do Parsons
& Whittemore and Southwire rely on the same sources of public policy? What about Triad?
 (a) “International” public policy. A few national courts appear to have looked at least in part
to what they have called “international” public policy, as distinguished from “domestic”
public policy. See Parsons & Whittemore, 508 F.2d at 974 (requiring “supranational
emphasis” rather than reliance on “national political interests”); Ledee v. Ceramiche
Ragno, 684 F.2d 184, 187 (1st Cir. 1982); National Oil Corp. v. Libyan Sun Oil Co., 733 F.Supp.
800, 819 (D. Del. 1990) (“‘public policy’ and ‘foreign policy’ are not synonymous”); Judgment
of 24 November 1993, XXI Y.B. Comm. Arb. 617 (Luxembourg Cour Superieure de Justice)
(1996) (“the public policy of the State where the arbitral award is invoked is thus not the
internal public policy of that country, but its international public policy, which is defined
as being all that affects the essential principles of the administration of justice or the
performance of contractual obligations”); Judgment of 15 May 1986, Neue Juristische
Wochenschrift, 26 November 1986, at 3027 (Bundesgerichtshoft, Germany) (holding that
“international” public policy applied under Article V(2)(b) exception). Similarly, Article
1498 of the New Code of Civil Procedure in France refers specifically to international
public policy in respect of the grounds for resisting enforcement of foreign arbitral
awards.
It is not clear what these decisions mean by “international” public policy. Some of these
decisions appear to require looking directly to “international” public policy – that is, to
substantive norms derived from international sources and not from U.S. (or other
municipal law) sources. This appears to be equivalent to what some European
commentators term “truly international public policy.” See B. Goldman, Les conflicts des
lois dans l'arbitrage international de droit privé, 1963 Recueil des Cours 352; Lalive,
Transnational (or Truly International) Public Policy and International Arbitration (in P.
Sanders, Comparative Arbitration Practice and Public Policy in Arbitration, at 257-318
(1987)).
How are national courts to ascertain “supranational” or “international” public policy? Are
courts intended to find international conventions or rules of customary international law
articulating basic legal rules? Are they supposed to ascertain principles common to
diverse legal systems? If so, which legal systems? Is there in fact any such thing as
“international public policy”? Do you think that, for example, the courts of Saudi Arabia,
Singapore, China, Nigeria, Sweden, the United States, and Brazil will arrive at the same
(or similar) views as to the content of such public policy?
Alternatively, “international” public policy might refer to local national public policies
that are intended by national legislatures (or courts) to apply to international
transactions and conduct. We discuss this below. See infra p. 827.
P "826"
P "827"
(b) Conflicts between national and international public policy. What if international public
policy permits actions that violate basic national policies and laws? For example,
suppose that a U.S. court were to conclude that international public policy permitted
actions that contravened U.S. policies against racial or religious discrimination? Cf. Antco
Shipping Co. v. & Sidermar, SpA, 417 F.Supp. 207, 215-17 (S.D.N.Y. 1976) (rejecting public
policy defense to stay pending arbitration where parties' agreement contained
provisions requiring boycott of Israel). Which authority should prevail?
(c) Authorities adopting “national” public policy. Notwithstanding the references to
“international” public policy in Parsons & Whittemore, other national courts (like
Southwire) have expressly invoked “national” public policy. See Victrix S.S. Co. v. Salen Dry
Cargo AB, 825 F.2d 709 (2d Cir. 1987); Waterside Ocean Nav. Co. v. International Nav., 737
F.2d 150, 152 (2d Cir. 1984) (“public policy of the United States”); McDonnell Douglas Corp.
v. Kingdom of Denmark, 607 F.Supp. 1016 (E.D. Mo. 1985); La Societe Nationale etc. v.
Shaheen Natural Resources Co., 585 F.Supp. 57, 63 (S.D.N.Y. 1983); Antco Shipping Co. v.
Sidermar, SpA, 417 F.Supp. 207, 213 (S.D.N.Y. 1976); Judgment No. 93 Da 53054 of 14 February
1995, XXI Y.B. Comm. Arb. 612 (Korean Supreme Court) (public policy exception “should be
interpreted narrowly”: “Only when the concrete outcome of recognizing such an award is
contrary to the good morality and other social order of Korea, will its recognition and
enforcement be refused”); Polytek Engineering Co. Ltd v. Hebei Import & Export Co., XXIII
Y.B. Comm. Arb. 666 (Hong Kong Court of Appeal 1997) (1998) (“The test we would therefore
adopt [for the Convention's public policy exception] is: whether, in all the circumstances
of the case, it would violate the most basic notions of morality and justic of the Hong Kong
system if the foreign award in question is to be enforced ... We would be slow to condemn
what happened before an arbitration tribunal in a foreign jurisdiction as having violated
the most basic notions of morality and justice of our system unless it is quite clearly the
case.”).
(d) National public policies subject to international standards. Alternatively, does
“international” public policy mean that a court may consider local public policy, but only
if it is consistent with international principles recognized in various nations as
constituting vital public policies. Compare Ledee v. Ceramiche Ragno, 684 F.2d 184 (1st Cir.
1982) (in context of Article II(3), citing rules that “can be applied neutrally on an
international scale”); supra pp. 113-16.
For example, the United States, European Union (and its member states), Japan, and
other developed nations have competition laws that are broadly similar. Do the U.S.
antitrust laws reflect international public policy? What about the fact that, let us assume,
countries with well over 75% of the world's population do not have such laws?
 (e) National public policies intended to have international application. Alternatively, national
courts might look to local public policies, but consider whether a particular public policy
was intended, as a matter of local law, to have international application. A. van den Berg,
The New York Convention of 1958 360-61 (1981). That is arguably the approach taken in
Parsons & Whittemore.
It is important, however, to understand precisely what it means to require that a public
policy be intended to have international application. One possibility is that certain local
public policies might be deemed not to apply in international disputes, because of
countervailing systemic interests in permitting consensually arranged certainty in such
disputes. E.g., Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S. 614 (1985)
(U.S. antitrust claims are arbitrable in international disputes, even if not in domestic
disputes); supra pp. 275-76.
Alternatively (or additionally), the requirement that a policy be intended to have
international application might contemplate a “conflict of policies” analysis, in which the
appropriate scope of each policy is determined and any true conflicts resolved in an
“interest analysis” derived from conflict of laws contexts. That is arguably the approach
taken in U.S. cases dealing with forum selection clauses. Bremen v. Zapata Off-Shore Co.,
407 U.S. 1 (1972) (U.S. public policy against exculpation for negligence not applicable to
conduct outside the United States); G. Born, International Civil Litigation in United States
Courts 428-30 (3d ed. 1996).

(f) Source of U.S. public policy – state or federal? Assuming that the public policy
contemplated by Article V(2) is national – not international – public policy, what is the
source of that public policy in the United States? Is it state, or federal, public policy?
What was the legal source of the public policy that was applied in Southwire?
As discussed below, it is not clear under the domestic FAA whether federal or state law
governs issues of public policy. See infra pp. 829-30. Note the treatment of public policy
P "827" in the context of recognizing foreign judgments, where courts generally look to state
P "828" public policies; note also, however, that, under the Full Faith and Credit Clause, a state
court may not rely on state public policy to resist enforcement of a judgment of a court in
another state. G. Born, International Civil Litigation in United States Courts 936-37 (3d ed.
1996).
In cases under the Convention, do federal interests in uniformity and undue interference
with the arbitral process support preemption of state public policies? Recall that, in
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), the Court held
that antitrust claims were arbitrable in international disputes under the Convention,
even if they might not be in domestic matters. The Court relied on notions of
international comity in reaching this conclusion. See supra pp. 264-78. The same
considerations would appear to support application of federal law to issues of public
policy.

9. Effect of foreign public policies on enforceability of awards in national courts. To what extent
should a national court give effect to the public policies of foreign states in applying the
Convention? Suppose, for example, that an arbitral award orders relief against European
companies operating in Europe that violates European Union competition laws? or that
requires or rewards conduct in a foreign state that is unlawful there? Should a U.S. court (or
other non-EU court) enforce the award? Would a U.S. court enforce a contract calling for such
conduct? See also Omnium De Traitement et de Valorisation SA v. Hilmarton Ltd, 14 Mealey's Int'l
Arb. Rep. A-1 (June 1999) (“there is nothing which offends English public policy if an Arbitral
Tribunal enforces a contract which does not offend the domestic public policy under either the
proper law of the contract or its curial law, even if English domestic public policy might have
taken a different view”).
(a) Basis for arbitrator to apply foreign public policy. Recall that §187 of the Restatement
(Second) Conflict of Laws (1971), excerpted above at supra pp. 289, 558, provides that a
parties' choice-of-law agreement will not be effective if it would “be contrary to a
fundamental policy of a state which has a materially greater interest than the chosen
state in the determination of the particular issue and which ... would be the state of the
applicable law in the absence of an effective choice of law by the parties.” Article 7(1) and
Article 3(3) of the Rome Convention, also excerpted and discussed above, supra pp. 289,
561, are broadly similar. Both §187 and the Rome Convention give effect to the mandatory
character of certain national laws, and provide an analytical basis for applying such laws
notwithstanding the parties' choice-of-law agreement. For further discussion, see supra
pp. 558-71; Lalive, Transnational (or Truly International) Public Policy and International
Arbitration (in P. Sanders, Comparative Arbitration Practice and Public Policy in
Arbitration, 257-318 (1987)).
 (b) Triad's application of foreign public policy. How does the court in Triad deal with Saudi
Arabian public policy against bribery? Did it reach a sensible result? Compare Triad
Financial Establishment v. Tumpane Co., 611 F.Supp. 157 (N.D.N.Y. 1985) (applying Saudi law
against broker fees on military sales to invalidate contract); Oscanyan v. Arms Co., 103
U.S. 261, 277 (1880) (“A contract to bribe or corruptly influence officers of a foreign
government will not be enforced in the courts of this country – not from any
considerations of the interests of that government or any regard for its policy, but from
the inherent viciousness of the transaction, its repugnance to our morality, and the
pernicious effect which its enforcement by our courts would have upon our people.”);
Lemenda Trading Co. v. African Middle East Petroleum Co. [1988] Q.B. 448 (English court will
not enforce contract for influence peddling if it is contrary to foreign law at place of
performance).
(c) U.S. courts' reluctance to rely on foreign public policies. As Triad suggests, even if foreign
public policy were demonstrably in conflict with an arbitral award, and even if the
concerned foreign jurisdiction has a reasonably close relationship to the parties' dispute,
U.S. courts have been reluctant to vacate the award. American Construction Machinery &
Equipment Corp. v. Mechanised Construction of Pakistan, Ltd, 659 F.Supp. 426, 429 (S.D.N.Y.
1987) (rejecting argument that “United States public policy would be offended by
confirming an arbitral award in the face of a Pakistani judgment that the arbitration
clause and proceeding were void,” at least where Pakistan was not arbitral situs).
Compare Mayer, Mandatory Rules of Law in International Arbitration, 2 Arb. Int'l 274, 290
(1986) (“One is ... hard put to understand why a judge would refuse to recognize an award
dealing with, for example, foreign competition law on the grounds that under his own law
such a dispute is not arbitrable. Obversely, the fact that the dispute may be arbitrable
under his law should not lead him automatically to enforce an award which paid no heed
to the fact that the dispute was not arbitrable under foreign laws whose applicability
appears legitimate.”).
The most tenable example of a U.S. court's refusal to enforce an international arbitral
award because of a foreign public policy was Victrix S.S. Co. v. Salen Dry Cargo AB, 825
P "828" F.2d 709 (2d Cir. 1987). There, the court refused to enforce an English arbitration award
P "829" against the assets of a company which had been declared bankrupt under Swedish law,
because doing so would conflict with what was termed a U.S. public policy of giving effect
to foreign bankruptcy proceedings and policies (Swedish, in this case) for the equitable
distribution of bankrupt's assets. Compare the similar inclination of the Triad court to
give greater weight to U.S. Defense Department pronouncements than to Saudi laws from
which the U.S. policies derived.

10. Public policy exception under the domestic FAA. Although the domestic FAA provides no
statutory basis for vacating or declining to confirm awards on public policy grounds in the
United States, it is well-established that such an exception exists. As in the context of
recognition of awards under the Convention, however, the domestic public policy exception is
extremely narrow. W.R. Grace & Co. v. Local Union 749 etc., 461 U.S. 757 (1983); Misco, Inc. v.
United Paper Workers Int'l Union, 484 U.S. 29 (1987). U.S. courts emphasize that, under the FAA,
the public policy exception does not “sanction a broad judicial power to set aside arbitration
awards as against public policy.”Id. at 43.
(a) Public policy under the FAA must be express and based on laws and legal precedents. As we
have seen, in order for a public policy to provide a basis for overturning an award under
the domestic FAA, the policy must be “explicit,” “well-defined and dominant.” W.R. Grace,
461 U.S. at 766. Public policies may only be derived “by reference to the laws and legal
precedents,” and not from “general considerations of supposed public interests.” Id. Even
if these standards are satisfied, “the violation of such a policy must be clearly shown if an
award is not to be enforced.”United Paperworkers, 484 U.S. at 43.
(b) Difficulty in vacating award on public policy grounds under FAA. U.S. courts have generally
rejected public policy defenses to the enforcement of arbitral awards under the domestic
FAA. In United Paperworkers, for example, the Court held that there had been no sufficient
showing that “existing laws and legal precedents” establish a “‘well-defined and
dominant’ policy against the operation of dangerous machinery while under the influence
of [illegal] drugs.” 484 U.S. at 44. See Prudential-Bache Securities, Inc. v. Tanner, 72 F.3d 234
(1st Cir. 1995) (rejecting public policy challenge on grounds of insufficient showing that
award violated asserted public policy); Paine Webber, Inc. v. Agron, 49 F.3d 347 (8th Cir.
1995) (rejecting public policy challenge to award); Osceloa County Rural Water System, Inc.
v. Subsurfco. Inc., 914 F.2d 1072 (8th Cir. 1990); Van Waters & Rogers Inc. v. International
Bhd of Teamsters, etc., 913 F.2d 736 (9th Cir. 1990); Revere Copper & Brass Inc. v. OPIC, 628
F.2d 81 (D.C. Cir. 1980) (“not available for every party who manages to find some generally
accepted principle which is transgressed by the award”), cert. denied, 446 U.S. 983 (1980).
 (c) Decisions vacating awards on public policy grounds under FAA. Despite the rigorous
showing that is required, a surprising number of U.S. decisions have vacated domestic
arbitral awards on public policy grounds. See Iowa Elec. & Power Co. v. Local 204 etc., 834
F.2d 1424, 1426-28 (8th Cir. 1987) (“well-defined and dominant national policy requiring
strict adherence to nuclear safety rules”); S.D. Warren Co. v. United Paperworkers' Int'l
Union etc., 815 F.2d 178 (1st Cir. 1987) (policy against illegal drug use by operator of
dangerous machinery); Amalgamated Meat Cutters etc. v. Great Western Food Co., 712 F.2d
122 (5th Cir. 1983) (policy against alcohol-consumption by truck drivers); Saturday Evening
Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191 (7th Cir. 1987); Broadway Cab Co-op v.
Teamsters & Chauffeurs etc., 710 F.2d 1379 (9th Cir. 1983) (vacating award as contrary to
“law and public policy”); Ottley v. Sheepshead Nursing Home, 688 F.2d 883 (2d Cir. 1982);
Local No. P-1236 etc. v. Jones Dairy Farm, 680 F.2d 1142 (7th Cir. 1982); Dragon, Inc. v. Gebr.
van Weelde etc., 574 F.Supp. 367 (S.D.N.Y. 1983); Telephone Workers etc. v. New Jersey Bell
Telephone Co., 450 F.Supp. 284 (D.N.J. 1977), aff'd, 584 F.2d 31 (3d Cir. 1978).
(d) Respective roles of federal and state public policy under the domestic FAA. There is little
reasoned analysis of the respective roles of federal and state public policies under the
domestic FAA. Cf. Dominick & Dominick, Inc. v. Investor Services & Savings Corp., 1991 U.S.
Dist. Lexis 9960 (S.D.N.Y. 1991) (applying state public policy, without analysis, but finding
it not satisfied). From first principles, it should be clear that the FAA preempts state
public policies that single out arbitration awards (like agreements) for special disfavor,
as compared to judicial judgments. Thus, a state public policy forbidding enforcement of
arbitral awards for future disputes or for tort claims should be preempted. See supra pp.
348-58.
However, legislative authority in the United States is of course shared (and divided)
between federal and state governments. Many subjects, including issues of vital public
importance, are dealt with principally by state law – including real property, contract,
tort, and domestic relations. In areas where state law is not preempted by the federal
substantive law, is there any reason not to apply a general state public policy? Suppose,
P "829" for example, that state policies concerning local real property or domestic relations are
P "830" affected by an arbitral award. Should not state public policy be applied? What if the
arbitrators expressly or impliedly rejected arguments based on state public policy?

(e) Application of domestic FAA precedents by analogy to foreign awards under Article V(2)(b).
Domestic FAA precedents considering issues of public policy are likely, in practice, to be
relevant to public policy challenges to the recognition of foreign awards under Article V(2)
(b). Consider, however, whether domestic U.S. public policies should apply, or apply
without qualification, to foreign awards.
(f) Potential direct applicability of domestic FAA precedents involving public policy. As
discussed above, if an award which is subject to the New York Convention is made in the
United States, then domestic FAA public policy precedents may be directly applicable as
a basis for vacating the award. See supra pp. 726-28. What role should U.S. domestic
public policy objections have in actions to vacate “non-domestic” awards made in the
United States?
11. Does the public policy exception focus on enforcement of the award or the underlying
substantive dispute? Suppose that two parties conclude a contract that is unlawful, or in
violation of applicable public policy. Suppose further that an arbitrator makes an award of
money damages after a dispute arises under the contract. Does mere enforcement of the
money damages award implicate issues of public policy? How?
(a) U.S. authorities considering whether public policy exception focuses on underlying
substantive dispute. It is not clear whether the public policy exception in the United
States requires proof that enforcement of the arbitral award itself would violate
applicable public policy or compel conduct that would violate a public policy. Widell v.
Wolf, 43 F.3d 1150 (7th Cir. 1994) (enforcing award for money damages did not implicate
underlying public policy). Alternatively, and more likely, the public policy exception in
U.S. courts is implicated where the substantive claim on which the award is based is
contrary to applicable public policy. United Paperworkers Int'l Union v. Misco, Inc., 484
U.S. 29, 45 n.12 (1987). Compare Prudential-Bache Securities, Inc. v. Tanner, 72 F.3d 234 (1st
Cir. 1995) (rejecting public policy challenge on grounds of insufficient showing that award
violated asserted public policy).
 (b) What should public policy exception focus on? Consider the following excerpt from a
recent English decision in Soleimany v. Soleimany [1998] 3 W.L.R. 811:
So we turn to the enforcement stage, on the basis (as we have already concluded), that
the arbitrators had jurisdiction. Even if we were wrong in the view already expressed that
an arbitration agreement between robbers (for example) to arbitrate their disputes
would itself be void, it is our view inconceivable that an English court would enforce an
award made on a joint venture agreement between bank robbers, any more than it would
enforce an agreement between highwaymen.... Where public policy is involved, the
interposition of an arbitration award does not isolate the successful party's claim from
the illegality which gave rise to it....
The reason, in our judgment, is plain enough. The court declines to enforce an illegal
contract, as Lord Mansfield said in Holman v. Johnson (1775) 1 Cow p. 341, 343, not for the
sake of the defendant, nor (if it comes to the point) for the sake of the plaintiff. The court
in our view concerned to preserve the integrity of its process, and to see that it is not
abused. The parties cannot override that concern by private agreement. They cannot by
procuring an arbitration conceal that they, or rather one of them, is seeking to enforce an
illegal contract. Public policy will not allow it....
Is this persuasive?
12. Non-arbitrability under Article II(1) and Article V(2)(a) of the New York Convention. Article V(2)
(b)'s public policy exception is closely related to the “non-arbitrability” exception in Article
V(2)(a) of the New York Convention. Article V(2)(a) of the Convention excuses countries from
enforcing Convention awards if “the subject matter of the difference is not capable of
settlement by arbitration” under the law of the enforcing country. As we have seen, Article II(1)
of the Convention is similarly worded (with respect to arbitration agreements). These
provisions are examined in detail above at supra pp. 243-95.
Most authorities have concluded that “question[s] of arbitrability” under Article II(1) and Article
V(2)(a) are the “same.” A. van den Berg, The New York Convention of 1958 359 (1981). That is, if
arbitration of a claim cannot be compelled under Article II(1), because it is non-arbitrable,
then an arbitral award dealing with that claim is unenforceable under Article V(2)(a), subject to
P "830" possible waiver arguments. See Judgment of 12 May 1977, IV Y.B. Comm. Arb. 254 (Liege Court of
P "831" Appeals Belgium) (1979) (disputes over termination of exclusive distribution agreements are
non-arbitrable under Belgian law and arbitral awards resolving such disputes will not be
recognized).
13. Possible waiver of non-arbitrability objections. If a party arbitrates a claim that is otherwise
non-arbitrable under Article II(1), participation in the arbitration may render Article V(2)(a)
inapplicable, because that participation may constitute an agreement to arbitrate an existing
dispute. As we have seen, in some jurisdictions, claims which would be non-arbitrable pursuant
to agreements to arbitrate future disputes may be validly subjected to arbitration pursuant to
an agreement to arbitrate an existing dispute. See supra pp. 254-55, 279. On the other hand, at
least in some jurisdictions, non-arbitrability rules may not be waivable by private parties
(even with respect to claims and disputes which are already in existence). See supra pp. 254-55.
14. Judicial review of arbitral awards involving potentially non-arbitrable claims. As discussed
previously, see supra pp. 278-79, antitrust, securities, and other “public law” claims are
arbitrable in some states, but only subject to certain safeguards. After an arbitral tribunal has
disposed of such claims, what level of judicial scrutiny of such awards is applicable under
national law? As discussed above, Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473
U.S. 613 (1985), indicates that U.S. courts will have the opportunity to take a “second look” at
arbitral dispositions of U.S. antitrust claims:
Having permitted the arbitration to go forward, the national courts of the United States will
have the opportunity at the award enforcement stage to ensure that the legitimate interest in
the enforcement of the antitrust laws has been addressed.... While the efficacy of the arbitral
process requires that substantive review at the award-enforcement stage remain minimal, it
would not require intrusive inquiry to ascertain that the tribunal took cognizance of the
antitrust claims and actually decided them.
Does this mean that the manifest disregard standard will apply to review of public law
disputes? something more searching? less searching? See Employers Ins. of Wausau v. National
Union Fire Ins. Co., 933 F.2d 1481 (9th Cir. 1991) (“[m]istakes in law ... statutory, constitutional, or
common – do not merit vacation”); Ottley v. Sheepshead Nursing Home, 688 F.2d 883, 889-90 &
n.7 (2d Cir. 1982) (“leave for another day the question of the scope of review to be accorded
arbitration awards that are based solely on an erroneous interpretation of public law”);
Broadway Cab Co-op Inc. v. Teamsters & Chauffeurs etc., 710 F.2d 1379, 1383-85 (9th Cir. 1983)
(vacating award because arbitration “contradicted Supreme Court precedent and applied an
incorrect legal standard” under federal labor legislation); General Telephone Co. of Penn. v.
Local 1635 etc., 427 F.Supp. 398, 399 (W.D. Pa. 1977) (arbitrators' decision conflicting with
Supreme Court's Title VII sex discrimination holding vacated on manifest disregard grounds).
For discussion, see supra pp. 278-79, 291-93.
Compare the treatment of EC competition law claims. See supra pp. 274-75.
15. U.S. lower court decisions refusing to accord deference to arbitrators' awards on public
policy. Notwithstanding the FAA's requirement of deference to the substantive decisions
contained in arbitral awards, U.S. courts have said, without significant analysis, that decisions
by arbitrators on issues of public policy will be reviewed de novo. For example, in W.R. Grace &
Co. v. Local Union 749, 461 U.S. at 766, the Supreme Court declared that “the question of public
 policy is ultimately one for resolution by the courts.”See also Transmarine Seaways Corp. v.
Marc Rich & Co., 480 F.Supp. 352 (S.D.N.Y. 1979) (rejecting “argument that the question of [a
public policy violation] is foreclosed from judicial review by the conclusion of a majority of the
arbitrators that ... the contract was enforceable. When public policy is asserted as the basis for
vacating an arbitration award, the court is required to make its own, independent
evaluation.”); Botany Indus., Inc. v. New York Joint Board, 375 F.Supp. 485, 491 (S.D.N.Y. 1974);
Meltzer, Ruminations about Ideology, Law and Labor Arbitration, 34 U. Chi. L. Rev. 545, 558 (1967).
Is that appropriate? The dividing line between public policy and other legal issues is a blurred
one. Is it sensible to grant arbitrators virtually unfettered discretion on, for example, the
merits of a billion dollar fraud claim or an environmental claim, while affording no deference
at all on the percentage rate of post-award interest?
Nonetheless, relatively few U.S. judicial decisions vacate arbitral awards on the grounds that
the arbitrators erred in their resolution of issues of public policy. See Dole Ocean Liner Express
v. Georgia Vegetable Co., 84 F.3d 772 (5th Cir. 1996) (arbitral tribunal did not exceed its authority
by finding liquidated damages provision unenforceable as contrary to public policy).
P "831"
P "832"
16. Unreasoned awards involving public policy or mandatory law. As noted above, it is common
in U.S. arbitrations (but not in international practice more generally) for arbitrators to issue
unreasoned awards. The lack of any requirement for a reasoned award has been held
applicable to claims based on the federal securities laws. See Antwine v. Prudential-Bache
Securities, Inc., 735 F.Supp. 1331 (S.D. Miss. 1989); Sobel v. Hertz, Warner & Co., 469 F.2d 1211,
1214-15 (2d Cir. 1972). See also Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth Inc., 473 U.S.
614, 638 n.20 (1985) (noting that applicable institutional rules called for transcript of hearing
and reasoned award); John T. Brady & Co. v. Form-Eze Systems, Inc., 623 F.2d 261 (2d Cir. 1980)
(rejecting public policy defense on grounds that award did not expressly say that penalty
clause was enforceable, although it awarded damages equal to amounts specified in the
clause).
Consider again Mitsubishi Motors' holding that antitrust claims are arbitrable, provided that
the enforcing court reserves the right to take a “second look” at the award. See supra pp. 279,
292-93. Is that consistent with the lack of any requirement of a reasoned award? Note, Judicial
Review of Foreign Arbitral Awards on Antitrust Matters After Mitsubishi Motors, 26 Colum. J.
Transnat'l L. 407 (1988).
5. Denial of the Opportunity to Present Party's Case and Irregular Procedural Conduct of the
Arbitration
Under all developed legal regimes, international arbitration awards may be challenged on the
grounds of procedural unfairness or irregularity. This exception to the presumptive
enforceability of an arbitral award includes the related topics of serious procedural
irregularity or unfairness (e.g., due process) and of failure to comply with the procedural
requirements of the parties' arbitration agreement or the procedural law governing the
arbitration.
a. Denial of Opportunity to Present a Party's Case
On an international level, the New York Convention's grounds for refusal of enforcement of a
Convention award include cases where the “party against whom the award is invoked was not
given proper notice of the appointment of the arbitrator or of the arbitration proceedings or
was otherwise unable to present his case.” (73) The Inter-American Convention and the 1961
European Convention on International Commercial Arbitration contain a similar (but not
identical) exception. (74) Broadly speaking, these exceptions permit challenges to awards for
grave procedural unfairness in the arbitration proceedings. This is what European lawyers
would term a denial of procedural fairness, equality of treatment, or natural justice and what
U.S. lawyers would regard as a denial of “due process.” (75)
As discussed above, every developed national legal system demands certain minimum levels
P "832" of procedural fairness from the arbitration process. (76) Article 18 of the UNCITRAL Model Law
P "833" provides that “[t]he parties shall be treated with equality and each party shall be given a
full opportunity of presenting his case,” (77) and Article 36(1)(a)(ii) of the Model Law includes as
a ground for non-recognition of arbitral awards cases where a party is “not given proper notice
of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to
present his case.” (78) Likewise, Article 182(3) of the Swiss Law on Private International Law
provides that the “arbitral tribunal shall ensure equal treatment of the parties and the right of
the parties to be heard in adversarial procedures.” (79) Article 190(2)(d) permits arbitral awards
to be set aside where the principle of equal treatment of the parties or their right to be heard
in adversarial procedure has not been observed. (80)
In the United States, the FAA permits non-recognition of arbitration awards because of serious,
prejudicial procedural defects. Section 10(a)(3) of the domestic FAA permits an award to be
vacated “[w]here the arbitrators were guilty of misconduct in refusing to postpone the hearing,
upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the
controversy; or of any other misbehavior by which the rights of any party have been
prejudiced.” (81) More generally, the FAA has been interpreted by U.S. courts as requiring that
arbitrators conduct arbitral proceedings in accordance with basic principles of due process
and procedural fairness. (82)
b. Irregular Procedural Conduct of the Arbitration
 Both the New York and Inter-American Conventions and developed national arbitration
legislation provide a related ground for challenging the procedural regularity of an arbitration.
Under both sources of authority, an arbitral award need not be recognized if the arbitral
procedures deviated significantly from the parties' arbitration agreement or the procedural
law applicable to the arbitration.
Article V(1)(d) of the New York Convention provides for non-enforcement of an award:
where the composition of the arbitral authority or the arbitral procedure was not in
accordance with the agreement of the parties, or, failing such agreement, was not in
accordance with the law of the country where the arbitration took place. (83)
P "833"
P "834" Importantly, Article V(1)(d) refers to the arbitral situs's law, applicable where the parties
have not agreed upon an arbitral procedure. The Inter-American Convention and the 1961
European Convention contain similar provisions. (84)
Most developed national arbitration regimes also permit awards to be challenged where the
arbitral procedures departed materially from the arbitration agreement or the applicable
procedural law. Although many national arbitration statutes do not make express reference to
departures from the procedural law of the arbitral situs, (85) national court decisions do. (86)
c. Selected Materials on Procedural Fairness and Regularity
The materials excerpted below illustrate the procedural regularity exception to the
enforcement of international arbitral awards. First, consider Article V(1)(b) and V(1)(d) of the
New York Convention and Article IX(1)(d) of the 1961 European Convention. Second, review
Article 36(1)(a)(ii) of the UNCITRAL Model Law, Article 190(2)(d) of the Swiss Law on Private
International Law, and §10(a)(3) of the FAA. Third, consider, again the court's opinion in Parsons
& Whittemore, which illustrates the customary approach of U.S. courts to claims of procedural
irregularity. Finally, consider the Avco decision, also excerpted below, which is an unusual
example of a refusal to enforce an award on due process grounds.
NEW YORK CONVENTION
Article V(1)(b) & V(1)(d)
[excerpted below at p. 988]
1961 EUROPEAN CONVENTION
Article IX(1)(d) & IV
[excepted below at pp. 982-83]
UNCITRAL MODEL LAW
Article 36(1)(a)
[excerpted below at pp. 1020-21]
P "834"
P "835"
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 190(2)
[excerpted below at p. 1035]
FEDERAL ARBITRATION ACT
9 United States Code §10(a)(3)
[excerpted below at p. 1001]
PARSONS & WHITTEMORE OVERSEAS CO.v. SOCIETE GENERALE DE L'INDUSTRIE DU PAPIER
508 F.2d 969 (2d Cir. 1974)
J. JOSEPH SMITH, CIRCUIT JUDGE. [The facts of the case are excerpted above at supra pp. 789-
91.] ... Under Article V(I)(b) of the Convention, enforcement of a foreign arbitral award may be
denied if the defendant can prove that he was “not given proper notice ... or was otherwise
unable to present his case.” This provision essentially sanctions the application of the forum
state's standards of due process. See Quigley, Accession by the United States to the United
Nations Convention on the Recognition and Enforcements of Foreign Arbitral Awards, 70 Yale L.J.
1049, 1067 n.81 (1961). Overseas seeks relief under this provision for the arbitration court's
refusal to delay proceedings in order to accommodate the speaking schedule of one of
Overseas' witnesses, David Nes, the United States Charge d'Affaires in Egypt at the time of the
Six Day War. This attempt to state a due process claim fails for several reasons. First, inability
to produce one's witnesses before an arbitral tribunal is a risk inherent in an agreement to
submit to arbitration. By agreeing to submit disputes to arbitration, a party relinquishes his
courtroom rights – including that to subpoena witnesses – in favor of arbitration “with all of its
well known advantages and drawbacks.”Washington-Baltimore Newspaper Guild, Local 35 v. The
Washington Post Co., 442 F.2d 1234, 1288 (1971).
Secondly, the logistical problems of scheduling hearing dates convenient to parties, counsel
and arbitrators scattered about the globe argues against deviating from an initially mutually
agreeable time plan unless a scheduling change is truly unavoidable. In this instance,
Overseas' allegedly key witness was kept from attending the hearing due to a prior
commitment to lecture at an American university – hardly the type of obstacle to his presence
which would require the arbitral tribunal to postpone the hearing as a matter of fundamental
 fairness to Overseas. Finally, Overseas cannot complain that the tribunal decided the case
P "835" without considering evidence critical to its defense and within only Mr. Nes' ability to produce.
P "836" In fact, the tribunal did have before it an affidavit by Mr. Nes in which he furnished, by his
own account, “a good deal of the information to which I would have testified.” ... The arbitration
tribunal acted within its discretion in declining to reschedule a hearing for the convenience of
an Overseas witness. Overseas' due process rights under American law, rights entitled to full
force under the Convention as a defense to enforcement, were in no way infringed by the
tribunal's decision.
IRAN AIRCRAFT INDUSTRIES v. AVCO CORP.
980 F.2d 141 (2d Cir. 1992).
LUMBARD, CIRCUIT JUDGE.... [Avco Corporation, a U.S. company, asserted claims against certain
Iranian entities before the Iran-United States Claims Tribunal, created by the Algiers Accords
between the United States and Iran in order to resolve the criminal seizure of U.S. hostages
during the Carter Administration. The Tribunal rejected many of Avco's claims, and upheld a
number of those of the Iranian parties, producing an award against Avco of approximately $3.5
million. The Iranians sought to enforce the award in the United States, and the following
decision was rendered denying enforcement.]
On May 17, 1985, the Tribunal held a pre-hearing conference to consider, inter alia, “whether
voluminous and complicated data should be presented through summaries, tabulations,
charts, graphs or extracts in order to save time and costs.” At the conference, Avco's counsel,
Dean Cordiano, requested guidance from the Tribunal as to the appropriate method for proving
certain of its claims which were based on voluminous invoices, stating:
In the interest of keeping down some of the documentation for the Tribunal we have not placed
in evidence as of yet the actual supporting invoices. But we have those invoices and they are
available and if the Tribunal would be interested in seeing them we can obviously place them
in evidence or we can use a procedure whereby an outside auditing agency, uh, certifies to the
amounts of the, uh, summaries vis-a-vis the underlying invoices. Both of those approaches can
be taken. But I want to assure the Tribunal that all of the invoices reflected in our exhibits to
the memorial ... exist and are available.
After noting that the Iranian parties “obviously have had those invoices all along,” Cordiano
stated that he would:
like the Tribunal's guidance as to whether, uh, you would like this outside certifying agency to
P "836" go through the underlying invoices and certify as to the summary amounts or that the Tribunal
P "837" feels at this point that the, uh – that you would rather have the, uh, raw data, so to speak –
the underlying invoices. Oh, we're prepared to do it either way.
The Chairman of Chamber Three, Judge Nils Mangard of Sweden, then engaged in the following
colloquy with Cordiano:
Mangard: I don't think we will be very, very much enthusiastic getting kilos and kilos of
invoices.
Cordiano: That, that's what I thought so ...
Mangard: So I think it will help us ...
Cordiano: We'll use ...
Mangard: to use the alternative rather.
Cordiano: Alright ...
Mangard: On the other hand, I don't know if, if any, if there are any objections to any specific
invoices so far made by the Respondents. But anyhow as a precaution maybe you could ...
Cordiano: Yes. sir.
Mangard: Get an account made.
Neither counsel for the Iranian parties nor the Iranian Judge attended the pre-hearing
conference.
On July 22, 1985, Avco submitted to the Tribunal a Supplemental Memorial, which stated in
part:
In response to the Tribunal's suggestion at the Pre-hearing Conference, Avco's counsel has
retained Arthur Young & Co., an internationally recognized public accounting firm, to verify
that the accounts receivable ledgers submitted to the Tribunal accurately reflect the actual
invoices in Avco's records.
Attached to the Supplemental Memorial was an affidavit of a partner at Arthur Young & Co.
which verified that the accounts receivable ledgers submitted by Avco tallied with Avco's
original invoices, with the exception of one invoice for $240.14.
The Tribunal held its hearing on the merits on September 16-17, 1986. By that time, Judge
Mangard had resigned as Chairman of Chamber Three and had been replaced by Judge Michel
Virally of France. At the hearing, Judge Parviz Ansari of Iran engaged in the following colloquy
with Cordiano:
Ansari: May I ask a question? It is about the evidence. It was one of the first or one of the few
cases that I have seen that the invoices have not been submitted. So what is your position on
this point about the substantiation of the claim?
P "837"
P "837"
P "838"
Cordiano: Your Honor, this point was raised at the pre-hearing conference in May of last year.
Ansari: I was not there.
Cordiano: I remember that you weren't there. I think we were kind of lonely that day. We were
on one side of the table, the other side was not there.... We could have produced at some point
the thousands of pages of invoices, but we chose to substantiate our invoices through ... the
Arthur Young audit performed specifically for this tribunal proceeding.
The Tribunal issued the Award on July 18, 1988. Of particular relevance here, the Tribunal
disallowed Avco's claims which were documented by its audited accounts receivable ledgers,
stating, “The Tribunal cannot grant Avco's claim solely on the basis of an affidavit and a list of
invoices, even if the existence of the invoices was certified by an independent audit.”
Judge Brower, the American judge and the only judge of the panel who was present at the pre-
hearing conference, filed a separate Concurring and Dissenting Opinion in which he stated:
I believe the Tribunal has misled the Claimant, however unwittingly, regarding the evidence it
was required to submit, thereby depriving Claimant, to that extent, of the ability to present its
case ... Since Claimant did exactly what it previously was told to do by the Tribunal the denial
in the present Award of any of those invoice claims on the ground that more evidence should
have been submitted constitutes a denial to Claimant of the ability to present its case to the
Tribunal....
Avco argues that the district court properly denied enforcement of the Award pursuant to
Article V(1)(b) of the New York Convention because it was unable to present its case to the
Tribunal. The New York Convention provides for non-enforcement where:
The party against whom the award is invoked was not given proper notice of the appointment
of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case
...
We have recognized that the defense provided for in Article V(1)(b) “essentially sanctions the
application of the forum state's standards of due process,” and that due process rights are
“entitled to full force under the Convention as defenses to enforcement.”Parsons & Whittemore,
508 F.2d at 975-76. Under our law, “the fundamental requirement of due process is the
P "838" opportunity to be heard ‘at a meaningful time and in a meaningful manner.’”Mathews v.
P "839" Eldridge, 424 U.S. 319, 333 (1976) (quoting Armstrong v. Manzo, 380 U.S. 545, 552 (1965)).
Accordingly, if Avco was denied the opportunity to be heard in a meaningful time or in a
meaningful manner, enforcement of the Award should be refused pursuant to Article V(1)(b).
At the pre-hearing conference, Judge Mangard specifically advised Avco not to burden the
Tribunal by submitting “kilos and kilos of invoices.” Instead, Judge Mangard approved the
method of proof proposed by Avco, namely the submission of Avco's audited accounts
receivable ledgers. Later, when Judge Ansari questioned Avco's method of proof, he never
responded to Avco's explanation that it was proceeding according to an earlier understanding.
Thus, Avco was not made aware that the Tribunal now required the actual invoices to
substantiate Avco's claim. Having thus led Avco to believe that it had used a proper method to
substantiate its claim, the Tribunal then rejected Avco's claim for lack of proof.
We believe that by so misleading Avco, however unwittingly, the Tribunal denied Avco the
opportunity to present its claim in a meaningful manner. Accordingly, Avco was “unable to
present [its] case” within the meaning of Article V(1)(b), and enforcement of the Award was
properly denied.
CARDAMONE, JUDGE, DISSENTING.... Avco's focus is on a pre-trial colloquy between its counsel
and Judge Mangard of the Tribunal regarding the use of summaries in place of some of the
invoices Avco needed to prove its claim. Judge Mangard stated the panel would not be very
“enthusiastic about getting kilos and kilos of invoices,” and added that there appeared to be
no objection to using summaries of certain invoices, and suggested to counsel that “as a
precaution” Avco might get an account summary made. Based on this brief exchange, Avco now
makes the dubious argument that this colloquy constituted a binding pre-trial ruling by the
Tribunal that summaries of those particular invoices could substitute for the invoices and
would be sufficient evidence at trial.
At the time of trial Judge Mangard was no longer a member of the Tribunal. Another judge who
was present at the pre-trial had also been replaced. The three-judge panel hearing the case
retained therefore only one of the original judges present at the pre-trial exchange. These trial
judges had different concerns than had the earlier panel. One of the new judges, Judge Ansari,
questioned the adequacy of Avco's proof based only on summaries of invoices. He noted that it
was “the first or one of the few cases” he had heard of in which none of the invoices were
produced as evidence. In response, Avco's counsel stressed the massive number of invoices
involved, mentioning that Avco “chose to substantiate [the] invoices through other methods,”
and stated, “we simply chose not to put in thousands of pages of documents.” (emphases
added.) Concluding that Avco's proof did not establish its claim, the Tribunal declined to grant
Avco an award based only on summaries of its invoices.
The New York Convention obligates U.S. courts to enforce foreign arbitral awards unless certain
defenses provided in Article V(1) of the Convention are established. The specific defense with
P "839" which we deal in the case at hand appears in Article V(1)(b). That section states that
P "840" enforcement of an arbitral award may be denied if the court is satisfied that the party
against whom the award is sought to be enforced was unable to present its case before the
arbitration panel.
 Based on the facts before us, Avco fails to meet the legal standard of being unable to present
its case before the arbitral Tribunal so as to render the award unenforceable under the New
York Convention. That standard, as the majority points out, essentially involves a due process
inquiry to see whether the party against whom enforcement is sought has been put on notice
and has had an opportunity to respond. See Parsons & Whittemore. Unfortunately, only limited
case law exists on this issue, and those cases that can be found merely note, in applying Article
V(1)(b), that due process serves as an interpretative guide.
One of the reasons for this dissent is because until today no federal or foreign case appears to
have used Article V(1)(b)'s narrow exception as a reason to refuse to enforce an arbitral award
due to the arbitration panel's failure to consider certain evidence. Moreover, some decisions
have rejected the Article V(1)(b) defense under other, somewhat analogous circumstances. For
example, in Parsons & Whittemore, 508 F.2d at 975-76, we refused to use the defense to bar
enforcement based on an arbitral Tribunal's refusal to accommodate a key witness' schedule,
stating that the inability to present one's witness was “a risk inherent in an agreement to
submit to arbitration.” Similarly, another court has held that a party was not denied the
opportunity to present its defenses under Article V(1)(b) when it had notice of an arbitration,
but chose not to respond. See Geotech Lizenz AG v. Evergreen Systems, 697 F.Supp. 1248, 1253
(E.D.N.Y. 1988). The court in Evergreen Systems ruled that the defendant's “failure to participate
was a decision that was reached only after the Company had full knowledge of the peril at
which it acted.” In the face of Judge Ansari's repeated questioning of Avco's counsel, Avco was
plainly placed on similar notice of the possible risk that the panel would choose not to rely on
invoice summaries in determining whether to grant it an award.
Further support for finding that Avco was not denied due process arises from a like exception
to enforceability that appears in the [FAA], 9 U.S.C. §10 (1988). That Act also provides an
exception to enforcement for the inability to present one's case at arbitration. The more
extensive case law available under §10 supports the conclusion that Avco was not denied due
process before the Iran-U.S. Claims Tribunal. Avco's protests that the events in this case were
more “egregious” than in other cases involving the inability to present one's case at arbitration
are unpersuasive. The ruling by the Hague Tribunal in the instant matter was not high-handed
or arbitrary as are those cases, upon which Avco relies, arising under the [FAA]. A reading of
those cases reveals that they either involve arbitration hearings actually cut short and not
completed before an award was rendered ... or a panel's outright refusal to hear certain
relevant evidence at all....
The present picture is vastly different. Avco had a full opportunity to present its claims, and
was on notice that there might be a problem with its proof, especially given Judge Ansari's
P "840" concerns voiced at trial. The earlier panel surely had never said that the invoices themselves
P "841" would not be accepted or considered as evidence at trial. Nor did the pretrial colloquy
clearly indicate that the earlier panel had issued a definitive ruling that account summaries
would be sufficient substitute proof for the invoices. Avco did not declare, after hearing Judge
Ansari's comments, that it had been precluded by the pretrial colloquy from producing the
invoices, nor did it then attempt to introduce them before the panel. Rather than address
Judge Ansari's concerns through producing the invoices themselves, Avco reiterated its “choice”
to produce only a summary of the invoices. In so doing it took a calculated risk. Under these
circumstances, Avco can scarcely credibly maintain that it was prevented from presenting its
case before the Tribunal....
Notes on Procedural Fairness and Regularity As Grounds for Non-Recognition of International
Arbitral Award
1. Procedural fairness and regularity as grounds for non-recognition of international arbitral
award. Consider Articles V(1)(b) and V(1)(d) of the New York Convention, and their counterparts
under national arbitration legislation. What is the purpose of these grounds for denying
recognition to an otherwise valid arbitral award? Is there any basis for arguing that no such
exception should exist?
What is the difference between the exceptions set forth in Article V(1)(b) and-Article V(1)(d)?
Construct hypotheticals where one exception, but not the other, would apply.
Suppose that the parties' arbitration agreement provides for a particular arbitral procedure.
Why should a national court be permitted to decide that this procedure is unfair (for example,
under Article V(1)(b) of the New York Convention)? Alternatively, why should an arbitral
tribunal's interpretation of the procedural requirements of an arbitration agreement be given
complete deference (for example under Article V(1)(d) of the New York Convention)? Compare
the treatment of an arbitral tribunal's interpretation of the substantive provisions of an
agreement. See supra pp. 797-814.
2. Desirability of judicial review of fairness of arbitral procedures. Should national courts take a
more active role in supervising the procedures used in international arbitration? What would
the advantages and disadvantages of such a role be?
3. Law applicable to standards of procedural fairness under Article V(1)(b). The New York
Convention does not specify what nation's laws, or what international standards, apply in
determining whether Article V(1)(b)'s exception for procedural unfairness is met. What law
should be applied to determine whether an arbitral procedure was unfair and, if so, how
serious that unfairness was? Possible choices include: (a) the national law of the enforcement
forum; (b) the national law of the arbitral situs; (c) an internationally uniform standard derived
directly from Article V(1)(b); and (d) a national law standard developed especially for
application to international arbitration. Which of these choices best serves the Convention's
purposes? Which approach do the UNCITRAL Model Law and the Swiss Law on Private
 International Law appear to adopt?
For an argument that Article V(1)(b) refers to the procedural fairness standards of the national
law governing the parties' arbitration agreement, or of the arbitral situs, see Martinez,
Recognition and Enforcement of International Arbitral Awards Under the United Nations
Convention of 1958: The Refusal Provisions, 24 Int'l Law. 487, 499 (1990). Compare Inter-American
Convention Article 5(1)(d) (referring specifically to law of arbitral situs) and 1961 European
Convention Article IX(1)(d).
4. U.S. lower court decisions selecting law applicable to standards of procedural fairness under
Article V(1)(b). Consider the court's opinion in Parsons & Whittemore. The court held that the law
of the forum where enforcement is sought – there, the United States – should be applied to
determine whether a party was given “proper” notice or was “unable” to present his case. Other
lower U.S. courts have agreed. Fotochrome, Inc. v. Copal Co., 517 F.2d 512 (2d Cir. 1975);
Compagnie des Bauxites de Guinee v. Hammermills, Inc., 1992 WL 122712 (D.D.C. 1992); Essex
Cement Co. v. Italmare, SpA, 763 F.Supp. 55 (S.D.N.Y. 1991); Laminoirs etc. v. Southwire Co., 484
F.Supp. 1063, 1067 (N.D. Ga. 1980); Biotronik etc. v. Medford Medical Instrument Co., 415 F.Supp.
133, 140 (D.N.J. 1976). This use of U.S. due process standards parallels the treatment of adequate
notice and procedural fairness in the enforcement of foreign court judgments. See G. Born,
International Civil Litigation in United States Courts 963-67 (3d ed. 1996).
P "841"
P "842"
What law should be applicable to issues of procedural fairness under Article V(1)(b)? Should
Article V(1)(b) be read as establishing a uniform international standard of procedural fairness?
If so, what sources would this standard be derived from? Recall the fundamentally differing
approaches to judicial and arbitral procedure in many parts of the world. See supra pp. 411-50.
5. Source of standards of procedural fairness under U.S. law. If U.S. law applies under Article
V(1)(b), what is the source of U.S. standards of procedural fairness? Is it the FAA, state law, or
the U.S. Constitution?
(a) Due process standards under the U.S. Constitution. Lower U.S. courts have generally
concluded that foreign arbitral awards falling under the Convention are subject to
scrutiny under the “due process” standards of the Fifth and Fourteenth amendments to
the U.S. Constitution. Iran Aircraft Industries v. Avco Corp., 980 F.2d 141 (2d Cir. 1992) (“the
fundamental requirement of due process is the opportunity to be heard ‘at a meaningful
time and in a meaningful manner.’”); Fotochrome, Inc. v. Copal Co., 517 F.2d 512 (2d Cir.
1975); Parsons & Whittemore, 508 F.2d at 975; Laminoirs etc. v. Southwire Co., 484 F.Supp.
1063, 1066-67 (N.D. Ga. 1980); Biotronik etc. v. Medford Med. Instrument Co., 415 F.Supp. 133,
140 (D.N.J. 1976) (due process requirement in New York Convention consists essentially of
notice and opportunity to be heard). See McLendon, Enforcement of Foreign Arbitral
Awards in the United States, 4 Nw. J. Int'l L. & Bus. 58 (1982).
(b) U.S. state procedural rules not applied. U.S. courts have not looked to U.S. state law
procedural rules in applying Article V(1)(b) to foreign arbitral awards. Is that appropriate?
Should procedural rules applicable under state arbitration statutes apply under Article
V(1)(b)? Why should the FAA or the Convention preempt such rules? What if the state
arbitration rules are identical to state rules in judicial proceedings?
(c) Federal procedural rules under FAA §10(a)(3). As noted above, §10(a)(3) of the FAA permits
arbitral awards to be vacated for the arbitrators' procedural misconduct. There is a
substantial body of precedent under §10(c) defining standards of procedural fairness in
arbitration, which we discuss below, infra pp. 843-46. It is settled that the standards of
procedural regularity applicable under §10(c) are federal ones, and that they preempt
state procedural rules. In general, the federal standards for procedural regularity which
have been developed under the FAA are similar to those of the due process clause. See
Robbins v. Day, 954 F.2d 697 (11th Cir. 1992); Forsythe Int'l, SA v. Gibbs Oil Co., 915 F.2d 1017,
1020 (5th Cir. 1990); Catz American Co. v. Pearl Grange Fruit Exchange, Inc., 202 F.Supp. 549
(S.D.N.Y. 1968).
(d) Application of FAA §10(a)(3) precedents by analogy to foreign awards under Article V(1)(b). In
applying Article V(1)(b) to foreign awards, U.S. courts have frequently relied on §10(c)
precedent. See Parsons & Whittemore, 508 F.2d at 975; Libyan Sun Oil, 733 F.Supp. at 817;
P.T. Reasuransi Umum Indonesia v. Evanston Insurance Co., 1992 U.S. Dist. Lexis 19753
(S.D.N.Y. 1992); Biotronik etc. v. Medford Medical Instrument Co., 415 F.Supp. 133, 137-8
(D.N.J. 1976).
(e) Potential direct applicability of §10(a)(3) in actions to vacate Convention awards made in
the United States. As discussed previously, if an award which is subject to the New York
Convention is made in the United States, then §10(a)(3) and other provisions of §10 have
been held directly applicable as a basis for vacating the award. See supra pp. 726-27.
6. Judicial deference to arbitrators' procedural decisions under Article V(1)(b). Although
requiring that arbitrators comply with basic standards of due process, Parsons & Whittemore
and many other national court decisions make it plain that a national court will not sit in de
novo review of procedural decisions of the arbitral panel under Article V(1)(b). Rather, courts in
most developed states generally accord international arbitrators particularly broad discretion
in their conduct of proceedings. See Judgment No. 8469 of 11 July 1992, XXII Y.B. Comm. Arb. 715
(Corte di Cassazione) (1997) (rejecting challenge to award based on alleged procedural
unfairness, where losing party failed to provide facts challenging arbitrators' treatment of
procedural complaints); Judgment of 16 December 1992, XXI Y.B. Comm. Arb. 535
(Oberlandesgericht Cologne) (1996) (“arbitrator's choice of English as the language of the
 proceedings does not constitute a violation of due process”); Parsons & Whittemore, 508 F.2d at
975-76; Compagnie des Bauxites de Guinee v. Hammermills, Inc., 1992 WL 122712 (D.D.C. 1992); C.T.
Shipping Ltd v. DMI (U.S.A.) Ltd, 774 F.Supp. 146, 149 (S.D.N.Y. 1991); Judgment of 8 October 1981,
1984 Revista de la Corte Espanola de Arbitrage I 158 (Spanish Supreme Court) (rejecting
argument that foreign arbitral award was unenforceable because it did not comply with
procedural requirements of Spanish arbitration statute); Laminoirs etc. v. Southwire Co., 484
F.Supp. 1063, 1066-67 (N.D. Ga. 1980) (curtailing cross-examination did not deny petitioner fair
hearing).
Avco is one of the few U.S. cases refusing to enforce a foreign arbitral award for failure to
permit a party to present its case. Was this an appropriate application of the “unable to
present its case” exception?
P "842"
P "843"
7. Recognition of special character of arbitral process under Article V(1)(b) and developed
national arbitration regimes. As discussed earlier, see supra pp. 444-49, 473-74, decisions under
most developed arbitration statutes emphasize the procedural informality and flexibility of
arbitration. “Although arbitration hearings are of a quasi-judicial nature the prime virtue of
arbitration is its informality, and it would be inappropriate for courts to mandate rigid
compliance with procedural rules.”Transport Workers Union v. Philadelphia Transportation Co.,
283 F.Supp. 597, 600 (E.D. Pa. 1968).
The same recognition of the special attributes of the arbitral process exists, and is even more
pronounced under Article V(1)(b) of the Convention. See Judgment of 8 October 1981, 1984
Revista de la Corte Espanola de Arbitrage I 158 (Spanish Supreme Court); Carte Blanche
(Singapore) Pte. Ltd v. Carte Blanche Int'l, Ltd, 888 F.2d 260 (2d Cir. 1989); Parsons & Whittemore,
508 F2d at 976; C.T. Shipping Ltd v. DMI (U.S.A.) Ltd, 774 F.Supp. 146, 149 (S.D.N.Y. 1991).
8. Deference to arbitrators' procedural decisions in actions to vacate under FAA §10(a)(3). U.S.
decisions under §10(a)(3) of the FAA also reflect strong judicial reluctance to overturn awards
based on procedural mistakes by the arbitrators. “An arbitrator enjoys wide latitude in
conducting an arbitration hearing. Arbitration proceedings are not constrained by formal rules
of procedure or evidence.”Hotel Condado Beach v. Union de Tronquistas Local 901, 763 F.2d 34,
38 (1st Cir. 1985). Some U.S. courts have held that they must “accord even greater deference to
the arbitrator's decisions on procedural matters than those bearing on substantive
grounds.”Stroh Container Co. v. Delphi Industries, Inc., 783 F.2d 743 (8th Cir. 1986). See also United
Steelworkers of America v. Ideal Cement Co., 762 F.2d 837, 841 (10th Cir. 1985) (greater deference
to arbitrators on procedural issues).
For domestic U.S. decisions expressing deference to arbitrators' procedural actions, see supra
pp. 444-49; Bernhardt v. Polygraphic Co. of Am., 350 U.S. 198, 203 n.4 (1956); Smith v. Wal-Mart
Stores, 891 F.2d 1177, 1180 (5th Cir. 1990); Legion Ins. Co. v. Insurance Gen. Agency, 822 F.2d 541,
543 (5th Cir. 1987); FDIC v. Air Florida Sys., 822 F.2d 833, 842 (9th Cir. 1987); Pompano-Windy City
Partners v. Bear Stearns & Co., 794 F.Supp. 1265, 1272 (S.D.N.Y. 1992), dismissed, 1993 U.S. Dist.
Lexis 1649 (S.D.N.Y. 1993); Compania Chilena de Navegacion v. Norton, Lilly & Co., 652 F.Supp.
1512, 1515 (S.D.N.Y. 1987).
Some U.S. courts have applied an “abuse of discretion” standard to arbitrators' procedural
rulings. Orion Shipping & Trading Co. v. Eastern States Petroleum Corp., 312 F.2d 299, 300 (2d Cir.),
cert. denied, 373 U.S. 949 (1963); Petroleum Transport Ltd v. Yacimientos Petroliferos Fiscales, 419
F.Supp. 1233, 1235 (S.D.N.Y. 1976); Fairchild & Co. v. Richmond, Fredericksburg & Potomac RR Co.,
516 F.Supp. 1305 (D.D.C. 1981) (award will be upheld if “there exists a reasonable basis for the
arbitrators' considered decision not to grant a postponement”); Laminoirs etc. v. Southwire Co.,
484 F.Supp. 1063, 1067 (N.D. Ga. 1980).
9. Burden of proof of procedural unfairness. Most national courts have held that the burden of
proof is on the party alleging procedural unfairness under Article V of the Convention. Judgment
No. 8469 of 11 July 1992, XXII Y.B. Comm. Arb. 715 (Corte di Cassazione) (1997); Judgment of 22
February 1992, XVIII Y.B. Comm. Arb. 433 (1993) (Supreme Court of Italy) (“The party against
which the award is invoked has the burden to prove, inter alia, that the arbitrators were not
validly appointed ...”); Judgment of 24 March 1982, VIII Y.B. Comm. Arb. 408 (Supreme Court of
Spain) (1983) (“the burden of proof of this ground of refusal for lack of notice is placed on the
party against whom the award in question is rendered and who invokes it”); Parsons &
Whittemore, 508 F.2d at 975; Saxis Steamship Co. v. Multifacs Int'l Traders, Inc., 375 F.2d 577, 582
(2d Cir. 1967); Catz American Co. v. Pearl Grange Fruit Exchange, Inc., 292 F.Supp. 549, 552
(S.D.N.Y. 1968).
10. Examples of challenges based upon procedural irregularity. For examples of the types of
procedural decisions by arbitrators that have frequently provoked judicial scrutiny, consider
the following:
(a) Introduction of new claims. Arbitrators generally are allowed substantial discretion in
permitting or excluding the introduction of new claims. Carte Blanche (Singapore) Pte. Ltd
v. Carte Blanche Int'l, Ltd, 888 F.2d 260 (2d Cir. 1989) (upholding award allegedly not within
ICC Terms of Reference); Peters Fabrics, Inc. v. Jantzen, Inc., 582 F.Supp. 1287, 1292 (S.D.N.Y.
1984) (upholding award where arbitrator refused to allow counterclaim submitted one
week before hearing); Faberge Inc. v. Felsway Corp., 539 N.Y.S.2d 944 (App. Div. 1989)
(award not invalid where arbitrator permitted party to assert claim not made in request
for arbitration; AAA rules permitted amendment). The arbitrators' discretion may be
limited by institutional rules, such as ICC Rules Article 19.
 (b) Adjournment and scheduling of hearings. As Parsons & Whittemore suggests, scheduling
hearings is always a difficult task in international arbitrations, because the arbitrators,
P "843" parties, counsel, and witnesses often are located in different countries and have busy
P "844" schedules. Under the FAA, arbitrators are accorded substantial discretion in scheduling
and adjourning hearings. Schmidt v. Finberg, 942 F.2d 1571 (11th Cir. 1991) (upholding award
where tribunal denied request for adjournment without explanation and where key
witness had long-standing, important prior commitment); Compagnie des Bauxites de
Guinee v. Hammermills, Inc., 1992 WL 122712 (D.D.C. 1992) (no due process violation where
party did not expressly request hearing on costs and attorneys' fees, which arbitrators
awarded in amount of $1 million); Storey v. Searle Blatt, Ltd, 685 F.Supp. 80 (S.D.N.Y. 1988);
Dan River, Inc. v. Cal-Togs, Inc., 451 F.Supp. 497 (S.D.N.Y. 1978) (refusal to reschedule
hearing at request of “chief witness” of party, made one week before hearing scheduled
for several months); Lee v. Dean Witter Reynolds, Inc., 594 So.2d 783 (Fla. Ct. App. 1992)
(refusal to grant second continuance); Ceseretti v. Trans-Air System, 253 N.Y.S.2d 409 (App.
Div. 1964) (refusal to postpone hearing scheduled for several weeks, where party claimed
need to attend negotiations relating to subject matter of arbitration).
For decisions vacating awards for the treatment of scheduling issues, see Naing Int'l
Enterprises, Ltd v. Ellsworth Assoc., Inc., 961 F.Supp. 1 (D.D.C. 1997) (vacating award because
of arbitrator's refusal to postpone hearing); Allendale Nursing Home, Inc. v. Local 1115 etc.,
377 F.Supp. 1208, 1214 (S.D.N.Y. 1974) (vacating award because of arbitrator's refusal to
adjourn hearing when “crucial” witness clearly became ill); Tube & Steel Corp. of America
v. Chicago Carbon Steel Products, 319 F.Supp. 1302, 1304 (S.D.N.Y. 1970) (vacating award
when tribunal scheduled hearing on date that one party could not make, and parties had
mutually agreed on another date).

(c) Inadequate internal deliberations of all members of tribunal. A number of judicial

decisions have overturned awards where there was not meaningful participation among
all the tribunal members. Polytek Engineering Co. v. Hebei Import & Export Corp., XXIII Y.B.
Comm. Arb. 666 (1998) (presiding arbitrator's inspection of machinery in presence of one
party, and the other, requires non-recognition of arbitral award); Szuts v. Dean Witter
Reynolds, Inc., 931 F.2d 830 (11th Cir. 1991) (award issued by two arbitrators, after third
arbitrator was disqualified, not valid); Jones v. St. Louis-San Francisco Railway Co., 728
F.2d 257, 263 (6th Cir. 1984) (“As a general rule in the arbitration context, it is essential
that there be unanimous participation by the arbitrators during the deliberations upon
the award to be made”); Western Canada SS Co. v. Cia de Nav. San Leonardo, 105 F.Supp.
452 (S.D.N.Y. 1952) (vacating award because two party-appointed arbitrators concluded
they agreed on merits and, after deciding not to select a chairman (as contemplated in
parties' agreement), issued an award); Goeller v. Liberty Mutual Ins. Co., 568 A.2d 176 (Pa.
1990) (vacating an award where two tribunal members excluded the third from
deliberations). Compare Apex Fountain Sales, Inc. v. Kleinfeld, 818 F.2d 1089 (3d Cir. 1987)
(chairman of panel heard evidence alone and forwarded proposed award to other
members of tribunal; award upheld); National Bulk Carriers, Inc. v. Princess Mgt Co., 597
F.2d 819 (2d Cir. 1979) (rejecting argument that presiding arbitrator acted improperly by
stating “he would sign an award with whichever of his colleagues would first agree to a
number between $1.5 million and $2.0 million”).
Suppose the procedural law of a foreign arbitral situs permits a neutral chairman to
exclude both party-appointed arbitrators from hearings. Should U.S. law forbid that, by
denying effect to the resulting award? Suppose that the foreign procedural law permits
the chairman and one party-appointed arbitrator to exclude the other party-appointed
arbitrator. Ought U.S. courts to enforce a resulting award?
 (d) Exclusion or admission of evidence. One of the most common bases for challenging an
award is the arbitrators' exclusion or admission of evidence. The basic rule under the FAA
in the United States remains that stated by Judge Friendly in Bell Aerospace Co. v. Local
516, 500 F.2d 921 (2d Cir. 1974) (holding exclusion of affidavit not improper): “in handling
evidence an arbitrator need not follow all the niceties observed by the federal courts. He
need only grant the parties a fundamentally fair hearing.”
As this standard suggests, challenges based on evidentiary decisions by the arbitral
tribunal have rarely succeeded. For lower court decisions, see Financial Group v. Stifel,
Nicolaus & Co., 22 F.3d 1010 (10th Cir. 1994); Robbins v. Day, 954 F.2d 679, 685 (11th Cir.
1992); Forsythe Int'l SA v. Gibbs Oil Co., 915 F.2d 1017 (5th Cir. 1990) (misconduct by counsel
in stone-walling discovery not basis for overturning award); Legion Ins. Co. v. Insurance
General Agency, Inc., 822 F.2d 541, 543 (5th Cir. 1987) (arbitration requires “expeditious and
summary hearing, with only restricted inquiry into factual issues”); Reed & Martin, Inc. v.
Westinghouse Elec. Corp., 439 F.2d 1268 (2d Cir. 1971); Areca, Inc. v. Oppenheimer & Co., 960
F.Supp. 52 (S.D.N.Y. 1997) (“arbitrators are afforded broad discretion to determine whether
to hear evidence”); Hayme, Miller & Farmi, Inc. v. Flume, 888 F.Supp. 949 (E.D. Wis. 1995)
(“Arbitrators may admit evidence which would be unduly prejudicial if admitted in
P "844" court.”); Warth Line, Ltd v. Merinda Marine Co., 778 F.Supp. 158 (S.D.N.Y. 1991); Essex Cement
P "845" Co. v. Italmare SpA, 763 F.Supp 55 (S.D.N.Y. 1991); Cobec Brazilian Trading etc. v.
Isbrandtsen, 524 F.Supp. 7, 10 (S.D.N.Y. 1980) (no denial of opportunity to present
evidence); Fairchild & Co. v. Richmond, Fredericksburg & Potomac RR Co., 516 F.Supp. 1305
(D.D.C. 1981) (“arbitrators are charged with the duty of determining what evidence is
relevant.... While they may err in their determination, every failure to receive relevant
evidence does not constitute misconduct”); Petroleum Transport, Ltd v. Yacimientos
Petroliferos Fiscales, 419 F.Supp. 1233, 1235 (S.D.N.Y. 1976), aff'd, 556 F.2d 558 (2d Cir. 1977).
For decisions under the domestic FAA finding due process violations based upon
disputed evidentiary decisions, see Hyman v. Pottsberg's Exec., 101 F.2d 262 (2d Cir. 1939);
Prudential Securities, Inc. v. Dalton, 929 F.Supp. 1411 (N.D. Okla. 1996) (vacating award
because arbitrators excluded material evidence); Cofinco, Inc. v. Bakrie & Bros., 395
F.Supp. 613 (S.D.N.Y. 1975) (“neglectful disregard” of evidentiary issues, which denied
party opportunity to present evidence, held to constitute misconduct under §10(a)(3));
Riko Enterprises, Inc. v. Seattle Supersonics Corp., 357 F.Supp. 521 (S.D.N.Y. 1973) (refusal to
hear evidence or conduct hearing grounds for vacating award); Chevron Transport Corp. v.
Astro Vencedor Compania Naviera, SA, 300 F.Supp. 179 (S.D.N.Y. 1969); Harvey Aluminum v.
United Steelworkers of America, 263 F.Supp. 488 (N.D. Cal. 1967) (refusal to hear evidence
grounds for vacating award).
In some countries and industries. “documents only” arbitrations are commonly held
without oral hearings or testimony. See A. Redfern & M. Hunter, International Commercial
Arbitration 238 (2d ed. 1991). U.S. courts have rejected arguments that §10(a)
automatically forbids such procedures, while leaving the door open to overturning
awards where live testimony was critical. Intercarbon Bermuda, Ltd v. Caltex Trading and
Transport Corp., 146 F.R.D. 64 (S.D.N.Y. 1993).

(e) Cross-examination. It is widely said by U.S. courts that cross-examination is a

fundamental procedural right in the common law legal tradition, Chambers v. Mississippi,
410 U.S. 284 (1973), and that it must be afforded in arbitration. In fact, there appears to be
no such per se rule in the United States. Lower U.S. courts have considered the
importance of the testimony, the available opportunities for rebutting it and other
factors in deciding whether a denial of cross-examination rendered a hearing
fundamentally unfair. Fairchild & Co. v. Richmond, Fredericksburg and Potomac R.R. Co.,
516 F.Supp. 1305, 1314-15 (D.D.C. 1981); Laminoirs etc. v. Southwire Co., 484 F.Supp. 1063,
1066-67 (N.D. Ga. 1980); Standard Tankers, etc. v. Motor Tank Vessel, AKTI, 438 F.Supp. 153
(E.D.N.C. 1977). Most cases, however, have involved only refusals to permit particular
requests for cross-examination, not blanket denials of all opportunities for cross-
examination.
In an international arbitration, is some opportunity for cross-examination a necessary
component for a fair arbitral procedure? Suppose that a U.S. and a Saudi party arbitrate
in Switzerland (under Swiss substantive law), and the Swiss arbitrator refuses to permit
any cross-examination by either party; instead, the arbitrator himself questions the
witnesses. Does this procedure permit non-recognition of the resulting award under
Article V(1)(b) and FAA §10(a)(3)?
 (f) Compliance with time limits concerning rendering of award and the like. U.S. courts have
generally rejected claims that the tribunal's failure to comply with time limits imposed
by institutional rules provides a basis for vacating an award. Dean Witter Reynolds, Inc. v.
McCoy, 995 F.2d 649 (6th Cir. 1993); Paine Webber, Inc. v. Hofman, 984 F.2d 1372 (3d Cir.
1993); Edward D. Jones & Co. v. Sorrells, 957 F.2d 509 (7th Cir. 1992); Fiat SpA v. Ministry of
Finance and Planning, 1989 U.S. Dist. Lexis 11995 (S.D.N.Y. 1989) (arbitrators' failure to
comply with AAA's rule requiring awards within 30 days of hearing not basis for vacating
award); Laminoirs etc. v. Southwire Co., 484 F.Supp. 1063, 1066-67 (N.D. Ga. 1980) (failure to
comply with ICC 6 month limit for issuing award not basis to vacate); Automobile
Mechanics etc. v. Holiday Oldsmobile, 356 F.Supp. 1325 (N.D. Ill. 1972); Annotation, Failure of
Arbitrators to Make Award Within Specified Time Limit, 154 A.L.R. 1392. Contra Miller v.
Prudential Bache Securities, Inc., 884 F.2d 128 (4th Cir. 1989), cert. denied, 497 U.S. 1004
(1990); Gains v. Financial Planning Consultants, Inc., 857 S.W.2d 430 (Mo. App. 1993).
At common law, an arbitral award was invalid if rendered after the time specified in the
parties' arbitration agreement. See Jones v. St. Louis-San Francisco R. Co., 728 F.2d 257, 265
(6th Cir. 1984) (dicta); Local Union 560 etc. v. Anchor Motor Freight, Inc., 415 F.2d 220, 225
(3d Cir. 1968) (dicta); Bandon v. Hires, 439 A.2d 495, 510 (D.C. Ct. App. 1981). More recently,
particularly in labor arbitrations, some U.S. courts have held that an award is valid if
rendered a “reasonable” time following expiry of time limits in the parties' agreement.
Local Union 560 etc. v. Anchor Motor Freight, Inc., 415 F.2d 220, 226 (3d Cir. 1968); Tamczak
v. Erie Ins. Exchange, 268 F.Supp. 185, 189 (W.D. Pa. 1967).
If, however, the parties' agreement provides expressly that the arbitrators' power to
P "845" render an award expires after a given period, that limit will be enforced. Jones v. St.
P "846" Louis-San Francisco R. Co., 728 F.2d 257, 265 (6th Cir. 1984); Davis v. Ohio Barge Line, Inc.,
697 F.2d 549, 555-56 (3d Cir. 1983). See generally Annotation, Failure of Arbitrators to Make
Award Within Specified Time Limit, 154 A.L.R. 1392.

(g) Decision to issue reasoned opinion (assuming no contrary agreement). U.S. courts do not
generally require reasoned arbitral awards, see supra pp. 794-95, and tribunals are
generally accorded discretion in deciding whether or not a reasoned award should be
issued. Raytheon Co. v. Automated Business Systems, Inc., 882 F.2d 6 (1st Cir. 1989)
(arbitrator has discretion whether or not to issue reasoned award); Associated Constr. Co.
v. Moliterno Stone Sales, Inc., 782 F.Supp. 15 (D. Conn. 1992) (same); Merrill Lynch, Pierce
Fenner & Smith, Inc. v. Burke, 741 F.Supp. 191 (N.D. Cal. 1990) (same).
Of course, if the parties' agreement or the applicable arbitral rules require a reasoned
award, failure to provide one can be grounds for vacating the award. See supra p. 795;
Western Employers Ins. Co. v. Jefferies & Co., 958 F.2d 258 (9th Cir. 1992).
Suppose the curial law of a foreign arbitration required a reasoned award, but none was
made. Should a U.S. court enforce the unreasoned award?

(h) Notice of hearings or other matters. In general, arbitrators are reasonably careful in
ensuring that the parties receive adequate notice of hearings, and national courts have
usually rejected claims of inadequate notice on the facts. See Geotech Lizenz AG v.
Evergreen Systems, Inc., 697 F.Supp. 1248, 1353 (E.D.N.Y. 1988); Ferrara SpA v. United Grain
Growers Ltd, 441 F.Supp. 778 (S.D.N.Y. 1977); Judgment of 10 April 1990, XVII Y.B. Comm. Arb.
568 (Korean Supreme Court)(1992) (no lack of procedural fairness where arbitrator sent
several written communications to defaulting party's address, which were not returned);
Judgment of 22 February 1992, XVIII Y.B. Comm. Arb. 433 (1993) (Corte di Cassazione) (no
procedural unfairness where registered letters were sent to party's address and return
receipts were completed); Judgment of 27 February 1989, XVII Y.B. Comm. Arb. 581
(Appellationsgericht Basel-Stadt) (1992) (no lack of procedural fairness where party
received “invitation [to participate in arbitration] in a ‘comprehensible’ language only 4
to 5 days before the start of the proceedings”); Judgment of 4 October 1991, XVIII Y.B.
Comm. Arb. 415 (Corte di Appello Milan) (1993) (rejecting claim of inadequate notice of
hearing); Guangdou New Technology Import & Export Corp. v. Chiu Shing, XVIII Y.B. Comm.
Arb. 385 (S.Ct. Hong Kong) (1993) (rejecting claim of inadequate notice of arbitral
proceedings). See also Avraham v. Shigur Express Ltd, 1991 U.S. Dist. Lexis 12267 (S.D.N.Y.
1991) (rejecting claim that arbntrators committed misconduct warranting nonenforcement
on Article V(1)(b) grounds by relying on personal knowledge).
For cases in which a party was held not to have received proper notice, see Judgment of 1
July 1999, XXIVa Y.B. Comm. Arb. 296 (Cour d'Appel Paris) (setting award aside on grounds
of opportunity to be heard); Sesostris, SAE v. Transportes Navales, SA, 727 F.Supp. 737, 741-
43 (D. Mass. 1989); Seldner Corp. v. W.R. Grace & Co., 22 F.Supp. 388 (D.Md. 1938); PPX
Enterprises, Inc. v. Musicali, 384 N.Y.S.2d 801 (1976), aff'd, 397 N.Y.S.2d 987 (1977) (failure to
timely inform Italian company of arbitration hearing in New York violated CPLR §7506(b)
& 7511(b)(1)(IV)). See also Judgment of April 3, 1975, II Y.B. Comm. Arb. 241 (1977)
(Oberlandesgericht Hamburg) (refusing to enforce award because of AAA's failure to
forward letter from claimant to respondent). Compare Judgment of 14 April 1988, N.J.W., 30
November 1988, at 3090 (Bundesgerichtshof, Germany) (no public policy violation where
arbitral tribunal failed to inquire as to parties' positions prior to extending time for
making award under ICC Rules).
 (i) Questioning by tribunal. Lower U.S. courts have generally rejected claims that questioning
or comments by an arbitrator (even when very interventionist) constituted misconduct.
Ballantine Books, Inc. v. Capital Distributing Co., 302 F.2d 17 (2d Cir. 1962) (“A judge is not
wholly at the mercy of counsel, and would be remiss if he did not participate in
questioning to speed proceedings and eliminate irrelevancies. A fortiori an arbitrator
should act affirmatively to simplify and expedite the proceedings before him....”); Catz
American Co. v. Pearl Grange Fruit Exchange, Inc., 292 F.Supp. 549 (S.D.N.Y. 1968).
(j) Ex parte contacts. A number of national courts have considered whether and when ex
parte contacts between an arbitrator and a party (or its counsel) will be grounds for
vacating an award. These are discussed below in the context of arbitrator bias. See infra
p. 874.
11. National court decisions vacating awards for procedural disobedience. National courts
generally strain to conclude that an arbitral tribunal did not violate applicable procedural
rules. Nevertheless, few decisions have vacated awards for failure to follow procedural rules
set forth in the parties' agreement. AT&T Corporation v. Saudi Cable Co., 2 Lloyd's Rep. 201 (Ct.
App. 2000) (“Non-compliance with the terms of an arbitration agreement [by an arbitrator] can
amount to misconduct”); Western Employers Ins. Co. v. Jefferies & Co., 958 F.2d 258 (9th Cir. 1992)
P "846" (tribunal's failure to comply with arbitration agreement's requirement to provide findings of
P "847" fact and conclusions of law was excess of authority warranting vacation of award under
§10(d)); Szuts v. Dean Witter Reynolds, Inc., 931 F.2d 830, 831 (11th Cir. 1991) (failure to maintain
three-person tribunal); Jones v. St. Louis-San Francisco Ry. Co., 728 F.2d 257 (6th Cir. 1984);
Western Canada SS Co. v. Cia de Nav. San Leonardo, 105 F.Supp. 452 (S.D.N.Y. 1952). For a
decision vacating an award by an improperly constituted tribunal, see Food Handlers Local 425
etc. v. Pluss Poultry, Inc., 260 F.2d 835 (8th Cir. 1958).
12. Importance of transcript as factual basis for due process challenge. As Avco suggests, a
challenge based on due process or procedural irregularity grounds requires some sort of
factual record. See McKee v. Home Buyers Warranty Corp. II, 45 F.3d 981, 983 (5th Cir. 1995)
(nothing that lacks of transcript places court in “unfortunate position” in reviewing unreasoned
award). If no transcript was kept of the arbitral proceedings, this may be available only through
affidavits of the parties recounting what occurred at the hearings. Catz American Co. v. Pearl
Grange Fruit Exchange, Inc., 292 F.Supp. 549 (S.D.N.Y. 1968).
13. Waiver of procedural objections. As with other types of objections during the arbitral
proceedings, most developed national laws require that parties must object to procedural or
evidentiary rulings during the proceedings in order to preserve their rights. See Fortune,
Alsweet & Eldridge, Inc. v. Daniel, 724 F.2d 1355, 1357 (9th Cir. 1983) (per curiam); Amicizia Societa
Navegazione v. Chilean Nitrate & Iodine Sales Corp., 274 F.2d 805, 809 (2d Cir. 1960); Avraham v.
Shigur Express Ltd, 1991 U.S. Dist. 12267 (S.D.N.Y. 1991) (“A party with an objection to an
arbitration panel has an affirmative obligation to raise that objection with the arbitrators or
else that objection shall be waived.”); International Standard Elec. Corp. v. Bridas Sociedad
Anonima Petrolera, 745 F.Supp. 172 (S.D.N.Y. 1990) (parties' failure to object to tribunal's
appointment of “secret” expert (whose identity was not disclosed to parties) waived due
process and related objections); La Societe Nationale etc. v. Shaheen Natural Resources Co., 585
F.Supp. 57, 62 (S.D.N.Y. 1983), aff'd, 733 F.2d 260 (2d Cir.), cert. denied, 469 U.S. 883 (1984);
Laminoirs etc. v. Southwire Co., 484 F.Supp. 1063, 1066 (N.D. Ga. 1980) (failure to object to ICC
Court of Arbitration's extension of time to issue award estops party from challenging alleged
non-compliance with 6 month deadline); Shenzhen Nan Da Industrial Trade United Co. v. FM Int'l
Ltd, XVIII Y.B. Comm. Arb. 377 (Supreme Court of Hong Kong 1991) (party challenging award “took
no objection” to use of new institutional arbitration rules); Minmetals Germany GmbH v. Ferco
Steel Ltd, [1999] 1 All E.R. 315 (party “had been given every opportunity [to present its case].
What had gone wrong was that its counsel had simply failed to take that opportunity”); Hebei
Import & Export Corp. v. Polytek Engineering Co., XXIII Y.B. Comm. Arb. 666 (Ct. App. Hong Kong
1998) (waiver based on fact that party “simply proceeded with the arbitration as if nothing
untoward had happened”); Judgment of 29 September 1995, XXII Y.B. Comm. Arb. 771 (Singapore
High Court) (1997) (“The defendants had had ample opportunity to put up before the arbitration
tribunal whatever they considered to be the real matter in dispute”).
What if a party is alleged to have waived a fundamental procedural protection? Are such
waivers valid and enforceable? In general, U.S. courts have answered in the affirmative. Marino
v. Writers Guild of Am., 992 F.2d 1480, 1484 (9th Cir. 1993) (waiver “extends even to questions
such as arbitrator bias, that go to the very heart of arbitral fairness”); Babcock & Wilcox Co. v.
PMAC, Ltd, 863 S.W.2d 225 (Tex. Ct. App. 1993) (failure to object during arbitration to the
selection of arbitrator, or his alleged bias, held to waive party's rights).
Many institutional arbitration rules contain provisions requiring parties promptly to raise
procedural objections and deeming the failure to do so a waiver. See, e.g., UNCITRAL
Arbitration Rules Article 30; ICC Rules Article 5; LCIA Rules Article 32.1.
14. Default awards are potentially enforceable. Although it is usually very unwise, parties
sometimes refuse or fail to take part in some or all of an arbitral proceeding. That action (or
inaction) often gives rise to issues in subsequent litigation to enforce any resulting award.
(a) Default awards provided for under leading institutional arbitration rules. Leading
institutional arbitration rules provide for default proceedings and awards if one party
refuses to participate in the arbitration. See ICC Rules Article 18(3), 21(2); AAA Commercial
Arbitration Rules Article 31; UNCITRAL Arbitration Rules Article 28; LCIA Rules Article 12,
15(8).
 (b) Arbitral tribunal's power to reject contentions in default proceedings. Suppose that a
respondent refuses to submit a statement of defense or to participate in the arbitral
proceedings. What obligations (and right) does the arbitral tribunal have to test the
strength of the claimant's legal and factual contentions? To reject claims as unfounded?
Consider the institutional rules cited above.
(c) Awards made without one party's particilation. The mere fact that a party refuses to
P "847" participate in arbitral proceedings, and an award is rendered against it in its absence, is
P "848" not a denial of due process rights under either Article V(1)(b) of the Convention or most
developed national arbitration statutes. See Judgment No. 1056 of 29 September 1995, XXII
Y.B. Comm. Arb. 111 (Singapore High Court) (1997) (rejecting challenge to default award
based on alleged procedural irregularity); Judgment of 8 June 1967, II Y.B. Comm. Arb. 234
(1977) (Landesgericht Bremen, Germany) (default award not contrary to public policy);
Comprehensive Accounting Corp. v. Ruddell, 760 F.2d 138 (7th Cir. 1985); Kentucky River Mills
v. Jackson, 206 F.2d 111 (6th Cir. 1953); Biotronik etc. v. Medford Medical Instrument Co., 415
F.Supp. 133, 140-41 (D.N.J. 1976); Geotech Lizenz AG v. Evergreen Systems, Inc., 697 F.Supp.
1248, 1253 (E.D.N.Y. 1988).
(d) Awards made by arbitrators unilaterally selected by one party. Courts have also confirmed
arbitral awards made after ex parte proceedings before an arbitrator selected by one
party, at least where the parties' arbitration agreement provides for selection of an
arbitrator without both parties' participation. Corallo v. Merrick Central Carburetor, 733
F.2d 248, 251 n.1 (2d Cir. 1984); Toyota of Berkeley v. Automobile Salesmen's Union, 834 F.2d
751 (9th Cir. 1987); Bernstein Seawell & Kove v. Bosarge, 813 F.2d 726 (5th Cir. 1987).
However, where an arbitration agreement provides for selection of arbitrators by both
parties, some courts have refused to enforce default awards rendered by an arbitrator
selected by one party. Sam Kane Racking Co. v. Amalgamated Meat Cutters, 477 F.2d 1128
(5th Cir.), cert. denied, 414 U.S. 1001 (1973).

15. Article V(1)(b) protects the party “against whom the award is invoked.” Note that Article V(1)
(b) is specifically directed at the protection of the party against whom the arbitration award is
sought to be enforced, or otherwise invoked. That party is not necessarily the party who signed
the arbitration agreement, nor who participated in the arbitration. See Sesostris, SAE v.
Transportes Navales, SA, 727 F.Supp. 737, 741-43 (D. Mass. 1989).
16. Is non-recognition of an award by a national court mandatory if standards of procedural
fairness under Article V(1)(b) were not observed? As described above, the New York Convention
provides only that recognition of an award “may be refused” if one of Article V's exceptions is
satisfied. That is fairly clearly discretionary, leaving national courts free under the Convention
to recognize an award even if Article V would permit non-recognition.
Suppose that a national court concludes that the tribunal used fundamentally unfair arbitral
procedures. Is the court therefore obliged to deny recognition of the award, or can it still
enforce the award? Some lower U.S. courts have held, at least as to Article V(1)(b)'s due process
exception, that non-recognition is mandatory. Fukaya Trading Co. v. Eastern Marine Corp., 322
F.Supp. 278, 281 (S.D.N.Y. 1971).
17. Relevance of procedural law or practice of foreign arbitral situs to issues of procedural
fairness under Article V(1)(b). Suppose that a national court is asked to deny recognition to an
award made in a foreign arbitral situs on the grounds of procedural unfairness (e.g., a U.S. court
is asked to deny recognition on the grounds that discovery or cross-examination was not
permitted). What would be the relevance (if any) of the fact that the procedural law of the
foreign situs did not permit discovery or cross-examination? What would be the relevance of
the fact that ordinary arbitration practice in the foreign situs did not include (but also did not
forbid) discovery or cross-examination? Does the U.S. concept of due process permit the waiver
or alteration of what would be basic procedural rights in a U.S. litigation?
18. Failure of arbitral procedures to comply with procedural law of arbitral situs as basis for
non-recognition of award. As described above, Article V(1)(d) of the New York Convention and
Article 5(1)(d) of the Inter-American Convention permit non-recognition of an arbitral award if
the arbitral procedures violated the procedural law of the arbitral situs. Those exceptions are
expressly applicable where the parties have not agreed upon the arbitral procedures; the
exception is also at least arguably applicable as to mandatory requirements of the arbitral
situs even where an agreement on arbitral procedures exists.
There is little national court precedent dealing with Article V(1)(d)'s exception for violations of
the arbitral situs's procedural requirements. In one decision, the court reasoned that “the
agreement between the parties here did not establish any particular arbitral procedure, so the
question is whether the procedure was in accordance with the law of the United States [the
arbitral situs].”Intercarbon Bermuda, Ltd v. Caltex Trading & Transport Corp., 146 F.R.D. 64
(S.D.N.Y. 1993). In another case, the district court refused to consider an argument that the
arbitral award was invalid under foreign law, on the grounds that the foreign law relied upon
was not in fact properly applicable to the arbitration. American Construction Machinery &
Equip. Corp. v. Mechanised Constr. of Pakistan Ltd, 659 F.Supp. 426 (S.D.N.Y. 1987) (relying on
arbitrator's choice of law decision). See also Judgment of 24 February 1994, XXII Y.B. Comm. Arb.
682 (Paris Cour d'Appel) (1997) (rejecting challenge to award based on fact that arbitration
agreement provided for two arbitrators, which violated law of Tunisia, which was arbitral situs).
P "848" The most significant comments by U.S. courts on Article V(1)(d) are in several decisions,
P "849" excerpted and discussed above, involving enforcement of arbitration agreements. In Rhone
 Mediterranee etc. v. Achille Lauro, 712 F.2d 50 (3d Cir. 1983), supra pp. 100-03, the court required
an arbitration to proceed in Italy, notwithstanding a claim that Italian law would not permit
the arbitral procedure set forth in the parties' agreement. The court specifically concluded
that Italian law would govern the arbitral proceedings: “Article V unambiguously refers the
forum in which enforcement of an award is sought to the law chosen by the parties, or the law
of the place of the award.” But the Rhone court also held that “an award may still result” from a
defective Italian arbitration “which can be enforced outside Italy.” The court emphasized that
Article V “says only that ‘enforcement of an award may be refused’ on the basis of the law of the
country where it was made.” And where, as in the United States, “the law of such country
generally favors enforcement of arbitration awards, and the defect is at best one of a
procedural nature, Article V(1) certainly permits another forum to disregard the defect and
enforce.” Moreover, the court remarked that the defendants “will hardly be in a position to rely
on Italy's odd number of arbitrators rule if Rhone seeks to enforce an award” in the United
States.
Why should a U.S. court entertain claims that an arbitration (although fundamentally fair)
violated foreign procedural laws? Is it not more sensible for such claims to be resolved in an
action to vacate the award in the courts of the arbitral situs? If, however, a violation of the
parties' agreement is grounds for non-recognition, then why should not a violation of the curial
law (often also selected by the parties) also be?
6. No Valid Arbitration Agreement, Excess of Authority, or Improper Arbitral Procedures
As we have seen, international commercial arbitration is ordinarily consensual: unless the
parties have agreed to arbitrate a particular issue, the arbitral tribunal lacks authority to
resolve it. A party cannot ordinarily be compelled to arbitrate unless an agreement to do so
exists. This fundamental principle is embodied in the laws of all leading trading nations. (87)
A corollary of the consensual nature of arbitration is the unenforceability of awards that are
unsupported by a valid arbitration agreement. The New York and Inter-American Conventions
contain two provisions relating to the requirement for a valid agreement to arbitrate. First,
Article V(1)(a) of the New York Convention permits non-recognition of an award if:
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. (88)
As discussed above, the requirement for a valid arbitration agreement is closely related to
similar provisions in Article II(1) and II(3). (89) Authorities dealing with the existence and
validity of arbitration agreements under Article II are also relevant under Article V(1)(a). (90)
P "849"
P "850"
Second, arbitral awards need not be recognized under the New York and Inter-American
Conventions if the award went beyond the scope of the parties' submissions to the arbitrators.
Under Article V(1)(c) of the New York Convention, a party resisting enforcement of an arbitral
award may prevail by showing that:
The award deals with a difference not contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on matters beyond the scope of the
submission to arbitration. (91)
National courts have interpreted this provision narrowly. (92)
National arbitration legislation also permits an arbitral award to be vacated or denied
recognition if it is not supported by a valid arbitration agreement. In the United States, §10(a)
(4) of the FAA authorizes a U.S. court to vacate an award “[w]here the arbitrators exceeded their
powers.” (93) The UNCITRAL Model Law and the Swiss Law on Private International Law also
contain exceptions applicable where the arbitrators exceeded their authority under the
parties' arbitration agreement. (94)
Excerpted below are “excess of authority” provisions from the New York and Inter-American
Conventions, the UNCITRAL Model Law and the Swiss Law on Private International Law. Also
excerpted below are two judicial decisions which illustrate the general approach of U.S. courts
to challenges to an award based upon excess of authority arguments. In Parsons & Whittemore,
the court invoked a presumption that the arbitrators acted within their authority in rejecting a
fairly persuasive argument that the tribunal had awarded damages that were beyond its
powers. In First Options of Chicago, Inc. v. Kaplan, the Court set forth basic principles under the
FAA governing judicial review of an arbitrator's jurisdictional ruling.
NEW YORK CONVENTION
Article V(1)(a) & V(1)(c)
[excerpted below at p. 988]
INTER-AMERICAN CONVENTION
Article 5(1)(a) & 5(1)(c)
[excerpted below at p. 995]
P "850"
P "851"
UNCITRAL MODEL LAW
Article 36(1)(a)
 [excerpted below at pp. 1020-21]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Article 190(2)
[excerpted below at p. 1035]
FEDERAL ARBITRATION ACT
9 United States Code §10(a)(4)
[excerpted below at p. 1001]
PARSONS & WHITTEMORE OVERSEAS CO. v. SOCIETE GENERALE DE L'INDUSTRIE DU PAPIER
508 F.2d 969 (2d Cir. 1974)
J. JOSEPH SMITH, CIRCUIT JUDGE. [The facts of the case are excerpted above at supra pp. 789-
91.] ... Both [Article V(1)(c) and FAA §10(d)] basically allow a party to attack an award predicated
upon arbitration of a subject matter not within the agreement to submit to arbitration. This
defense to enforcement of a foreign award, like the others already discussed, should be
construed narrowly. Once again a narrow construction would comport with the enforcement-
facilitating thrust of the Convention. In addition, the case law under the similar provision of the
[FAA] strongly supports a strict reading. See, e.g., United Steelworkers, supra; Coenen v. R.W.
Pressprich & Co., 453 F.2d 1209 (2d Cir.), cert. denied, 406 U.S. 949 (1972).
In making this defense ... Overseas must therefore overcome a powerful presumption that the
arbitral body acted within its powers. Overseas principally directs its challenge at ... $185,000
awarded for loss of production. Its jurisdictional claim focuses on the provision of the contract
reciting that “[n]either party shall have any liability for loss of production.” The tribunal cannot
properly be charged, however, with simply ignoring this alleged limitation on the subject
matter over which its decision-making powers extended. Rather, the arbitration court
interpreted the provision not to preclude jurisdiction on this matter. As in United Steelworkers
of America v. Enterprise Wheel & Car Corp., 363 U.S. 593 (1960), the court may be satisfied that
the arbitrator premised the award on a construction of the contract and that it is “not
apparent,” 363 U.S. at 598, that the scope of the submission to arbitration has been exceeded.
P "851"
P "852"
The appellant's attack on ... $60,000 awarded for start-up expenses ... cannot withstand the
most cursory scrutiny. In characterizing the $60,000 as “consequential damages” (and thus
proscribed by the arbitration agreement), Overseas is again attempting to secure a
reconstruction in this court of the contract – an activity wholly inconsistent with the deference
due arbitral decisions on law and fact....
Although the Convention recognizes that an award may not be enforced where predicated on a
subject matter outside the arbitrator's jurisdiction, it does not sanction second-guessing the
arbitrator's construction of the parties' agreement. The appellant's attempt to invoke this
defense, however, calls upon the court to ignore this limitation on its decision-making powers
and usurp the arbitrator's role....
FIRST OPTIONS OF CHICAGO, INC. v. KAPLAN
514 U.S. 938 (1995)
[excerpted above at pp. 81-84]
Notes on Lack of Valid Arbitration Agreement and Excess of Authority as Grounds for Non-
Recognition of International Arbitral Award
1. Challenges to existence, validity or scope of arbitration agreement under New York and Inter-
American Conventions. Article V(1)(a) of the New York Convention provides for non-recognition
of arbitral awards where there was no valid arbitration agreement. Article V(1)(c) provides for
non-recognition (among other things) where an award dealt with matters falling outside the
scope of the arbitration agreement. Articles 5(1)(a) and 5(1)(c) of the Inter-American Convention
and Articles IX(1)(a) and IX(1)(c) of the 1961 European Convention are substantially similar. The
sorts of jurisdictional issues presented by these provisions can give rise to complex issues,
including with respect to the allocation of jurisdictional competence between national courts
and arbitrators and to choice of law issues. See also supra pp. 74-95.
Suppose that an arbitral tribunal expressly or impliedly makes a jurisdictional ruling (and that
it upholds its jurisdiction over disputed issues or claims). If an arbitral award is subsequently
made dealing with the disputed issues, and the award is challenged on “excess of authority”
grounds under Article V(1)(c) (or Article 5(1)(c)), what relevance (if any) does the arbitral
tribunal's jurisdiction ruling have? Specifically, is the tribunal's jurisdictional ruling either
binding or entitled to substantial deference in judicial enforcement proceedings? The issues
under Article V(1)(c) should, in this respect, be identical to those under Article V(1)(a), which is
discussed below. See infra p. 856.
2. Authorities interpreting Article V(1)(c) narrowly. When a case involves a true jurisdictional
challenge – for example, to the existence, validity, or scope of an arbitration agreement –
national courts have interpreted the Convention's “excess of authority” exception under Article
V(1)(c) narrowly, and seldom found it satisfied. See Judgment of 24 February 1994, XXII Y.B.
Comm. Arb. 682 (Paris Cour d'Appel) (1997) (rejecting challenge to award based on alleged
invalidity of arbitration agreement); Judgment No. 93 Da 53054 of 14 February 1995, XXI Y.B.
Comm. Arb. 612 (Korean Supreme Court) (rejecting challenge to foreign award on grounds of
 alleged invalidity of arbitration clause, reasoning that issue of validity was intertwined with
merits of the parties' underlying dispute which arbitrators had resolved); Inter-Arab Investment
Guarantee Corp. v. Banque Arabe et Internationale d'Investissements, XXII Y.B. Comm. Arb. 643
(Belgian Cour d'Appel 1997) (1997) (arbitrators had competence to decide scope of arbitration
clause); Management & Tech. Consultants v. Parsons-Jurden Int'l Corp., 820 F.2d 1531 (9th Cir.
1987) (“we construe arbitral authority broadly to comport with the enforcement facilitating
thrust of the Convention and the policy favoring arbitration”); Andros Compania Maritima v.
Marc Rich & Co., 579 F.2d 691 (2d Cir. 1978); Parsons & Whittemore, 508 F.2d at 973, 976
P "852" (Convention “does not sanction second-guessing the arbitrators' construction of the parties'
P "853"
agreement”); Avraham v. Shigur Express Ltd, 1991 U.S. Dist. Lexis 12267 (S.D.N.Y. 1991);
American Construction Machinery & Equipment Corp. v. Mechanised Construction of Pakistan, Ltd,
659 F.Supp. 426, 429 (S.D.N.Y. 1987); Fertilizer Corp. of India v. IDI Mgt, 517 F.Supp. 948, 958-60
(S.D. Ohio 1981) (Article V(1)(c) exception not applicable to award of consequential damages
even though “the contract between these parties clearly excluded consequential damages”;
“this court, acting under the narrow judicial review of arbitral awards granted to American
courts, may not substitute its judgment for that of the arbitrators”).
Several of the above decisions at least arguably involved challenges to the arbitrators'
substantive contract interpretations, or to the arbitrators' procedural rulings, rather than
purely jurisdictional challenges. In both instances, a true Article V(1)(c) defense is not present.
Rather, the defendant seeks to characterize a manifest disregard or due process argument as a
jurisdictional claim. Most national courts have properly declined to accept such tactics.
For a rare decision finding Article V(1)(c) satisfied on the grounds that the arbitrators exceeded
their authority by issuing an award against parties not signatory to arbitration agreement, see
Fiat SpA v. Ministry of Finance and Planning, 1989 U.S. Dist. Lexis 11995 (S.D.N.Y. 1989).
3. Objections to existence, validity or scope of arbitration agreement under national arbitration
legislation. Consider Article 36(1)(a) of the UNCITRAL Model Law, Article 190(2) of the Swiss Law
on Private International Law, and §10(a)(4) of the FAA. How does each deal provision with
challenges to an arbitral tribunal's jurisdiction to render an award?
4. Narrow interpretation of “excess of authority” exception under FAA §10(a)(4) Lower U.S. court
decisions under §10(a)(4) of the domestic FAA, dealing with cases where the arbitrators
allegedly “exceeded their authority,” take a narrow approach to the exception. See Fahnestock
& Co. v. Waltman, 935 F.2d 512 (2d Cir. 1991); Kerr-McGee Refining Corp. v. M/T Triumph Tanker
Ltd, 924 F.2d 467, 471 (2d Cir. 1991), cert. denied, 502 U.S. 821 (1991); Mutual Fire, Marine & Inland
Ins. Co. v. Norad Reinsurance Co., 868 F.2d 52 (3d Cir. 1989); Sun Ship, Inc. v. Matson Navigation
Co., 785 F.2d 59, 62 (3d Cir. 1986); Davis v. Chevy Chase Financial Ltd, 667 F.2d 160, 165 (D.C. Cir.
1981); Andros Compania Maritima SA v. Marc Rich & Co., 579 F.2d 691 (2d Cir. 1978); Elite Inc. v.
Texaco Panama Inc., 777 F.Supp. 289, 292 (S.D.N.Y. 1991) (courts accord “the ‘narrowest of
reading’ to the ‘excess of powers’ provisions”); Raytheon Co. v. Computer Distributors, Inc., 632
F.Supp. 553, 558 (D. Mass. 1986); Mobil Oil Indonesia Inc. v. Asamera Oil (Indonesia) Ltd, 487
F.Supp. 63, 65-7 (S.D.N.Y. 1980).
For U.S. decisions holding that the arbitral tribunal issued an award that exceeded its
authority, see E.I. DuPont de Nemours & Co. v. Local 900 etc., 968 F.2d 456 (5th Cir. 1992)
(vacating award on grounds that arbitrator exceeded authority by ordering relief after finding
no liability); Bacardi Corp. v. Congreso de Uniones Industriales de Puerto Rico, 692 F.2d 210 (1st
Cir. 1982) (vacating award for exceeding tribunal's authority); Coast Trading Co. v. Pacific
Molasses Co., 681 F.2d 1195, 1198 (9th Cir. 1982) (vacating award as “contrary to remedies
provided in the contract and as beyond the authority of the arbitrators under the submission”);
Milwaukee Typographical etc. v. Newspapers, Inc., 639 F.2d 386, 394 (7th Cir. 1981) (award
required parties to negotiate issues excluded by “plain restrictive terms of the contract”);
Stratton Oakmont, Inc. v. Nicholson, 868 F.Supp. 486 (E.D.N.Y. 1994) (vacating punitive damages
award).
5. Arbitrators' “excess of authority” under §10(a)(4) by exceeding scope of arbitration
agreement. One important basis for denying recognition to an award under §10(a)(4) is that the
arbitral award deals with issues not covered by the parties' arbitration agreement.
(a) U.S. judicial decisions considering arbitrators' alleged excess of authority by exceeding
scope of arbitration agreement. A number of U.S. courts have considered claims that the
arbitral tribunal exceeded the scope of its authority under the parties' arbitration
agreement. See United Steelworkers of America v. Enterprise Wheel & Car Corp., 363 U.S. 593
(1960); Eljer Mfg. Inc. v. Kowin Dev. Corp., 14 F.3d 1250 (7th Cir. 1994) (vacating $1 million
damages award on grounds that it reflected losses suffered by a third party, and
therefore was not within arbitrator's jurisdiction); Davis v. Chevy Chase Financial Ltd, 667
F.2d 160, 165 (D.C. Cir. 1985) (“an arbitral award regarding a matter not within the scope of
the governing arbitration clause is one made in excess of authority, and a court is
precluded from giving effect to such an award”); J.P. Greathouse Steel Erectors, Inc. v.
Blount Brothers Construction Co., 374 F.2d 324 (D.C. Cir.), cert. denied, 389 U.S. 847 (1967).
 (b) Lower U.S. court decisions adopting highly deferential standard of judicial review of
arbitrator's jurisdictional rulings. The “excess of authority” exception of §10(a)(4) raises
significant issues relating to the appropriate scope of judicial review of arbitral decisions
rejecting jurisdictional challenges. Historically, some U.S. courts were highly deferential
to the arbitrators' rulings concerning their jurisdiction. These courts continued to indulge,
P "853" at the award enforcement stage, in the same “pro-arbitration” interpretation of the
P "854" parties' arbitration agreement that apply under §§3 and 4. See Valentine Sugars, Inc. v.
Donau Corp., 981 F.2d 210 (5th Cir. 1993) (“In determining whether the arbitrator exceeded
his jurisdiction, we resolve all doubts in favor of arbitration.”); Kerr-McGee Refining Corp.
v. M.T. Triumph, 924 F.2d 467, 471 (2d Cir. 1991) (“a court must accord the ‘narrowest of
readings’ to the ‘excess of powers’ provisions of [§10(d)]”); Matter of Arbitration No. AAA13-
161-0511-85, 867 F.2d 130, 133 (2d Cir. 1989) (in challenge to award, court applies “strong
presumption in favor of arbitrability”); Sun Ship, Inc. v. Matson Navigation Co., 785 F.2d 59,
62 (3d Cir. 1986) (apparently applying manifest disregard standard to jurisdictional issue);
Willoughby Roofing & Supply Co. v. Kajima Int'l Inc., 776 F.2d 269 (11th Cir. 1985); Parsons &
Whittemore, 508 F.2d at 976-77 (apparently applying manifest disregard standard to
jurisdictional issue); Philadelphia Elec. Co. v. Nuclear Elec. Ins. Ltd, 845 F.Supp. 1026
(S.D.N.Y. 1994) (holding, in action to vacate award under §10(d)), that “any doubts
concerning the scope of arbitrable issues should be resolved in favor of arbitration”);
Peters Fabrics, Inc. v. Jantzen, Inc., 582 F.Supp. 1287, 1291 (S.D.N.Y. 1984) (“any doubts ...
should be resolved in favor of arbitration”); RPJ Energy Fund Mgt, Inc. v. Collins, 552
F.Supp. 946 (D. Minn. 1982); Fertilizer Corp. of India, 517 F.Supp. at 958-60; Mobil Oil
Indonesia Inc. v. Asamera Oil (Indonesia) Ltd, 487 F.Supp. 63 (S.D.N.Y. 1980).
(c) Lower U.S. court decisions adopting less deferential standards of judicial review of
arbitrators' jurisdictional rulings. Other U.S. lower court decisions did not accord the same
substantial degree of deference to arbitrators' jurisdictional rulings as was applicable to
substantive holdings or that was applicable at the stage of compelling arbitration. See
ARW Exploration Corp. v. Aguirre, 45 F.3d 1455, 1461 (10th Cir. 1995) (district court must
review arbitrators' award on jurisdictional issues); E.I. Dupont de Nemours & Co. v. Local
900, 968 F.2d 456, 458 (5th Cir. 1992) (If the court finds that the arbitrator exceeded the
arbitral authority laid out in the agreement, then the district court's action vacating the
award is appropriate”); Davis v. Chevy Chase Financial Ltd, 667 F.2d 160, 166-7 (D.C. Cir.
1985) (“threshold question of arbitrability is one of law, and a reviewing court is obligated
to make its own determination of the issue”; review of arbitrators' decision on jurisdiction
is “distinctly different” from review of decision on merits); Farkar Co. v. R.A. Hanson DISC
Ltd, 583 F.2d 68, 72 (2d Cir. 1978); Local Union 42 etc. v. Absolute Environmental Services,
Inc., 814 F.Supp. 392, 403-04 (D. Del. 1993) (“It is the province of the courts, not the
arbitrator, to determine whether or not a party possesses a duty to submit to
arbitration”).
6. Effect of First Options on standard of judicial review under FAA of arbitrator's jurisdictional
rulings. The U.S. Supreme Court's decision in First Options v. Kaplan restated, and sought to
clarify, the standards applicable under the FAA to judicial review of jurisdictional decisions by
arbitrators.
(a) Scope of judicial review of jurisdictional awards depends on arbitration agreement. As we
have seen, in First Options, the U.S. Supreme Court held that the standard of review
applicable to an arbitrator's jurisdictional award depended upon the parties' arbitration
agreement. See supra pp. 81-84. According to the Court, where the parties agreed to
submit questions of arbitrability to the arbitrators, the FAA's generally deferential
standards of review would apply; where the parties had not agreed to arbitrate
jurisdictional issues, however, judicial review of the arbitral award on these issues would
be de novo. See 514 U.S. at 943; supra pp. 89-94. In the words of the First Options Court:
Just as the arbitrability of the merits of a dispute depends upon whether the parties
agreed to arbitrate that dispute, so the question “who has the primary power to decide
arbitrability” turns upon what the parties agree about that matter. Did the parties agree
to submit the arbitrability question itself to arbitration? If so, then the court's standard to
reviewing the arbitrator's decision about that matter should not differ from the standard
courts apply when they review any other matter that parties have agreed to arbitrate.
That is to say, the court should give considerable leeway to the arbitrator, setting aside
his or her decision only in certain narrow circumstances. See, e.g., 9 U.S.C. §10. If, on the
other hand, the parties did not agree to submit the arbitrability question itself to
arbitration, then the court should decide that question just as it would decide any other
question that the parties did not submit to arbitration, namely independently. These two
answers flow inexorably from the fact that arbitration is simply a matter of contract
between the parties; it is a way to resolve those disputes – but only those disputes – that
the parties have agreed to submit to arbitration.
What standard of review is applicable, after First Options, to arbitrators' jurisdictional
P "854" rulings where the parties' arbitration agreement extends to questions of jurisdiction? Are
P "855" such rulings subject to review solely for “manifest disregard” of law? What does the
Court mean by its passing reference to §10(a)(4)'s “excess of authority” exception?

(b) Wisdom of judicial deference to arbitrators' jurisdictional rulings. First Options appears to
accord arbitrators' jurisdictional rulings very substantial deference, in those cases where
parties agreed to arbitrate “arbitrability questions.” Is this wise?
 (c) Practical and institutional context of arbitrators' jurisdictional ruling. As discussed above,
arbitrators are usually private lawyers who are compensated by the parties for their
services. There can be vigorous business development efforts by potential arbitrators to
develop their case-loads. See supra pp. 87-88. If an arbitrator holds that he lacks
jurisdiction, the case will go away and his fees may be substantially reduced. Does this
affect the deference that courts should afford to an arbitrator's jurisdictional rulings,
even where the parties' arbitration agreement extends to issues of arbitrability? Cf.
Tumey v. Ohio, 273 U.S. 510 (1927) (due process clause requires vacating conviction where
judge's income was affected by outcome of case). See also Ottley v. Sheepshead Nursing
Home, 688 F.2d 883, 898 (2d Cir. 1982) (Newman, J., dissenting) (“Our deference to
arbitrators had gone beyond the bounds of common sense. I cannot understand the
process of reasoning by which any court can leave to the unfettered discretion of an
arbitrator the determination of whether there is any duty to arbitrate. I am even more
mystified that a court could permit such unrestrained power to be exercised by the very
person who will profit by deciding that an obligation to arbitrate survives, thus ensuring
his own business. It is too much to expect even the most fair-minded arbitrator to be
impartial when it comes to determining the extent of his own profit. We do not let judges
make decisions which fix the extent of their fees, see Tumey v. Ohio, 273 U.S. 510, (1927).
How, then, can we shut our eyes to the obvious self-interest of an arbitrator?”). See supra
pp. 87-88.
7. Waiver of jurisdictional challenges by conduct in arbitration. As First Options suggests, a party
can waive its right to challenge an arbitrator's jurisdiction, either by agreement or by
implication. In First Options, the Kaplans were argued to have made such a waiver by
contesting the arbitrators' jurisdiction over them, without separately denying his power to
render a jurisdictional award. Although that claim was rejected, other conduct may constitute a
waiver of jurisdictional objections.
For lower U.S. court decisions considering claims that jurisdictional objections were waived,
see Jones Dairy Farm v. Local No. 8-1236, 760 F.2d 173 (7th Cir.), cert. denied, 474 U.S. 845 (1985);
Fortune, Alsweet and Eldridge, Inc. v. Daniel, 724 F.2d 1355 (9th Cir. 1983) (“a party may not
submit a claim to arbitration and then challenge the authority of the arbitrator to act after
receiving an unfavorable result”); Exportkhleb v. Maistros Corp., 790 F.Supp. 70 (S.D.N.Y. 1992)
(party's failure to argue in arbitration that counterclaim was not arbitrable because of prior
judicial order waives its jurisdictional objection); American Construction Machinery &
Equipment Corp. v. Mechanised Construction of Pakistan, Ltd, 659 F.Supp. 426 (S.D.N.Y. 1987)
(signing terms of reference in ICC arbitration is waiver); Jarrell v. Wilson Warehouse Co., 490
F.Supp. 412 (M.D. La. 1980) (party's arbitration of dispute, without objecting to tribunal's
jurisdiction, is waiver of jurisdictional objections).
If a party resists arbitration, but fails to raise a jurisdictional challenge, it will not be
permitted to raise that challenge in an action to vacate the award. Cobec Brazilian Trading etc.
v. Isbrandtsen, 524 F.Supp. 7, 9 (S.D.N.Y. 1980) (challenge “should have been raised ... when
[adverse party] moved to compel arbitration”). Compare A/S Ganger Rolf v. Zeeland Transp., Ltd,
191 F.Supp. 359, 363 (S.D.N.Y. 1961) (party could challenge arbitrator's jurisdiction in award
enforcement proceeding, where parties' arbitration agreement precluded any prior judicial
challenge).
8. U.S. judicial decisions holding that contesting arbitrators' jurisdiction in arbitration is not a
waiver of objections to arbitrators' authority to rule on jurisdictional issues. Although conduct
during the arbitration can constitute a waiver, merely contesting jurisdiction before the
arbitrator will not necessarily be deemed a waiver under the FAA. In addition to First Options,
see Davis v. Chevy Chase Financial Ltd, 667 F.2d 160, 167-8 (D.C. Cir. 1981); Local 719 etc. v.
National Biscuit Co., 378 F.2d 918, 921-22 (3d Cir. 1967); Caribbean Trading and Fidelity Corp. v.
Nigerian National Petroleum Corp., 1990 U.S. Dist. Lexis 17198 (S.D.N.Y. 1990) (participation in
arbitration after unsuccessfully challenging jurisdiction is not a waiver). See also Fertilizer Corp.
of India v. IDI Mgt., Inc., 517 F.Supp. 948, 958 (S.D. Ohio 1981) (dicta). Despite this, it is usually
appropriate to state expressly that submission of jurisdictional objections to an arbitrator is
not acceptance of his jurisdiction to resolve such questions.
9. Institutional arbitration rules' provisions concerning waiver of jurisdictional objections. Many
P "855" institutional arbitration rules contain provisions requiring that jurisdictional objections be
P "856" raised promptly, failing which they are waived. UNCITRAL Arbitration Rules Article 21(3); ICC
Rules Article 33; LCIA Rules Article 23.2.
10. Choice of law governing validity of arbitration agreement under Article V(1)(a). As discussed
above, Article V(1)(a) of the New York Convention contains conflict of laws rules for selecting the
law governing the validity of the parties' arbitration agreement. See supra pp. 116-17. Under
Article V(1)(a), an award need not be enforced if the parties' arbitration 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.” Some commentators have called this
choice of law provision the crowning achievement of the Convention. See A. van den Berg, The
New York Convention of 1958 282 (1981).
In practice, however, few judicial decisions have considered Article V(1)(a) at the award
enforcement stage. Those decisions that have done so have not ordinarily engaged in any
meaningful choice-of-law analysis. Fiat SpA v. Ministry of Finance and Planning, 1989 U.S. Dist.
Lexis 11995 (S.D.N.Y. 1989); Buques Centroamericanos, SA v. Refinadora Costarricense de
Petroleos, SA, 1989 U.S. Dist. Lexis 5429 (S.D.N.Y. 1989) (refusing to apply Costa Rican law
invalidating arbitration agreements of Costa Rican state entities); American Construction
Machinery & Equipment Corp. v. Mechanised Construction of Pakistan Ltd, 659 F.Supp. 426, 427
 (S.D.N.Y. 1987) (deferring to arbitrators' choice of law); Parsons & Whittemore, 508 F.2d at 973,
976; Fertilizer Corp. of India, 517 F.Supp. at 958-60. Compare Oberlandesgericht of Hamburg,
October 14, 1964, aff'd, Bundesgerichtshof, March 6, 1969, II Y.B. Comm. Arb. 235 (1977) (German
rules of duress not applicable to award made in Czechoslovakia pursuant to agreement subject
to Czechoslovak law); G.A. Pap-KG Holzgrosshandlung v. Pecoraro, VI Y.B. Comm. Arb. 228 (1981)
(Italian court applies Austrian law to claim that award made in Austria was invalid under
Article V(1)(a) because agreement was tainted by fraud).
One lower U.S. court decision rejected an argument under Article V(1)(a), which relied on the
law chosen by the parties, on the grounds that the arbitrators held that choice invalid and that
this ruling could only be overturned on manifest disregard grounds. American Construction
Machinery & Equipment Corp. v. Mechanised Construction of Pakistan, Ltd, 659 F.Supp. 426, 428-
29 (S.D.N.Y. 1987).
11. Lack of capacity under Article V(1)(a). Article V(1)(a) also permits non-recognition of an award
because one of the parties lacked the capacity to enter into the arbitration agreement. Article
V(1)(a) provides a choice-of-law rule, specifying the “law applicable to them,” but does not
define how that law is selected. See supra pp. 231-39.
One U.S. decision refused to vacate an award where it was argued that the defendant foreign
state entity lacked capacity under its national law to enter into a binding arbitration
agreement. Buques Centroamericanos, SA v. Reinadora Costarricense de Petroleos SA, 1989 U.S.
Dist. Lexis 5429 (S.D.N.Y. 1989) (refusing to vacate award under Article V(1)(a) against Costa
Rican state entity on grounds that Costa Rican law prohibiting state-owned companies from
entering into arbitration agreements).
12. Applicability of Article II(2)'s writing requirement in actions to confirm or vacate award. As
discussed above, Article II requires that arbitration agreements be in “writing.” See supra pp.
126-40. It is not clear whether Article II's “writing” requirement may be relied on to resist
enforcement of an award. Compare Haight, Report on the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards 17-18 (1958) (“Any form of agreement, express or tacit,
would appear to be sufficient.”) and Lanificio Walter Banci v. Bobbie Brooks Inc., VI Y.B. Comm.
Arb. 233 (Corte di Cassazione April 15, 1980) (Article II(2) not applicable in award enforcement
proceeding) with A. van den Berg, The New York Convention of 1958 284-87 (1981) (“the
legislative history of the Convention and its internal consistency” require application of Article
II(2) at award enforcement stage).
In practice, Article II(2)'s writing requirement will often be satisfied (assuming no waiver) by the
parties' written submissions or terms of reference in the arbitral process. Where this is not the
case, however, logic suggests that Article II(2) remains applicable at the award enforcement
stage. Putting aside the possibility of waiver, the requirement's purposes are no less
applicable then than in an action to compel arbitration.
13. “Excess of authority” by deciding issues not within submissions of the parties. Many
authorities hold that if the arbitrators “rule[] on issues not presented to [them] by the parties,”
they will be found to have exceeded their authority. Dighello v. Busconi, 673 F.Supp. 85, 87 (D.
Conn. 1987), aff'd mem., 849 F.2d 1467 (2d Cir. 1988). See Inter-City Gas Corp. v. Boise Cascade
Corp., 845 F.2d 184, 187 (8th Cir. 1988) (partially setting aside award because arbitrator ignored
P "856" unambiguous contract provision); Sun Ship, Inc. v. Matson Navigation Co., 785 F.2d 59, 62 (3d Cir.
P "857" 1986); Totem Marine Tug & Barge, Inc. v. North American Towing Inc., 607 F.2d 649, 651 (5th Cir.
1979) (award vacated because arbitrators awarded damages not requested); Andros Compania
Maritime, SA v. Marc Rich & Co., 579 F.2d 1047, 1053 (2d Cir. 1979).
Doubts about the scope of the parties' submissions are resolved in some national legal systems
(including the United States) in favor of coverage. Kurt Orbau Co. v. Angeles Metal Systems, 573
F.2d 739 (2d Cir. 1978); Keystone Printed Specialties Co. v. Scranton Printing Pressmen & Assistants
Union No. 119, 386 F.Supp. 416, 422 (M.D. Pa. 1974); Philippine Bulk Shipping Inc. v. International
Minerals & Chemical Corp., 376 F.Supp. 654, 656 (S.D.N.Y. 1973).
14. Arbitrators' failure to comply with procedural rules contained in arbitration agreement as
grounds for non-recognition. Arbitral awards can also be set aside under both international
conventions and national law if the arbitrators exceeded their powers by disobeying the
procedural rules agreed upon by the parties or included in institutional arbitration rules
selected by the parties. Consider in this regard, Article V(1)(c) of the New York Convention and
Article 5(1)(c) of the Inter-American Convention. Compare Article IX(1)(e) of the 1961 European
Convention. Note also Article 36(1)(iv) of the UNCITRAL Model Law. See also supra pp. 447, 850.
(a) Extreme and prejudicial procedural disobedience required. Technical departures from the
parties' agreed arbitration procedures will often be countenanced unless they are both
extreme and prejudicial. See Compagnie des Bauxites de Guinee v. Hammermills, Inc., 1992
WL 122712 (D.D.C. 1992) (refusing to vacate award for arbitrators' alleged violation of ICC
Rules, on grounds that Rules were not violated); Fiat SpA v. Ministry of Finance and
Planning, 1989 U.S. Dist. Lexis 11995 (S.D.N.Y. 1989) (arbitrators' failure to comply with
AAA's rule requiring awards within 30 days of hearing not basis for vacating award);
McMahon v. RMS Electronics, Inc., 695 F.Supp. 1557 (S.D.N.Y. 1988); Laminoirs etc. v.
Southwire Co., 484 F.Supp. 1063 (N.D. Ga. 1980) (arbitrators' alleged failure to comply with
ICC rule that award be issued within 6 months from signing Terms of Reference not basis
for vacating award); Dan River, Inc. v. Cal-Togs, Inc., 451 F.Supp. 497, 501-2 (S.D.N.Y. 1978)
(AAA's alleged error in selecting arbitral forum and procedural rules not basis to vacate
award without showing of effect on “substantive rights”); Local 355 etc. v. Fontainebleau
Hotel Corp., 423 F.Supp. 83 (S.D. Fla. 1976) (failure to comply with 30 day contractual limit
for issuing award not basis to vacate).
 (b) Waiver of objections to procedural flaws. As dicussed above, unless a party objects at the
time to deviation from the applicable arbitral procedures or rules, it will typically be
deemed to have waived the objection. See supra p. 847.
15. Functus officio doctrine. Under both U.S. common law and the FAA, an arbitrator generally
loses his power to reconsider or modify an award after it is rendered – he becomes “functus
officio.” In one court's words: “The term [functus officio] is Latin for ‘office performed’ and in the
law of arbitration means that once an arbitrator has issued his final award he may not revise
it.”Glass, Molders, Pottery, Plastics and Allied Workers International Union v. Excelsior Foundry
Co., 56 F.3d 844 (7th Cir. 1995). See Colonial Press Ins. Co. v. Omaha Indemnity Co., 943 F.2d 327
(3d Cir. 1991); Ottley v. Schwartzberg, 819 F.2d 373, 376 (2d Cir. 1987); Local P-9 etc. v. George A.
Hormel & Co., 776 F.2d 1393, 1394 (8th Cir. 1985); Anderson v. Norfolk & Western Ry. Co., 773 F.2d
880, 883 (7th Cir. 1985); La Vale Plaza, Inc. v. R.S. Noonan, Inc., 378 F.2d 569, 573 (3d Cir. 1967);
American Centennial Ins. Co. v. Arion Ins. Co., 1990 WL 52295 (S.D.N.Y. 1990); United Mine Workers
etc. v. Island Creek Coal Co., 630 F.Supp. 1278, 1279 (W.D. Va. 1986); Salt Lake Pressmen etc. v.
Newspaper Agency Corp., 485 F.Supp. 511, 515 (D. Utah 1980).
Under the FAA, the functus officio doctrine proceeds from the “unwillingness to permit one who
is not a judicial officer and who acts informally and sporadically, to re-examine a final decision
which he has already rendered, because of the potential evil of outside communication and
unilateral influence which might affect a new conclusion.”La Vale Plaza, Inc. v. R.S. Noonon, Inc.,
378 F.2d 569, 572 (3d Cir. 1967). Likewise, arbitrators do not share the “tradition which surrounds
judicial conduct.”Id.
In the United States, the functus officio doctrine is subject to exceptions for: (a) correcting
obvious mistakes; (b) deciding issues deliberately left open by an interim or partial final
award; and (c) clarifying ambiguities. See Glass, Molders, Pottery, Plastics and Allied Workers
International Union v. Excelsior Foundry Co., 56 F.3d 844 (7th Cir. 1995) (applying, generously,
exception to functus officio rule permitting arbitrator to clarify or complete award within
reasonable period after award); Colonial Penn Ins. Co. v. Omaha Indemnity Co., 943 F.2d 327, 332
(3d Cir. 1991); McClatchy Newspapers v. Central Valley Typographers Union No. 46, 686 F.2d 731,
734 n.1 (9th Cir.), cert. denied, 459 U.S. 1071 (1982); Saxis Steamship Co. v. Multifacs Int'l Traders,
Inc., 375 F.2d 577, 581 n.4 (2d Cir. 1967) (noting that district court permitted arbitral tribunal to
P "857" correct miscalculation); La Vale Plaza, Inc. v. R.S. Noonon, Inc., 378 F.2d 569, 572 (3d Cir. 1967).
P "858" Compare Danella Const. Corp. v. MCI Telecommunications Corp., 1992 U.S. Dist. Lexis 4952 (E.D.
Pa. 1992) (where institutional rules and agreement contain no authorization for arbitrators to
modify awards, FAA does not permit such modifications).
Some U.S. courts have recently questioned whether the functus officio doctrine serves any
continued purpose. Glass, Molders, Pottery, Plastics and Allied Workers, International Union v.
Excelsior Foundry Co., 56 F.3d 844 (7th Cir. 1995) (questioning wisdom of functus officio doctrine;
“perhaps the time has come to discard the rule”).
16. Retention of jurisdiction by arbitral tribunal after award is made. Where an award
contemplates future performance, it will sometimes be appropriate for an arbitral tribunal to
retain jurisdiction over the parties' dispute. U.S. courts have generally held that there is no
obstacle in principle to this and that the retention of jurisdiction is not contrary to the functus
officio doctrine. Dries & Krump Mfg. Co. v. International Assoc. of Machinists & Aerospace
Workers, etc., 802 F.2d 247 (7th Cir. 1986); Engis Corp. v. Engis Ltd, 800 F.Supp. 627, 632 (N.D. Ill.
1992).
17. Arbitrator's discretion as to remedies. Arbitral awards are not infrequently challenged on the
grounds that the arbitrators exceeded their authority in awarding particular damages or other
relief. The Parsons & Whittemore decision illustrates this. As we have seen, challenges to the
remedies awarded by the arbitrators can rest either on “manifest disregard” or “excess of
authority” grounds. Under either, courts in developed jurisdictions generally accord
substantial deference to the arbitrator's award. See supra pp. 813-14.
18. Punitive damages in international arbitration. In some jurisdictions (including particularly
the United States), courts are empowered by national law to award “punitive” (or exemplary)
damages. Punitive damages are not based upon damage suffered by the claimant, but are
intended to punish a wrongdoer and deter future wrong-doing. Other jurisdictions do not
permit judicial awards of punitive damages, and may have local public policies against the
imposition of such penalties. The possible availability of punitive damages can give rise to
complex issues in international arbitration.
 (a) Garrity v. Lyle Stuart – arbitrators cannot award punitive damages under New York law
even if the parties agree they can. In Garrity v. Lyle Stuart, the New York Court of Appeals
held that arbitrators lack the power to award punitive damages, even if the parties
expressly agree that they may do so. According to the Garrity court, punitive damages are
a “social, exemplary remedy, not a private compensatory remedy”: “The law does not and
should not permit private persons to submit themselves to punitive sanctions of the
order reserved to the State.” 40 N.Y.2d at 360. In the Garrity court's view, New York public
policy forbid agreements granting arbitrators the power to award punitive damages: “The
freedom of contract does not embrace the freedom to punish, even by contract.”Id.
A number of other lower U.S. state courts have followed Garrity. See Anderson v. Nichols,
359 S.E.2d 117, 121 n.1 (W. Va. 1987); Shaw v. Kuhnel & Assoc., Inc., 698 P.2d 880, 882 (N.M.
1985); School City of East Chicago, Indiana v. East Chicago Federation of Teachers, 422
N.E.2d 656 (Ind. App. 1981); Annotation, 83 A.L.R.3d 1037 (1989). For commentary on awards
of punitive damages by arbitrators, see Stipanowich, Punitive Damages in Arbitration,
Garrity v. Lyle Stuart, Inc. Reconsidered, 66 B.U.L. Rev. 953 (1986); Note, Arbitration: The
Award of Punitive Damages as a Public Policy Question, 43 Brooklyn L. Rev. 546 (1976); Note,
Punitive Damages in Arbitration: The Search for a Workable Rule, 63 Cornell L. Rev. 272
(1978); Jones, Punitive Damages as an Arbitration Remedy, 4 J. Int'l Arb. 35 (1987); Note, An
Argument Against the Availability of Punitive Damages in Commercial Arbitration, 62 St.
Johns L. Rev. 270 (1988); Note, Conflicts Presented by Arbitral Awards of Punitive Damages, 4
Arb. Int'l 255 (1988); Comment, Punitive Damage Awards in International Arbitration: Does
the “Safety Valve” of Public Policy Render Them Unenforceable in Foreign States, 20 Loy. L.
Rev. 455 (1987).

(b) U.S. state court decisions holding that arbitrators can award punitive damages if parties
agree they can. Some other lower courts have interpreted state law as permitting
arbitrators to award punitive damages if that is what the parties' arbitration agreement
provides. Baker v. Sadick, 162 Cal.App.3d 618 (4th Dist. 1984); Grissom v. Greener &
Summer Constr., Inc., 676 S.W.2d 709, 711 (Tex. App. 1984).
(c) When have the parties agreed that the arbitrators may award punitive damages? Most
arbitration agreements and institutional rules do not expressly grant the power to award
punitive damages. Rather, in most cases, the arbitrators are granted extremely broad
P "858" powers to fashion relief. Consider the ICC Rules, the LCIA Rules, and the UNCITRAL Rules.
P "859" What provisions do they contain concerning the relief that the arbitrators may grant?
(d) Mastrobuono and awards of punitive damages. Recall the Supreme Court's decision in
Mastrobuono, see supra pp. 368-73, where the Court refused to interpret an arbitration
clause as excluding power to award punitive damages. Note that the clause authorized an
award of “damages and other relief.” The Mastrobuono Court then concluded that the
arbitral tribunal had been granted the power to award punitive damages and that New
York's prohibition on awards of punitive damages by arbitrators was preempted by the
FAA.
Suppose that an arbitral award is made outside the United States, in a nation where (a)
punitive damages are not available under local law; and (b) furthermore, local public
policy forbids awards of punitive damages by arbitrators. Suppose also that, while the
parties' arbitration agreement is broadly drafted (and would encompass an award of
punitive damages), the tribunal refuses to entertain one parties' request for an award of
punitive damages, citing local public policy in the arbitral situs. What effect should (or
will) a U.S. court give to the tribunal's award denying an award of punitive damages?
What if the tribunal also held that U.S. substantive law governed the parties' dispute and
(in dicta) that it appeared there was a strong case under U.S. substantive law for an
award of punitive damages?

7. Lack of Independence, Bias, and Misconduct of the Arbitrators (95)

Virtually every nation insists on the observance of basic principles of integrity in the
arbitration process. Nevertheless, the New York Convention and many leading foreign
arbitration statutes do not contain specific provisions concerning matters such as fraud or
arbitrator bias or misconduct. (96)
The New York Convention's list of grounds for non-recognition in Article V does not contain any
provision dealing specifically with bias, arbitrator misconduct, or fraud. However, as described
above, Article V(1)(b) permits non-recognition where a party was “unable to present his case,”
which encompasses at least some forms of arbitrator misconduct. (97) Similarly, Article V(1)(d)
permits non-recognition where the “composition of the arbitral authority” was not “in
accordance with the law of the country where the arbitration took place,” which can
incorporate standards relating to arbitrator bias and misconduct. Beyond that, claims of fraud,
bias, and arbitrator misconduct have been considered under Article V(2)(b)'s general public
P "859" policy exception in U.S. (and foreign) courts. (98) The position under the Inter-American
P "860"
Convention is likely to be similar. (99)
Many developed national arbitration statutes also lack specific provisions for fraud and
arbitrator bias or misconduct. That is true, for example, under the UNCITRAL Model Law and
the Swiss Law on Private International Law.
In contrast, U.S. law contains several specific statutory exceptions to the general obligation to
enforce arbitral awards which apply when the arbitral process fails to satisfy basic standards
 of integrity and fairness. First, §10(a) of the domestic FAA permits non-enforcement where the
“award was procured by corruption, fraud, or undue means.” Second, §10(b) allows non-
enforcement if “there was evident partiality or corruption in the arbitrators.” Finally, as we
have seen, §10(c) permits non-enforcement if “the arbitrators were guilty of misconduct in
refusing to postpone the hearing ... or of any other misbehavior by which the rights of any party
have been prejudiced.” (100)
Like other defenses to the validity of international arbitral awards, national courts have
generally interpreted exceptions for arbitrator partiality (or bias) and misconduct narrowly.
(101) The materials excerpted below illustrate this. First, consider the excerpts from various
institutional arbitration rules dealing with the arbitrators' duties of independence, as well as
the IBA's Ethics for International Arbitrators. Second, reread the Technostroyexport decision.
Third, consider Commonwealth Coatings Corp. v. Continental Casualty Co., (102) and Fertilizer
Corporation. (103) In reading Fertilizer Corporation, consider what law should govern the
arbitrators' “bias” and conduct – U.S. law, the curial law, or some international standard.
Finally, consider the Veritas Shipping case.
P "860"
P "861"
AAA COMMERCIAL RULES
Articles 12, 15, 19 & 20
[excerpted below at pp. 1049-50]
UNCITRAL RULES
Articles 9 & 10
[excerpted below at p. 1025]
IBA ETHICS FOR INTERNATIONAL ARBITRATORS
[excerpted in Appendix O]
AAOT FOREIGN ECONOMIC ASSOCIATION (VO) TECHNOSTROYEXPORT v. INTERNATIONAL
DEVELOPMENT AND TRADE SERVICES, INC.
139 F.3d 980 (2d Cir. 1999)
[excerpted above at pp. 639-41]
COMMONWEALTH COATINGS CORP. v. CONTINENTAL CASUALTY CO.
393 U.S. 145 (1968)
JUSTICE BLACK. At issue in this case is the question whether elementary requirements of
impartiality taken for granted in every judicial proceeding are suspended when the parties
agree to resolve a dispute through arbitration.
The petitioner, Commonwealth Coatings Corporation, a subcontractor, sued the sureties on the
prime contractor's bond to recover money alleged to be due for a painting job. The contract for
painting contained an agreement to arbitrate such controversies. Pursuant to this agreement
petitioner appointed one arbitrator, the prime contractor appointed a second, and these two
together selected the third arbitrator. This third arbitrator, the supposedly neutral member of
the panel, conducted a large business in Puerto Rico, in which he served as an engineering
consultant for various people in connection with building construction projects. One of his
regular customers in this business was the prime contractor that petitioner sued in this case.
This relationship with the prime contractor was in a sense sporadic in that the arbitrator's
P "861" services were used only from time to time at irregular intervals, and there had been no
P "862" dealings between them for about a year immediately preceding the arbitration.
Nevertheless, the prime contractor's patronage was repeated and significant, involving fees of
about $12,000 over a period of four or five years, and the relationship even went so far as to
include the rendering of services on the very projects involved in this lawsuit. An arbitration
was held, but the facts concerning the close business connections between the third arbitrator
and the prime contractor were unknown to petitioner and were never revealed to it by this
arbitrator, by the prime contractor, or by anyone else until after an award had been made.
Petitioner challenged the award on this ground, among others, but the District Court refused to
set aside the award. The Court of Appeals affirmed....
Section 10 [of the FAA] sets out the conditions upon which awards can be vacated. The two
courts below held, however, that §10 could not be construed in such a way as to justify vacating
the award in this case. We disagree and reverse. Section 10 does authorize vacation of an
award where it was “procured by corruption, fraud, or undue means” or “[w]here there was
evident partiality ... in the arbitrators.” These provisions show a desire of Congress to provide
not merely for any arbitration but for an impartial one. It is true that petitioner does not
charge before us that the third arbitrator was actually guilty of fraud or bias in deciding this
case, and we have no reason, apart from the undisclosed business relationship, to suspect him
of any improper motives. But neither this arbitrator nor the prime contractor gave to petitioner
even an intimation of the close financial relations that had existed between them for a period
of years. We have no doubt that if a litigant could show that a foreman of a jury or a judge in a
court of justice had, unknown to the litigant, any such relationship, the judgment would be
subject to challenge. This is shown beyond doubt by Tumey v. Ohio, 273 U.S. 510 (1927), where
this Court held that a conviction could not stand because a small part of the judge's income
consisted of court fees collected from convicted defendants. Although in Tumey it appeared
the amount of the judge's compensation actually depended on whether he decided for one
 side or the other, that is too small a distinction to allow this manifest violation of the strict
morality and fairness Congress would have expected on the part of the arbitrator and the other
party in this case. Nor should it be at all relevant, as the Court of Appeals apparently thought it
was here, that “[t]he payments received were a very small part of [the arbitrator's] income....”
For in Tumey the Court held that a decision should be set aside where there is “the slightest
pecuniary interest” on the part of the judge, and specifically rejected the State's contention
that the compensation involved there was “so small that it is not to be regarded as likely to
influence improperly a judicial officer in the discharge of his duty....” Since in the case of courts
this is a constitutional principle, we can see no basis for refusing to find the same concept in
the broad statutory language that governs arbitration proceedings and provides that an award
can be set aside on the basis of “evident partiality” or the use of “undue means.” It is true that
arbitrators cannot sever all their ties with the business world, since they are not expected to
get all their income from their work deciding cases, but we should, if anything, be even more
P "862"
P "863"
scrupulous to safeguard the impartiality of arbitrators than judges, since the former have
completely free rein to decide the law as well as the facts and are not subject to appellate
review. We can perceive no way in which the effectiveness of the arbitration process will be
hampered by the simple requirement that arbitrators disclose to the parties any dealings that
might create an impression of possible bias.
While not controlling in this case, §18 of the Rules of the American Arbitration Association, in
effect at the time of this arbitration, is highly significant. It provided as follows:
“Section 18. Disclosure by Arbitrator of Disqualification - At the time of receiving his notice of
appointment, the prospective Arbitrator is requested to disclose any circumstances likely to
create a presumption of bias or which he believes might disqualify him as an impartial
Arbitrator. Upon receipt of such information, the Tribunal Clerk shall immediately disclose it to
the parties, who if willing to proceed under the circumstances disclosed, shall, in writing, so
advise the Tribunal Clerk. If either party declines to waive the presumptive disqualification,
the vacancy thus created shall be filled in accordance with the applicable provisions of this
Rule.”
And based on the same principle as this Arbitration Association rule is that part of the 33d
Canon Judicial Ethics which provides:
“33. Social Relations. “...[A judge] should, however, in pending or prospective litigation before
him be particularly careful to avoid such action as may reasonably tend to awaken the
suspicion that his social or business relations or friendships, constitute an element in
influencing his judicial conduct.”
This rule of arbitration and this canon of judicial ethics rest on the premise that any tribunal
permitted by law to try cases and controversies not only must be unbiased but also must avoid
even the appearance of bias. We cannot believe that it was the purpose of Congress to
authorize litigants to submit their cases and controversies to arbitration boards that might
reasonably be thought biased against one litigant and favorable to another....
MR. JUSTICE WHITE, CONCURRING. While I am glad to join my Brother Black's opinion in this
case, I desire to make these additional remarks. The Court does not decide today that
arbitrators are to be held to the standards of judicial decorum of Article III judges, or indeed of
any judges. It is often because they are men of affairs, not apart from but of the marketplace,
that they are effective in their adjudicatory functions. This does not mean the judiciary must
overlook outright chicanery in giving effect to their awards; that would be an abdication of our
responsibility. But it does mean that arbitrators are not automatically disqualified by a
business relationship with the parties before them if both parties are informed of the
relationship in advance, or if they are unaware of the facts but the relationship is trivial. I see
no reason automatically to disqualify the best informed and most capable potential
arbitrators.
P "863"
P "864"
The arbitration process functions best when an amicable and trusting atmosphere is preserved
and there is voluntary compliance with the decree, without need for judicial enforcement. This
end is best served by establishing an atmosphere of frankness at the outset, through disclosure
by the arbitrator of any financial transactions which he has had or is negotiating with either of
the parties. In many cases the arbitrator might believe the business relationship to be so
insubstantial that to make a point of revealing it would suggest he is indeed easily swayed, and
perhaps a partisan of that party. (104) But if the law requires the disclosure, no such
imputation can arise. And it is far better that the relationship be disclosed at the outset, when
the parties are free to reject the arbitrator or accept him with knowledge of the relationship
and continuing faith in his objectivity, than to have the relationship come to light after the
arbitration, when a suspicious or disgruntled party can seize on it as a pretext for invalidating
the award. The judiciary should minimize its role in arbitration as judge of the arbitrator's
impartiality. That role is best consigned to the parties, who are the architects of their own
arbitration process, and are far better informed of the prevailing ethical standards and
reputations within their business.
Of course, an arbitrator's business relationships may be diverse indeed, involving more or less
remote commercial connections with great numbers of people. He cannot be expected to
provide the parties with his complete and unexpurgated business biography. But it is enough
for present purposes to hold, as the Court does, that where the arbitrator has a substantial
interest in a firm which has done more than trivial business with a party, that fact must be
disclosed. If arbitrators err on the side of disclosure as they should, it will not be difficult for
courts to identify those undisclosed relationships which are too insubstantial to warrant
 vacating an award.
MR. JUSTICE FORTAS, DISSENTING. I dissent and would affirm the judgment. The facts in this
case do not lend themselves to the Court's ruling. The Court sets aside the arbitration award
despite the fact that the award is unanimous and no claim is made of actual partiality,
unfairness, bias, or fraud.
Each party appointed an arbitrator and the third arbitrator was chosen by those two. The
controversy relates to the third arbitrator. The third arbitrator was not asked about business
connections with either party. Petitioner's complaint is that he failed to volunteer information
about professional services rendered by him to the other party to the contract, the most recent
of which were performed over a year before the arbitration. Both courts below held, and
petitioner concedes, that the third arbitrator was innocent of any actual partiality, or bias, or
improper motive. There is no suggestion of concealment as distinguished from the innocent
failure to volunteer information.
P "864" The third arbitrator is a leading and respected consulting engineer who has performed services
P "865" for “most of the contractors in Puerto Rico.” He was well known to petitioner's counsel and
they were personal friends. Petitioner's counsel candidly admitted that if he had been told
about the arbitrator's prior relationship “I don't think I would have objected because I know
Mr. Capacete [the arbitrator].”
Clearly, the District Judge's conclusion, affirmed by the Court of Appeals for the First Circuit,
was correct, that “the arbitrators conducted fair, impartial hearings; that they reached a
proper determination of the issues before them and that plaintiff's objections represent a
‘situation where the losing party to an arbitration is now clutching at straws in an attempt to
avoid the results of the arbitration to which it became a party.’”
The Court nevertheless orders that the arbitration award be set aside. It uses this singularly
inappropriate case to announce a per se rule that in my judgment has no basis in the
applicable statute or jurisprudential principles: that, regardless of the agreement between the
parties, if an arbitrator has any prior business relationship with one of the parties of which he
fails to inform the other party, however innocently, the arbitration award is always subject to
being set aside. This is so even where the award is unanimous; where there is no suggestion
that the nondisclosure indicates partiality or bias; and where it is conceded that there was in
fact no irregularity, unfairness, bias or partiality. Until the decision today, it has not been the
law that an arbitrator's failure to disclose a prior business relationship with one of the parties
will compel the setting aside of an arbitration award regardless of the circumstances.
I agree that failure of an arbitrator to volunteer information about business dealings with one
party will, prima facie, support a claim of partiality or bias. But where there is no suggestion
that the nondisclosure was calculated, and where the complaining party disclaims any
imputation of partiality, bias, or misconduct, the presumption clearly is overcome. (105) I do
not believe that it is either necessary, appropriate, or permissible to rule, as the Court does,
that regardless of the facts, innocent failure to volunteer information constitutes the “evident
partiality” necessary under §10(b) of the [FAA] to set aside an award. “Evident partiality” means
what it says: conduct – or at least an attitude or disposition – by the arbitrator favoring one
party rather than the other. This case demonstrates that to rule otherwise may be a palpable
injustice, since all agree that the arbitrator was innocent of either “evident partiality” or
anything approaching it.
Arbitration is essentially consensual and practical. The [FAA] is obviously designed to protect
the integrity of the process with a minimum of insistence upon set formulae and rules. The
P "865" Court applies to this process rules applicable to judges and not to a system characterized by
P "866" dealing on faith and reputation for reliability. Such formalism is not contemplated by the
Act nor is it warranted in a case where no claim is made of partiality, of unfairness, or of
misconduct in any degree.
FERTILIZER CORP. OF INDIA v. IDI MANAGEMENT, INC.
517 F.Supp. 948 (S.D. Ohio 1981)
SPIEGEL, DISTRICT JUDGE. [The facts are excerpted above at pp. 731-33.] ... IDI asserts that
enforcement of the [Award] would violate the public policy of the United States, in violation of
Article V(2)(b) of the Convention. They allege that Mr. B. Sen, the arbitrator nominated by FCI
for the case (as well as for [a related arbitration] case) had served as counsel for FCI in at least
two other legal or arbitral proceedings and that these facts were not disclosed to IDI.
Respondent cites Commonwealth Coatings Corp. v. Continental Casualty Co., 393 U.S. 145 (1968),
to support the claim that American public policy demands that arbitrators be not only
unbiased but free from even the appearance of bias. Further, they argue, since Mr. B. Sen was
remunerated financially by FCI, the nondisclosure of the relationship is fatal to enforcement,
despite the fact that the arbitration was unanimous and even though actual fraud or bias may
be incapable of proof. IDI also claims that it had no constructive or other notice of Mr. Sen's
relationship with FCI, although Indian counsel retained by IDI may have been aware of the
arrangement. IDI has submitted affidavits of its responsible officers and past and present
counsel to support this contention.
FCI responds that Mr. Sen was chosen properly under the ICC rules as well as under the
Convention. Article V(1)(b) permits a refusal to enforce an award if the losing party was not
given proper notice of the arbitrator's appointment or was otherwise unable to present his
case; subsection (d) of this Article covers the case where the composition of the arbitral panel
was not in accord with the parties' agreement. IDI had proper notice and participated
extensively in all sessions, presenting its case thoroughly. The contract between the parties
 calls for arbitration under the ICC rules by one or more arbitrators appointed in accordance
with those rules. The ICC rules applicable at the time made no mention of neutrality, and not
until the 1975 ICC rules became effective was an “independent” arbitrator required. FCI
contends that even today it is not clear whether an “independent” arbitrator need be neutral.
Moreover, they argue, Mr. Sen is a Senior Advocate and, as such, his relationship with FCI was
not that of attorney and client. Rather, Senior Advocates in India are hired by the client's
advocate (similar to the retention of a barrister by a solicitor under the British system), are
paid by the advocate (who is normally reimbursed by the client), and the Senior Advocate is
thus insulated from the client. He is an officer of the Court, like a British Queennamp;apos;s
Counsel, and may argue for and against the same client at different times.
FCI answers further that, although not required by the ICC rules, a biographical data sheet on
P "866" Mr. Sen was furnished to IDI; this indicated that he had a connection with the Indian
P "867" Government, of which FCI is a wholly-owned entity. FCI also claims that IDI had actual or
constructive notice of Mr. Sen's relationship with FCI. They argue that IDI's Indian counsel, ...
was well-acquainted with the facts and that his knowledge should be imputed to IDI. They also
claim that an IDI vice-president was given a copy of another arbitration award which clearly
revealed that Mr. Sen appeared on FCI's behalf. IDI vigorously denies any such knowledge on its
part and strongly protests the propriety of imputing to IDI [its Indian counsel's] knowledge.
FCI has submitted the affidavit of Colin Ross-Munro, Q.C. which states that there is no
impropriety in an Indian Senior Advocate appearing in an arbitration on behalf of a party
without disclosing that he had represented that party in another context. IDI has submitted the
affidavit of George Mark Waller, Q.C. which asserts exactly the opposite.
The Court does not take lightly IDI's charge. In view of the unanimity of the [Award], there is
nothing to suggest actual bias or prejudice on Mr. Sen's part, yet we strongly believe that full
disclosure of any possible interest or bias is the better rule whenever one is in a position to
determine the rights of others. However, we do not find that nondisclosure of Mr. Sen's
relationship with FCI has so tainted the proceedings as to nullify the award.
FCI relies upon Commonwealth Coating, as the statement of American public policy with
respect to neutrality of arbitrators. It is true that in this case a plurality of the Supreme Court
found that “any tribunal permitted by law to try cases and controversies not only must be
unbiased but also must avoid even the appearance of bias,” and stated that “we should, if
anything, be even more scrupulous to safeguard the impartiality of arbitrators than judges.”
Two justices concurred but emphasized that arbitrators are not to be held to the standards of
Article III judges, or of any judges, and three Justices dissented, insisting that, in the absence of
a showing of unfairness or partiality, there was no reason to set aside an award for failure to
disclose a prior business relationship.
Moreover, Commonwealth Coatings is distinguishable on the facts. That case dealt with a so-
called tri-partite arbitration where one party chose one arbitrator, the other party chose a
second, and those two arbitrators selected the third. The controversy centered on the third
arbitrator, “the supposedly neutral member of the panel.” In the present case, we are dealing,
not with the third member of the panel, but with the member appointed by the party, FCI, with
whom the alleged undisclosed relationship existed. The third member of the panel was Lord
Devlin. Although IDI claims that Lord Devlin was appointed at Mr. Sen's suggestion, while FCI
claims that he was appointed at Mr. Rand's (IDI's former counsel's) suggestion, and each
supplies a letter purporting to uphold its claim, there is nothing at all to suggest that Lord
Devlin was other than totally impartial. In fact, it is undisputed that the identical panel of
arbitrators found for IDI in the [a related] arbitration, with Mr. Sen dissenting, but with Lord
Devlin and Mr. Wilson favoring IDI.
The Court of Appeals for the Second Circuit has concluded that the Convention's public policy
P "867" defense should be narrowly construed. “Enforcement of foreign arbitral awards may be denied
P "868" on this basis only where enforcement would violate the forum state's most basic notions of
morality and justice.”Parsons and Whittemore, supra. Even in domestic arbitrations, that Court
has “viewed the teachings of Commonwealth Coatings pragmatically, employing a case-by-case
approach in preference to dogmatic rigidity.” Andros Compania Maritima v. Marc Rich & Co., 579
F.2d 691, 700 (2d Cir. 1978). And, in a very recent case, the Second Circuit decided specifically
that awards should not be vacated because of an appearance of bias. International Produce,
Inc. v. A/S Rosshavet, 638 F.2d 548 (2d Cir. 1981). We believe, also, that the Court has given wise
advice in counselling courts “to invoke the public policy defense with caution lest foreign
courts frequently accept it as a defense to enforcement of arbitral awards rendered in the
United States.” Parsons and Whittemore, supra.
We therefore find that recognition or enforcement of the [Award] would not be contrary to the
public policy of the United States, and enforcement may not be denied on this basis. The
stronger public policy, we believe, is that which favors arbitration, both international and
domestic, as exemplified in Scherk v. Alberto-Culver Co., 417 U.S. 506, (1974)....
VERITAS SHIPPING CORP. v. ANGLO-CANADIAN CEMENT, LTD
[1966] 1 Lloyd's L. Rep. 76 (Q.B. 1965)
[excerpted above at pp. 644-45]
Notes on Fraud and Arbitrators' Lack of Independence or Bias as Grounds for Non-Recognition
of Arbitral Award
1. Claims of arbitrator bias or lack of independence under the New York and Inter-American
Conventions. As noted above, the exceptions set forth in the New York and Inter-American
Conventions do not provide an express basis for challenging an award based on an arbitrator's
 partiality. See Andros Compania Maritima, SA v. Marc Rich & Co., 579 F.2d 691 (2d Cir. 1978)
(questioning whether arbitrator bias is basis for resisting award under the New York
Convention).
Nevertheless, as Fertilizer Corporation illustrates, national courts have found no difficulty in
treating challenges to an arbitrator's impartiality as potential violations of public policy,
providing grounds for non-recognition of an award under the Convention. See National Oil Corp.
v. Sun Oil Co., 733 F.Supp. 800, 813 n.19 (D. Del. 1990); Biotronik etc. v. Medford Medical
Instrument Co., 415 F.Supp. 133 (D.N.J. 1976).
2. Choice of law defining standards of independence applicable to arbitrators in a foreign
arbitration. When an arbitration is conducted abroad, under a foreign arbitration statute, what
standards of neutrality should be applicable to the arbitrator's independence in an
enforcement action in the courts of a different state? The principal choices are the law of the
enforcement forum, the law of the arbitral situs, and (if different) the procedural law governing
the arbitration.
(a) Standards of independence under the procedural law governing the arbitration. As
discussed above, Article V(1)(d) of the New York Convention (and Article 5(1)(d) of the
Inter-American Convention) permit non-recognition of an arbitral award if the
“composition of the arbitral authority” was not “in accordance with the law of the country
where the arbitration took place.” Under this provision, the arbitrator's non-compliance
with standards of independence under the procedural law of the arbitral situs arguably
provides a basis to vacate the award.
In fact, national courts have not generally ascertained the applicable standards of
independence in foreign fora, or measured arbitrators' conduct against those standards.
Should national courts do so?
P "868"
P "869"
If State A forbids any arbitrator from having served in the past as a lawyer for a party, and
an arbitrator in an arbitration conducted in State A violates this requirement, should a
national court in another state (e.g., State B) enforce the award that the arbitrator makes?
Why can't (and shouldn't) the complaining party challenge the award in State A? Note
that this is not always a solution, if the prevailing party seeks to enforce the award in
State B. See supra pp. 704-05, 768-77.

(b) Standards of independence in enforcement forum. The arbitrator's independence has been
regarded in many national jurisdictions as a matter of public policy. As discussed above,
the enforcement forum's standards of public policy generally provide a separate basis
under the Convention for refusing to confirm an award. See supra pp. 826-28; New York
Convention Article V(2)(b); Inter-American Convention Article 5(2)(b).
(c) Application by U.S. courts of standards of arbitrator independence under FAA §10(b) to
international arbitral awards. Consistent with the treatment of arbitrator bias as a matter
of public policy (and with the application of domestic due process standards to
procedural issues, see supra pp. 841-42), U.S. courts have uniformly applied U.S.
standards of arbitrator independence, principally derived from §10(b) of the FAA and
Commonwealth Coatings, to awards under the New York and Inter-American Conventions.
See Andros Compania Maritima v. Marc Rich & Co., 579 F.2d 691 (2d Cir. 1978); National Oil
Corp. v. Libyan Sun Oil Co., 733 F.Supp. 800 (D. Del. 1990); Fertilizer Corp. of India v. IDI
Management, Inc., 517 F.Supp. 948 (S.D. Ohio 1981); Transmarine Seaways Corp. v. Marc Rich
& Co., 480 F.Supp. 352 (S.D.N.Y. 1979) (“The Supreme Court's elucidation of arbitral
propriety in Commonwealth Coatings is a declaration of public policy.”).
Nevertheless, as Fertilizer Corporation implies, U.S. standards of neutrality will likely be
influenced by legal and ethical standards in the arbitral situs. Note the court's reliance in
Fertilizer Corporation on the professional standards applicable to Mr. Sen in India.

(d) Appropriate sources for standards of arbitrators' independence. What sources should a
national court consider in articulating standards for an arbitrator's independence in an
international arbitration? Consider the IBA Ethics and the ABA/AAA Code of Ethics. Are
these appropriate sources? Consider national law standards of independence and bias,
applicable in domestic arbitrations. Are these applicable, even by analogy, to
international awards?
In considering challenges to the recognition of international arbitral awards based upon
lack of independence, U.S. courts can be expected to (a) apply the standards of
arbitrator independence applicable in the arbitral situs, but only where manifest
violations occurred and there is some reason that local judicial review is inadequate; and
(b) also apply basic U.S. standards of arbitrator independence under §10(b), but taking
into account the express and implied expectations of the parties (including their
agreement, applicable institutional rules, custom, and the curial law). E.g., National
Shipping Co. of Saudi Arabia v. Transamerican Shipping Corp., 1992 U.S. Dist. Lexis 18725
(S.D.N.Y. 1992).

3. Commonwealth Coatings and independence of arbitrators under FAA §10(b). The leading U.S.
domestic decision on the lack of independence (or “bias” or “partiality”) of arbitrators is
Commonwealth Coatings Corp. v. Continental Casualty Co., excerpted above. There, the
Supreme Court vacated an arbitration award because the “requirements of impartiality” of
 arbitrators under FAA §10(b) had not been satisfied. In particular, the Court relied on the fact
that the “neutral” chairman had failed to disclose his four-to-five year consulting relationship
with one party to the arbitration – which had earned him $12,000, including compensation on
“the very projects involved in” the arbitration. Note that in Commonwealth Coatingl there was
no suggestion that the arbitrator was in fact “guilty of fraud or bias in deciding this case.”
Rather, the sole basis for vacating the award was the undisclosed business relationship with
one of the parties.
4. Holding and rationale of Commonwealth Coatings. What exactly is the Supreme Court's
holding in Commonwealth Coatings? Is it set forth in Justice Black's opinion, or in Justice
White's? Consider the analysis of the Court's decision in Fertilizer Corporation, where the lower
court declines to derive any general standard of neutrality from the Supreme Court's
fragmented decision in Commonwealth Coatings. For other lower court decisions attempting to
parse Commonwealth Coatings and to state some generally applicable standard of neutrality,
see Apperson v. Fleet Carrier Corp., 879 F.2d 1344 (6th Cir. 1989); Sheet Metal Workers etc. v.
Kinney Air Conditioning Co., 756 F.2d 742, 745-46 (9th Cir. 1988); Morelite Construction Corp. v.
N.Y.C. District Council Carpenters' Benefit Funds, 748 F.2d 79 (2d Cir. 1984); Merit Ins. Co. v.
Leatherby Ins. Co., 714 F.2d 673 (7th Cir. 1983), cert. denied, 464 U.S. 1009 (1983); Andros Compania
Maritima, SA v. Marc Rich & Co., 579 F.2d 691 (2d Cir. 1978); Hunt v. Mobil Oil Corp., 654 F.Supp.
1487 (S.D.N.Y. 1987).
P "869"
P "870"
Is Commonwealth Coatings correctly decided on its facts? Consider Justice Fortas' dissent. Why
is it not correct?
What should be the general rule in the United States regarding arbitrator independence? In
Morelite Construction Corp. v. N.Y.C. District Council Carpenters' Benefit Funds, 748 F.2d 79 (2d Cir.
1984), the court adopted a requirement that “a reasonable person would have to conclude that
an arbitrator was partial to one party to the arbitration.” In Sheet Metal Workers etc. v. Kinney
Air Conditioning Co., 756 F.2d 742, 745-46 (9th Cir. 1988), the court concluded an award would be
vacated where there was “a reasonable impression of partiality.” Do these standards advance
analysis? How do they differ?
5. Choice of U.S. law – state or federal – applicable to arbitrator independence under FAA. What
U.S. law – state or federal – is applicable to issues of arbitrator independence under the FAA?
(a) Standards of arbitrator independence defined by federal law. As Commonwealth Coatings
suggests, awards subject to the FAA can be vacated only on grounds of a lack of arbitrator
independence set out in FAA §10(b). U.S. courts have generally assumed this (and the
preemption of state standards of arbitrator bias), without analysis. See Health Services
Mgt. Corp. v. Hughes, 975 F.2d 1253 (7th Cir. 1992); Apperson v. Fleet Carrier Corp., 879 F.2d
1344 (6th Cir. 1989); Morelite Constr. Corp. v. N.Y.C. District Council Carpenters Benefit Funds,
748 F.2d 79 (2d Cir. 1984); Merit Ins. Co. v. Leatherby Ins. Co., 714 F.2d 673 (7th Cir. 1983). The
few cases to have directly discussed the issues have held that the FAA preempts state
law. See Standard Tankers (Bahamas) Co. v. Motor Tank Vessel, AKTI, 438 F.Supp. 153, 159
(E.D.N.Y. 1977).
(b) Effect of Volt on standards of arbitrator independence. Under Volt Information, supra pp.
358-80, will a choice-of-law clause incorporate state standards of arbitrator bias or
conduct inconsistent with those in the FAA? There is little precedent. See Metropolitan
Property and Casualty Ins. Co. v. J.C. Penney Casualty Ins. Co., 780 F.Supp. 885 (D. Conn.
1991) (apparently looking to state law). As discussed below, the standards of arbitrator
neutrality applicable under §10 are influenced significantly by the parties' agreement
and institutional rules. See infra pp. 875-78. Why cannot the parties also agree upon state
law standards of arbitrator neutrality? Is that likely to be what is intended by ordinary
state law choice-of-law clauses?
6. Relevance of independence standards for national court judges to international arbitrators.
What is the relevance of standards of independence for national court judges to international
arbitrators?
(a) Authorities permitting lower ethical standards for arbitrators than national court judges. Is
it correct, as Justices White and Fortas conclude in Commonwealth Coatings, that
arbitrators should presumptively be held to a lower standard of ethical propriety than
national court judges? For similar conclusions, see Pitta v. Hotel Ass'n of New York City,
Inc., 806 F.2d 419, 423 (2d Cir. 1986); Merit Ins. Co. v. Leatherby Ins. Co., 714 F.2d 673 (7th Cir.
1983), cert. denied, 464 U.S. 1009 (1983); Andros Compania Maritima v. Marc Rich & Co., 579
F.2d 691, 699 (2d Cir. 1978); Reeves Bros., Inc. v. Capital-Mercury Shirt Corp., 962 F.Supp. 408
(S.D.N.Y. 1997) (“Arbitrators are ... held to a lower standard of impartiality than Article III
judges”); Hunt v. Mobil Oil Corp., 654 F.Supp. 1487, 1497-98 (S.D.N.Y. 1987).
Recall that, unlike judges, arbitrators are not subject to appellate review, to
governmental disclosure obligations, to democratic appointment or confirmation, or
other related requirements. Recall also that arbitrators can (and do) decide important
public law claims and that they often need not render reasoned awards. Does this suggest
that arbitrators ought presumptively to be held to higher – or at least equivalent – ethical
standards than judges?
Suppose that the parties expressly or impliedly agree that their arbitrator(s) will be
bound by ethical standards that are more rigorous than those applicable to Article III
judges. Should this agreement be respected?
 (b) Rationale for lower arbitral ethical standards for arbitrators. Realistically, what are the
disadvantages of imposing rigorous ethical standards on arbitrators? Consider the
following:
The unique role of arbitrators, whose special expertise arises from wide experience in
their fields, sometimes leads to a gain of their professional knowledge and skill at the
cost of the appearance of less than complete impartiality.
Pitta v. Hotel Ass'n of New York City, Inc., 806 F.2d 419, 423 (2d Cir. 1986). See also Morelite
Construction Corp. v. N.Y.C. District Council Carpenters' Benefit Funds, 748 F.2d 79 (2d Cir.
1984) (“Familiarity with a discipline often comes at the expense of complete impartiality.
Some commercial fields are quite narrow, and a given expert may be expected to have
formed strong views on certain topics, published articles in the field and so forth.
P "870" Moreover, specific areas tend to breed tightly knit professional communities. Key
P "871" members are known to one another, and in fact may work with, or for, one another, from
time to time.”); Andros Compania Maritima, SA v. Marc Rich & Co., 579 F.2d 691, 701 (2d Cir.
1978). Compare the similar concerns in Commonwealth Coatings. Are there really so few
practising and retired lawyers, academics, and judges that obtaining qualified arbitrators
requires lowering ethical standards? Why is there fairly robust competion for
appointments as arbitrators if there are insufficient potential arbitrators?
Consider the following rationale, advanced by Judge Posner in Merit Ins. Co. v. Leatherby
Ins. Co., 714 F.2d 673 (7th Cir. 1983), cert. denied, 464 U.S. 1009 (1983):
If Leatherby had wanted its dispute with Merit resolved by an Article III judge ... it would
not have inserted an arbitration clause in the contract, or having done so move for
arbitration against Merit's wishes. Leatherby wanted something different from judicial
dispute resolution. It wanted dispute resolution by experts in the insurance industry, who
were bound to have greater knowledge of the parties, based on previous professional
experience, than an Article III judge, or a jury.... It is no surprise, therefore, that the
standards for disqualification in the [AAA's] Commercial Arbitration Rules and the Code of
Ethics for Arbitrators are not so stringent as those in the federal statutes on judges.... (In
fact the arbitration rules and code do not contain any standards for disqualification as
such, though such standards are implicit in the disclosure requirements of the AAA's Rules
and the AAA-ABA Code.)
The [AAA] is in competition not only with other private arbitration services but with the
courts in providing – in the case of the private services, selling – an attractive form of
dispute settlement. It may set its standards as high or as low as it thinks its customers
want. The statute has a different purpose – to make arbitration effective by putting the
coercive force of the federal courts behind arbitration decrees that effect interstate
commerce or are otherwise of federal concern.... The statute does not provide a dispute
settlement mechanism; it facilitates private dispute settlement. The standards for
judicial intervention are therefore narrowly drawn to assure the basic integrity of the
arbitration process without meddling in it. Section 10 is full of words like corruption and
misbehavior and fraud. The standards it sets are minimum ones.... The fact that the AAA
went beyond the statutory standards in drafting its own code of ethics does not lower the
threshold for judicial intervention.
Is that persuasive? Compare Andros Compania Maritima, SA v. Marc Rich & Co., 579 F.2d
691, 699 (2d Cir. 1978), where the court remarked: “More fundamentally, the parties in a
judicial proceeding do not choose their judges as they do in arbitration.” Which way does
that cut?
For a different view, see Nariman, Standards of Behaviour of Arbitrators, 4 Arb. Int'l 311,
311-12 (1988):
[S]tandards of behaviour expected of arbitrators ... are no less stringent than those
demanded of judges; in fact, arbitrators are expected to behave a shade better since
judges are institutionally insulated by the established court-system, their judgments
being also subjected to the corrective scrutiny of an appeal.
See also AT&T Corporation v. Saudi Cable Co., 2 Lloyd's Rep. 127 (Ct. App. 2000) (“The courts
are responsible for the provision of public justice. If there are two standards I would
expect a lower threshold [for bias or lack of independence] to apply to courts of law than
applies to a private tribunal whose ‘judges’ are selected by the parties. After all, there is
an overriding public interest in the integrity of the administration of justice in the
courts”). How far does the rationale in Merit Insurance, quoted above, extend? What if the
parties agree to waive any challenge to the arbitrator's neutrality? and then, the
arbitrator turns out to be an employee of one party? Would Judge Posner have permitted
Dr. Wallersteiner to serve?

(c) National arbitration legislation requiring arbitrators to satisfy the same ethical standards
as judges. In some countries, arbitrators are subject to the same standards of impartiality
as judges. French New Code of Civil Procedure Article 341.
7. Burden of proof of arbitrator bias. The burden of demonstrating that an international award
should not be recognized because of arbitrator bias is on the party resisting enforcement
under most developed arbitration statutes. In general, this is a difficult burden to discharge.
Judgment of 6 July 1994, XXII Y.B. Comm. Arb. 702 (Oberlandesgericht Hamm) (1997) (rejecting
P "871" challenge to award based on alleged bias of arbitrators); Judgment of 3 September 1996, XXII
P "872" Y.B. Comm. Arb. 766 (Zutphen Arrondissementsrecht-bank) (1997) (rejecting challenge to
P "872"
foreign award based on alleged partiality of arbitral tribunal, where no facts were alleged to
support challenge); Judgment No. 1997-2 HKC 481 of 22 May 1997, XXIII Y.B. Comm. Arb. 660 (Hong
Kong Court of Appeal) (1998) (rejecting challenge to foreign award on alleged grounds of
arbitrator's partiality); Transocean Shipping Agency Ltd v. Black Sea Shipping, XXIII Y.B. Comm.
Arb. 713 (1998) (Indian public policy does not require non-recognition of Ukrainian arbitral
award made by sole arbitrator who was an officer of one of the parties).
8. Commonly-involved bases for alleged lack of arbitrator independence. In practice, the same
types of bases for finding arbitrator bias are frequently encountered. These are outlined below.
Importantly, these bases are generally best regarded as presumptive; that is, they apply most
fully in the absence of agreement between the parties with respect to standards for the
arbitrator's ethical conduct and in the absence of any waiver by a party. As discussed below, if
the parties so agree, most grounds for challenging an arbitrator's impartiality may be waived.
See infra p. 877.
(a) Overview of bases for arbitrator bias. For a summary of commonly-litigated bases for
finding arbitrator bias, see Toyota of Berkeley v. Automobile Salesman's Union Local 1095,
834 F.2d 751, 756 (9th Cir. 1987), cert. denied, 486 U.S. 1043 (1988):
[bias] include[s] an arbitrator's financial interest in the outcome of the arbitration, an
arbitrator's ruling on a grievance that directly concerned his own lucrative employment
for a considerable period of time, a family relationship that made the arbitrator's
impartiality suspect, the arbitrator's former employment by one of the parties, and the
arbitrator's employment by a firm represented by one of the parties' law firms.
See also Annotation, Setting Aside Arbitration Award on Ground of Interest or Bias of
Arbitrators, 56 A.L.R.3d 697; Hobet Mining, Inc. v. International Union, United Mine Workers,
877 F.Supp. 1011 (S.D.W. Va. 1994) (specifying four factors relevant to issue of arbitrator's
partiality: “(1) any personal interest, pecuniary or otherwise, the arbitrator has in the
proceedings; (2) the directness of the relationship between the arbitrator and the party
he is alleged to favor, keeping in mind that the relationship must be ‘substantial,’ rather
than ‘trivial,’ ... (3) the relationship's connection to the arbitration; and (4) the proximity
in time between the relationship and the arbitration proceeding.”).
(b) Financial interest in outcome of arbitration. The clearest basis for bias is the arbitrator's
material, undisclosed financial interest in the outcome of the arbitration. Middlesex
Mutual Ins. Co. v. Levine, 675 F.2d 1197 (11th Cir. 1982); In re Friedman, 213 N.Y.S. 369 (App.
Div. 1925) (award vacated because arbitrator borrowed money from party during
arbitration); Knickerbocker Textile Corp. v. Sheila-Lynn, Inc., 16 N.Y.S.2d 435, aff'd, 20
N.Y.S.2d 985 (App. Div. 1939) (award vacated because arbitrator was president of party to
first arbitration and arbitrators issued contemporaneous awards in favor of each other's
firms); Shirley Silk Co. v. American Silk Mills, Inc., 23 N.Y.S.2d 254 (App. Div. 1940) (same);
Hyman v. Pottberg's Ex'rs, 101 F.2d 262 (2d Cir. 1939) (vacating award because arbitrators
were also potential claimants); Rand v. Readington, 13 N.H. 72 (1842) (award vacated
because prevailing party was indebted to arbitrators and amounts received were
pledged to repay arbitrators' claims). In cases involving an arbitrator's ownership of de
minimis numbers of shares of one of the parties, courts have generally refused to vacate
the award. Standard Tankers (Bahamas) Co. v. Motor Tank Vessel, AKTI, 438 F.Supp. 153, 160
(E.D.N.Y. 1977).
(c) Prior involvement in parties' dispute. A second clear presumptive basis for bias is the
arbitrator's prior involvement in the parties' dispute, either as a lawyer, decision-maker,
or witness. Veritas Shipping Corp. v. Anglo-Canadian Cement, Ltd [1966] 1 Lloyd's L. Rep. 76
(Q.B. 1965). But see Employers Ins. of Wausau v. National Union Fire Ins. Co., 933 F.2d 1481,
1488-89 (9th Cir. 1991) (no bias where party-appointed arbitrator had previously provided
legal advice to party on an issue in the arbitration); Modern Brokerage Corp. v.
Massachusetts Bonding & Ins. Co., 56 F.Supp. 696 (S.D.N.Y. 1944).
 (d) Present or past employment by a party. An arbitrator's present employment by a party
should presumptively be a per se basis for finding bias. Veritas Shipping Corp. v. Anglo-
Canadian Cement, Ltd [1966] 1 Lloyd's L. Rep. 76 (Q.B. 1965) (arbitrator was managing
director of party who appointed him). Compare Transocean Shipping Agency Ltd v. Black
Sea Shipping, XXIII Y.B. Comm. Arb. 713 (1998) (Indian public policy does not require non-
recognition of Ukrainian arbitral award made by sole arbitrator who was an officer of one
of the parties); Logy Enterprises Ltd v. Haikou City Bonded Area Wansen Products Trading
Co., XXIII Y.B. Comm. Arb. 660 (1998) (arbitrator's status as high-ranking official of state
entity related to one party does not constitute bias); Judgment of 11 July 1992, VII Y.B.
P "872" Comm. Arb. 345 (Corte di Cassazione) (1982) (fact that co-arbitrator for defaulting party
P "873" was appointed by adverse party (a Romanian state entity) and was a Romanian state
official does not constitute bias).
As Fertilizer Corporation illustrates, it is less clear whether an arbitrator's past
employment or retention as a counsel on unrelated matters will presumptively sustain a
finding of bias. See Employers Insurance of Wausau v. National Union Fire Ins., 933 F.2d
1481 (9th Cir. 1991); Merit Ins. Co. v. Leatherby Ins. Co., 763 F.2d 673 (7th Cir. 1983); Imperial
Ethiopian Government v. Baruch-Foster Corp., 535 F.2d 334, 337 (5th Cir. 1976) (neutral
arbitrator advised party on unrelated matter in past); Austin South I, Ltd v. Barton-Malow
Co., 799 F.Supp. 1135 (M.D. Fla. 1992) (fact that arbitrator had briefly collaborated with
party, five years earlier in a different job, to make business development presentation
not grounds for finding partiality); Fertilizer Corp. of India v. IDI Mgt. Inc., 517 F.Supp. 948
(S.D. Ohio 1981) (party-appointed arbitrator had acted personally as counsel for party on
several past occasions).

(e) Direct, substantial business or personal relationship. If an arbitrator has substantial,

undisclosed business dealings with a party, or a close personal relationship, bias can
presumptively be found. Olson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 51 F.3d 157
(8th Cir. 1995) (vacating award where arbitrators failed to disclose that their employers
had ongoing business relations with one party); Middlesex Mutual Ins. Co. v. Levine, 675
F.2d 1197 (11th Cir. 1982); Sanko S.S. Co. v. Cook Industries, Inc., 495 F.2d 1260 (2d Cir. 1973)
(remanding for factual inquiry where arbitrator had business relations with party and its
attorney); Brandeis Intsel Ltd v. Calabrian Chemicals Corp., 656 F.Supp. 160 (S.D.N.Y. 1987);
Petroleum Cargo Carriers Ltd v. Unitas, Inc., 220 N.Y.S.2d 724, aff'd, 224 N.Y.S.2d 654 (1961)
(award vacated because arbitrator's firm received $350,000 in commissions from party).
Compare Woods v. Saturn Dist. Corp., 78 F.3d 424 (9th Cir. 1996) (rejecting bias claim based
on financial relationship of arbitrator with party which was disclosed); Cook Industries,
Inc. v. C. Itoh & Co. (America) Inc., 449 F.2d 106 (2d Cir. 1971), cert. denied, 405 U.S. 921 (1972)
(award upheld where arbitrator was employee of company with significant business
dealings with party); Texas Eastern Transmission Corp. v. Barnard, 177 F.Supp. 123 (D. Ky.),
rev'd on other grounds, 285 F.2d 536 (6th Cir. 1959) (fact that arbitrator was officer of a
bank, which used party's counsel, not grounds to vacate award).
(f) Family relationships. A family relationship between an arbitrator and one of the parties,
one of the parties' principals, or a key witness can also sustain a finding of bias. See Merit
Ins. Co. v. Leatherby Ins. Co., 763 F.2d 673 (7th Cir. 1983).
(g) Law firm “conflicts.” Arbitrators are often members of law firms. Although the arbitrator
himself may not have represented either of the parties, his partners or other colleagues
may have. When this occurs, difficult issues of bias arise.
It appears settled that the arbitrator's law firm's conflicts will presumptively be relevant
to assessing his impartiality. In general, however, national courts have been reluctant to
vacate awards where an arbitrator was not personally involved in representations that
were wholly unrelated to the arbitration. See Reed & Martin, Inc. v. Westinghouse Electric
Corp., 439 F.2d 1268 (2d Cir. 1971) (award upheld despite arbitrator's affiliation with law
firm that represented client with interest on legal issue identical to that of one party to
arbitration); Hunt v. Mobil Oil Corp., 654 F.Supp. 1487 (S.D.N.Y. 1987); Standard Tankers
(Bahamas) Co. v. Motor Tank Vessel, AKTI, 438 F.Supp. 153 (E.D.N.Y. 1977) (“the fact that
Smith's firm includes greater than twenty attorneys and that he was not directly involved
in the legal decisions regarding the majority of the actions described above (in which
[Smith's law firm represented one party]) substantiate the conclusion that these
‘relationships’ do not satisfy the statutory prerequisite”). Compare Erving v. Virginia
Squires Basketball Club, 468 F.2d 1064, 1067 & n.2 (2d Cir. 1972).
Suppose that, midway into an arbitration, one party hires the law firm with which the
chairman (or the other party's arbitrator) is associated. Can it challenge the arbitrator's
impartiality? Can the other party do so?
 (h) Arbitrator's conduct during arbitral proceedings as evidence of bias. An arbitrator's acts
and comments during the arbitral proceedings can either constitute misconduct or
evidence of bias. Commentators sometimes cite the example of an arbitrator, in a
proceeding between Italian and Norwegian parties who remarked, in quite direct terms,
that Italians were not reliable witnesses. Paulsson, Securing the Integrity, Impartiality and
Independence of Arbitrators: Judicial Intervention, 1993 Y.B. Arb. Inst. of Stockholm Cham.
Comm. 91, 93 (“Italians are all liars in these cases.”).
In practice, however, national courts have generally rejected claims that an arbitrator's
conduct was evidence of improper bias. Judgment of 24 November 1994, XXI Y.B. Comm.
P "873" Arb. 635 (Rotterdam Rechtbank) (1996) (rejecting challenge to award based on alleged
P "874" improper ex parte contacts by tribunal); Judgment of 24 February 1994, Kluwer
International Arbitration CD-Rom Case 25 (Cour d'Appel Paris) (arbitrators' refusal to
suspend arbitral proceedings pending resolution of judicial challenge not evidence of
bias); Fort Hill Builders, Inc. v. National Grange Mutual Ins. Co., 866 F.2d 11, 13-4 (1st Cir.
1989) (award upheld despite repeated hostile interruptions by arbitrator of one party's
counsel); Areca, Inc. v. Oppenheimer & Co., 960 F.Supp. 52 (S.D.N.Y. 1997) (“evident
partiality may not be shown by alleged procedural or evidentiary errors, by legitimate
efforts to move the case along, or by failure to follow the rules of evidence”); Fairchild &
Co. v. Richmond, Fredericksburg & Potomac RR Co., 516 F.Supp. 1305 (D.D.C. 1981).

(i) Discussion of merits prior to nomination. Lack of independence should presumptively be

found where an arbitrator has discussed the merits of the case with a party prior to
appointment and indicated his views. Metropolitan Property and Casualty Ins. Co. v. J.C.
Penney Casualty Ins. Co., 780 F.Supp. 885 (D. Conn. 1991).
(j) Ex parte contacts. Most institutional arbitration rules, as well as the IBA and AAA/ABA
codes of ethics, forbid ex parte contacts between the tribunal and the parties concerning
the substance of the arbitration. Even in the absence of institutional rules, undisclosed ex
parte contacts concerning the merits of the parties' dispute are presumptively regarded
as improper. For lower court decisions vacating awards for ex parte contacts, see Totem
Marine Tug & Barge, Inc. v. North American Towing, Inc., 607 F.2d 649 (5th Cir. 1979)
(arbitrator engaged in ex parte communications with one party's lawyers, without
notifying adverse party); MacNeal v. Rotfeld, 1990 U.S. Dist. Lexis 4371 (E.D. Pa. 1990);
Judgment of 3 April 1975, RIW 432 (Oberlandesgericht Hamburg, Germany) (July/August
1975) (refusing to enforce award on public policy grounds, based on material violation of
German procedural standards as consequence of arbitrator's consideration of ex parte
communications); Carolina-Virginia Fashion Exhibitors, Inc. v. Gunter, 230 S.E.2d 380 (N.C.
1976) (arbitrators' ex parte inspection of property held misconduct warranting vacation of
award). Compare Judgment of 24 November 1994, XXI Y.B. Comm. Arb. 635 (Rotterdam
Rechtbank) (1996).
A number of decisions have required evidence that ex parte contracts had a material
adverse impact on the complaining party's rights. Glass, Molders, Pottery, Plastics and
Allied Workers International Union v. Excelsior Foundry Co., 56 F.3d 844 (7th Cir. 1995) (“An
ex parte contact is not an automatic ground for vacating [an arbitral] award”); Remmey v.
Paine Webber, Inc., 32 F.3d 143 (4th Cir. 1994) (rejecting misconduct claim on grounds that
alleged ex parte contacts were not proven and, in any event, would have been
immaterial); National Bulk Carriers, Inc. v. Princess Mgt Co., 597 F.2d 819 (2d Cir. 1979) (even
assuming that settlement information was provided ex parte to tribunal, no evidence
that this affected deliberations); Spector v. Torenberg, 852 F.Supp. 201 (S.D.N.Y. 1994) (to
vacate award based upon ex parte contacts “a party must show that this conversation
deprived him of a hearing and influenced the outcome of the arbitration”); Austin South I,
Ltd v. Barton-Malow Co., 799 F.Supp. 1135 (M.D. Fla. 1992) (“mere fact that an arbitrator
conversed with a party at some point during the proceedings is insufficient to establish
‘evident partiality’”); Drexel Burnham Lambert, Inc. v. Pyles, 701 F.Supp. 217, 220 (N.D. Ga.
1988) (conversation between arbitrator and party during break in hearing does not
establish partiality).
If the parties agree to permit ex parte contacts between party-appointed arbitrators and
parties, most U.S. courts will not forbid this. See Employers Ins. of Wausau v. National
Union Fire Ins. Co., 933 F.2d 1481, 1490-91 (9th Cir. 1991) (no misconduct where panel
permitted (and both parties engaged in) ex parte contacts between party-appointed
arbitrators and parties).
 (k) Miscellaneous. National courts have considered, and usually rejected, a variety of other
challenges to arbitrators' neutrality. Remmey v. Paine Webber, Inc., 32 F.3d 143 (4th Cir.
1994) (rejecting claims that arbitrators lacked qualifications required by arbitration
agreement); International Produce, Inc. v. A/S Rosshavet, 638 F.2d 548 (2d Cir. 1981) (no
bias where arbitrator had been a witness in another case involving same law firms);
Andros Compania Maritima, SA v. Marc Rich & Co., 579 F.2d 691 (2d Cir. 1978) (upholding
award where neutral arbitrator had frequently appointed, and been appointed by, one
party-appointed arbitrator); Judgment of 15 May 1986, RIW pp. 816-819 (1986) (sole
arbitrator appointed by one party not necessarily biased); Cook Industries, Inc. v. C. Itoh
& Co. (America) Inc., 449 F.2d 106 (2d Cir. 1971), cert. denied, 405 U.S. 921 (1972) (award
upheld despite arbitrator's employment by company with substantial business dealings
with one party); Hayne, Miller & Farmi, Inc. v. Flume, 888 F.Supp. 949 (E.D. Wis. 1995) (“An
arbitrator may develop an opinion during the course of the hearing and even express it.”);
Smith v. Prudential Securities Inc., 846 F.Supp. 978 (M.D. Fla. 1994) (rejecting claim that
arbitrator displayed gender bias against party's female counsel); Hunt v. Mobil Oil Corp.,
P "874" 654 F.Supp. 1487 (S.D.N.Y. 1987) (rejecting claim that the arbitrators engaged in
P "875" misconduct by allegedly charging excessive fees); Gidarma Societa Italiana di
Armamento SpA v. Holt Marine Indus., Inc., 515 F.Supp. 1302 (S.D.N.Y. 1981) (rejecting bias
claim based on arbitrator's alleged motivation to protect maritime arbitration
profession); Transmarine Seaways Corp. v. Marc Rich & Co., 480 F.Supp. 352 (S.D.N.Y. 1979)
(arbitrator's company represented a firm that was adverse to party in an unrelated
matter); Babcock & Wilcox Co. v. PMAC, Ltd, 863 S.W.2d 225 (Tex. Ct. App. 1993) (rejecting
claim that arbitrator committed misconduct by handling out business card at hearing
and making “conspicuous overtures” for future work).
9. “Appearance” of partiality. It is not clear whether an “appearance” of partiality by an
arbitrator will suffice to vacate an award under the FAA or otherwise. For suggestions, like that
in Fertilizer Corporation, that an appearance of partiality does not constitute “bias,” see
Apperson v. Fleet Carrier Corp., 879 F.2d 1344, 1358 (6th Cir. 1989) (rejecting “appearance of bias”
as basis for challenging award under §10(b)), cert. denied, 110 S.Ct. 2206 (1990); Bernstein
Seawell & Kove v. Bosarge, 813 F.2d 726, 732 (5th Cir. 1987); Pitta v. Hotel Ass'n of New York City,
Inc., 806 F.2d 419, 423 (2d Cir. 1986); Dominick & Dominick, Inc. v. Investor Services & Savings
Corp., 1991 U.S. Dist. Lexis 9960 (S.D.N.Y. 1991); Hunt v. Mobil Oil Corp., 654 F.Supp. 1487, 1497-98
(S.D.N.Y. 1987) (“‘Evident partiality’ means more than a mere appearance of bias”); AT&T
Corporation v. Saudi Cable Co., 2 Lloyd's Rep. 201 (Ct. App. 2000) (“The court considers on all the
material which is placed before it whether there is any real danger of unconscious bias on the
part of the decision maker.”).
On the other hand, what other rationale explains Commonwealth Coatings? True “bias” can
virtually never be proved, at least if it connotes a subjective state-of-mind of the arbitrator.
See Morelite Construction Corp. v. N.Y.C. District Council Carpenters' Benefit Funds, 748 F.2d 79 (2d
Cir. 1984):
Bias is always difficult, and indeed often impossible, to “prove.” Unless an arbitrator publicly
announces his partiality, or is overheard in a moment of private admission, it is difficult to
imagine how ‘proof’ would be obtained.
That sort of bias can usually only be inferred from external relations, statements, or actions
(i.e., “appearances”). Is it useful to state broadly that a mere “appearance” of bias is not
grounds for vacating an award?
10. Domestic U.S. tradition of different standards for “party-nominated” and “neutral”
arbitrators. Note that the disqualified arbitrator in Commonwealth Coatings was the “neutral”
chairman of a three-person tribunal. Note also that in Fertilizer Corporation the court relied on
the fact that the challenged arbitrator was party-nominated. Are different standards of
neutrality applicable to party-nominated and “neutral” arbitrators?
(a) No distinction between “party-nominated” and “neutral” arbitrators under §10(b). Section
10(b) of the FAA does not make any express distinction between the standards of
impartiality applicable to party-nominated and “neutral” arbitrators. It permits an award
to be vacated for “evident partiality ... in the arbitrators, or either of them.” 9 U.S.C. §10(b)
(emphasis added). A few federal courts have suggested that this implies that a uniform
standard of impartiality applies to all the arbitrators. Standard Tankers (Bahamas) Co. v.
Motor Tank Vessel AKTI, 438 F.Supp. 153, 159 (E.D.N.Y. 1977). See also IBA Ethics. Compare
ABA/AAA Code, supra pp. 47, 626-27.
(b) Customary distinction between “party-nominated” and “neutral” arbitrators in the United
States. Historically, party-nominated arbitrators in the United States have been
understood to have a measure of partiality towards the party that appointed them. This
view has played a significant role in actions to vacate arbitral awards under the FAA,
particularly where there were indications that the parties proceeded with this view in
mind (through industry practice or express incorporation of institutional rules permitting
partial party-nominated arbitrators). See Stef Shipping Corp. v. Norris Grain Co., 209
F.Supp. 249 (S.D.N.Y. 1962) (party-appointed arbitrators “are partisans once removed from
the actual controversy”); Petition of Dover SS Co., 143 F.Supp. 738, 740-41 (S.D.N.Y. 1956)
(“the designation by the parties themselves of arbitrators who may not be completely
disinterested, accords with the generally accepted practice in arbitration proceedings of
this kind”); see supra pp. 626-27, discussing the AAA/ABA Code of Ethics and U.S. decisions
under the FAA.
 (c) Party-nominated and “neutral” arbitrators under AAA Commercial Rules. Consider the
excerpted portions of the 1999 AAA Commercial Arbitration Rules, and in particular the
differing treatment of “neutral” and party-nominated arbitrators. What precisely are the
P "875" differences in the obligations on each category of arbitrator? Is the AAA approach wise?
P "876" What limits are there on the partiality or conduct of a party-nominated arbitrator?
(d) Limits on bias on partial arbitrators. There are limits on the extent of “partiality” of a
party-nominated arbitrator, even under the traditional U.S. and AAA/ABA Code approach.
See, for example, the decision excerpted above in Veritas Shipping. See also H. Holtzmann
& J. Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial Arbitration
409 (1989). What should these limits be? For a lower court decision refusing to accept an
argument that “actual,” as opposed to potential, bias should be non-waivable, see
Behring Int'l Inc. v. Local 295 etc., 449 F.Supp. 513, 518 (E.D.N.Y. 1978). Suppose Dr.
Wallersteiner had not previously been involved in the dispute with Veritas. Could he have
been appointed then as an arbitrator, notwithstanding his position with Anglo-Canadian?
What if the parties' agreement incorporated rules allowing partial party-nominated
arbitrators?
(e) Treatment of “party-nominated” and “neutral” arbitrators under leading international
arbitration rules. Compare the AAA Commercial Arbitration Rules to Article 7(1) of the 1998
ICC Rules, Article 5-11 of the 1998 LCIA Rules, and Articles 9-10 of the UNCITRAL Arbitration
Rules. Are there different standards of neutrality or independence for party-nominated
and other arbitrators under these rules? Compare also the approach of the IBA Ethics.
Suppose that an arbitration is conducted pursuant to an agreement incorporating
institutional rules requiring that all arbitrators (including party-nominated arbitrators)
be independent. If a party-nominated arbitrator behaves in accordance with traditional
U.S. standards (e.g., is predisposed towards “his” party), may the award be vacated for
bias under FAA §10(b)?

(f) Agreement to non-neutral party-nominated arbitrators. Lower U.S. court decisions have
generally rejected claims of bias based upon professional relationships where these were
contemplated by the appointment mechanism agreed to by the parties, or where the
parties intended party-appointed arbitrators to act as advocates. Catz American Co. v.
Pearl Grange Fruit Exchange, Inc., 292 F.Supp. 549 (S.D.N.Y. 1968); Petrol Corp. v.
Groupement D'Achat des Carburants, 84 F.Supp. 446, 448 (S.D.N.Y. 1949) (“no reason
appears why the parties could not mutually agree to let one arbitrator decide the issue,
thus treating him as an umpire and the other arbitrators as advocates and agents of the
parties designating them”); Modern Brokerage Corp. v. Massachusetts B. & I. Co., 56
F.Supp. 696, 697 (S.D.N.Y. 1944) (a party can agree to arbitration before a biased
arbitrator, provided that the bias is disclosed); Astoria Medical Group v. Health Ins. Plan,
227 N.Y.S.2d 401 (Ct. App. 1962). See also Metropolitan Property and Casualty Ins. Co. v. J.C.
Penney Casualty Ins. Co., 780 F.Supp. 885 (D. Conn. 1991).
Reread the quotation from Judge Posner's opinion in Merit Ins., supra p. 871. How would
Judge Posner answer questions about the parties' competence to agree upon reduced (or
heightened) ethical standards and independence obligations for arbitrators?

(g) Wisdom of traditional U.S. distinction between “party-appointed” and “neutral” arbitrators.
Is it wise to permit party-nominated arbitrators to be less independent than the
presiding (or sole) arbitrator? If this is what the parties desire, why interfere with their
choice? How clear an agreement on “less independent” arbitrators should be required
before they will be appropriate? How much “less independent” may arbitrators be?
(h) Ethical standards for non-neutral arbitrators. Even where a court permits non-neutral
party-nominated arbitrators, U.S. common law and §10(b) generally impose minimum
standards of fairness:
Partisan he may be, but not dishonest. Like all arbitrators, the arbitrator selected by a
party must (unless the requirement is waived) take the prescribed oath that he will
“faithfully and fairly ... hear and examine the matters in controversy and ... make a just
award according to the best of [his] understanding.” And, if either one of the party-
appointed arbitrators fails to act in accordance with such oath, the award may be
attacked on the ground that it is the product of “evident partiality or corruption.”
Astoria Medical Group v. Health Ins. Plan, 227 N.Y.S.2d 401 (App. Div. 1962). See
Metropolitan Property and Casualty Ins. Co. v. J.C. Penney Casualty Ins. Co., 780 F.Supp. 885
(D. Conn. 1991); Aetna Casualty and Surety Co. v. Grabbert, 590 A.2d 88, 93-94 (R.I. 1991)
(requiring “ethical obligation to act in good faith and with integrity and fairness”); Bacon
Assoc. Inc. v. Tri County Asphalt Corp., 86 N.J. 179, 190-91 (1981).
What if the parties agree that co-arbitrators may be advocates, with their minds made up
in advance? Does the FAA permit this?

P "876" 11. Judicial decisions relying on tribunal's unanimity in rejecting bias claim. The court in Fertilizer
P "877" Corporation and Justice Fostas' dissent in Commonwealth Coatings relied on the fact that the
arbitral award was unanimous. The implicit or explicit point is that even the party-appointed
arbitrator of the party resisting enforcement agreed with the award's result and, therefore, any
bias was either harmless error or of trivial importance. Other courts have adopted similar
logic. See Merit Ins. Co. v. Leatherby Ins. Co., 714 F.2d 673, 683 (7th Cir. 1983).
 Is it material to a charge of bias that the award was unanimous? Recall that an award can be
vacated if all three members of the tribunal did not hear the evidence and participate in
deliberations. See supra p. 844. Is the principle underlying that rule consistent with a harmless
error approach to arbitrator bias? Could a unanimous vote overcome a clear showing of real
bias (e.g., a direct financial stake or bribe)?
12. Effect of challenge procedure under institutional rules on ability to vacate award under
national law? As the excerpts above from the AAA International Rules illustrate, leading
institutional arbitration rules impose standards of impartiality on, and establish procedures
for challenging, arbitrators. Most of these rules specifically provide that the institution's
decisions on challenges are final. See ICC Rules Article 7(4); UNCITRAL Rules Articles 9-12; AAA
International Rules Articles 7-9. See also supra pp. 649-50 for a more detailed discussion. What
effect do these rules have on the statutory standards under national law for arbitrator
impartiality?
Suppose that an arbitrator complies with the applicable institutional rules concerning
disclosure and a party unsuccessfully makes an institutional challenge. Does the failure of such
a challenge preclude a later claim under a national arbitration statute, even if the standards
under national law are higher than the institutional standards and would otherwise result in
vacating the award? Although the answer in most jurisdictions is very likely “no,” there are few
directly applicable national court decisions. See supra pp. 649-50.
13. Effect of prospective waiver of right to seek judicial review of appointing authority's
resolution of challenge to arbitrator. Some institutional rules expressly or impliedly require
parties to waive any right to seek judicial review of an appointing authority's resolution of a
challenge. See LCIA Rules Article 3(9) (“To the extent permitted by the law of the place of
arbitration the parties shall be taken to have waived any right of appeal ...”); ICC Rules Article
7(4) (decisions “shall be final”). What effect do such waivers have? In general, U.S. courts have
held that prospective waivers of rights to challenge final arbitral awards are not effective as to
FAA and New York Convention grounds. See supra pp. 743-44. Should a different approach be
taken to a specific waiver dealing with a subject – independence – that is highly judgmental?
See also Judgment of 15 May 1985, Cour d'appel, Paris, reported in (1985) Revue de l'Arbitrage
147 (Paris Court of Appeals holds that in international arbitration, ICC Rules are exclusive basis
for challenge); Judgment No. 8469 of 11 July 1992, XXII Y.B. Comm. Arb. 715 (Corte di Cassazione)
(1997) (rejecting challenge to award based on alleged partiality of arbitrators; relying on party's
acceptance of rules of foreign (Romanian) arbitral institution).
In principle, there is a substantial argument that an institutional challenge procedure cannot
wholly insulate an arbitral award from judicial review. There are limits on the extent to which
parties may validly consent directly to biased arbitrators. See supra pp. 649-50. Likewise, there
must also be limits to the enforceability of a waiver resulting from institutional challenge
procedures. Suppose, for example, that Dr. Wallersteiner survived an institutional challenge.
Nevertheless, the parties' acceptance of institutional rules, providing expressly that
institutional decisions are “final,” will (and should) significantly influence analysis in most
jurisdictions. This is particularly true in the United States, given the absence of precisely-
defined standards under §10(b) under the FAA.
Conversely, could the standard of impartiality contained in a set of institutional rules raise the
standard applicable under national law? Suppose, for example, that specific restrictions in the
parties' arbitration agreement or applicable institutional rules were violated by an arbitrator,
but this only came to light after the award was made. Merit Ins. Co. v. Leatherby Ins. Co., 714 F.2d
673, 679 (7th Cir. 1983), cert. denied, 464 U.S. 1009 (1983) (fact that AAA might have upheld
challenge to arbitrator not relevant to application of FAA's “minimum standard”). Would this
not be a basis for concluding that “[t]he composition of the arbitral authority or the arbitral
procedure was not in accordance with the agreement of the parties” under Article V(1)(d) of the
Convention?
14. Waiver of claims of arbitrator bias. Under virtually all national laws, claims that an
P "877" arbitrator is biased or lacks independence must be raised promptly or will be waived.
P "878" Consider again the Technoyexport case and the court's disposition of waiver claims.
(a) Waiver of claims of arbitrator bias under national arbitration legislation. Consider Articles 4
and 13 of the UNCITRAL Model Law. How do they deal with the timing for raising
objections to an arbitrator's independence? Compare Article 180 of the Swiss Law on
Private International Law.
 (b) Waiver of claims of arbitrator bias under the FAA. A number of lower U.S. court decisions
have required that objections as to bias be made in a timely fashion to the arbitration
tribunal itself, or to the appointing authority, when the facts underlying the claim were or
reasonably should have been available. Remmey v. Paine Webber, Inc., 32 F.3d 143, 146
(4th Cir. 1994) (party's alleged failure to discover facts later asserted in post-award
challenge to arbitrator's impartiality suggested impermissible effort to retain “second
bite at the apple”); Marino v. Writers Guild of Am., 992 F.2d 1480, 1484 (9th Cir. 1993)
(waiver “extends even to questions such as arbitrator bias, that go to the very heart of
arbitral fairness”); Health Services Management Corp. v. Hughes, 975 F.2d 1253 (7th Cir.
1992) (parties' failure to exercise right to challenge arbitrator under AAA Rules constitutes
waiver of right to object to bias at award confirmation stage); York Research Corp. v.
Landgarten, 927 F.2d 119 (2d Cir. 1991) (same); Apperson v. Fleet Carrier Corp., 879 F.2d 1344,
1358-59 (6th Cir. 1989), cert. denied, 110 S.Ct. 2206 (1990); American Construction Machinery
& Equipment Corp. v. Mechanised Construction of Pakistan Ltd, 659 F.Supp. 426 (S.D.N.Y.
1987) (signing ICC terms of reference is waiver of objections to ICC's selection of
arbitrator).
For a decision holding that a party's objection to the arbitrator's alleged bias, but failure
to formally challenge constituted a waiver, see Garfield & Co. v. Wiest, 308 F.Supp. 1107
(S.D.N.Y. 1970), aff'd on other grounds, 432 F.2d 849 (2d Cir. 1970).

(c) Possibility of non-waivable bias. As discussed above, however, there are some types of
defects in the tribunal that appear to be non-waivable. See supra pp. 649-50. Consider
the alleged “bias” or lack of independence that was held to have been waived in
Technoyexport. If outright bribery and equivalent corruption can be waived, what cannot
be? Was it important that IDTS itself initiated the allegedly corrupt conduct? Suppose a
party accidentally learns of bribery by the other party, but does nothing at the time. Can
it waive claims based on the corruption? See supra pp. 649-50 for U.S. decisions
suggesting that most such waivers are enforceable. For a lower court decision refusing to
accept an argument that “actual,” as opposed to “potential,” bias of an arbitration should
be non-waivable, see Behring Int'l Inc. v. Local 295 etc., 449 F.Supp. 513, 518 (E.D.N.Y. 1978).
15. U.S. court-ordered discovery into potential sources of bias. It appears that, in principle, the
discovery provisions of the Federal Rules of Civil Procedure are available in actions to enforce
arbitral awards under the FAA. Andros Compania Maritima, SA v. Marc Rich & Co., 579 F.2d 691
(2d Cir. 1978); Continental Materials Corp. v. Gaddis Mining Co., 306 F.2d 952 (10th Cir. 1962)
(permitting discovery where arbitrator's bills to parties indicated he had delegated decision
to third party); Fertilizantes Fosfatados Mexicanos, SA v. Chemical Carriers, Inc., 751 F.Supp. 467
(S.D.N.Y. 1990) (after several hundred page dissenting opinion by co-arbitrator, charging
majority with bias and misconduct, district court conducted evidentiary hearing; charges
rejected as “unfair broadside attacks”); Hunt v. Mobil Oil Corp., 654 F.Supp. 1487, 1495 n.13
(S.D.N.Y. 1987). Compare Imperial Ethiopian Gov't v. Baruch-Foster Corp., 535 F.2d 334, 336 (5th
Cir. 1976) (raising question whether Federal Rules of Civil Procedure discovery provisions are
applicable at all in summary FAA enforcement action, but concluding that, even if they are,
district judge properly exercised discretion not to require broad discovery).
Nevertheless, at the enforcement stage, U.S. courts will generally not order discovery relating
to potential bias of arbitrators unless the party resisting enforcement provides strong,
independent evidence of possible bias. See Woods v. Saturn Dist. Corp., 78 F.3d 424 (9th Cir.
1996) (no discovery permitted into arbitrators' alleged bias); Andros Compania Maritima, SA v.
Marc Rich & Co., 579 F.2d 691 (2d Cir. 1978) (refusing to permit discovery into arbitrator's
relations with party and party-appointed arbitrator); Hunt v. Mobil Oil Corp., 654 F.Supp. 1487,
1495-96 (S.D.N.Y. 1987) (“inordinate delay” if “discovery and an evidentiary hearing were
ordered”); Samuels v. Beheer, BV, 500 F.Supp. 1357, 1362 (S.D.N.Y. 1980); Fukaya Trading Co. v.
Eastern Marine Corp., 322 F.Supp. 278 (E.D. La. 1971) (refusing discovery to determine arbitrators'
“motives”).
16. Arbitrators not necessarily biased if appointed by only one party. As discussed above, if one
party refuses to participate in the arbitral proceedings, some arbitration agreements permit
the other party either to appoint all the members of a three-person tribunal, to appoint two
arbitrators (who then select a chairman), or to appoint the sole arbitrator. There is no per se
P "878" rule against such agreements. See supra pp. 623-24; Judgment of 6 July 1994, XXII Y.B. Comm.
P "879" Arb. 702 (Oberlandesgericht Hamm) (1997) (arbitral award against non-Yugoslav party not
unenforceable where non-Yugoslav party failed to appoint arbitrator and three Yugoslav
arbitrators were appointed).
17. Fraud under §10(a) of the FAA. Section 10(a) of the domestic FAA permits the non-
enforcement of an arbitration award based on “fraud.” This typically refers to deliberate efforts
to deceive the tribunal and adverse party. Even in domestic arbitration cases, it is exceedingly
difficult to establish fraud. See Foster v. Turley, 808 F.2d 38, 42 (10th Cir. 1986); Dogherra v.
Safeway Stores, Inc., 679 F.2d 1293, 1297 (9th Cir. 1982) (“courts must be slow to vacate an arbitral
award on the ground of fraud”); Washington-Baltimore Newspaper Guild Local 35 v. Washington
Post Co., 442 F.2d 1234, 1238-39 (D.C. Cir. 1971). The same is true in the context of foreign
judgments. G. Born, International Civil Litigation in United States Courts 985-86 (3d ed. 1996).
A standard formulation of the showing that is required under the domestic FAA is:
First, the movant must establish the fraud by clear and convincing evidence. Second, the fraud
must not have been discoverable upon the exercise of due diligence prior to or during the
arbitration. Third, the person seeking to vacate the award must demonstrate that the fraud
materially related to an issue in the arbitration. Bonar v. Dean Witter Reynolds, Inc., 835 F.2d
 1378, 1383 (11th Cir. 1988).
Other courts have adopted similar formulae. Foster v. Turley, 808 F.2d 38, 42 (10th Cir. 1986);
Dogherra v. Safeway Stores, Inc., 679 F.2d 1293, 1297 (9th Cir. 1982) (“The fraud must not have
been discoverable upon the exercise of due diligence prior to the arbitration.... The fraud must
materially relate to an issue in the arbitration ... [and] must be established by clear and
convincing evidence.”); Shearson Hayden Stone, Inc. v. Liang, 653 F.2d 310, 313 (7th Cir. 1981);
Drayer v. Krasner, 512 F.2d 348, 352 (2d Cir. 1978); A.G. Edwards & Sons, Inc. v. Petrucci, 525 So.2d
923 (Fla. App. 1988).
18. Perjury and fabricated or altered evidence under §10(a) of the FAA. Section 10(a)'s fraud
exception is most often invoked in cases involving allegations of perjured testimony or
fabricated evidence. “Intentionally giving false testimony in an arbitration proceeding would
constitute fraud.”National Oil Corp. v. Libyan Sun Oil Co., 733 F.Supp. 800, 814 (D. Del. 1990). See
Dogherra v. Safeway Stores, Inc., 679 F.2d 1293, 1297 (9th Cir.), cert. denied, 459 U.S. 990 (1982). For
the type of extreme case that will satisfy the fraud exception, see Bonar v. Dean Witter
Reynolds, Inc., 835 F.2d 1378 (11th Cir. 1988), where an “expert witness” was held to have “lied
about all of his credentials – where he went to school, what degrees he had, and what jobs he
had held.” Some courts have also suggested that withholding material evidence may also be
analogous to providing perjured testimony. Biotronik etc. v. Medford Medical Instrument Co., 415
F.Supp. 133 (D.N.J. 1976).
Even if perjured testimony, or the equivalent, is shown, an award will not be vacated for fraud if
the complaining party “had an opportunity to rebut his opponent's claims at the arbitration
hearing.”Biotronik etc. v. Medford Medical Instrument Co., 415 F.Supp. 133, 137 (D.N.J. 1976). See
Waterside Ocean Navigation Co. v. International Navigation Ltd, 737 F.2d 150, 153 (2d Cir. 1984);
National Oil Corp. v. Libyan Sun Oil Co., 733 F.Supp. 800, 814 (D. Del. 1990); Mobil Oil Indonesia
Inc. v. Asamera Oil (Indonesia) Ltd, 487 F.Supp. 63 (S.D.N.Y. 1980); Kirschner v. West Co., 247
F.Supp. 550 (E.D. Pa.), aff'd per curiam, 353 F.2d 537 (3d Cir. 1965), cert. denied, 383 U.S. 945 (1966).
See also A.G. Edwards & Sons, Inc. v. McCollough, 967 F.2d 1401 (9th Cir. 1992) (reversing district
court decision vacating arbitral award, where district judge held that prevailing parties'
submission of two meritless arguments to arbitrators constituted “undue means” under §10(a)
(1)).
U.S. courts have generally rejected claims of fraud based upon alleged misstatements of fact in
the arbitration. Local 261 v. Great Northern Paper Co., 118 L.R.R.M. 2317 (D. Me. 1984); Newark
Stereotypers' Union No. 18 v. Newark Morning Ledger Co., 397 F.2d 594, 600 (3d Cir.), cert. denied,
393 U.S. 954 (1968).
For an English judicial decision addressing the issue, see Westacre Investments Inc. v.
Jugoimport-SDPR Holdings Co., [1988] 4 All ER 570 (“Where a party to a foreign New York
Convention arbitration award alleges at the enforcement stage that it has been obtained by
perjured evidence that party will not normally be permitted to adduce in the English courts
additional evidence to make good that allegation unless it is established that: (i) the evidence
sought to be adduced is of sufficient cogency and weight to be likely to have materially
influenced the arbitrators' conclusion had it been advanced at the hearing; and (ii) the
evidence was not available or reasonably obtainable either (a) at the time of the hearing of the
P "879"
P "880"
arbitration; or (b) at such time as would have enabled the party concerned to have adduced
it in the court of supervisory jurisdiction to support an application to reverse the arbitrators'
award if such procedure were available.”).
19. Fraud under the New York Convention. It is not clear whether or not fraud is a defense to
enforcement under the New York Convention. In general, however, lower U.S. courts have taken
seriously the argument that the Convention's public policy exception incorporates a fraud
defense. National Oil Corp. v. Libyan Sun Oil Co., 733 F.Supp. 800, 813 n.19 (D. Del. 1990); Biotronik
etc. v. Medford Medical Instrument Co., 415 F.Supp. 133, 137 (D.N.J. 1976).
8. Disputes Not “Capable of Settlement” by Arbitration
As noted above, Article V(2)(a) of the Convention permits national courts to deny recognition to
arbitral awards that concern a subject matter that is not capable of settlement by arbitration.
(106) The “non-arbitrability” doctrine is discussed in detail in Chapter 3 above, as a defense to
the enforceability of arbitration agreements. That discussion is generally relevant in actions to
enforce arbitration awards: an arbitral award dealing with non-arbitral claims can usually be
resisted on the same grounds that would have been available in a defense to an arbitration
agreement.
One qualification is important. If a party does not challenge the arbitrability of particular
disputes or claims, it may later be deemed to have waived jurisdictional objections thereto.
Although there is little precedent, a party's arbitration (without reservation) of particular
claims may very well constitute an agreement to arbitrate an existing dispute. Likewise,
participation in an arbitration without raising procedural objections will generally constitute a
waiver of those objections in later enforcement proceedings. (107)
Some authorities suggest that participation in an arbitration of claims which are non-
arbitrable under mandatory national law or public policy will not produce an enforceable
award. (108) On the other hand, there is also precedent suggesting that parties may enter into
enforceable agreements to arbitrate existing claims – even if those claims are ordinarily non-
arbitrable. (109) The latter view is more consistent with the historic rationale for the non-
arbitrability doctrine. (110)
P "880"
References
1) See supra pp. 20-22, 706-07.
2) See infra pp. 791-93.
3) See supra pp. 736-37.
4) The Convention thus does not require either expeditious or efficient procedural
mechanisms for enforcing Convention awards; it merely requires signatory states to use
procedures no more cumbersome than their domestic enforcement procedures. New York
Convention Article III.
5) Inter-American Convention Articles 4 & 5.
6) UNCITRAL Model Law Articles 35 & 36; see infra pp. 791-92.
7) Swiss Law on Private International Law, Article 194; see infra pp. 791-92.
8) English Arbitration Act, 1996, §§66-71, 99-104; French New Code of Civil Procedure Articles
1476-79, 1500. 1501-1502.
9) 9 U.S.C. §207 (emphasis added). The second chapter of the FAA does not contain a
separate list of exceptions to the general obligation to recognize arbitration awards
subject to the Convention.
10) As discussed above, see supra pp. 727-28, if a “non-domestic” award is made in the United
States, authorities are divided on the question whether non-Article V exceptions may be
relied on.
11) See supra pp. 704-05.
12) See supra pp. 707-08 & infra 792-93.
13) UNCITRAL Model Law Article 34(2)(a).
14) UNCITRAL Model Law Article 36(2)(a).
15) Swiss Law on Private International Law Article 190(2).
16) 9 U.S.C. §9. The section continues:
If no court is specified in the agreement of the parties, then such application may be
made to the United States court in and for the district within which such award was made.
Notice of the application shall be served upon the adverse party, and thereupon the
court shall have jurisdiction of such party as though he had appeared generally in the
proceeding. If the adverse party is a resident of the district within which the award was
made, such service shall be made upon the adverse party or his attorney as prescribed by
law for service of notice of motion in an action in the same court. If the adverse party
shall be a non-resident, then the notice of the application shall be served by the marshal
of any district within which the adverse party may be found in like manner as other
process of the court.

17) Diapulse Corp. of Am. v. Carba, Ltd, 626 F.2d 1108 (2d Cir. 1980). See infra pp. 793-94; Note,
Judicial Review of Arbitration Awards on the Merits, 63 Harv. L. Rev. 681 (1950).
18) See supra pp. 29-30 & infra pp. 791-92.
19) See infra p. 791.
20) See infra pp. 797-813.
21) Judgment No. 93Da 53054 of 14 February 1995, XXI Y.B. Comm. Arb. 612 (Korean Supreme
Court) (1996) (Article IV does not require that certified translation be personally prepared
by individual making certification); Juangdong New Technology v. Chin Shing, Hong Kong S.
Court 1991, XVIII Y.B. Comm. Arb. 385 (1993) (Article IV satisfied notwithstanding
petitioner's failure to supply original of arbitral award); Zurich Commercial Court, XVII Y.B.
Comm. Arb. 584 (1992) (“one should not apply too strict a standard to the formal
requirements for the submission of documents ... when the conditions for recognition are
undisputed and materially beyond doubt”); Bergesen v. Joseph Muller Corp., 710 F.2d 928,
934 (2d Cir. 1983) (refusing to require “duly authenticated copy of duly authenticated
original”; accepting affidavit from tribunal chairman as to authenticity of award); Geotech
Lizenz AG v. Evergreen Systems, Inc., 697 F.Supp. 1248, 1252-53 (E.D.N.Y. 1988); OGH
17/11/1965, I Y.B. Comm. Arb. 182 (1976) (Article IV satisfied notwithstanding petitioner's
failure to produce copy of underlying arbitration agreement). Compare Vicere Livio v.
Prodexport, Corte di Cassazione, May 26, 1981, No. 3456, VII Y.B. Comm. Arb. 345 (1982)
(refusing to enforce award on grounds that Article IV was not complied with because of
petitioner's failure to supply copy of arbitration agreement “at the time of [its]
application” for enforcement); Judgment of 4 February 1993, XIX Y.B. Comm. Arb. 700 (1994)
(Bologna Corte di Appello) (refusing to enforce final arbitral award on grounds that Article
VI was not complied with because petitioner failed to produce original or certified copy
of interim arbitral award (although it did produce original of final award); Jassica SA v.
Ditta Pioacchino Polojaz, Corte di Cassazione, Feb. 12, 1987, No. 1526, XVII Y.B. Comm. Arb.
525 (1992) (same). See generally A. van den Berg, The New York Convention of 1958 246-63
(1981).
22) See infra p. 793; Fertilizer Corp. of India v. IDI Mgt., Inc., 517 F.Supp. 948, 951 (1981); A. van
den Berg, The New York Convention of 1958 13-15 (1981).
23) UNCITRAL Model Law Article 35(2).
24) 9 U.S.C. §13.
25) Swiss Law on Private International Law Article 193; French New Code of Civil Procedure
Article 1477.
26) XI Y.B. Comm. Arb. 508 (1986).
27) 508 F.2d 969 (2d Cir. 1974).
28) See New York Convention Article V; UNCITRAL Model Law Articles 34 and 35; Swiss Law on
Private International Law Article 190; FAA, 9 U.S.C. §10.
29) New York Convention Article V(1)(a); Inter-American Convention Article 5(1)(a); 1961
European Convention Article IX(1)(a).
30) New York Convention Article V(1)(b); Inter-American Convention Article 5(1)(b); 1961
European Convention Article IX(1)(b).
31) New York Convention Article V(1)(c); Inter-American Convention Article 5(1)(c); 1961
European Convention IX(1)(c).
32) New York Convention Article V(1)(d); Inter-American Convention Article 5(1)(d); 1961
European Convention Article IX(1)(d).
33) New York Convention Article V(1)(e); Inter-American Convention Article 5(1)(e).
34) New York Convention Article V(2)(a); Inter-American Convention Article 5(2)(a).
35) New York Convention Article V(2)(b); Inter-American Convention Article 5(2)(b).
36) New York Convention Article VI; Inter-American Convention Article 6.
37) See supra pp. 780-82.
38) See supra pp. 791-92 & infra pp. 809-10.
39) See supra pp. 791-92 & infra pp. 809-10.
40) For commentary, see Domke, Arbitral Awards Without Written Opinions: Comparative
Aspects of International Commercial Arbitration, in XXth Century Comparative and Conflicts
Law – Legal Essays in Honor of Hessel E. Yntema (1961); Note, Manifest Disregard of the Law
in International Commercial Arbitration, 28 Colum. J. Trans. L. 449 (1990); Comment,
International Commercial Arbitration Under the United Nations Convention and the
Amended Federal Arbitration Statute, 47 Wash. L. Rev. 441 (1972); Note, Judicial Review of
Arbitration Awards on the Merits, 63 Harv. L. Rev. 681 (1950).
41) New York Convention Article V; Inter-American Convention Article 5.
42) Burchell v. Marsh, 58 U.S. 344 (1855).
43) Even contemporary decisions are not quite as deferential as one Scottish decision from
the last century, declaring that an arbitrator “may believe what nobody else believes, and
he may disbelieve what all the world believes. He may overlook or flagrantly misapply
the most ordinary principles of law, and there is no appeal for those who have chosen to
submit themselves to his despotic power.”Mitchell v. Cable [1848] 10 D. 1297.
44) The “question of interpretation of the [parties'] agreement is a question for the arbitrator.
It is the arbitrator's construction which was bargained for.”United Steelworkers v.
Enterprise Wheel & Car Corp., 363 U.S. 593, 599 (1960). See United Paperworkers Int'l Union v.
Misco, Inc., 484 U.S. 29, 38 (1987) (“Because the parties have contracted to have disputes
settled by an arbitrator chosen by them rather than by a judge, it is the arbitrator's view
of the facts and the meaning of the contract that they have agreed to accept ... as long as
the arbitrator is even arguably construing or applying the contract and acting within the
scope of his authority, that a court is convinced he committed serious error does not
suffice to overturn his decision.”; Courts “do not sit to hear claims of factual or legal error
by an arbitrator as an appellate court does in reviewing decisions of lower courts.”);
National Wrecking Co. v. Int'l Bd of Teamsters, Local 731, 990 F.2d 957, 960 (7th Cir. 1993)
(“Arbitrators do not act junior varsity trial courts where subsequent appellate review is
readily available to the losing party.”); Note, Manifest Disregard of the Law in International
Commercial Arbitrations, 28 Colum. J. Trans. L. 449 (1990); infra pp. 810-13.
45) See authorities cited supra pp. 797-98 & infra pp. 810-13.
46) English Arbitration Act, 1996, §69.
47) English Arbitration Act, 1996, §69(3)(c).
48) English Arbitration Act, 1996, §69(1).
49) 346 U.S. at 436-37. In turn, the Wilko Court apparently drew on a 19th century Supreme
Court opinion in a prize dispute. United States v. Farragut, 89 U.S. 406, 420 (1874). Farragut
stated that mistakes of law made by arbitrators “could have been corrected in the court
below, and can be corrected here.”Id. at 420. The Court then continued:
The award was also liable ... to be set aside ... for exceeding the power conferred by the
submission, for manifest mistake of law, for fraud, and for all the reasons on which awards
are set aside in courts of law and chancery.
The Court's broad language in Farragut cannot easily be reconciled with Burchell v. Marsh,
58 U.S. 344, 349 (1854), where the Court said that arbitral awards cannot be vacated “for
error, either in law or fact.”
50) I/S Stavborg v. National Metal Converters, Inc., 500 F.2d 424, 430 n.13 (2d Cir. 1974).
51) San Martine Compania de Navegacion, SA v. Saguenay Terminals Ltd, 293 F.2d 796, 801 n.4
(9th Cir. 1961).
52) 500 F.2d 424 (2d Cir. 1974).
53) 25 N.Y.2d 451 (1969).
54) 508 F.2d 969 (2d Cir. 1974).
55) The majority opinion followed this statement with the sentence “In this case, Rosal held a
bill of lading which stated the freight had been prepaid.” The majority already having
stated that this bill of lading was known by all parties to be incorrect in this respect, its
treatment of the bill of lading is difficult to comprehend.
56) The dissenting arbitrator took the view that the bill of lading should not be read as
indicating that the freight had been prepaid because it reads “Freight Prepaid as per
Charter Party,” and the charter party itself clearly indicated that the freight had not been
prepaid.
57) This problem was dealt with early in the history of the Republic by Mr. Justice Story, who,
sitting as Circuit Justice, was careful to preserve the distinction between scope of review,
on the one hand, and the problems created by the presence or absence of a written
opinion by the arbitrators in cases where questions of law had been preserved for the
court. In Kleine v. Catara, 14 F. Cas. 732 (No. 7,869) (C.C.D. Mass. 1814), Story stated that,
“under an unqualified submission,” if the parties mean for the arbitrators “to take upon
themselves the whole responsibility, and not to refer it to the court, to decide differently
from what the court would on a point of law, the award ought not to be set aside.”Id. at
735. Kleine was, however, a case in which the parties had agreed that the arbitrators
should “decide according to law, and [were the arbitrators to make a] mistake,” that
mistake was to be referred to the court for its review. Dealing with the case in which
power to review questions of law had been preserved, Story observed that, in the absence
of a reasoned opinion by the arbitrators, “it would have deserved very grave
consideration, whether we could, by collateral evidence, have examined into the
existence of any errors of law.”Id. The Justice then held that, where the arbitrators had
given the grounds for their decision (something he did not recommend highly), their
decision “once before the court, ... must stand or fall by its intrinsic correctness, tested by
legal principles.”
58) Appellant suggests that this court has power to vacate the award under 28 U.S.C. §2106,
the general Judicial Code section relating to appellate review, if such an action would “be
just under the circumstances.” That provision, however, can hardly be thought to expand
the scope of review specifically tailored by 9 U.S.C. §§10 & 11 to the review of arbitral
awards under the [FAA].
59) For commentary on the public policy exception, see Barry, Application of the Public Policy
Exception to the Enforcement of Foreign Arbitral Awards Under the New York Convention: A
Modest Proposal, 51 Temple L.Q. 832 (1978); Berglin, The Application in United States Court
of the Public Policy Provision of the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, 4 Dickinson J. Int'l L. 167 (1986); Bermann, Public Law in the Conflict
of Laws, 34 Am. J. Comp. L. 157 (Supp. 1986); Buchanan, Public Policy and International
Commercial Arbitration, 26 Am. Bus. L.J. 511 (1988); Cole, The Public Policy Exception to the
New York Convention on the Recognition and Enforcement of Arbitral Awards, 1 J. Disp. Res.
365 (1986); De Emterria, The Role of Public Policy in International Commercial Arbitration,
21 Law & Pol'y in Int'l Bus. 389 (1990); Derains, Public Policy and the Law Applicable to the
Dispute in International Arbitration (in P. Sanders, Comparative Arbitration Practice and
Public Policy in Arbitration 227 (1987)); Kuner, The Public Policy Exception to the
Enforcement of Foreign Arbitral Awards in the United States and West Germany Under the
New York Convention, 7 J. Int'l Arb. 71 (1990); Lalive, Transnational (or Truly International)
Public Policy and International Arbitration (in P. Sanders, Comparative Arbitration Practice
and Public Policy in Arbitration 257-318 (1987)); Liebscher, European Public Policy: A Black
Box?, 17 J. Int'l Arb. 73 (2000); Tolson, Punitive Damage Awards in International Arbitration:
Dopes the “Safety Valve” of Public Policy Render Them Unenforceable in Foreign States? 20
Loy. L.A. L. Rev. 455 (1987); Wade, Westacre v. Soleimany: What Policy? Which Public?, 2 Int'l
Arb. 2 Rev. 97 (1999); Comment, The Public Policy Defense to Recognition and Enforcement of
Foreign Arbitral Awards, 7 Cal. W. Int'l L.J. 228 (1977); Note, Judicial Review of Foreign Arbitral
Awards on Antitrust Matters After Mitsubishi Motors, 26 Colum. J. Transnat'l L. 407 (1988).
See also the discussion above at supra pp. 558-71 of the role of public policy in choice-of-
law analysis in arbitration.
60) Inter-American Convention Article 5(2)(b) (“recognition or execution of the decision would
be contrary to the public policy (‘ordre public’) of that State.”).
61) UNCITRAL Model Law Article 36(1)(b)(ii); Swiss Law on Private International Law Article
190(2)(e); Netherlands Arbitration Act Article 1065(1)(e).
It has sometimes been said that the term “ordre public” has a more expansive meaning in
civil law states than does the term “public policy” in common law jurisdictions. J. Lew,
Applicable Law in International Commercial Arbitration paragraph 401 (1978). Note that the
equally authentic French version of Article V(b)(2) of the New York Convention uses the
phrase “ordre public.”
62) See 9 U.S.C. §10.
63) See Misco, Inc. v. United Paper Workers Int'l Union, 484 U.S. 29 (1987); W.R. Grace & Co. v.
Local Union 749, 461 U.S. 757, 766 (1983); Local No. P-1236 v. Jones Dairy Farm, 680 F.2d 1142
(7th Cir. 1982); Perma-Line Corp. v. Sign Pictorial and Display Union, 639 F.2d 890, 895 (2d
Cir. 1981); Revere Copper & Brass Inc. v. Overseas Private Inv. Corp., 628 F.2d 81, 83 (D.C.
Cir.), cert. denied, 446 U.S. 983 (1980).
64) United Paperworkers Int'l Union v. Misco, Inc., 484 U.S. 29, 42 (1987). See W.R. Grace & Co. v.
Local Union 749, 461 U.S. 757, 766 (1983); Hurd v. Hodges, 334 U.S. 24, 34-35 (1948).
65) See infra pp. 826-30. In the United States, there is a further question whether U.S. federal
or U.S. state law provides the content of applicable local public policy.
66) Katzenbach, Conflicts on an Unruly Horse: Reciprocal Claims and Tolerances in Interstate
and International Law, 65 Yale L.J. 1087 (1956). Cf. Antco Shipping Co. v. Sidermar SpA, 417
F.Supp. 207 (S.D.N.Y. 1976) (“The nation speaks in different tongues and at different times;
cases arise when the determination of ‘public policy’ must be a distillation of several
government utterances”).
67) Deutsche Schachtbau- und Tiefbohrgesellschaft GmbH v. Ras Al Khaimah National Oil Co.
[1987] 2 All E.R. 769, 779 (Ct. App. 1987) (“‘It is never argued at all but when other points
fail.’ It has to be shown that there is some element of illegality or that the enforcement of
the award would be clearly injurious to the public good or, possibly, that enforcement
would be wholly offensive to the ordinarily reasonable and fully informed member of the
public on whose behalf the powers of the state are exercised.”).
68) W.R. Grace & Co. v. Local Union 749, 461 U.S. 757 (1983). As described below, U.S. courts
have generally adopted even narrower views of public policy in international matters. See
infra pp. 826-30.
69) Alexander v. Gardner-Denver Co., 415 U.S. 36, 56-57 (1974).
70) See supra pp. 257-95.
71) As described in detail above, public law claims have become increasingly frequent, and
important, in international arbitration. See supra pp. 257-82.
72) We do not explore here the application of public policy or statutory claims and defenses
by arbitrators; those subjects are considered in Chapter 7 above. We also do not directly
address the related subject of non-arbitrability, discussed above in Chapter 3.
73) Article V(1)(b).
74) Inter-American Convention Article 5(1)(b); 1961 European Convention Article IX(1)(d).
75) The Convention's drafting history also suggests that the exception may extend to cases in
which extraordinary circumstances, akin to force majeure, prevented a party from
presenting its case. U.N. Doc. No. E/CONF.26/SR.23 at 15 (1958).
76) See supra pp. 436-37, 446-47.
77) UNCITRAL Model Law Article 18.
78) UNCITRAL Model Law Article 36(1)(a)(ii).
79) Swiss Law on Private International Law Article 182(3).
80) Swiss Law on Private International Law Article 190(2)(d).
81) 9 U.S.C. §10(c).
82) See infra pp. 841-46.
83) Article V(1)(d) is closely related to Article V(1)(b), in that both deal with alleged
procedural defects in the arbitral proceeding. Article V(1)(b), however, focuses on basic
standards of procedural fairness – in the United States, derived from U.S. law – while
Article V(1)(d) is concerned with noncompliance with the procedures agreed upon by the
parties or, as discussed below, the curial law.
84) Article 5(1)(d) of the Inter-American Convention provides for non-recognition if “the
arbitration procedure has not been carried out in accordance with the terms of the
agreement signed by the parties or, in the absence of such agreement, that ... the
arbitration procedure had not been carried out in accordance with the law of the State
where the arbitration took place.”See 1961 European Convention Article IX(1)(d).
85) UNCITRAL Model Law Articles 34, 35 & 36; Swiss Law on Private International Law Article
190; FAA, 9 U.S.C. §10.
86) See infra p. 848.
87) See supra pp. 155-67.
88) Article 5(1)(a) of the Inter-American Convention is substantially the same.
89) See supra pp. 157-61.
90) See A. van den Berg, The New York Convention of 1958 282-96 (1981). There have been
relatively few U.S. decisions considering the application of Article V(1)(a). See Martinez,
Recognition and Enforcement of International Arbitral Awards Under the United Nations
Convention of 1958: The Refusal Provisions, 24 Int'l Law. 487, 498 (1990); Buques
Centroamericanos, SA v. Refinadora Costarricense de Petroleos, SA, 1989 U.S. Dist. Lexis
5429 (S.D.N.Y. May 18, 1989); American Construction Machinery & Equipment Corp. v.
Mechanised Construction of Pakistan Ltd, 659 F.Supp. 426 (S.D.N.Y. 1987); Transmarine Corp.
v. Marc Rich & Co., 480 F.Supp. 352 (S.D.N.Y. 1979).
91) Article 5(1)(c) of the Inter-American Convention is substantially identical to Article V(1)(c).
92) See infra pp. 852-53.
93) 9 U.S.C. §10(a)(4). Similarly, under §11 of the FAA, an award may be “corrected” if the
arbitrators “awarded upon a matter not submitted to them.”
94) UNCITRAL Model Law Article 36(1)(a)(iii) (excerpted below); Swiss Law on Private
International Law Article 190(2)(c) (excerpted below).
95) For commentary, see Alvarez, The Challenge of Arbitrators, 6 Arb. Int'l 203 (1990); Art,
Challenge of Arbitrators: Is an Institutional Decision Final?, 2 Arb. Int'l 261 (1986); Bond, The
Selection of ICC Arbitrators and the Requirement of Independence, 4 Arb. Int'l 300 (1988);
Coulson, An American Critique of the IBA's Ethics for International Arbitrators, 4 J. Int'l Arb.
103 (1987); Holtzmann, The First Code of Ethics for Arbitrators in Commercial Disputes, 33
Bus. Law. 309 (1977); Hunter & Paulsson, A Code of Ethics for Arbitrators in International
Commercial Arbitration?, 13 Int'l Bus. Law. 153 (1985); Lalive, On the Neutrality of the
Arbitrator and the Place of Arbitration, Swiss Essays on International Arbitration 23-4 (1984);
J. Lew, The Immunity of Arbitrators (1990); Mosk, The Role of Party-Appointed Arbitrators in
International Arbitration: The Experience of the Iran-U.S. Claims Tribunal, 1 Trans. Law. 253
(1988); Paulsson, Securing the Integrity, Impartiality and Independence of Arbitrators:
Judicial Intervention, 1993 Y.B. Arb. Inst. Stockholm Cham. Comm. 91; Tupman, Challenge
and Disqualification of Arbitrators in International Commercial Arbitration, 38 Int'l &
Comp. L.Q. 26 (1989); The Arbitral Process and the Independence of Arbitrators, Sixth Joint
ICC/ICSID/AAA Colloquium on International Arbitration (1988); Annotation, Interest or Bias
of an Arbitrator, 56 A.L.R. 3d 697 (1974).
96) A. van den Berg, The New York Convention of 1958 377-80 (1981).
97) See supra pp. 832-33; A. van den Berg, The New York Convention of 1958 306-10 (1981).
98) See, e.g., National Oil Corp. v. Libyan Sun Oil Co., 733 F.Supp. 800, 813 n.19 (D. Del. 1990);
Fertilizer Corp. of India v. IDI Management, Inc., 517 F.Supp. 948 (S.D. Ohio 1981); Biotronik,
etc. v. Medford Medical Instrument Co., 415 F.Supp. 13, 17 (D.N.J. 1976). See also Judgment of
12 January 1989, XV Y.B. Comm. Arb. 509 (Swiss Federal Tribunal) (1990) (claim that
arbitrator was partial falls within Article V(b)(2)); Judgment of 15 May 1986, XII Y.B. Comm.
Arb. 489 (1987) (Bundesgerichtshof) (same).
99) Article 5(1)(d) parallels Article V(1)(d) of the New York Convention with generally
unimportant differences in language.
100) Claims that an arbitrator was biased are also often coupled with claims that the
arbitrator was guilty of misconduct. Indeed, alleged examples of misconduct are often
cited as evidence of bias or partiality. E.g., Health Service Mgt. Corp. v. Hughes, 975 F.2d
1253 (7th Cir. 1992) (arbitrator's statement at hearing of his personal views of merits of
case held not to be either misconduct or evidence of bias); Sheet Metal Workers etc. v.
Jason Mfg., Inc., 900 F.2d 1392 (9th Cir. 1990) (various procedural decisions in one party's
favor not evidence of bias); Bell Aerospace Co. v. Local 516, 500 F.2d 921 (2d Cir. 1974)
(various evidentiary and interim rulings in favor of one party not evidence of bias); Cook
Chocolate Co. v. Salomon Inc., 748 F.Supp. 122 (S.D.N.Y. 1990), aff'd, 932 F.2d 955 (2d Cir.
1991) (disagreements between party's counsel and arbitrators not evidence of bias).
101) See infra pp. 872-75.
102) 393 U.S. 145 (1968).
103) 517 F.Supp. 948 (S.D. Ohio 1981).
104) In fact, the District Court found on the basis of the record and petitioner's admissions that
the arbitrator in this case was entirely fair and impartial. I do not read the majority
opinion as questioning this finding in any way.
105) At the time of the contract and the arbitration herein, §18 of the Rules of the American
Arbitration Association, which the Court quotes, was phrased merely in terms of a
“request” that the arbitrator “disclose any circumstances likely to create a presumption of
bias or which he believes might disqualify him as an impartial Arbitrator.” In 1964, the
rule was changed to provide that “the prospective neutral Arbitrator shall disclose any
circumstances likely to create a presumption of bias or which he believes might
disqualify him as an impartial Arbitrator.”
106) See supra pp. 243-44.
107) See supra pp. 847, 855.
108) Alexander v. Gardner-Denver, 415 U.S. 36 (1974); supra pp. 255-57.
109) Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985); Schattner v.
Girard, Inc., 668 F.2d 1366 (D.C. Cir. 1981) (“Although a party is not required to arbitrate
facts underlying a securities law claim, once the facts underlying those claims are in fact
arbitrated the decision of the arbitrators is binding”); Gardner v. Shearson, Hammill & Co.,
433 F.2d 367, 368 (5th Cir. 1970), cert. denied, 401 U.S. 978 (1971); supra p. 254.
110) In the United States, the non-arbitrability doctrine has been closely related to concerns
about uninformed waivers and disparities in economic power and sophistication. See
supra pp. 253-54. Those concerns are generally not significantly implicated after a party
elects to go forward with arbitration of an existing dispute.
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Jurisdiction
United States of America
Bibliographic reference
'Part Three : Chapter 13.
Enforcement of International
Arbitration Awards in U.S.
Courts', in Gary B. Born ,
International Commercial
Arbitration: Commentary and
Materials (Second Edition),
2nd edition (© Kluwer Law
International; Kluwer Law
International 2001) pp. 881 -
918
P "881"
P "882"
P "882"
P "883"
KluwerArbitration
Part Three : Chapter 13. Enforcement of International
Arbitration Awards in U.S. Courts
13 Enforcement of International Arbitration Awards in U.S. Courts
The enforcement of international arbitration awards in U.S. courts raises a variety of
procedural and related issues under U.S. law. This Chapter examines these issues. First, we
discuss the procedural avenues for enforcing or challenging international arbitral awards in
U.S. courts. Second, we consider awards of interest by U.S. courts in connection with
international arbitrations. Third, we discuss awards of attorneys' fees by U.S. courts in
connection with international arbitrations. Finally, we consider the preclusive effects of
arbitral awards in U.S. courts.
A. Procedural Avenues for Enforcing or Challenging International Arbitral Awards in
U.S. Courts
A party seeking to confirm or vacate an international arbitral award in the United States may
choose among a wide range of procedural avenues. In outline, one or more of the following
options is generally available: (a) confirm an award subject to the New York Convention under
§207 of the FAA; (b) confirm an award subject to the Inter-American Convention under §304 of
the FAA; (c) confirm an award that affects foreign commerce under §9 of the FAA; (d) confirm an
award against a foreign state under the Foreign Sovereign Immunities Act; (e) vacate an award
that affects foreign commerce under §10 of the FAA; (f) vacate an award under the New York or
Inter-American Conventions and their U.S. implementing legislation; (g) confirm or vacate an
award in state court under state statutory or common law; (h) modify an award in federal court
under §11 of the FAA; or (i) convert the award into a foreign money judgment, and enforce it as
such under state law. Each of these procedures is discussed below.
1. Actions to Confirm International Arbitral Awards Under §207 of the FAA
Section 207 of the FAA governs the confirmation in U.S. courts of arbitral awards which satisfy
the jurisdictional requirements of the New York Convention. Section 207 provides:
Within three years after an arbitral award falling under the Convention is made, any party to
the arbitration may apply to any court having jurisdiction under this chapter for an order
confirming the award as against any other party to the arbitration. The court shall confirm the
award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of
the award specified in the said Convention.
The second sentence of §207 imposes a general obligation to enforce arbitral awards, subject
to the Convention's eight exceptions to enforceability which are incorporated by reference
(and described above). In addition, as we have seen, §207 forbids application of other, non-
Convention bases for non-enforcement, by providing that the court “shall confirm” the award
unless one of the grounds “specified in the ... Convention” exists. (1)
a. Non-Exclusivity of §207
It is reasonably clear that §207 is not the exclusive avenue for enforcing an award subject to
the Convention in the United States. Rather, §207 provides an enforcement mechanism for
Convention awards, without disturbing other available enforcement avenues in U.S. courts if a
party chooses to use them.
Thus, the Second Circuit has held that a party with an award subject to the Convention may
bring an action to enforce either under §207, taking advantage of its three-year limitations
period, or under §9 of the FAA, subject to its one-year bar. (2) Presumably, state and common
law actions to confirm an arbitral award are also possible under this theory. Moreover, a party
can confirm its award in another country (typically the arbitral situs) and attempt to enforce
the resulting foreign court judgment in the United States. (3) Enforcement actions under the
FSIA are also clearly permitted. (4)
b. Three-Year Time Limit Under §207
Section 207 permits an action to confirm an arbitral award to be brought within three years of
the date of the award is “made.” This is substantially longer than the one-year limitations
period available under the domestic FAA. (5) The additional period reflects a desire to
facilitate the enforceability of arbitral awards and a recognition of the delays inherent in
transnational matters. (6)
There are several uncertainties surrounding §207's three-year limit. First, it is not clear whether
the three-year period referred to in §207 is permissive or mandatory: that is, must an action to
confirm an arbitral award subject to the Convention be brought within three years, in order to
obtain enforcement, or can confirmation actions be brought under §207 after the three-year
 period expires? Lower court decisions under §9 of the FAA, discussed below, are likely to be
significant in interpreting §207; they are divided, with some courts treating the one year period
as a mandatory bar and others treating it as a permissive grant. (7) In Seetransport Wiking
Trader etc. v. Navimpex Centrala Navala, (8) the Second Circuit apparently regarded §207's
three-year limit as mandatory.
Second, it is not clear when the three-year period under §207 begins to run. Section 207 refers
to the date “the award is made,” which should usually be clear. The section, however, does not
expressly address what occurs when an award is challenged in the courts of the place where it
was made. The Second Circuit has rejected the argument that §207's three-year period does
not begin to run until foreign judicial challenges have been finally dismissed. (9) Again,
interpretations of §9 should be relevant here. (10)
Third, one lower court has held that the Convention's defenses to recognition of an arbitral
award can be raised at any time a confirmation action is brought. (11) That result contrasts with
precedent under §9, where some lower courts have held that §10's grounds for vacating an
award can only be raised during §12's three-month limitations period. (12)
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c. Venue Under §207
Application for confirmation of an arbitral award can be made under §207 in either federal or
state courts. Venue in an action under §207 is prescribed by §204, which provides that a
confirmation action can be brought in any U.S. district court for a district where the parties'
dispute could originally have been litigated or where the parties agreed that arbitration could
occur. (13)
Section 204 apparently does not permit confirmation of an award in a district merely because
the defendant's property is located there. Rather, the award must be confirmed in a venue
permitted under §207 and the resulting judgment can then be enforced in the district or state
where the defendant's assets are located. If the arbitration was conducted abroad, and if the
parties' underlying dispute would not have been subject to U.S. jurisdiction, §204 appears not
to provide for venue in any U.S. district.
Nevertheless, §204 was not intended as the exclusive basis for venue for actions under §207.
Lower courts have relied on other venue provisions in §207 actions, albeit without analysis. (14)
More important, it is well-settled that venue provisions will be interpreted as permissive, not
mandatory, absent clear language to the contrary. (15) That rule would permit reliance in §207
actions on the ample venue provisions of the Alien Venue Act, the Foreign Sovereign
Immunities Act, and general venue statutes. (16)
d. Federal Subject Matter Jurisdiction and Removal
Section 207 provides for actions to confirm in any court “having jurisdiction under this chapter.”
Section 203 of the FAA, in turn, grants U.S. district courts federal subject matter jurisdiction in
any action “falling under the Convention.” (17) Similarly, §205 provides for removal to federal
court where the “subject matter of an action or proceeding pending in a State court relates to
an arbitration agreement or award falling under the Convention.”
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Sections 203 and 205 differ from §§9 and 10 under the FAA's first chapter, which do not contain
an independent basis for federal subject matter jurisdiction. (18) The difference can have
important litigation consequences where having a federal forum is significant. (19) Under §§203
and 205, there is no requirement for either diversity of citizenship or a minimum amount in
dispute.
It is not clear how broad a grant of subject matter jurisdiction §203 confers. Section 203
extends to actions “falling under the Convention,” which clearly applies to actions to confirm
arbitral awards. Moreover, lower courts have also held that §203 grants jurisdiction in actions
that are at best ancillary to proceedings to confirm an award. (20) As described above,
however, one lower court decision has concluded that an action to vacate an arbitral award is
not subject to the FAA's second chapter, on the doubtful ground that the Convention does not
provide for actions to vacate. (21)
Section 203 has not been regarded as the exclusive basis for jurisdiction in actions to enforce
arbitration awards. Subject matter jurisdiction based on the Foreign Sovereign Immunities Act
and alienage provisions has also been permitted in actions under §207. (22)
e. Personal Jurisdiction Under §207
Actions under §207 must satisfy both statutory and constitutional requirements concerning
personal jurisdiction. It is not clear whether the FAA's second chapter contains a statutory grant
of personal jurisdiction; arguably, §204's “venue” provisions were intended to amount to that.
More likely, Rules 81 and 4 of the Federal Rules of Civil Procedure provide for the borrowing of
any applicable federal or local state long-arm statutes. Several lower courts have relied on the
personal jurisdiction provisions of the Foreign Sovereign Immunities Act to permit actions
under §207. (23)
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Under either general jurisdictional provisions or §204, confirmation actions can be brought
either where the parties agreed that the arbitration would be conducted (24) or where, under
the local long-arm statute, the parties' dispute could have been litigated had there been no
 arbitration agreement. (25) Some lower courts have gone further, albeit without much analysis,
and suggested that actions to enforce arbitral awards under the Convention can be brought
wherever the defendant has assets. (26)
Constitutional due process limits on personal jurisdiction must also be satisfied in actions
under §207. In general, there should be no due process objection to the forums specified in
§204. There also should be no due process obstacle where jurisdiction is based only on the
presence of the award-debtor's assets in the forum. (27)
f. Service Under §207
Chapter two of the FAA does not contain provisions regarding service of process in actions to
confirm or vacate arbitral awards. As a consequence, service rules are based either on the first
chapter of the FAA (incorporated by §208) or other statutes (notably the FSIA). Section 208 has
been held to incorporate §12 of the FAA, which provides for service in domestic actions. (28)
P "886" Unfortunately, §12 is both an “anachronism” (29) and silent as to service outside the United
P "887" States. (30) Lower courts have held, therefore, that §208 also incorporates Rule 4 of the
Federal Rules of Civil Procedure as a “fallback provision” for service. (31) In addition, lower
courts have also held that defects in service in arbitration enforcement actions may be
liberally excused. (32)
Service on foreign states also can (and presumably must) be effected as provided in the FSIA.
Section 1608 sets forth the required mechanisms. (33)
g. No Requirement for Entry-of-Judgment Clause Under the Convention
As described below, §9 of the FAA has been interpreted as requiring an agreement on judicial
enforcement of the arbitrators' award (a so-called “entry-of-judgment” clause). “Entry-of-
judgment” stipulations are probably not required under §207, which contains no language
equivalent to §9's entry-of-judgment provision. (34) It is perhaps arguable that §208
incorporates §9's “entry-of-judgment” requirement into §207. The better view is that §9 in fact
imposes no such requirement and, even if it does, the requirement conflicts with the
Convention's enforcement scheme and is not incorporated by §208. Nevertheless, cautious
practitioners should continue to include entry-of-judgment stipulations in international
arbitration agreements.
2. Actions to Confirm International Arbitral Awards Under §9 of the FAA
The domestic FAA also contains provisions setting forth procedures for seeking to confirm an
arbitral award. These provisions, in §9 of the FAA, will generally be applicable to international
awards not subject to the New York Convention. They are also available as an alternative
means of confirming awards that are subject to the Convention. (35)
Section 9 provides:
“If the parties in their agreement have agreed that a judgment of the court shall be entered
upon the award made pursuant to the arbitration, and shall specify the court, then at any time
within one year after the award is made any party to the arbitration may apply to the court so
specified for an order confirming the award and thereupon the court must grant such an order
P "887" unless the award is vacated, modified, or corrected as prescribed in §§10 and 11 of this title. If
P "888" no court is specified in the agreement of the parties, then such application may be made to
the United States court in and for the district within which such award was made....” (36)
As discussed above, the FAA reflects a strong “pro-enforcement” bias, contained in §9's
requirement that “the court must grant such an order [confirming an arbitral award] unless the
award is vacated, modified, or corrected.” (37)
a. One-Year Time Limit Under §9
Section 9 of the FAA grants parties one year from the date of the award is “made” in which to
seek an order confirming the award. Several uncertainties have arisen in connection with this
provision.
First, as with §207, it is not entirely clear whether §9's one-year period is merely permissive or
is instead a mandatory time bar. Some lower courts have held that an action to confirm an
award may be brought within one year from its making, but that there is no time bar to a later-
filed action to confirm. (38) Other decisions, however, appear to have interpreted §9 as
imposing a one-year time bar for confirmation of an award. (39) It also may be possible to
enforce an arbitration award at common law, even after the FAA's one-year period has expired.
(40)
Second, it is not completely settled when the one-year period prescribed by §9 begins to run.
One lower decision (reversed on appeal) suggests that the period does not begin to run until
actions to vacate have been finally dismissed. (41) Other decisions have held that the period
begins to run as soon as a “final” award is made. (42)
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b. Entry-of-Judgment Clause
It is because of §9's language that many U.S. arbitration agreements include an “entry-of-
judgment” stipulation. For example, many U.S. clauses provide that “judgment upon any award
rendered by the arbitrator[s] may be entered in any Court having jurisdiction thereof.” (43)
The origins of entry-of-judgment language lie in the wording of §9, which provides that “[i]f the
 parties in their agreement have agreed that a judgment of the court shall be entered upon the
award made pursuant to the arbitration,” the court selected in the parties' agreement shall
confirm the award. Section 9 has both a mandatory aspect – conditioning judicial enforcement
of an arbitral award on an “entry of judgment” agreement – and a permissive aspect –
providing for the enforceability of forum selection agreements for actions to confirm an
arbitral award. (44) Relying on §9, early U.S. judicial decisions refused to enforce arbitration
awards absent an indication that the parties agreed to judicial enforcement. (45) More
recently, most (but not all) lower courts have found §9's entry-of-judgment requirement
P "889" satisfied by implied understandings concerning judicial enforcement. (46) Even if the parties
P "890" have agreed that the arbitral award shall be final, some federal courts have considered
whether the agreement contemplated federal – as opposed to state (or foreign) – court
enforcement. Most courts have concluded, absent contrary evidence, that federal court
enforcement was contemplated. (47)
As described above, entry-of-judgment clauses may not be necessary where the Convention
applies. (48) Nevertheless, entry-of-judgment provisions are included in most international
agreements involving U.S. parties and are particularly important where an international
arbitral award may not be subject to the New York Convention and thus, enforcement under §9
of the FAA may be required. The district court decision in Splosna Plovba v. Agrelak Steamship
Corp. (49) is illustrative. There, enforcement was sought of an arbitral award made in England,
before the United Kingdom ratified the New York Convention. The district court declined to
enforce the award, on the grounds that, under §9 of the domestic FAA, the parties were
required to have agreed to judicial enforcement of their award. The court reached this
conclusion notwithstanding the fact that the parties' agreement had provided “for the purpose
of enforcing any award, this agreement may be made a rule of the Court.” (50)
c. Venue Under §9
Section 9 contains what appear to be limits on the venue for actions to confirm a arbitral
award: a party may “apply to the court specified” in their arbitration agreement or, if no court
is specified, “to the United States court in and for the district within which such award was
made.” Where the parties have agreed that confirmation will be sought in a particular court,
U.S. courts have upheld such forum selection provisions. (51)
Unfortunately, when the parties have not selected a confirmation forum, the federal courts of
appeals have reached widely divergent interpretations of §9's venue provision. (52) The Ninth
Circuit has held that proceedings under §§9 and 10 to vacate or confirm an award must be
initiated exclusively in the district in which the award was made. (53) That result would
arguably render the domestic FAA largely irrelevant as a confirmation mechanism where
foreign awards are sought to be confirmed.
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P "891"
In contrast, the Second, Fifth, and Seventh Circuits have held that proceedings to confirm an
award can be initiated either in one of the venues identified in §9 or where other venue rules
permit. (54) Given the general rule that venue provisions are permissive, (55) these decisions
appear better-reasoned than those of the Ninth Circuit. The Supreme Court held, albeit some
decades ago, that an action to confirm can be brought in the court that compelled arbitration
under §4. (56) Of course, if §9's venue provisions are permissive, then forum non conveniens, lis
pendens, and §1404 defenses would presumably be available. (57)
Lower courts are also divided as to whether §9 imposes a venue requirement or a subject
matter jurisdiction requirement. The difference is important, among other things, because
venue can be waived by the opposing party, while subject matter jurisdiction cannot. (58) The
better view, given the FAA's purposes, is to regard §9 as a waivable venue provision (as would
appear implicit in §9's incorporation of forum selection agreements).
d. Personal Jurisdiction and Service Under §9
Personal jurisdiction is not coherently dealt with by §9. After reciting venue provisions
(discussed above), §9 goes on to provide that “[n]otice of the application [for an order
confirming an award] shall be served upon the adverse party, and thereupon the court shall
have jurisdiction of such party as though he had appeared generally in the proceeding.” (59)
That language is fairly clearly a grant of personal jurisdiction.
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Unfortunately, it is not clear what the grant means. First, it follows immediately after a
sentence providing for venue in the district where an award was made; at least arguably, the
grant of personal jurisdiction is limited to that district. (60)
Second, §9's grant of personal jurisdiction is linked with the service of process under §9 and
the section's service provision is defective. Section 9 permits service upon parties resident
within the district where the award was made by serving the party or its attorney in the manner
“prescribed by law for service of notice of motion in an action in the same court.” As to parties
resident elsewhere, §9 requires service by a marshal – an anachronism that is no longer
possible.
Lower courts have generally not discussed personal jurisdiction under §9. (61) As a matter of
principle, it appears that Federal Rule of Civil Procedure Rules 4 and 81 would permit reliance
on local state long-arm statutes. (62) That would fairly clearly allow actions in the district
where the award was made (as §9 itself provides). (63) It would also permit actions to confirm
an award in any state where the defendant was subject to general jurisdiction or where the
 defendant could have been sued in an action on the dispute underlying the arbitration. Finally,
and less clearly, it would arguably permit actions in any state where the defendant's assets
could be located. (64)
e. No Independent Basis for Federal Subject Matter Jurisdiction Under §9
Unlike §203, §9 does not create an independent basis for federal subject matter jurisdiction. In
order to seek federal court enforcement of an award under §9, some independent basis for
federal court jurisdiction, such as alienage or diversity, must be established. (65) It is likely not
sufficient that the parties' underlying claims, disposed of in the award, were based on federal
substantive law. (66)
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f. Applicability of §9 in State Courts
Some state laws permit the confirmation of arbitral awards to be resisted on broader grounds
than those available under §§9 and 10 of the FAA. In many cases, removal from state to federal
court may moot the question whether §§9 and 10 apply in state court. But in cases under only
the domestic FAA (as opposed to chapters 2 and 3 of the FAA), removal is only possible if there
is an independent basis for federal court jurisdiction. (67) Then, it is important to determine
whether §§9 and 10 are applicable and binding on state courts.
The applicability of §9 in state courts is unclear. Unlike §§3 and 4 of the FAA, (68) §9 does not
refer to courts “of” the United States. Instead, under §9, confirmation may be sought from any
court specified by the parties in their agreement, or the court for the district where the award
was made, or the court for any district in which the adverse party may be found. (69) Most state
courts that have considered the issue have held that §§9 and 10 of the FAA do apply in actions
to confirm arbitral awards (subject to the FAA) in state courts. (70)
The FAA's policies of ensuring the enforceability of arbitration agreements and awards are
significantly affected by state laws subjecting arbitral awards to non-recognition or heightened
judicial scrutiny. If §2's provisions regarding the substantive enforceability of arbitration
agreements must be followed by state courts, (71) then it is difficult to see why the provisions of
§§9 and 10 concerning the enforceability of arbitral awards would not be binding in similar
fashion. Nevertheless, some courts and commentators have suggested that §§9 and 10 do not
preempt state laws permitting arbitral awards to be vacated on broader grounds than under
the FAA. (72) One lower court decision, relying on the Supreme Court's opinion in Volt
P "893" Information Sciences, Inc. v. Board of Trustees, (73) holds that a choice-of-law clause selecting
P "894" state law makes state law grounds for vacating an award available. (74)

g. Non-Exclusivity of §9
A few authorities have suggested that §§9 and 10 of the FAA establish an exclusive mechanism
for enforcing arbitral awards in federal court, which divests state courts of jurisdiction in such
matters. (75) Most lower courts have rejected this result. (76) Conversely, a few decisions have
raised the possibility that a state court, significantly involved in earlier aspects of the arbitral
process, might have exclusive jurisdiction to enforce the award. (77)
3. Actions to Confirm International Arbitral Awards Under §304
Section 304 of the FAA implements the Inter-American Convention, much as §207 implements
the New York Convention. In enacting §304, Congress included a reciprocity requirement
paralleling that of the U.S. reciprocity reservation. Section 302 incorporates the procedural
and jurisdictional provisions of chapter two of the FAA into the Inter-American Convention's
implementing legislation. That, and the similarities between the New York and Inter-American
Conventions, suggest that decisions under the two instruments will follow a single path.
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4. Actions to Confirm International Arbitral Awards Under FSIA
U.S. courts have held that the Foreign Sovereign Immunities Act's jurisdictional, service, and
venue provisions are available in actions to confirm arbitral awards against foreign states. (78)
As described above, §1605(a)(1) grants federal district courts personal and subject matter
jurisdiction over foreign states in cases “in which the foreign state has waived its immunity
either explicitly or by implication.” (79) Similarly, §1605(a)(6) provides for jurisdiction in cases
involving arbitral awards:
in which the action is brought either to enforce an agreement made by the foreign State with or
for the benefit of a private party to submit to arbitration all or any differences which have
arisen or which may arise between the parties with respect to a defined legal relationship,
whether contractual or not, concerning a subject matter capable of settlement by arbitration
under the laws of the United States, or to confirm an award made pursuant to such an
agreement to arbitrate, if (A) the arbitration takes place or is intended to take place in the
United States, (B) the agreement or award is or may be governed by a treaty or other
international agreement in force for the United States calling for the recognition and
enforcement of arbitral awards, (C) the underlying claim, save for the agreement to arbitrate,
could have been brought in a United States court under this section or section 1607, or (D)
paragraph (1) of this subsection is otherwise applicable.
Lower courts have interpreted §1605(a)(1) broadly in the context of enforcing arbitral awards.
(80) The weight of lower court authority holds that a foreign state's agreement to arbitrate in
one New York Convention signatory state is an implied waiver of immunity from actions to
P "895" confirm and enforce a resulting arbitral award in other Convention signatories. (81) One lower
P "896" court, however, has indicated (albeit without analysis) that an agreement to arbitrate
outside the United States is not a waiver of immunity in actions to confirm resulting awards in
the United States. (82)
The prevailing view is illustrated by M.B.L. Int'l Contractors, Inc. v. Republic of Trinidad &
Tobago. (83) There, the Republic of Trinidad & Tobago agreed to arbitrate a construction
dispute with a Canadian contractor. The arbitration was conducted in Trinidad & Tobago,
under Trinidad & Tobago law. The Canadian contractor prevailed and, when it encountered
difficulties in collecting the award, filed suit in U.S. district court to confirm the award. The
district court rejected Trinidad & Tobago's claim of immunity. It held that the arbitral award
was governed by the New York Convention and that, under §1605(a)(1), when a foreign state
agrees to an arbitration governed by the New York Convention, it impliedly waives its immunity
in a subsequent enforcement action – even if the arbitration is conducted within the foreign
sovereign's territory and under its laws. Other lower court decisions are to the same effect. (84)
5. Actions to Vacate International Arbitral Awards Under §10 of the FAA
Section 10 of the FAA provides a statutory basis for actions to vacate arbitration awards. The
section permits “the United States court in and for the district wherein the award was made” to
make an order “vacating the award” if any of the statutory or common law bases examined
above is present.
a. Three-Month Time Limit Under §10
Section 12 provides that notice of a motion to vacate an award under §10 “must be served upon
the adverse party or his attorney within three months after the award is filed or delivered.” (85)
Unlike the one-year period referred to in §9, this three-month period is clearly mandatory;
P "896" lower courts have held that motions to vacate an award under §10 of the FAA cannot be
P "897" brought outside the three-month period. (86) Recognizing the peculiarity of this rule, (87) lower
courts have held that this is true even if the challenge to the award is jurisdictional. (88)
Moreover, some lower courts have held that an award cannot be vacated – even in response to
a motion to confirm under §9 – after §10's three-month period has run; indeed, some of these
courts also refuse to permit §10's exceptions to be raised as defenses to confirmation. (89) In
contrast, other courts have held that a party can defend against an action to confirm by raising
§10's grounds for vacating an award, even after §12's three-month period has expired. (90)
According to some courts, there is also no common law right to vacate an award which arguably
would not be subject to the three-month time bar. (91) Finally, if an action to confirm an award
is brought within the three-month period, an action to vacate must be made in defense, or it is
lost. (92)
It is not clear when §12's three-month period begins to run. First, does it run from the earlier, or
the later, of the date on which the award is “filed or delivered”? Second, and potentially more
significant, how should courts treat petitions to modify the tribunal's award – made to the
P "897" tribunal itself? Do such petitions toll the three-month period, and if so do they do so in all
P "898" cases, or only where some modification is made? Finally, it is not clear whether §12's three-
month time limit is a non-waivable jurisdictional bar, or a waivable statute of limitations. Most
courts have reached the latter conclusion. (93)
b. Venue Under §10
Section 10 provides that an action to vacate an arbitral award will be filed in the district where
the award was “made.” As under §9, lower courts are divided as to whether or not this is a
permissive venue provision (that supplements other possible bases for venue) or a mandatory,
exclusive provision. Some lower courts have interpreted §10's venue provision as mandatory.
(94) Other lower courts have held that actions to vacate can be brought where an action to
confirm is commenced, (95) or where an action to compel arbitration was commenced. (96)
c. Applicability of §10 in State Courts
Section 10's plain language suggests that the provision is not applicable in actions to vacate
brought in state courts. That is, however, a peculiar result, given that §9 apparently is
applicable in state courts and was clearly intended to function together with §10 as part of a
uniform regime governing enforcement of arbitral awards.
A number of state courts have held that §10 is applicable in state courts, concurrently with
P "898" federal courts, and that it provides the exclusive substantive grounds for vacating arbitral
P "899" awards that are subject to the FAA. (97) In contrast, a few state courts have concluded that
§10 is the exclusive avenue for vacating awards subject to the FAA, but that only federal courts
may entertain actions under §10. (98) Conversely, some courts have held that the parties'
choice of law agreements or conduct conferred exclusive jurisdiction on a state court to
confirm or vacate an arbitral award. (99)
Under state law in some jurisdictions, there is no time bar, or a different time bar than that in
§12, for motions to vacate. (100) For example, the Uniform Arbitration Act (and many state
arbitration statutes) permits an application to vacate “90 days” after delivery of the award to
the applicant, “except that, if predicated upon corruption, fraud, or other undue means, it
shall be made within 90 days after such grounds are known or should have been known.” (101) It
is not clear what the result will be if an action to vacate is brought in state court after three
months have expired, but within the time permitted by the exception to §12 of the Uniform
Arbitration Act. (102) The better view is that such an action would be time-barred.
 6. Actions to Vacate Arbitral Awards Subject to New York and Inter-American Conventions
There is no counterpart to §10 in the second or third chapters of the FAA, implementing the
New York and Inter-American Conventions. This gap leaves actions to vacate awards subject to
the Convention on uncertain footing: can such actions be brought under §10, under §§204 and
302, or only under state law?
As described above, there is little lower court precedent on this issue and it is muddled. First,
actions to vacate Convention awards were held by the district court in Tesoro Petroleum not to
be subject to §204, and as only subject to §10 (including its venue and time limitations). (103)
Second, in contrast, actions to vacate Convention awards were held by another court to fall
P "899" outside §10 (and its three-month time bar), and only to be subject to the Convention's three-
P "900" year time bar for action to confirm awards. (104) Third, another court entertained an action
to vacate a Convention award under both §§10 and 201. (105) As discussed above, this
conclusion is more consistent with the Convention's purposes than Tesoro. (106)
Under either §10 or §201, the New York Convention's limitations on venue for actions to vacate
an award will apply. As discussed above, the Convention precludes actions to vacate except in
the arbitral forum or the state that provided the curial law. (107) The FAA's provisions
concerning venue for actions to vacate should seldom be inconsistent with the Convention's
limits. Exceptions could include cases where an action to vacate is brought in response to an
action to confirm, (108) or in a forum that issued an order compelling arbitration. (109)
7. Actions to Enforce International Arbitral Awards Under State Law (110)
As we have seen, the weight of authority suggests that state courts can entertain actions to
confirm arbitral awards that are subject to the Convention or FAA: nothing grants federal courts
exclusive jurisdiction over such actions. (111) If the New York or Inter-American Convention is
applicable, actions to enforce an award in state court are generally removable to federal court
(under §205). (112) Actions to vacate non-Convention awards may also be removable under the
first chapter of the FAA, but only if an independent basis for federal subject matter jurisdiction
exists. (113) Once an action is removed to federal court, then the Convention and the FAA apply.
If an action is not removable, or is not removed, questions arise as to the availability in state
court of procedures for confirmation and enforcement that are different from federal
P "900" procedures. State arbitration statutes vary, of course, both from the FAA and from arbitration
P "901" statutes in sister states. In many states, local legislation provides for the enforcement of
arbitral awards, including foreign arbitral awards. (114) For example, §11 of the Uniform
Arbitration Act permits actions to confirm arbitral awards in much the same fashion as §9 of
the FAA. Nevertheless, there is precedent in some states suggesting that state arbitration
statutes are only available to enforce awards made within the state. (115) In addition to
enforcement under state arbitration statutes, common law enforcement may also be possible.
(116)
State arbitration statutes also have varying substantive provisions defining the circumstances
in which awards will not be enforced. Where the Convention is applicable to an award, then a
state court must give effect to its substantive provisions, and cannot rely on conflicting state
law. (117) Determining when a conflict exists between state and federal law will usually not be
difficult, although there are exceptions. (118) Where state law permits an award to be vacated
on grounds not available under the Convention, it will generally be preempted. (119) The
Convention would not be offended if state enforcement provisions are less restrictive than
federal ones (i.e., if it is easier to enforce an arbitral award under state law than the
Convention).
If the Convention is not applicable to an award, then state arbitration rules are preempted
only if inconsistent with the domestic FAA. (120) As under the Convention, state laws will be
preempted if they permit non-recognition of an award on grounds not available under the FAA.
(121) A state law provision generally should not be subject to challenge if it permits
enforcement of arbitral awards more readily than does the FAA. It is not clear to what extent
the FAA's venue, time limits, and other quasi-substantive provisions are binding on state
courts.
8. Actions to Vacate International Arbitral Awards Under State Law
State arbitration statutes also provide for actions to vacate arbitral awards. For example, §12
of the Uniform Arbitration Act permits actions to vacate arbitral awards, on the same general
P "901" substantive grounds as those under the FAA. As discussed above, the Conventions and the FAA
P "902" preempt inconsistent state law providing for broader bases to vacate awards than available
under federal law. (122) Also as discussed above, it is not clear whether the three-month period
is binding on state courts, nor, if so, in what fashion. (123)
9. Actions to Modify an International Arbitral Award
Section 11 of the FAA provides for modifying or correcting arbitral awards. Section 11
contemplates that modifications or corrections shall be made judicially (rather than by the
arbitral tribunal). There is no counterpart to §11 in either chapter 2 or 3 of the FAA, although §11
would likely be applicable pursuant to §208 and §307. (124)
Nevertheless, some courts have suggested that awards can be returned to the arbitrators for
correction. (125) Institutional arbitration rules generally permit applications for modifications
to be made directly to the tribunal. (126) Nothing in §11 prevents this, although the interaction
between institutional rules permitting applications to the tribunal to modify an award and the
FAA's time limits for actions to confirm or modify an award has not been considered.
 Section 11 provides that “the United States court in and for the district wherein the award was
made” may modify or correct an award. Modification or corrections may be made by the court
if there was an “evident material” miscalculation or description of any person, property or
thing; or if the arbitration award deals with “a matter not submitted to” the tribunal; or if the
award “is imperfect in matter of form not affecting the merits of the controversy.” In addition,
“the order may modify and correct the award, so as to effect the intent thereof and promote
justice between the parties.”
P "902" Some courts have “corrected” awards on matters of substance, (127) although it is well-settled
P "903" that §11 “does not license the district court to substitute its judgment for that of the
arbitrators.” (128) If an award is unclear, it can be referred back to the arbitrators for
clarification. (129) Other courts have concluded that trial judges can resolve straightforward
issues without requiring the parties to return to the tribunal. (130)
10. Converting an International Arbitral Award into a Judgment
A foreign arbitration award is not a foreign court judgment. (131) However, court confirmation of
the arbitral award, either abroad or in the United States, does create a judgment of the court,
which is then enforceable as such. (132) By converting an arbitral award into a judgment, and
then taking advantage of the Full Faith and Credit Clause, a judgment creditor may be able to
obtain satisfaction even if the judgment debtor's assets are located outside a state where
jurisdiction to recognize the arbitral award initially exists. (133) At least some courts have held
that confirming an arbitral award allows the award/judgment creditor to pursue both
enforcement of the award and the judgment. (134)
11. Summary Enforcement Procedures for International Arbitral Awards Under the FAA
P "903" The FAA prescribes an expedited procedure for enforcing arbitral awards. “These rules further
P "904" the Act's policy of expedited judicial action because they prevent a party who has lost in the
arbitration process from filing a new suit in federal court and forcing relitigation of the issues.”
(135) Similarly, “[t]o advance [the Convention's] objectives, the [FAA's] implementing legislation
prescribed a summary procedure in the nature of federal motion practice to expedite
petitions for confirmations of foreign arbitral awards.” (136)
Disposition of motions under §§9, 10, and 11 is summary. Sections 9, 12, and 13 of the FAA
provide that actions to confirm, vacate, and modify awards shall be treated as motions. A party
seeking to enforce or challenge an award does not file a complaint, but rather a petition to
confirm the award or a motion to vacate or correct it. (137) There is no jury trial in actions to
confirm an arbitral award under §207. (138) Moreover, a district court need not necessarily
conduct a full evidentiary hearing on a motion to vacate or confirm. (139) Rather, the motion
can be decided on the basis of affidavits and supporting memoranda. (140) Nevertheless, some
challenges require evidentiary hearings, and even discovery, in order to resolve genuine issues
of material fact. (141)

B. Awards Of Interest In International Arbitration (142)

Under most national laws, including those of most U.S. states, interest is awardable in civil
P "904" actions. (143) The availability and rate of interest awards in civil lawsuits varies significantly
P "905" from nation to nation. As a result, claims for interest in international arbitration raise
significant conflict of laws issues. In addition, interest in international arbitration may be
available from either arbitrators and national courts, and the amount of any award therefore
may depend on the respective authority of the tribunal and national courts at different stages
of the arbitral process. This section briefly discusses interest in international arbitration and in
U.S. courts during the enforcement of international arbitral awards.
The availability and rate of interest in an international arbitration can have substantial
practical importance. Major arbitrations can take a number of years to resolve, and
enforcement proceedings may take at least as long again. With market rates of interest
accruing, the ultimate interest award can exceed the principal amount in dispute. In one
celebrated arbitration during the 1980s, the principal award was $83 million, to which $96
million in interest was added. (144)
1. Awards of Interest by International Arbitrators
Interest is potentially awardable by an international arbitral tribunal on a variety of grounds.
(145) Applicable substantive law may permit the award of interest as an element of
compensatory damages. (146) Alternatively, statutory provisions of applicable national law
may grant pre-judgment or post-judgment interest in national courts at specified rates, (147)
and these statutory rates may be deemed applicable by an arbitral tribunal.
An arbitrator presented with a claim for interest must first decide what law governs the
demand. As in other aspects of international arbitration, several principal possibilities exist:
P "905" (a) the substantive law governing the parties' dispute; (b) the law of the arbitral situs (or, if
P "906" different, the curial law); or (c) an “international” standard. There is no consensus as to which
these options is preferred: “international tribunals ... furnish precedents for almost any
decision one might wish to make in regard to interest.” (148)
In many civil law jurisdictions, rules concerning interest are regarded as “substantive” for
conflict of law purposes; (149) the same is true in the United States. (150) In other jurisdictions,
however, rules governing interest may be deemed “procedural.” (151) The interplay between
differing national laws dealing with interest, as well as national characterizations of interest
rules, can be metaphysical in their complexity. Moreover, the arbitral situs's laws may contain
mandatory prohibitions against interest awards, (152) or mandatory rules concerning the
 availability or rate of any interest awards. (153)
Notwithstanding these potential by-ways, arbitrators have in practice generally looked to the
substantive law governing the parties' underlying claims for standards regarding interest. If the
substantive law governing the parties' dispute contains rules concerning interest, arbitral
P "906" tribunals have generally applied those rules. (154) Conversely, if applicable substantive law
P "907" forbids awards of interest, arbitrators usually comply. (155) Nevertheless, other approaches
also occur, including application of the law of the place where payment is due, (156) a
“reasonable” rate based on international practice, (157) or the law of arbitral situs. (158)
Application of the arbitral situs's law is especially likely where the arbitral situs's law contains
mandatory prohibitions or requirements concerning interest.
International arbitral tribunals often award interest for both the period prior to their award
and for periods after the award but prior to payment. A few older awards concluded that the
tribunal lacked the power to grant post-award interest, on the theory that it was then functus
officio. (159) The more general practice, however, is to award interest until the date of payment
of the award (or, less commonly, the date of a judgment confirming the award). (160)
Putting aside conflicts issues, international arbitral tribunals are generally inclined to grant
interest and, less clearly, to do so at a rate approximating market rates of interest during the
period in question for the relevant currency. (161) They do so, at the end of the day, because
interest often represents an element of the damage suffered by the aggrieved party:
It is a dictate of natural justice, and the law of every civilized country, that a man is bound in
equity, not only to perform his engagements, but also to repair all the damages that accrue
naturally from their breach.... Every one who contracts to pay money on a certain day knows
P "907" that, if he fails to fulfil his contract, he must pay the established rate of interest as damages for
P "908" his non-performance. Hence it may correctly be said that such is the implied contract of the
parties.
(162) In general, simple interest (rather than compound interest) is awarded. (163)
2. Enforcement of Arbitral Awards of Interest in U.S. Courts
An arbitral tribunal's award of interest should be capable of being enforced. In general, U.S.
courts will enforce arbitrators' interest awards, even where the award is made under foreign
law, and regardless whether the applicable rates exceed those under U.S. law. (164) Awards of
interest are subject to public policy prohibitions against “penal” interest, as well as to other
generally applicable grounds for challenging arbitral awards, but these generally do not result
in non-enforcement of awards. (165) As discussed below, U.S. courts will generally enforce
awards of interest for both the period prior to the arbitral award and the period between the
award and entry of judgment confirming the award; (166) it is less clear whether U.S. courts will
enforce post-judgment awards of interest. (167) A “supplemental” award of interest, rendered
after the tribunal apparently initially overlooked the issue, has also been enforced. (168)
3. Awards of Interest by U.S. Courts
U.S. courts may themselves award additional interest, both for the post-award/pre-judgment
period, the post-judgment period, and (less clearly) the pre-award period. Most U.S. courts
P "908" have rejected requests, usually under state law, that they grant a pre-award interest that the
P "909" arbitrators have refused to award. (169) In contrast, one federal decision has granted pre-
award interest, albeit in unusual circumstances where the tribunal arguably invited a judicial
interest award. (170)
Post-award/pre-judgment interest is routinely awarded by U.S. courts when tribunals have not
addressed the issue. (171) It is, however, unclear whether the availability and rates of such
interest is governed by federal or state law. (172) Some courts have held that federal law
governs post-award/pre-judgment interest in federal courts, apparently on the dubious theory
that cases under the FAA arise under federal law. (173) Other courts have concluded that state
law governs post-award/pre-judgment interest in diversity cases, while federal law governs in
federal question cases. (174) Under this theory, in cases under the New York and Inter-American
Conventions, it would appear that federal law would govern the rate of pre-judgment interest.
(175)
Where federal law applies to an award of post-award/pre-judgment interest, some courts have
looked to 28 U.S.C. §1961. Section 1961 provides that “Interest shall be all owed on any money
judgment in a civil case recovered in a district court.” (176) Despite §1961's apparently
mandatory language, federal district courts have held that grants of post-award/pre-judgment
interest are within their discretion, defined as a matter of federal law. (177) Under those
P "909" standards, absent unusual circumstances that countervail the defendant's use of the
P "910" plaintiff's money, interest will usually be awarded. (178) Market rates of interest have typically
been awarded. (179) Where it appears that the judgment-debtor is delaying payment to gain
the benefits of below-market interest rates on an award, surcharges can be imposed. (180)
As described above, arbitrators sometimes render awards that establish an interest rate that
applies until payment of the award, which can include post-judgment, as well as post-
award/prejudgment, interest. U.S. courts have generally enforced such awards as to the post-
award/pre-judgment interest provisions. (181) As to post-judgment interest, most courts have
refused to enforce awards of interest by arbitrators. (182) These courts have generally reasoned
that §1961(a) applies to all civil judgments in federal court, including judgments confirming
arbitral awards, and that the section is mandatory. (183) Nevertheless, some courts have
upheld awards of post-judgment interest at rates different from §1961, on the unpersuasive
theory that the tribunal may have been awarding consequential damages. (184)
 C. Awards of Costs of Legal Representation In International Arbitration
International arbitration is usually expensive, in large part because of the fees of legal
representatives. The standards for enforcing arbitral awards of the costs of legal
representation, and for awards of such expenses by courts, are of corresponding importance.
P "910"
P "911"
1. Institutional Rules and International Practice
Most institutional arbitration rules expressly grant arbitral tribunals the power to award the
costs of legal representation. (185) In addition, arbitration clauses sometimes specifically
address the issue of the costs of legal representation. (186) The precise terms of the
institutional rules and the parties' contract will obviously affect a tribunal's fee award.
The law of the arbitral situs may also contain rules regarding the costs of legal representation.
(187) Different legal systems have widely differing approaches to awards of legal
representation costs in civil litigation. In the United States, the so-called “American Rule”
provides that each party generally bears its own legal costs: except in unusual cases, the
prevailing party has no right to an award of attorneys' fees. (188) In many civil law jurisdictions,
however, the prevailing party is entitled to recover its reasonable costs of legal representation,
or to an award of fees based upon a statutory formula. (189) Similarly, some common-law
jurisdictions, such as England, award the prevailing party its costs of legal representation. (190)
The differing availability of costs of legal representation under different national laws gives
conflict of laws issues practical importance. As a practical matter, arbitrators in international
cases routinely award the costs of legal representation, usually without discussing questions of
applicable law. (191) Most awards either rely exclusively on grants of discretion (or other
standards) pursuant to applicable institutional rules, (192) or simply award a “reasonable” or
“appropriate” amount. (193) Nevertheless, some awards have relied on provisions of applicable
national substantive law, including RICO, (194) or statutory rules regarding the costs of legal
representation under national law. (195)
P "911" In exercising their discretion, international arbitral tribunals have often made some award of
P "912" the costs of legal representation to the “prevailing party.” But in doing so, arbitrators
invariably take into account the extent to which that party recovered what it initially claimed,
the extent to which each party's position was substantively reasonable, the extent to which a
party's conduct needlessly complicated the proceedings, and similar factors. (196)
2. Costs of Legal Representation in International Arbitration Under the FAA
Under the FAA, a number of courts have held that arbitrators lack the power to award
attorneys' fees incurred in the arbitration unless the parties have expressly conferred this
authority on the tribunal. (197) In contrast, other U.S. courts have apparently taken a broader
view and concluded that arbitrators have implied authority to award attorneys' fees. (198)
As a matter of principle, U.S. courts enforcing foreign arbitral awards should not necessarily
apply the general U.S. rule against attorneys' fee awards in the absence of an express
P "912" agreement. Nothing in the FAA itself imposes such a rule. While the U.S. decisions on the
P "913" subject do not explain their rationale, it must rest on the familiar “American rule” that, in
domestic U.S. litigation, each party bears its attorneys' fees. (199) That rule applies in U.S.
arbitration either because the law of a U.S. state, incorporating the rule, provides the curial
law or the substantive law for the arbitration; absent a contrary agreement, this rule can
reasonably be concluded to apply in the arbitration. (200)
In a foreign arbitration, the “American rule” may not be applicable through either the curial
law or the substantive law. If non-U.S. law provides the curial law and substantive law, and if
that law grants the arbitrators authority to award the costs of legal representation absent an
express agreement, then the arbitrators generally will, and should, do so. Equally, a U.S. court
asked to recognize the award should do so. The “American rule” regarding costs of legal
representation does not rise to the level of U.S. public policy and if applicable curial or
substantive law permitted an award of the costs of legal representation, no excess of authority
argument can be made. (201)
The costs of legal representation can also be awarded by U.S. courts with respect to actions to
enforce arbitration awards. The general rule under the FAA appears to be that refusals to pay
an award must be in bad faith before attorneys' fees for confirmation proceedings are
awardable. (202) Provisions in an arbitration agreement regarding the costs of legal
representation are generally not applicable to fee awards in subsequent enforcement
litigation. (203)
P "913"
P "914"
D. Preclusive Effects of Arbitral Awards in the United States (204)
Parties frustrated by the outcome of an arbitration sometimes attempt to relitigate claims
they unsuccessfully arbitrated. (205) Such efforts are typically met by the argument that
relitigation is precluded by an existing arbitral award. This section describes the preclusive
effect of arbitral awards in U.S. courts. (206)
U.S. courts are split in decisions regarding the allocation of competence to decide the
preclusive effects of arbitral awards. Some courts have held that such decisions are for judicial
resolution. (207) More recent decisions have held that the preclusive effects of arbitral awards
are presumptively for resolution by the arbitrators pursuant to the parties' underlying
 arbitration agreement. (208)
Under U.S. law, the preclusive effects of arbitral awards are broadly similar – but not
necessarily identical – to those of judicial judgments. (209) As with judicial judgments, U.S.
courts have distinguished between the res judicata and collateral estoppel consequences of
arbitral awards. (210) The former, also referred to as “claim preclusion,” refers to the effect of
an award in barring a subsequent action between the same parties or their privies that is
based upon the same claim as that in the original action. (211) In contrast, under “issue
P "914" preclusion” or collateral estoppel, “once a court has decided an issue of fact or law necessary
P "915" to its judgment, that decision may preclude relitigation of the issue in a suit on a different
cause of action involving a party to the first case.” (212)
If an arbitral award is confirmed under the FAA, then it becomes a judgment of the court,
entitled to the same preclusive effect as any other civil judgment of a federal district court.
(213) Similarly, if an award is confirmed by a state court, then the resulting judgment is entitled
to recognition under the federal Full Faith and Credit statute. (214) Unconfirmed arbitral
awards, however, are not protected either by §1738 (215) or directly by the general rules of
preclusion applicable to judicial judgments. (216) “Because federal courts are not required by
statute to give res judicata or collateral estoppel effect to an unappealed arbitration award,
any rule of preclusion would necessarily be judicially fashioned.” (217)
Where underlying federal law claims are involved, federal law governs issues of preclusion.
(218) In contrast, where state (and presumably foreign) law substantive claims are concerned,
state law governs the subject of preclusion. (219) Lower courts have not considered whether,
under the FAA or New York Convention, federal law governs issues of preclusion. (220)
The starting point for judicially fashioned rules of preclusion for arbitral awards has been
preclusion standards for judicial judgments. The Restatement (Second) of Judgments is
illustrative, providing in §84:
(1) Except as stated in Subsections (2), (3), and (4), a valid and final award by arbitration has
the same effects under the rules of res judicata, subject to the same exceptions and
qualifications, as a judgment of a court.
P "915"
P "916"
(2) An award by arbitration with respect to a claim does not preclude relitigation of the same
or a related claim based on the same transaction if a scheme of remedies permits assertion of
the second claim notwithstanding the award regarding the first claim.
(3) A determination of an issue in arbitration does not preclude relitigation of that issue if:
(a) According preclusive effect to determination of the issue would be incompatible with a
legal policy or contractual provision that the tribunal in which the issue subsequently
arises be free to make an independent determination of the issue in question, or with a
purpose of the arbitration agreement that the arbitration be specially expeditious; or
(b) The procedure leading to the award lacked the elements of adjudicatory procedure
prescribed in §83(2).
(4) If the terms of an agreement to arbitrate limit the binding effect of the award in another
adjudication or arbitration proceeding, the extent to which the award has conclusive effect is
determined in accordance with that limitation.
The weight of lower court authority also concludes that preclusion rules for unconfirmed
arbitral awards begin from comparable standards for judgments. (221)
Principles of res judicata or claim preclusion are frequently applied to unconfirmed arbitral
awards. (222) If a party attempts to litigate an arbitrable claim that it previously has
arbitrated, and the parties to the proceedings are identical, U.S. courts have uniformly held
that res judicata principles bar the action. (223) Moreover, most courts have also held that res
judicata bar claims that could have been, but were not, asserted in a prior arbitral proceeding.
(224)
P "916"
P "917"
The general applicability to arbitral awards of the res judicata standards for judgments is
subject to important qualifications. First, as §84(2) provides, an arbitral award will not operate
as res judicata where a statutory “scheme of remedies” prevents it from doing so. Thus, where
Congress has guaranteed a judicial right of action for a federal claim, arbitral awards may not
be preclusive. (225) Although there is little precedent, a state statutory scheme denying
preclusive effect to arbitral awards dealing with particular issues would likely be preempted
by the FAA. (226)
Second, where the parties' arbitration clause denies res judicata effect to an award, that
agreement will be respected. (227) In practice, few agreements have such an effect.
The collateral estoppel effects of arbitral awards are more complex. Again, the same basic
rules apply as in the context of judicial judgments: (228) There is good reason to treat the
determination of issues in an arbitration proceeding as conclusive in a subsequent proceeding,
just as determinations of a court would be so treated. (229)
Thus, lower courts have invoked collateral estoppel where an issue (necessary to a dispute's
outcome) was raised and actually adjudicated after a full and fair hearing in an arbitration,
P "917" and the same issue arises in subsequent litigation. (230) Lower courts have generally rejected
P "918" the argument that the procedural differences between arbitration and litigation prevent the
 application of general collateral estoppel principles to arbitral awards. (231)
Even more so than with res judicata, however, this general rule is subject to exceptions. First,
where an arbitral award is either unreasoned or does not clearly dispose of particular factual
or legal issues, some courts will refuse to give it collateral estoppel effect. (232) Second, if the
parties' agreement provides that awards shall not have collateral estoppel effect, courts will
enforce that limitation. (233) Finally, where non-arbitrable statutory claims are asserted, some
U.S. courts have concluded that generally-applicable collateral estoppel principles must be
modified. (234) Even where an award is not entitled to preclusive effect, it may be admissible
in evidence. (235)
P "918"

References
1) See supra p. 792-93.
2) See infra pp. 883, 888; Seetransport Wiking Trader etc. v. Navimpex Centrala Navala, 989
F.2d 572 (2d Cir. 1993); Bergesen v. Joseph Muller Corp., 710 F.2d 928, 938 (2d Cir. 1983).
3) See Seetransport Wiking Trader etc. v. Navimpex Centrala Navala, 989 F.2d 572 (2d Cir.
1993); infra p. 903.
4) See infra pp. 895-96.
5) See 9 U.S.C. §9; infra p. 888.
6) Foreign Arbitral Awards, S. Rep. No. 91-702, 91st Cong., 2d Sess. 6 (1970) (Appendix;
Statement of Richard D. Kearney) (“essential to allow time for ... initial enforcement
efforts outside the United States and the consensus was that 3 years is a reasonable
period ...”
7) See infra p. 888.
8) 989 F.2d 572 (2d Cir. 1993).
9) See Seetransport Wiking Trader v. Navimpex Centrala, 989 F.2d 572 (2d Cir. 1993), reversing,
793 F.Supp. 444 (S.D.N.Y. 1992) (holding that FAA §207's three-year period, running from
date “award was made,” begins when award is signed, not when judicial challenge in
arbitral situs was finally dismissed on appeal).
10) See infra p. 888.
11) Jamaica Commodity Trading Co. v. Connell Rice & Sugar Co., 1991 U.S. Dist. Lexis 8976
(S.D.N.Y. July 3, 1991).
12) See infra pp. 888-89.
13) 9 U.S.C. §204. It is clear that §204 allows venue in either the arbitral situs or where suit
could have been brought but for the arbitration clause. See Audi NSU Auto Union AG v.
Overseas Motors, Inc., 418 F.Supp. 982 (E.D. Mich. 1976); Transatlantic Bulk Shipping Ltd v.
Saudi Chartering SA, 622 F.Supp. 25 (S.D.N.Y. 1985).
14) American Construction Machinery & Equipment Corp. v. Mechanised Construction of
Pakistan, Ltd, No. 85 Civ. 3765 (S.D.N.Y. March 5, 1986) (venue proper under both §204 and
§1391(f)(1)); Ipitrade Int'l, SA v. Federal Republic of Nigeria, 465 F.Supp. 824 (D.D.C. 1978) (28
U.S.C. §1391(f)(4)). Both of these decisions relied on the FSIA's venue provisions. As
discussed below, the FSIA specifically contemplated actions against foreign sovereigns to
enforce arbitral awards. See infra pp. 895-96. It is arguably less clear that general venue
provisions, including the Alien Venue Act, would be available in actions under sect;207.
15) See Brunette Machine Works v. Kockum Indus., Inc., 406 U.S. 706 (1972); G. Born,
International Civil Litigation in United States Courts 367-69 (3d ed. 1996).
16) 28 U.S.C. §1391(d) (“An alien may be sued in any district” 28 U.S.C. §1391(f) (FSIA); 28 U.S.C.
§1391(a), (b) & (c).
17) 9 U.S.C. §203.
18) See infra p. 892.
19) Among other things, as discussed above, the applicability of §§9 and 10 in state courts is
uncertain. More generally, state courts may provide significantly different procedures
and/or decision-makers in particular cases.
20) York Hannover Holding AG v. McDermott Int'l, Inc., 794 F.Supp. 118 (S.D.N.Y. 1992) (holding
that action to disqualify arbitrator is removable under §205 because it “relates to”
agreement falling under Convention); Seetransport Wiking Trader etc. v. Navimpex Centrala
Navala, 989 F.2d 572 (2d Cir. 1993) (§203 grants jurisdiction in action to enforce foreign
judgment confirming arbitral award).
21) Tesoro Petroleum Corp. v. Asamera (South Sumatra) Ltd, 798 F.Supp. 400 (W.D. Tex. 1992).
22) Seetransport Wiking Trader etc. v. Navimpex Centrala Navala, 989 F.2d 572 (2d Cir. 1993)
(subject matter jurisdiction under §1330(a) and §1605(a)(1)); American Construction
Machinery & Equipment Corp. v. Mechanised Construction of Pakistan Ltd, No. 85 Civ. 3765
(S.D.N.Y. March 5, 1986); In re Application of Molino Fratelli Pardini, SpA, 78 Civ. 3549
(S.D.N.Y. May 18, 1979) (subject matter jurisdiction under either §203 or 28 U.S.C. §1332).
23) See Seetransport Wiking Trader etc. v. Navimpex Centrala, 989 F.2d 572 (2d Cir. 1993),
reversing, 793 F.Supp. 444 (S.D.N.Y. 1992) (applying 28 U.S.C. §1605(a)(6) of FSIA); M.B.L. Int'l
Contractors, Inc. v. Trinidad and Tobago, 725 F.Supp. 52 (D.D.C. 1989); Ipitrade Int'l SA v.
Federal Republic of Nigeria, 465 F.Supp. 824 (D.D.C. 1978) (applying 28 U.S.C. §1605(a)(1) of
FSIA); Liberian Eastern Timber Corp. v. Republic of Liberia, 650 F.Supp. 73 (S.D.N.Y. 1986),
aff'd mem., 854 F.2d 1314 (2d Cir. 1987). See infra pp. 895-96.
24) This formulation presumably includes cases where the arbitral tribunal or the arbitration
institution selects the arbitral forum (at least if it does so pursuant to institutional rules
selected by the parties). It also presumably includes cases where a party participates
without protest in arbitral proceedings in a particular place.
25) See 9 U.S.C. §204. This formulation requires ignoring the parties' arbitration agreement
and considering whether the defendant would have been subject to personal jurisdiction
in the enforcement forum in an action on the claims that were arbitrated. That, in turn,
requires application of the forum's personal jurisdiction statutes, which will typically
require in quiry into the existence of either specific or general jurisdiction under the due
process clause. See G. Born, International Civil Litigation in United States Courts 67-78 (3d
ed. 1996).
26) Seetransport Wiking Trader etc. v. Navimpex Centrala Navala, 793 F.Supp. 444, 448 (S.D.N.Y.
1992), reversed on other grounds, 989 F.2d 572 (2d Cir. 1993); Transatlantic Bulk Shipping Ltd
v. Saudi Chartering SA, 622 F.Supp. 25 (S.D.N.Y. 1985):
Similarly, as to the Act implementing the Convention, it authorizes the court to hear a new
category of action not previously within its subject matter jurisdiction. It does not,
however, give the court power over all persons throughout the world who have entered
into an arbitration agreement covered by the Convention. Some basis must be shown,
whether arising from the respondent's residence, his conduct, his consent, the location of
his property or otherwise, to justify his being subject to the court's power.
27) See G. Born, International Civil Litigation in United States Courts 973-74 (3d ed. 1996).
28) Intercarbon Bermuda, Ltd v. Caltex Trading and Transport Corp., 146 F.R.D. 64 (S.D.N.Y.
1993).
29) Id. at 67.
30) Section 12 provides for service within the district where an award is made in the manner
provided for in the case of motions. For service outside that district, service is to be made
by “the marshal of any district within which the adverse party may be found in like
manner as other process of the court.” 9 U.S.C. §12.
31) Intercarbon Bermuda, Ltd v. Caltex Trading and Transp. Corp., 146 F.R.D. 64, 67 (S.D.N.Y.
1993). See also Reed & Martin, Inc. v. Westinghouse Elec. Corp., 439 F.2d 1268, 1277 (2d Cir.
1971).
32) Intercarbon Bermuda, Ltd v. Caltex Trading and Transport Corp., 146 F.R.D. 64, 67-69
(S.D.N.Y. 1993); Victory Transport, Inc. v. Comisaria General de Abastecimientos y
Transportes, 336 F.2d 354, 363-4 (2d Cir. 1964).
33) See G. Born, International Civil Litigation in United States Courts 836-38 (3d ed. 1996).
34) See Audi NSU Auto Union AG v. Overseas Motors, Inc., 418 F.Supp. 982, 985 (E.D. Mich. 1976)
(raising, but not deciding, issue).
35) See Bergesen v. Joseph Muller Corp., 710 F.2d 928 (2d Cir. 1983).
36) 9 U.S.C. §9.
37) 9 U.S.C. §9. See supra pp. 780-83, 793-94.
38) Sverdrup Corp. v. WHC Constructors Inc., 1993 U.S. App. Lexis 5270 (4th Cir. 1993); Kentucky
River Mills v. Jackson, 206 F.2d 111, 120 (6th Cir. 1953) (“language of [§9] is not mandatory,
but permissive”), cert. denied, 346 U.S. 887 (1953); Paul Allison, Inc. v. Minikin Storage of
Omaha, Inc., 452 F.Supp. 573, 575 (D. Neb. 1978); Brown v. Bridgeport Rolling Mills Co., 245
F.Supp. 41, 45 n.7 (D. Conn. 1965) (dicta).
Other courts have held that any time bar for confirmation is waived if the adverse party
challenges the substance of the arbitral award. Maidman v. O'Brien, 473 F.Supp. 25, 27
(S.D.N.Y. 1979); Paul Allison, Inc. v. Minikin Storage of Omaha, Inc., 452 F.Supp. 573, 575 (D.
Neb. 1978).
39) Sverdrup Corp. v. WHC Constructors, Inc., 787 F.Supp. 542 (D.S.C. 1992) (treating §9 as
permissive “implies that Congress inserted the one-year provision in §9 even though it is
wholly unnecessary”), rev'd, 1993 U.S. App. Lexis 5270 (4th Cir. 1993); Kerr-McGee Refining
Corp. v. Triumph Tankers Ltd, 740 F.Supp. 288 (S.D.N.Y. 1990).
40) See Sverdrup Corp. v. WHC Constructors Inc., 1993 U.S. App. Lexis 5270 (4th Cir. 1993) (“Thus,
an action at law remains an alternative to confirmation proceedings under §9.”); A.J. Curtis
v. D.W. Falls, 305 F.2d 811 (3d Cir. 1962); McCollough v. Clinch-Mitchell Construction Co., 71
F.2d 17, 22 (8th Cir.), cert. denied, 293 U.S. 582 (1934); E.A. Bromund Co. v. Exportadora
Affonso de Alburquerque Ltda., 110 F.Supp. 502 (S.D.N.Y. 1953).
41) See Seetransport Wiking Trader v. Navimpex Centrala, 793 F.Supp. 444 (S.D.N.Y. 1992), rev'd,
989 F.2d 572 (2d Cir. 1993).
42) Kerr-McGee Refining Corp. v. Triumph Tankers Ltd, 740 F.Supp. 288 (S.D.N.Y. 1990) (time for
moving to confirm runs from time an award “finally and definitely” disposing of a
“separate and independent” claim is made).
43) E.g., Southland Corp. v. Keating, 465 U.S. 1, 4 (1984); Nesslage v. York Sec., 823 F.2d 231, 234-
35 (8th Cir. 1987); City of Atlanta v. Brinderson Corp., 799 F.2d 1541, 1543 (11th Cir. 1986); Hull
v. Narcom, Inc., 750 F.2d 1547 (11th Cir. 1985).
44) Sunshine Beauty Supplies, Inc. v. U.S. District Court etc., 872 F.2d 310, 311 (9th Cir. 1989).
45) E.g., Oklahoma City Associates v. Wal-Mart Stores, Inc., 923 F.2d 791 (10th Cir. 1991) (“The
unambiguous language of §9 leads us to believe that it creates its own level of subject
matter jurisdiction for confirmation under the FAA.... There is no federal court jurisdiction
to confirm under the FAA where such jurisdiction has not been made a part of the
arbitration agreement.”); Varley v. Tarrytown Assocs., 477 F.2d 208, 210 (2d Cir. 1973) (“the
parties must have ... agreed that judgment shall be entered upon the award”); Island
Territory of Curacao v. Solitron Devices, Inc., 489 F.2d 1313, 1319 (2d Cir. 1973); Lehigh
Structural Steel Co. v. Rust Engineering Co., 59 F.2d 1038 (1932), cert. denied, 287 U.S. 626
(1932).
46) See Booth v. Hume Publishing Inc., 902 F.2d 925, 930 (11th Cir. 1990); Place St. Charles v. J.A.
Jones Constr., 823 F.2d 120, 124 (5th Cir. 1980); Milwaukee Typographical Union No. 23 v.
Newspapers, Inc., 639 F.2d 386 (7th Cir. 1981) (contractual provision that award is “final and
binding” held sufficient); T & R Enterprises v. Continental Grain Co., 613 F.2d 1272, 1278-79
(5th Cir. 1980) (“final and binding” clause, plus involvement of court in staying litigation
and compelling arbitration, held sufficient); Kallen v. District 1199 etc., 574 F.2d 723, 724-26
(2d Cir. 1978) (“final and binding” clause, plus participation in arbitration, held sufficient);
Commonwealth Edison Co. v. Gulf Oil Co., 541 F.2d 1263 (7th Cir. 1976) (incorporation of
amended AAA rules, containing provisions regarding consent to entry of judgment,
satisfies §9); I/S Stavborg v. National Metal Converters, Inc., 500 F.2d 424 (2d Cir. 1974)
(provision that award shall be “final,” and parties' conduct, satisfy §9); Pennsylvania Eng.
Corp. v. Islip Resource Recovery Agency, 710 F.Supp. 456, 460-61 (E.D.N.Y. 1989) (parties'
agreement that award will be “final, binding determination (not subject to appeal)”);
Compania Chilena de Navegacion Interoceanica, SA v. Norton Lilly & Co., 652 F.Supp. 1512,
1515 (S.D.N.Y. 1987) (relying on clause providing that award would be “final and binding”);
Ingvold Stad v. Kings Wharf Island Enter., 593 F.Supp. 997, 1002-03 (D.V.I. 1984); Dan River,
Inc. v. Cal-Togs, Inc., 451 F.Supp. 497 (S.D.N.Y. 1978); Paley Assoc., Inc. v. Universal Woolens,
Inc., 446 F.Supp. 212, 214-15 (S.D.N.Y. 1978) (amended AAA rules); Audi NSU Auto Union AG v.
Overseas Motors, Inc., 418 F.Supp. 982, 984-85 (E.D. Mich. 1976) (statement in arbitration
clause that award “shall be final and binding upon the parties” satisfies §9). See also
Marine Transit Corp. v. Dreyfus, 284 U.S. 263, 276 (1932).
For example, some courts have held that an agreement to arbitrate according to AAA
Rules satisfies §9, because those rules provide that parties to AAA arbitrations have
consented to judgment being entered upon the award in a federal or state court.
Milwaukee Typographical Union No. 23 v. Newspapers, Inc., 639 F.2d 386 (7th Cir.), cert.
denied, 454 U.S. 838 (12981); Audi NSU Auto Union Aktiengesellschaft v. Overseas Motors,
418 F.Supp. 982 (E.D. Mich. 1976).
47) I/S Stavborg v. National Metal Converters, Inc., 500 F.2d 424 (2d Cir. 1974); Pennsylvania
Eng. Corp. v. Islip Resource Recovery Agency, 710 F.Supp. 456, 460-61 (E.D.N.Y. 1989).
48) See supra p. 887.
49) 381 F.Supp. 1368 (S.D.N.Y. 1974).
50) 381 F.Supp. at 1369-70.
51) See Sunshine Beauty Supplies, Inc. v. U.S. District Court etc., 872 F.2d 310 (9th Cir. 1989);
Reed & Martin, Inc. v. Westinghouse Elec. Corp., 439 F.2d 1268 (2d Cir. 1971).
52) See Note, Venue for Motions to Confirm or Vacate Arbitration Awards Under the Federal
Arbitration Act, 57 Fordham L. Rev. 653 (1989).
53) Sunshine Beauty Supplies, Inc. v. U.S. District Court etc., 872 F.2d 310, 312 (9th Cir. 1989);
Central Valley Typographical Union No. 46 v. McClatchy Newspapers, 762 F.2d 741, 744 (9th
Cir. 1985); Enserch Int'l Explorations, Inc. v. Attock Oil Co., 656 F.Supp. 1162, 1164 n.5 (N.D.
Tex. 1987); Arthur Imerman Undergarment Corp. v. Local 162, 145 F.Supp. 14 (D.N.J. 1956).
54) In re VMS Sec. Litigation, 21 F.3d 139, 145 (7th Cir. 1994); Purdy v. Monex Int'l Ltd, 867 F.2d
1521, 1523 (5th Cir. 1989); Motion Picture Laboratory Technicians Local 780 v. McGregor &
Werner, Inc., 804 F.2d 16, 19 (2d Cir. 1986); Smiga v. Dean Witter Reynolds, Inc., 766 F.2d 698,
706 (2d Cir. 1985), cert. denied, 475 U.S. 1067 (1986); NII Metals Services, Inc. v. ICM Steel
Corp., 514 F.Supp. 164 (N.D. Ill. 1981) (holding that §9 does not limit jurisdiction to confirm
award to district where award was made, but instead permits confirmation where local
choice-of-law rules permit; fact that district court in Illinois granted stay under §3 of FAA
argued for permitting action to confirm there under §9); Paul Allison, Inc. v. Minikin
Storage, 452 F.Supp. 573 (D. Neb. 1978).
55) See supra p. 884.
56) Marine Transit Corp. v. Dreyfus, 284 U.S. 263, 276 (1932) (because district court had
authority “to make an order for arbitration, the court also has authority to confirm the
award”). See also Samiga v. Dean Witter Reynolds Inc., 766 F.2d 698 (2d Cir. 1985), cert.
denied, 475 U.S. 1067 (1986) (“a court [that] orders arbitration retains jurisdiction to
determine any subsequent application involving the same agreement to arbitrate,
including a motion to confirm the arbitral award”).
57) Motion Picture Laboratory etc. v. McGregor & Werner, Inc., 804 F.2d 16, 19 (2d Cir. 1986).
Compare Sunshine Beauty Supplies, Inc. v. U.S. District Court, 872 F.2d 310, 311 (9th Cir. 1989)
(district court for district where award was made may not transfer §9 action to confirm
under §1404).
58) Compare Stroh Container Co. v. Delphi Indus., Inc., 783 F.2d 743 n.7 (8th Cir. 1986) (“special
venue provision”) and Weststar Assoc., Inc. v. Tin Metals Co., 752 F.2d 5, 7 (1st Cir. 1985)
(same) with Oklahoma City Assoc. v. Wal-Mart Stores, Inc., 923 F.2d 791 (10th Cir. 1991)
(“creates its own level of subject matter jurisdiction”) and I/S Stavborg v. National Metal
Converters, 500 F.2d 424, 425-26 (2d Cir. 1974) (“jurisdiction of the federal district court”)
and Higgins v. U.S. Postal Service, 655 F.Supp. 739 (D.Me. 1987).
59) 9 U.S.C. §9.
60) That reading is further suggested by the sentences immediately following the grant of
personal jurisdiction in §9, which deal with service in actions commenced in the district
where the award was made.
61) Some lower courts to confirm an award have held that jurisdiction will be proper in a
court where actions to enforce the underlying agreement were litigated. Allen Group, Inc.
v. Allen Deutschland GmbH, 877 F.Supp. 395, (W.D. Mich. 1994) (adopting rule that “once a
court obtains jurisdiction in an action, that court retains the right to enter judgment on
the arbitrator's award which was an outgrowth of the original action”).
62) See also supra pp. 885-86; G. Born, International Civil Litigation in United States Courts 68-
69, 171-98 (3d ed. 1996).
63) Reed & Martin, Inc. v. Westinghouse Elec. Corp., 439 F.2d 1268 (2d Cir. 1971); Farr & Co. v. Cia.
Intercontinental de Navegacion de Cuba, 213 F.2d 342 (2d Cir. 1957).
64) See G. Born, International Civil Litigation in United States Courts 973 (3d ed. 1996).
65) Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 29 n.32 (1983);
Harry Hoffman Printing v. Graphic Communications Labor Union, 912 F.2d 608, 611 (2d Cir.
1990); General Atomic Co. v. United Nuclear Corp., 655 F.2d 968 (9th Cir. 1981), cert. denied,
455 U.S. 948 (1981); New Hope Baptist Church v. Design Bldg. Interiors, 789 F.Supp. 19, 20
(D.D.C. 1992); Huffco Petroleum Corp. v. Transcontinental Gas Pipe Line Corp., 681 F.Supp.
400 (S.D. Tex. 1988); Bangor & Aroostock R. v. Maine Central R., 359 F.Supp. 261 (D.D.C. 1973).
66) See supra p. 884-85.
67) See supra p. 892.
68) See supra pp. 385-91, 395-97.
69) See Lewis & Peat Coffee, Inc. v. Condor Group, Inc., 588 So.2d 316 (Fla. Dist. Ct. App. 3d Dist.
1991) (permitting confirmation based on clause providing that “judgment on any award
may be entered in the court of [New York], or in any other court of competent
jurisdiction”).
70) A.G. Edwards & Sons, Inc. v. Petrucci, 525 So.2d 918, 920-21 (Fla. App. 1988) (holding §9 and
§10 applicable in state courts); United Nuclear Corp. v. General Atomic Co., 651 P.2d 1277,
1286 (N.M. 1982) (same); Hilton Construction Co. v. Martin Mechanical Contractors, Inc., 303
S.E.2d 119 (Ga. App.), aff'd, 308 S.E.2d 830 (Ga. 1983) (holding that §9 was applicable in
state courts, while leaving open applicability of §10); Moss v. Prudential-Bache Securities,
Inc., 581 A.2d 1138 (Del. Sup. 1990).
71) See supra pp. 341-58.
72) See Atwood, Issues in Federal-State Relations Under the Federal Arbitration Act, 37 U. Fla. L.
Rev. 61, 91 (1985) (arguing it does not); Thayer v. American Financial Advisors, Inc., 322
N.W.2d 599 (Minn. 1982) (FAA does not preempt state law governing enforceability of
awards and, under state law, arbitration agreement did not reach claims of fraudulent
inducement). See also Huber, Hunt & Nichols, Inc. v. Architectural Stone Co., 625 F.2d 22, 26
n.8 (5th Cir. 1980) (raising but not resolving effect of §§9 and 10 in state courts); RPJ Energy
Fund Mgt., Inc. v. Collins, 552 F.Supp. 946, 949 (D. Minn. 1982) (same).
73) 109 S.Ct. 1248 (1989).
74) St. Lukes's Hospital v. SMS Computer Systems, Inc., 785 F.Supp. 1243 (E.D. Mich. 1991) (under
Volt, agreement that arbitration be “determined in accordance with” state arbitration
statute held to incorporate Michigan standards for vacating award; court observes
Michigan standards are similar to FAA).
75) For decisions raising the possibility that §§9 and 10 provide exclusive jurisdiction to
federal courts, see General Atomic Co. v. United Nuclear Corp., 655 F.2d 968, 970-71 (9th Cir.
1981) (suggesting that, in the absence of contrary agreement, federal courts have
exclusive jurisdiction under §9 to confirm arbitration awards), cert. denied, 455 U.S. 948
(1982); Hilton Construction Co. v. Martin Mechanical Contractors, Inc., 303 S.E.2d 119 (Ga.
App.), aff'd on other grounds, 308 S.E.2d 830 (Ga. 1983) (§10 proceedings to vacate in
federal court are arguably exclusive avenue to vacate award subject to FAA).
76) McEntire v. Monarch Feed Mills, Inc., 631 S.W.2d 307 (Ark. 1982) (FAA does not grant federal
courts exclusive jurisdiction); Paul Allison, Inc. v. Minikin Storage of Omaha, Inc., 452
F.Supp. 573, 574-75 (D. Neb. 1978) (FAA does not grant federal courts exclusive jurisdiction
to enforce awards; common law enforcement rights still exist); Kentucky River Mills v.
Jackson, 206 F.2d 111, 120 (6th Cir. 1953), cert. denied, 346 U.S. 887 (1953); Salt Lake
Pressman and Platemakers, Local Union No. 28 v. Newspaper Agency Corp., 485 F.Supp. 511
(D. Utah 1980); Brown v. Bridgeport Rolling Mills Co., 245 F.Supp. 41, 45 n.7 (D. Conn. 1965).
77) Ballantine Books, Inc. v. Capital Distributing Co., 302 F.2d 17 (2d Cir. 1962) (raising
possibility that extensive state court “supervision” of arbitration would warrant exclusive
state court jurisdiction to enforce award, but rejecting theory on the facts); Paley Assoc.,
Inc. v. Universal Woolens, Inc., 446 F.Supp. 212, 215 (S.D.N.Y. 1978) (same). It is not clear
whether this would be consistent with the enforcement mechanisms available under §§9
and 10 of the FAA. Presumably the theory would rest on some sort of implied agreement of
the parties, and conversely would also apply where a federal court had been extensively
engaged in the arbitral process.
78) “Foreign states” are defined by §1603(a) of the Foreign Sovereign Immunities Act, 28 U.S.C.
§1603(a), as including “agencies” and “instrumentalities” of foreign states. See G. Born,
International Civil Litigation in United States Courts 213-16 (3d ed. 1996).
79) 28 U.S.C. §1605(a)(1). Under the FSIA, foreign states enjoy a presumptive grant of sovereign
immunity. 28 U.S.C. §1604. Section 1605(a) sets forth various exceptions to that immunity.
Where an exception to immunity exists, then §1330(a) provides federal district courts with
an affirmative grant of subject matter jurisdiction over the action, while §1330(b) provides
an affirmative grant of personal jurisdiction (provided proper service is made.) See G.
Born, International Civil Litigation in United States Courts 211-12 (3d ed. 1996).
80) As described above, lower courts have taken a narrower view of §1605(a)(1) in actions to
enforce arbitration agreements. See Seetransport Wiking Trader etc. v. Navimpex Centrala
Navala, 989 F.2d 572, 577-78 (2d Cir. 1993); Ipitrade Int'l SA v. Federal Republic of Nigeria, 465
F.Supp. 824 (D.D.C. 1978).
81) See Seetransport Wiking Trader etc. v. Navimpex Centrala Navala, 989 F.2d 572, 577-78 (2d
Cir. 1993); M.B.L. Int'l Contractors, Inc. v. Trinidad and Tobago, 725 F.Supp. 52 (D.D.C. 1989);
Liberian Eastern Timber Corp. v. Republic of Liberia, 650 F.Supp. 73, 76 (S.D.N.Y. 1986), aff'd
mem., 854 F.2d 1314 (2d Cir. 1987); Verlinden BV v. Central Bank of Nigeria, 488 F.Supp. 1284,
1300 (S.D.N.Y. 1980), aff'd on other grounds, 647 F.2d 320 (2d Cir. 1981), rev'd, 461 U.S. 480
(1983). In Seetransport Wiking, the Second Circuit also apparently relied on the fact that
the foreign state in question had ratified the New York Convention. 989 F.2d at 578-79. That
suggests focusing on the foreign state's treaty obligation for purposes of §1605(a)(1). The
prevailing view, however, is to focus on the foreign state's agreement to arbitrate in a New
York Convention state (regardless whether the foreign state making the agreement has
ratified the Convention). That is because the New York Convention's reciprocity
reservations are generally held to render arbitral awards enforceable based on whether
the state in which the award was made is a Convention signatory, and not on whether the
state against which the award is made is a signatory. See supra pp. 733-34.
82) Caribbean Trading and Fidelity Corp. v. Nigerian Nat'l Petroleum Corp., 1990 U.S. Dist. Lexis
17198 (S.D.N.Y. 1990).
83) 725 F.Supp. 52 (D.D.C. 1989).
84) See American Construction Machinery & Equipment Corp. v. Mechanised Construction of
Pakistan, Ltd, No. 85 Civ. 3765 (S.D.N.Y. March 5, 1986); Ipitrade Int'l, SA v. Federal Republic
of Nigeria, 465 F.Supp. 824 (D.D.C. 1978).
85) Procedurally, a party must file a motion to vacate an arbitral award as provided for in §6
of the FAA and Rule 7(b) of the Federal Rules of Civil Procedure.
86) Booth v. Hume Publishing Co., 902 F.2d 925 (11th Cir. 1990); Cullen v. Paine, Webber, Jackson
& Curtis, Inc., 863 F.2d 851, 853 (11th Cir.), cert. denied, 109 S.Ct. 3159 (1989); Carpenters 46
etc. v. Meddles, 535 F.Supp. 775, 777 (N.D. Cal. 1981). See also Prudential-Bache Securities,
Inc. v. Tanner, 72 F.3d 234 (1st Cir. 1995) (rejecting argument that institutional arbitration
rules imposed shorter period to seek to vacate arbitral award than FAA §12).
87) Paul Allison, Inc. v. Minitrin Storage of Omaha, Inc., 452 F.Supp. 573 (D. Neb. 1978) (“the
time structure within §12 is inexplicable when the party who prevails at arbitration moves
to confirm the award and the defendant desires to raise objections”); Chauffeurs,
Teamsters, Warehousemen and Helpers Local Union No. 364 v. Ruan Transport Corp., 473
F.Supp. 298 (D. Ind. 1979); Riko Enterprises, Inc. v. Seattle Supersonics Corp., 357 F.Supp. 521
(S.D.N.Y. 1973) (same).
88) Carpenters 46 etc. v. Meddles, 535 F.Supp. 775 (N.D. Cal. 1981); DeLorto v. United Parcel
Service, Inc., 401 F.Supp. 408, 409 (D. Mass. 1975).
89) Booth v. Hume Publishing Inc., 902 F.2d 925, 929 n.4 (11th Cir. 1990); Taylor v. Nelson, 788
F.2d 220, 225 (4th Cir. 1986); Florasynth, Inc. v. Pickholz, 750 F.2d 171, 175 (2d Cir. 1984) (“a
party may not raise a motion to vacate, modify or correct an arbitration award after the
three month period has run, even when raised as a defense to a motion to confirm”);
Chauffeurs, Teamsters, etc. v. Jefferson Trucking Co., 628 F.2d 1023 (7th Cir. 1980); Jamaica
Commodity Trading Co. Ltd v. Connell Rice & Sugar Co., 1991 U.S. Dist. Lexis 8976 (S.D.N.Y.
July 3, 1991); Drexel Burnham Lambert Inc. v. Pyles, 701 F.Supp. 217, 219 (N.D. Ga. 1988)
(“once the three month period for filing a motion to vacate ... has expired, an attempt to
vacate an arbitration award cannot be made even in opposition to a later motion to
confirm”); Tokura Constr. Co. v. Corporacion Raymond, SA, 533 F.Supp. 1274 (S.D. Tex. 1982);
Carpenters 46 etc. v. Meddles, 535 F.Supp. 775, 778-9 (N.D. Cal. 1981).
90) Chauffeurs Union No. 264 v. Ruan Transp. Corp., 473 F.Supp. 298 (N.D. Ind. 1979); Paul Allison,
Inc. v. Minikin Storage of Omaha, Inc., 452 F.Supp. 573 (D. Neb. 1978); Riko Enterprises, Inc.
v. Seattle Supersonics Corp., 357 F.Supp. 521 (S.D.N.Y. 1973). See also Moran v. Paine,
Webber, Jackson & Curtis, 279 F.Supp. 573 (W.D. Pa. 1967); Cocotos Steamship of Panama SA
v. Hugo Neu Corp., 178 F.Supp. 491 (S.D.N.Y. 1959).
91) Florasynth, Inc. v. Pickholz, 750 F.2d 171, 175 (2d Cir. 1984); Chauffeurs Local 135 v. Jefferson
Trucking Co., 628 F.2d 1023, 1027 (7th Cir. 1980).
92) See Florasynth, Inc. v. Pickholz, 750 F.2d 171, 174 (2d Cir. 1984); The Hartbridge, 57 F.2d 672
(2d Cir. 1932), cert. denied, 288 U.S. 601 (1933).
93) Foster v. Turley, 808 F.2d 38 (10th Cir. 1986); Florasynth, Inc. v. Pickholz, 750 F.2d 171, 176 (2d
Cir. 1984); Chauffeurs, Teamsters etc. v. Jefferson Trucking Co., 628 F.2d 1023, 1025-26 (7th
Cir. 1980), cert. denied, 449 U.S. 1125 (1981).
94) Central Valley Typographical Union, No. 46 v. McClatchy Newspapers, 762 F.2d 741, 744 (9th
Cir. 1985); Enserch Int'l Exploration, Inc. v. Attock Oil Co., 656 F.Supp. 1162 (N.D. Tex. 1987).
95) See The Hartbridge, 57 F.2d 672 (2d Cir. 1932); Fukaya Trading Co. v. Eastern Marine Corp.,
322 F.Supp. 278, 280 (S.D.N.Y. 1971); Catz Am. Co. v. Pearl Grange Fruit Exchange, Inc., 292
F.Supp. 549 (S.D.N.Y. 1968). See also Motion Picture Laboratory Technicians Local 780 etc. v.
McGregor & Werner, Inc., 804 F.2d 16, 18-19 (2d Cir. 1986); Amalgamated Clothing etc. v.
Federation of Union Representatives, 664 F.Supp. 995, 996 (S.D.W. Va. 1987); Paul Allison, Inc.
v. Minikin Storage of Omaha, Inc., 452 F.Supp. 573 (D. Neb. 1978) (same).
96) See Purdy v. Morex Int'l Ltd, 867 F.2d 1521 (5th Cir.), cert. denied, 493 U.S. 863 (1989); Tesoro
Petroleum Corp. v. Asamera (South Sumatra) Ltd, 798 F.Supp. 400 (W.D. Tex. 1992); Smiga NI
Metal Services, Inc. v. ICM Steel Corp. 514 F.Supp. 164 (N.D. Ill. 1981).
97) Lee v. Dean Witter Reynolds, Inc., 594 So.2d 783 (Fla. Ct. App. 1992) (“the [FAA] supersedes
the Florida Arbitration Code when interstate commerce is involved ... we must review the
actions of the AAA in this case pursuant to the grounds to vacate set forth in §10(c) of the
FAA”); United Services General Life Co. v. Bauer, 568 So.2d 1321 (Fla. Ct. App. 1990); Moss v.
Prudential-Bache Securities, Inc., 581 A.2d 1138 (Del. Sup. 1990) (“The Court of Chancery ...
shares concurrent subject matter jurisdiction with the federal district courts in cases
arising under the Act ...”); Hilton Construction Co. v. Martin Mechanical Contractors, Inc.,
308 S.E.2d 830 (Ga. 1983).
98) Hilton Construction Co. v. Martin Mechanical Contractors, Inc., 303 S.E.2d 119 (Ga. App.
1983). On appeal, the Georgia Supreme Court decided the case on other grounds,
expressly refusing to consider whether a state court could consider an action to vacate
under §10. The Court did observe that “logic would dictate that the state court have
jurisdiction to vacate an award if it has jurisdiction to confirm an award.” 308 S.E.2d 830
(1983).
99) E.g., Merritt-Chapman & Scott Corp. v. Pennsylvania Turnpike Comm'n, 387 F.2d 768 (3d Cir.
1967); Monte v. Southern Delaware County Authority, 321 F.2d 870 (3d Cir. 1963); Litton RCS,
Inc. v. Pennsylvania Turnpike Comm'n, 376 F.Supp. 579 (E.D. Pa. 1974); Formigli Corp. v. Alcar
Builders, Inc., 236 F.Supp. 586 (E.D. Pa. 1964). See also Hydaburg Coop. Ass'n v. Hydaburg
Fisheries, 826 P.2d 751 (Alas. 1992).
100) E.g., N.Y. C.P.L.R. §7511; United Parcel Service, Inc. v. Mitchell, 451 U.S. 56, 63 n.5 (1981)
(collecting state limitations periods).
101) Uniform Arbitration Act §12, 7 U.L.A. 55 (1981).
102) See Downing v. Allstate Ins. Co., 317 N.W.2d 302, 305 (Mich. App. 1982) (court raises, without
answering, question whether federal time limits apply in state court).
103) Tesoro Petroleum v. Asamera (South Sumutra) Ltd, 798 F.Supp. 400, 404-05 (W.D. Tex. 1992)
(Convention “does not appear ... to authorize a suit to be initiated for the purpose of
vacating an arbitral award”); supra pp. 767-68.
104) Jamaica Commodity Trading Co. v. Connell Rice & Sugar Co., 1991 U.S. Dist. Lexis 8976
(S.D.N.Y. July 3, 1991); supra p. 883.
105) See P.T. Reasuransi Umum Indonesia v. Evanston Insurance Co., 1992 U.S. Dist. Lexis 19753
(S.D.N.Y. Dec. 21, 1992); supra p. 768.
106) See supra pp. 767-68.
107) See supra pp. 757-58; International Standard Electric Corp. v. Bridas SA etc., 745 F.Supp. 172
(S.D.N.Y. 1990).
108) See supra p. 898 for lower U.S. court decisions holding that under §10 actions to vacate
can be brought wherever an action to confirm is commenced.
109) See supra p. 898 for lower U.S. court decisions holding that under §10 actions to vacate
can be brought in the court where an order compelling arbitration was issued.
110) Note, Enforcing International Commercial Arbitration Agreements and Awards Not Subject
to the New York Convention, 23 Va. J. Int'l L. 75 (1982).
111) See supra pp. 882, 884.
112) See supra pp. 884. It is less clear whether actions to vacate an award would be
removable, given the absence of any provision under the FAA's second chapter dealing
with actions to vacate. See supra pp. 767-68, and Tesoro Petroleum Corp. v. Asamera (South
Sumatra) Ltd, 798 F.Supp. 400 (W.D. Tex. 1992).
113) See supra p. 896-99. There is no removal section in the FAA's first chapter equivalent to
§205; removal must be sought under independent statutory removal provisions.
114) In New York, for example, it has long been settled that an agreement to arbitrate abroad
is not contrary to New York public policy, and that a resulting award is enforceable.
Gilbert v. Burnstine, 255 N.Y. 348 (1931); von Engelbrechten v. Galvanoni & Nevy Brothers,
Inc., 300 N.Y.S.2d 239 (N.Y. Civ. Ct. 1969), aff'd per curian, 307 N.Y.S.2d 381 (App. Div. 1970).
115) G. Wilner, Domke on Commercial Arbitration §40.01 (Rev. ed. 1993).
116) E.A. Bromund Co. v. Exportadora Affonso etc., 110 F.Supp. 503 (S.D.N.Y. 1953); Jones v. John A.
Johnson & Sons, Inc., 131 N.Y.S.2d 362 (App. Div. 1954).
117) See supra pp. 797-98.
118) See, for example, the divergent views that have emerged with respect to the question
whether the FAA preempts state arbitration statutes prohibiting enforcement of awards of
punitive damages by arbitrators. See supra pp. 858-59.
119) Victrix Steamship Co. v. Salen Dry Cargo AB, 825 F.2d 709, 712 (2d Cir. 1987); I/S Stavborg v.
National Metal Converters, Inc., 500 F.2d 424, 429-30 (2d Cir. 1974).
120) See supra pp. 332-40, 898-99.
121) See supra p. 898-99.
122) See supra pp. 898-99.
123) See supra pp. 896-97.
124) Many state arbitration statutes contemplate motions to correct or modify being made to
the tribunal directly. Uniform Arbitration Act §§9 & 13. There is little authority on the
interplay between thedse state statutes and the FAA. See Spector v. Torenberg, 852
F.Supp. 201 (S.D.N.Y. 1994) (arbitrators' authority to modify award made in New York is
governed by New York arbitration statute, which is not preempted by FAA); Pine Valley
Productions v. S.L. Collections, 828 F.Supp. 245 (S.D.N.Y. 1993) (N.Y. C.P.L.R. §7511,
authorizing arbitrator to modify award, not preempted by FAA); Productos Mercantiles e
Industriales, SA v. Faberge USA, Inc., 23 F.3d 41 (2d Cir. 1994) (Inter-American Convention
does not preempt U.S. courts' power to modify award made in United States pursuant to 9
U.S.C. §11).
125) E.g., Diapulse Corp of Am. v. Carbra Ltd, 626 F.2d 1108 (2nd Cir. 1980).
126) E.g., UNCITRAL Rules Article 36; AAA International Rules Article 31. Compare ICC Rules
Article 28 (“Every award shall be binding on the parties.”).
127) Eljer Mfg. Inc. v. Kowin Dev. Corp., 14 F.3d 1250 (7th Cir. 1994) (“When an arbitration award
orders a party to pay damages that have already been paid or which are included
elsewhere in the award, a court may modify the award. Double recovery constitutes a
materially unjust miscalculation which may be modified under [§11 of the FAA]”);
Transnitro Inc. v. M/V WAVE, 943 F.2d 471 (4th Cir. 1991).
128) Diapulse Corp. of Am. v. Carbra, Ltd, 626 F.2d 1108, 1110 (2d Cir. 1980); National Shipping Co.
of Saudi Arabia v. Transamerican Steamship Corp., 1992 U.S. Dist. Lexis 18725 (S.D.N.Y. 1992)
(modifying award to correct undisputed “mathematical error.”).
129) Id.
130) National Post Office etc. v. U.S. Postal Service, 751 F.2d 834, 844-45 (6th Cir. 1985).
131) Victrix Steamship Co. v. Salen Dry Cargo AB, 825 F.2d 709, 713-14 nn. 2 & 3 (2d Cir. 1987);
Fotochrome, Inc. v. Copal Co., 517 F.2d 512 (2d Cir. 1975) (“the Japanese arbitral award may
not itself be treated as a foreign money judgment”); Oriental Commercial & Shipping Co. v.
Rosseel, NV, 1991 WL 135940 (S.D.N.Y. July 12, 1991).
132) 9 U.S.C. §13; Island Territory of Curacao v. Solitron Devices, Inc., 356 F.Supp. 1, 11 (S.D.N.Y.),
aff'd, 489 F.2d 1313 (2d Cir. 1973), cert. denied, 416 U.S. 986 (1974)(same); Victrix S.S. Co. v.
Salen Dry Cargo AB, 825 F.2d 709 (2d Cir. 1987) (New York Convention not applicable to
judgment entered on award). See w Order 343, 348 (1983).
133) See Island Territory of Curacao v. Solitron Devices, Inc., 489 F.2d 1313 (2d Cir. 1973), cert.
denied, 416 U.S. 986 (1974); Comment, Enforcing Arbitration Agreements and Awards, 23 Va.
J. Int'l L. 75, 89 (1982).
134) Victrix Steamship Co. v. Salen Dry Cargo AB, 825 F.2d 709, 713-14 nn.2 & 3 (2d Cir. 1987);
Waterside Ocean Navigation Co. v. International Navigation, Ltd, 737 F.2d 150, 154 (2d Cir.
1984); Oriental Commercial & Shipping Co. v. Rosseel NV, 1991 WL 135940 (S.D.N.Y. July 12,
1991) (“the foreign confirmation ... simply increased the options available to the enforcing
party”). The arbitral award is held not to have merged into the judgment. Id.; Oilcakes &
Oilseeds Trading Co. v. Sirason Teicher Inter American Grain Corp., 170 N.Y.S.2d 378 (Sup. Ct.
1958); Sargant v. Monroe, 49 N.Y.S.2d 546 (App. Div. 1944).
135) Booth v. Hume Publishing, Inc., 902 F.2d 925, 932 (11th Cir. 1990). See O.R. Securities v.
Professional Planning Assoc., 857 F.2d 742, 746 (11th Cir. 1988); Synergy Gas Co. v. Sasso, 853
F.2d 59, 63 (2d Cir.), cert. denied, 488 U.S. 994 (1988) (role of trial court “in confirming or
vacating arbitration awards is severely limited. If it were otherwise, the ostensible
purpose for resort to arbitration, i.e., avoidance of litigation, would be frustrated.”)
(quoting Amicizia Societa Navegazione v. Chilean Nitrate and lodine Sales Corp., 274 F.2d
805, 808 (2d Cir.), cert. denied, 363 U.S. 843 (1960)).
136) Imperial Ethiopian Gov't v. Baruch-Foster Corp., 535 F.2d 334 (5th Cir. 1976).
137) Booth v. Hume Publishing, Inc., 902 F.2d 925, 932 (11th Cir. 1990).
138) Audi-NSU Auto Union AG v. Overseas Motors Ind., 418 F.Supp. 982 (E.D. Mich. 1976).
139) O.R. Securities v. Professional Planning Assoc., 857 F.2d 742, 746 n.3 (11th Cir. 1988); Booth v.
Hume Publishing, Inc., 902 F.2d 925, 932 (11th Cir. 1990); Legion Ins. Co. v. Ins. General
Agency Inc., 822 F.2d 541, 543 (5th Cir. 1987).
140) Legion Ins. Co. v. Insurance General Agency Inc., 822 F.2d 541, 543 (5th Cir. 1987); Commerce
Park at DFW Freeport v. Mardian Constr. Co., 729 F.2d 334, 340-41 (5th Cir. 1984); Parsons &
Whittemore Overseas Co. v. Societe Generale de L'Industrie du Papier, 508 F.2d 969 (2d Cir.
1974) (motions supported by affidavits); Island Territory of Curacao v. Solitron Devices, Inc.,
489 F.2d 1313 (2d Cir. 1973) (same).
141) Sanco Steamship Co. v. Cook Indus., 495 F.2d 1260, 1265 (2d Cir. 1973) (reversing order
confirming award because record as to arbitrator's impartiality was incomplete); Totem
Marine Tug & Barge, Inc. v. North American Towing, 607 F.2d 649 (5th Cir. 1979).
142) Branson & Wallace, Awarding Interest in Interesting International Commercial Arbitration:
Establishing a Uniform Approach, 28 Va. Int'l L. 919 (1988); Hunter & Triebel, Awarding
Interest in International Arbitration, 6 J. Int'l Arb. 1 (1989); A. Redfern & M. Hunter,
International Commercial Arbitration 402-406 (2d ed. 1991); Wetter, Interest as an Element
of Damages in the Arbitral Process, Int'l Fin. L. Rev., Dec. 1986, at 20.
143) F.A. Mann, The Legal Aspect of Money 70-71 (5th ed. 1992); D. Dobbs, Remedies 164-81 (1973).
144) State of Kuwait v. Aminoil, Award of March 24, 1982 (cited in Wetter, Interest as an Element
of Damages in the Arbitral Process, Int'l Fin. L. Rev. Dec. 1986, at 20).
145) The parties' arbitration agreement must, of course, encompass interest claims.
Institutional arbitration rules do not address the subject of interest. One exception are
the LCIA Rules which provide that the tribunal may award compound interest. LCIA Rules
Article 26(6). In virtually all cases an arbitration agreement applicable an underlying
claim will be deemed to encompass claims for interest in connection with that claim. The
conclusion is virtually always assumed without discussion. See also Westminster
Construction Corp. v. PPG Industries, Inc., 376 A.2d 708 (R.I. 1977); Matter of Burke, 191 N.Y.
437 (1908).
146) See, e.g., D. Dobbs, Remedies 164-81 (1973); Branson & Wallace, Awarding Interest in
International Commercial Arbitration: Establishing a Uniform Approach, 28 Va. J. Int'l L. 919
(1988); Arove Skanska v. Lockheed Aircraft Int'l AG, ICC Case No. 3903 of 1981 (awarding
interest as element of damages, notwithstanding absence of contractual provision).
147) See, e.g., 28 U.S.C. §1961(a) (post-judgment interest in federal civil cases); N.Y. C.P.L.R.
§5001. Statutory rates of interest vary, of course, from nation to nation. In the United
States, §1961 provides for a market rate of interest. In other jurisdictions, a fixed rate is
established, which inevitably bears no relation to market rates. E.g., N.Y. C.P.L.R. §5001,
5004 (6%). And in some nations, such as Sweden, a rate exceeding market rates is
established to deter delays in payment. See Wetter, Interest as an Element of Damages in
the Arbitral Process, Int'l Fin. L. Rev., Dec. 1986, at 22 (8% above discount rate).
148) McCollough & Co. v. Ministry of Post, Telegraph and Telephone, Iranian Assets Lit. Rep., May
9, 1986, at 12, 276, n.305 (Brower, J., dissenting).
149) See Hunter & Triebel, Awarding Interest in International Arbitration, 6 J. Int'l Arb. 1 (1989);
Wetter, Interest as an Element of Damages in the Arbitral Process, Int'l Fin. L. Rev. Dec.
1986, at 22.
150) Restatement (Second) Conflict of Laws §207 comment e (1971); Compare J. Story,
Commentaries on the Conflict of Laws 395, 405-06 (8th ed. 1883) (“as a general rule ... the
lex loci contractus will, in all cases, govern as to the rule of interest”).
151) See Hunter & Triebel, Awarding Interest in International Arbitration, 6 J. Int'l Arb. 1 (1989);
Wetter, Interest as an Element of Damages in the Arbitral Process, Int'l Fin. L. Rev. Dec.
1986, at 22.
152) That is the case in some Middle Eastern states, where neither local courts nor arbitrators
may award interest. See S. Saleh, The Recognition and Enforcement of Foreign Arbitral
Awards in the States of the Arab Middle East, in Contemporary Problems in International
Arbitration 348, 349 (1986).
153) French Civil Code Article 1652.
154) Award in ICC Case No. 2637, II Y.B. Comm. Arb. 153 (1977) (applying statutory French interest
rate where French law governed contract; Swiss arbitral situs); LIAMCO v. Libyan Arab
Republic, VI Y.B. Comm. Arb. 89, 115-16 (1981) (applying Libyan interest rates); AGIP Co. v.
Congo, VIII Y.B. Comm. Arb. 133, 142 (1983); Final Award in ICC Case No. 6281 of 26 August
1989, XV Y.B. Comm. Arb. 96 (1990) (applying Yugoslav statutory interest rules where
Yugoslav law governed contract; rates apparently based on historical market rates, with
7.25% to accrue from date of award until payment); Award of February 17, 1984 in ICC Case
No. 4237, X Y.B. Comm. Arb. 52, 59-60 (1985) (applying English law, granting arbitrator
discretion regarding interest, because English law governed contract; Paris was arbitral
situs); Ad Hoc Award of 27 May 1991, XVII Y.B. Comm. Arb. 11, 26-27 (1992) (applying 5%
statutory Swiss rate of interest because contract was governed by Swiss law; New York
arbitral situs); Final Award in ICC Case No. 6162 of 1990, XVII Y.B. Comm. Arb. 153, 162 (1992)
(applying 5% statutory Egyptian rate of interest, because contract was governed by
Egyptian law, notwithstanding higher market rates; Swiss arbitral situs); Final Award in ICC
Case No. 5485 of 18 August 1987, XIV Y.B. Comm. Arb. 156, 173 (1989) (applying Spanish
statutory rates of interest because Spanish law governed agreement; French arbitral
situs); Final Award in ICC Case No. 6230 of 1990, XVII Y.B. Comm. Arb. 164, 175-76 (1992)
(applying Swiss statutory interest rules, which looked to official discount rates at place of
payment, because Swiss law governed contract; Swiss arbitral situs); Final Award in ICC
Case No. 6531 of 1991, XVII Y.B. Comm. Arb. 221, 223-4 (1992) (applying French statutory
rates of interest because French law governed agreement; French arbitral situs).
155) See Second Interim Award in ICC Case No. 5277 of 1987, XIII Y.B. Comm. Arb. 80, 89-90 (1988)
(refusing to award interest, notwithstanding contractual provision for such, because
parties' chosen law had been Islamicized and forbids interest awards); Final Award of 20
November 1987 (Ad Hoc), XIV Y.B. Comm. Arb. 47, 51, 68 (1989) (refusing to award interest
under contract governed by Saudi law); Parker Drilling Co. v. Sonatrach, summarized in
Branson & Wallace, Awarding Interest in International Commercial Arbitration: Establishing
a Uniform Approach, 28 Va. J. Int'l L. 919, 934 (1988) (denying interest because applicable
substantive law (Algeria) contained no provision for interest).
156) Final Award in ICC Case No. 5460 of 1987, XIII Y.B. Comm. Arb. 104, 109 (1988) (applying
statutory rate of interest prescribed by Austrian law, to debt in Austrian Schillings,
notwithstanding applicability of English law to contract and English arbitral situs); Award
in ICC Case No. 2930 of 1982, IX Y.B. Comm. Arb. 105, 107-08 (1984) (awarding interest at
Swiss statutory rate because payment was due in Swiss Francs, notwithstanding fact that
law governing contract was Yugoslav).
157) Asian Agricultural Products Ltd v. Sri Lanka, 30 Int'l Legal Mat. 580 (1991) (applying “long
established rule of international law” that “it is just and reasonable to allow interest at a
reasonable rate”); McCollough & Co. v. Ministry of Post, Telegraph & Telephone, Iranian
Assets Lit. Rep., May 9, 1986, at 12,276, 12,294-5.
158) Hunter & Triebel, Awarding Interest in International Arbitration, 6 J. Int'l Arb. 1 (1989).
159) Lillich, Interest in the Law of International Claims in Essays in Honor of Voitto Saario and
Toivo Sainio 51, 57 (1983).
160) See infra pp. 908-09.
161) See Branson & Wallace, Awarding Interest in International Commercial Arbitration, 28 Va. J.
Int'l L. 919, 920, 924 (1988); A. Redfern & M. Hunter, International Commercial Arbitration
402-6 (2d ed. 1991); J. Ralston, International Arbitral Law and Procedure 82-83 (1910).
162) Spalding v. Mason, 161 U.S. 375, 396 (1896) (quoting Curtis v. Innerarity, 47 U.S. (6 How) 146,
154 (1848)).
163) But see LCIA Rules Article 26(6).
164) See Peoples Security Life Ins. Co. v. Monumental Life Ins. Co., 991 F.2d 141 (4th Cir. 1993)
(upholding arbitral award of pre-award interest); Sun Ship, Inc. v. Matson Nav. Co., 785
F.2d 59 (3d Cir. 1986); International Standard Elec. Corp. v. Bridas SA, etc., 745 F.Supp. 172,
182 (S.D.N.Y. 1990); American Construction Machinery & Equipment Corp. v. Mechanised
Construction of Pakistan Ltd, 659 F.Supp. 426 (S.D.N.Y.), aff'd, 828 F.2d 117 (2d Cir. 1987),
cert. denied, 484 U.S. 1064 (1988); Brandeis Intsel Ltd v. Calabrian Chemicals Corp., 656
F.Supp. 160, 170 (S.D.N.Y. 1987); Al Haddad Bros. Enterprises, Inc. v. M/S Agapi, 635 F.Supp.
205, 210 (D. Del. 1986).
165) For a rare exception, see Laminoirs etc. v. Southwire Co., 484 F.Supp. 1063 (N.D. Ga. 1980),
excerpted above, vacating an award of “penal” interest. See supra pp. 815-32.
166) See infra pp. 908-09.
167) See infra p. 910.
168) A/S Siljestad v. Hideca Trading, Inc., 678 F.2d 391 (2d Cir. 1982).
169) Sansone v. Metropolitan Property & Liability Ins. Co., 572 N.E.2d 588 (Mass.App. 1991); Fort
Hill Builders v. National Grange Mut. Ins. Co., 682 F.Supp. 145 (D. R.I. 1988); Creative
Builders, Inc. v. Avenue Dev. Inc., 715 P.2d 308, 312 (Ariz. App. 1986) (“a trial judge may not
modify an award so as to grant pre-award interest”); Kermacy v. First Unitarian Church, 361
S.W.2d 734 (Tex. Civ. App. 1962) (“appellant's claim for interest prior to the date of the
award of the arbitrators was merged in the award”); Penco Fabrics Inc. v. Louis Bolopulsky
Inc., 146 N.Y.S.2d 982 (1955).
170) Schlobohm v. Pepperidge Farm, Inc., 806 F.2d 578 (5th Cir. 1986).
171) See J. Lauritzen A/S v. Intertanker Ltd, No. 82 Civ. 1739 (S.D.N.Y. May 13, 1982); Lake Utopia
Paper Ltd v. Connelly Containers, Inc., No. 79 Civ. 510 (S.D.N.Y. May 9, 1979); Creative
Builders, Inc. v. Avenue Developments, Inc., 715 P.2d 308, 313-14 (Ariz. App. 1986). See also
Bergesen v. Joseph Muller Corp., 548 F.Supp. 650, 651 (S.D.N.Y. 1982), aff'd, 710 F.2d 928 (2d
Cir. 1983); Trustees of Lawrence Academy v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 821
F.Supp. 59 (D.N.H. 1993) (court has power to award post-award interest); Laminoirs etc. v.
Southwire Co., 484 F.Supp. 1063, 1069 (N.D. Ga. 1980); Sterling Eng. & Constr. Co. v. City of
Taunton, 360 N.E.2d 650 (Mass. App. 1977).
172) U.S. courts have regarded the availability and rate of court-ordered, post-award interest
as governed by the law of the U.S. forum, not by the substantive law of the underlying
dispute or the curial law. National Oil Corp. v. Libyan Sun Oil Co., 733 F.Supp. 800, 822 n.36
(D. Del. 1990).
173) Sunship, Inc. v. Matson Nav. Co., 785 F.2d 59 (3d Cir. 1986); National Dev. Co. v. Khashoggi,
781 F.Supp. 959 (S.D.N.Y. 1992). The theory is dubious because it is well-settled that the
domestic FAA confers no independent basis for federal subject matter jurisdiction. See
supra p. 892.
174) Northrop Corp. v. Triad Int'l Marketing SA, 842 F.2d 1154, 1155 (9th Cir. 1988); First
Commercial Financial Group, Inc. v. Baghdoian, 812 F.Supp. 837 (N.D. Ill. 1993). See also
Executone Info. Sys. Inc. v. Davis, 26 F.3d 1314 (5th Cir. 1994) (“Texas law governs the award
of prejudgment interest on the arbitrator's award”).
175) It is not clear, however, under the Erie doctrine that federal common law should
automatically apply in federal question cases. At least arguably, state law should provide
the rule of decision in the absence of a federal statute. See Westen & Lehman, Is There Life
for Erie After the Death of Diversity?, 78 Mich. L. Rev. 311 (1980).
176) 28 U.S.C. §1961(a); National Dev. Co. v. Khashoggi, 781 F.Supp. 959 (S.D.N.Y. 1992).
177) Fort Hill Builders, Inc. v. National Grange Mutual Ins. Co., 866 F.2d 11, 14-15 (1st Cir. 1989);
Stroh Container Co. v. Delphi Indus., Inc., 783 F.2d 743, 752 (8th Cir. 1986); Waterside Ocean
Navigation Co. v. Int'l Navigation Ltd, 737 F.2d 150, 153-4 (2d Cir. 1984); Mitsui & Co. v.
American Export Lines, Inc., 636 F.2d 807, 823 (2d Cir. 1981); Compagnie des Bauxites de
Guinee v. Hammermills, Inc., 1992 WL 122712 (D.D.C. May 29, 1992) (using discretion to refer
to state law); National Oil Corp. v. Libyan Sun Oil Co., 733 F.Supp. 800, 821 (D. Del. 1990);
Reefer Express Lines Pty v. General Authority for Supply Commodities, 714 F.Supp. 699
(S.D.N.Y. 1989); Al Haddad Bros. Enterprises, Inc. v. M/S Agapi, 635 F.Supp. 205 (D. Del. 1986),
aff'd, 813 F.2d 396 (3d Cir. 1987); Trans-World Mfg Corp. v. Al Nyman & Sons Inc., 633 F.Supp.
1047, 1057-58 (D. Del. 1986); Larsen v. A.C. Carpenter, Inc., 620 F.Supp. 1084, 1125 (E.D.N.Y.
1985), aff'd, 800 F.2d 1128 (2d Cir. 1986).
178) Waterside Ocean Nav. Co. v. International Nav., Ltd, 737 F.2d 150, 154 (2d Cir. 1984); National
Dev. Co. v. Khashoggi, 781 F.Supp. 959 (S.D.N.Y. 1992).
179) Al Haddad Bros. Enterprises, Inc. v. M/S Agapi, 633 F.Supp. 205, 210 (D. Del. 1986); Trans-
World Mfg. Corp. v. Al Nyman & Sons, Inc., 633 F.Supp. 1047, 1057-58 (D. Del. 1986).
180) A/S Siljestad v. Hideca Trading, Inc., 678 F.2d 391 (2d Cir. 1982).
181) International Standard Electric Corp. v. Bridas SA etc., 745 F.Supp. 172, 181 (S.D.N.Y. 1990);
American Construction Machinery Corp. v. Mechanised Const. of Pakistan Ltd, 659 F.Supp.
426 (S.D.N.Y.), aff'd, 828 F.2d 117 (2d Cir. 1987), cert. denied, 484 U.S. 1064 (1988). See also
Foley Co. v. Grindsted Products, Inc., 662 P.2d 1254 (Kan. 1983).
One court has said, however, that an arbitral tribunal would have “lacked authority to
decide the ... question of prejudgment interest on the amount confirmed by the district
court judgment,” by which the court meant post-award/pre-judgment interest. Sun Ship,
Inc. v. Matson Nav. Co., 785 F.2d 59, 63 (3d Cir. 1986).

182) Carte Blanche (Singapore) Pte. v. Carte Blanche Int'l Ltd, 880 F.2d 260 (2d Cir. 1989); Parsons
& Whittemore Alabama Machinery & Serv. Corp. v. Yeargin Constr. Co., 744 F.2d 1482 (11th
Cir. 1984). Contra French v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 784 F.2d 902 (9th Cir.
1986).
183) Carte Blanche (Singapore), 888 F.2d at 269; Parsons & Whittemore, 744 F.2d at 1484;
Northrop Corp. v. Triad Int'l Mktg SA, 842 F.2d 1154, 1155-56 (9th Cir. 1988); National Oil
Corp. v. Libyan Sun Oil Co., 733 F.Supp. 800, 822 (D. Del. 1990).
184) French v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 784 F.2d 902 (9th Cir. 1986);
International Standard Elec. Corp. v. Bridas SA, 745 F.Supp. 172, 182 (S.D.N.Y. 1990).
185) ICC Rules Article 31; UNCITRAL Rules Article 38; LCIA Rules Article 28; AAA International
Rules Article 31.
186) Final Award in ICC Cases No. 7385 and No. 7402 of 1992, XVIII Y.B. Comm. Arb. 68, 78 (1993);
Ad Hoc Award of 27 May 1991, XVII Y.B. Comm. Arb. 11, 26-27 (1992); Koch Shipping, Inc. v.
Antco Shipping Ltd, XII Y.B. Comm. Arb. 169, 172 (1987).
187) A. Redfern & M. Hunter, International Commercial Arbitration 411-12 (2d ed. 1991).
188) Alyeska Pipeline Co. v. Wilderness Society, 421 U.S. 240 (1975).
189) See M. Glendon, M. Gordon & C. Osakwe, Comparative Legal Traditions 172-73 (1985).
190) See M. Mustill & S. Boyd, Commercial Arbitration 394-403 (2d ed. 1989).
191) See A. Redfern & M. Hunter, International Commercial Arbitration 406-12 (2d ed. 1991).
192) Final Award in ICC Case No. 7006 of 1992, XVIII Y.B. Comm. Arb. 67 (discretion); Award of 20
February 1988, XIV Y.B. Comm. Arb. 73, 81 (AAA Rules require each party to bear own fees).
193) Final Award in ICC Case No. 6752 of 1991, XVIII Y.B. Comm. Arb. 54, 57 (1993); Final Award in
ICC Case No. 6527, XVIII Y.B. Comm. Arb. 44, 53 (1993); Final Award in ICC Case No. 5460 of
1987, XIII Y.B. Comm. Arb. 104 (1988).
194) Final Award in ICC Case No. 2642, XVIII Y.B. Comm. Arb. 112, 120 (1993) (where RICO was
substantive basis for plaintiff's recovery).
195) Final Award in ICC Case No. 5946 of 1990, XVI Y.B. Comm. Arb. 97, 118 (1991) (Zurich court fee
schedule).
196) Final Award in ICC Case No. 6527 of 1991, XVIII Y.B. Comm. Arb. 44, 53 (1993) (no award of
fees, because prevailing party claimed “excessive” damages); Final Award in ICC Case No.
7006 of 1992, XVIII Y.B. Comm. Arb. 58, 67 (1993) (listing factors; awarding all fees because
of respondent's procedural misconduct); Final Award in ICC Case No. 5759 of 1989, XVIII Y.B.
Comm. Arb. 34, 43 (1993) (percentage corresponding to success); Final Award in ICC Case
No. 4629 of 1989, XVIII Y.B. Comm. Arb. 11 (1993) (awarding 90% of all fees because of
respondent's delaying tactics); Final Award in ICC Case No. 6363 of 1991, XVII Y.B. Comm.
Arb. 186, 211 (1992) (awarding all fees because claimant prevailed “in substance”).
197) Bacardi Corp. v. Congreso de Uniones Industriales de Puerto Rico, 692 F.2d 210 (1st Cir. 1982)
(vacating award of attorneys' fees); In re Prudential-Bache Securities, Inc., 814 F.Supp. 1081
(M.D. Fla. 1993); C.T. Shipping, Ltd v. DMI (U.S.A.) Ltd, 774 F.Supp. 146, 152-53 (S.D.N.Y. 1991);
Sammi Line Co. v. Altamar Navegacion SA, 605 F.Supp. 72 (S.D.N.Y. 1985) (relying on
“traditional American rule” to conclude that agreement not addressing power to award
attorneys' fees did not permit such award); Transvenezuelian Shipping Co. v. Czarnikow-
Rionda Co., 1982 A.M.C. 1458 (S.D.N.Y. 1981) (vacating award of attorneys' fees as exceeding
arbitrators' authority where parties' agreement provided for discretion to apportion
“expenses and costs of the arbitration,” but was silent as to attorneys' fees); Paston &
Coffman v. Katzen, 610 So.2d 512 (Fla. App. 1992); Koenigsberg v. Zinn, 381 N.Y.S.2d 248
(1976).
Most courts will uphold awards of attorneys' fees where the parties' arbitration
agreement (or submissions in the arbitration) contemplates such an award. See also
Prudential- Bache Securities, Inc. v. Tanner, 72 F.3d 234 (1st Cir. 1995) (permitting award of
attorneys' fees where authorized by institutional rules and both parties sought such
award from arbitrators); Skip Kirchdorfer, Inc. v. Aegis/Zublin Joint Venture, 869 F.Supp. 387
(E.D. Va. 1994) (attorneys' fee award upheld where requested by both parties); Spector v.
Torenberg, 852 F.Supp. 201 (S.D.N.Y. 1994) (attorneys' fees award upheld where both
parties agreed, during hearing that tribunal had power to award fees and sought fee
awards); Pierce v. J.W. Charles-Bush Sec., Inc., 603 So.2d 625 (Fla. App. 1992) (attorneys' fees
may be awarded by arbitrators if all parties agree; overruling earlier decisions, denying
arbitrators' power to award fees, as “manifest[ing] the old hostility to arbitration
agreements”); Babcock & Wilcox Co. v. PMAC, Ltd, 863 S.W.2d 225 (Tex. Ct. App. 1993)
(refusing to overturn arbitrator's award denying attorneys' fees, where arbitration
agreement gave arbitrator power to award fees).
198) MCT Shipping Corp. v. Sabet, 497 F.Supp. 1078 (S.D.N.Y. 1980) (confirming award of
attorneys' fees); J.R. Snyder Co. v. Soble, 226 N.W.2d 276 (Mich. App. 1976); Commercial
Metals Co. v. International Union Marine Corp., 1973 A.M.C. 515 (S.D.N.Y. 1972).
199) See supra pp. 911.
200) It is, however, unclear why an arbitrator's contrary conclusion should not survive manifest
disregard scrutiny.
201) If the substantive and curial law differ, difficulties arise. Suppose the arbitration is
conducted in England, with English law as the curial law, but the parties' underlying
dispute is governed by New York law. English law permits (arguably requires) attorneys'
fee awards; New York law does not. If the tribunal awards attorneys' fees, will a U.S. court
enforce the award? As a matter of principle, where the arbitrators' award rests on a
choice-of-law decision concerning the respective scope and priority of the curial and
substantive laws, that conflicts decision should receive substantial deference in U.S.
courts. See supra p. 814.
202) Sun Ship, Inc. v. Matson Navigation Co., 785 F.2d 59, 64 (3d Cir. 1986); Gelco Corp. v. Baker
Indus., Inc., 779 F.2d 26, 28 (8th Cir. 1985); National Ass'n of Letter Carriers v. United States
Postal Service, 590 F.2d 1171, 1179 (D.C. Cir. 1978); C.T. Shipping, Ltd v. DMI (U.S.A.) Ltd, 774
F.Supp. 146 (S.D.N.Y. 1991); Hunt v. Commodity Haulage Corp., 647 F.Supp. 797 (E.D.N.Y.
1986) (awarding attorney's fees because party refused to comply with award without any
justification); Supermarkets General Corp. v. Local 919 etc., 645 F.Supp. 831 (D. Conn. 1986)
(refusing to award attorneys' fees for party's action to vacate award, because challenge
was not in bad faith); Jarrell v. Wilson Warehouse Co., 490 F.Supp. 412 (M.D. La. 1980)
(same); Shearson Hayden Stone, Inc. v. Liang, 493 F.Supp. 104 (N.D. Ill. 1980) (refusing to
award fees because defendant's opposition was not “without justification”); Chauffeurs,
Teamsters etc. v. Jefferson Trucking Co., 473 F.Supp. 1255, 1259-60 (S.D. Ind. 1979). See also
Teamsters Local Union No. 764 v. J.H. Merritt & Co., 770 F.2d 40, 43 n.2 (3d Cir. 1985).
203) Sun Ship, Inc. v. Matson Navigation Co., 785 F.2d 59, 64 (3d Cir. 1986).
204) For commentary, see Restatement (Second) Judgments §84 (1982); Carlisle, Getting a Full
Bite of the Apple: When Should the Doctrine of Issue Preclusion Make an Administrative or
Arbitral Determination Binding in a Court of Law?, 55 Fordham L. Rev. 63 (1986); Motomura,
Arbitration and Collateral Estoppel: Using Preclusion to Shape Procedural Choices, 63
Tulane L. Rev. 29 (1988); Shell, Res Judicata and Collateral Estoppel Effects of Commercial
Arbitration, 35 UCLA L. Rev. 623 (1988); Spatt, Res Judicata and Collateral Estoppel, 42 Arb. J.
61 (1987); Note, The Preclusive Effect of Arbitral Determinations in Subsequent Federal
Securities Litigation, 55 Ford. L. Rev. 655 (1987); Note, Judicial Deference to Arbitrators'
Decisions in Title VII Cases, 26 Stan. L. Rev. 421 (1974).
205) See, e.g., Rudell v. Comprehensive Accounting Corp., 802 F.2d 926 (7th Cir. 1986) (after
unsuccessfully seeking to vacate arbitral award, plaintiffs commenced litigation on
original and additional claims).
206) Most U.S. courts have proceeded on the assumption that the preclusive effect of an
arbitral award in a national court is governed by the law of the jurisdiction in which the
claim of preclusion is asserted. See infra p. 915.
Some courts have suggested, however, that the law of the state where an award or
judgment was rendered governs its preclusive effect. Lynne Carol Fashions, Inc. v. Cranston
Print Works Co., 453 F.2d 1177, 1184 & n.9 (3d Cir. 1972). Compare the treatment of this issue
in the context of enforcing foreign judgments. See G. Born, International Civil Litigation in
United States Courts 943-51 (3d ed. 1996); Restatement (Second) Conflict of Laws §95 (1971)
(law of issuing court); Degnan, Federalized Res Judicata, 85 Yale L. J. 741, 773 (1976).
207) Conforti & Eisele, Inc. v. Scully, 98 A.D.2d 646 (S.Ct.N.Y. 1983).
208) See supra p. 325.
209) See Restatement (Second) Judgments §84 (1982).
210) Shell, Res Judicata and Collateral Estoppel Effects of Commercial Arbitration, 35 UCLA L.
Rev. 623 (1988).
211) McDonald v. City of West Branch, 104 S.Ct. 1799 (1984); Parklane Hosiery Co. v. Shore, 439
U.S. 322, 326 n.5 (1979).
212) Allen v. McCurry, 449 U.S. 90, 94 (1980); McDonald v. City of West Branch, 104 S.Ct. 1799
(1984); Montana v. United States, 440 U.S. 147, 153 (1979).
213) 9 U.S.C. §13. See Norris v. Grosvenor Mktg. Ltd, 803 F.2d 1281, 1285 & n.4 (2d Cir. 1986)
(“collateral estoppel applies to issues adjudicated in arbitration where the arbitration
award has been entered as a judgment”); Lynne Carol Fashions, Inc. v. Cranston Print Works
Co., 453 F.2d 1177, 1184-85 (3d Cir. 1972); Ufheil Construction Co. v. Town of New Windsor, 478
F.Supp. 766, 768 (S.D.N.Y. 1979), aff'd, 636 F.2d 1204 (2d Cir. 1980); United States Plywood
Corp. v. Hudson Lumber Co., 127 F.Supp. 489 (S.D.N.Y. 1954) (“a judgment entered on an
award is a judgment on the merits”); American Ins. Co. v. Messinger, 401 N.Y.S.2d 36, 39
(1977).
214) 28 U.S.C. §1738.
215) Kremer v. Chemical Constr. Co., 456 U.S. 461, 466 (1982) (“Arbitral awards are not ... subject
to the mandate of §1738.”).
216) McDonald v. City of West Branch, 104 S.Ct. 1799 (1984).
217) McDonald v. City of West Branch, 104 S.Ct. 1799, 1801 (1984).
218) Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313 (1971);
Kamakazi Corp. v. Robbins Music Corp., 534 F.Supp. 69, 80 (S.D.N.Y. 1982).
219) Norris v. Grosvenor Marketing Ltd, 803 F.2d 1281, 1285 (2d Cir. 1986); Ritchie v. Landau, 475
F.2d 151, 154 (2d Cir. 1973).
220) Properly analyzed, the general requirement imposed by FAA §9 and New York Convention
Article III, that arbitral awards be recognized except in defined circumstances, provides a
basis for federal rules of preclusion. For example, federal law would preempt state law
that accorded no preclusive effect to arbitral awards, or that established significantly
more limited preclusion rules than for judicial judgments. (Compare the preemptive rules
regarding arbitration agreements under §2 of the FAA, discussed above at supra pp. 332-
35, 349-53).
221) Steelmet, Inc. v. Carike Towing Corp., 747 F.2d 689 (11th Cir. 1984); Schattner v. Girard, Inc.,
668 F.2d 1366, 1371 (D.C. Cir. 1981); Ritchie v. Landau, 475 F.2d 151 (2d Cir. 1973); City of
Gainesville v. Island Creek Coal Sales Co., 618 F.Supp. 513, 517 (N.D. Fla. 1984) (“Valid
arbitration decisions are accorded res judicata and collateral estoppel effect”); Kamakazi
Corp. v. Robbins Music Corp., 534 F.Supp. 69, 80 (S.D.N.Y. 1982).
222) City of Gainesville v. Island Creek Coal Sales Co., 618 F.Supp. 513, 517-18 (N.D. Fla. 1984),
aff'd, 771 F.2d 1495 (11th Cir. 1985); Behens v. Shelly, 173 F.2d 715, 720 (3d Cir.), cert. denied,
338 U.S. 821 (1949).
Default awards are also subject to general rules of preclusion. E.g., Rudell v.
Comprehensive Accounting Corp., 802 F.2d 926 (7th Cir. 1986); Blumberg v. Berland, 678 F.2d
1068 (11th Cir. 1982); Maxwell Shapiro Woolen Co. v. Ameratron Corp., 158 N.E.2d 875 (Mass.
1959).
223) See Restatement (Second) Judgments §84(1) & (2) (1982); Schattner v. Girard, Inc., 668 F.2d
1366, 1369 (D.C. Cir. 1981); Gardner v. Shearson, Hammill & Co., 433 F.2d 367, 368 (5th Cir.
1970), cert. denied, 401 U.S. 978 (1971); Goldstein v. Doft, 353 F.2d 484 (2d Cir. 1965).
If the claim rejected in arbitration was different from that subsequently asserted in
litigation, then res judicata will not apply. See, e.g., James L. Saphier Agency, Inc. v. Green,
293 F.2d 769, 773 (2d Cir. 1961).
224) Norris v. Grosvenor Marketing Ltd, 803 F.2d 1281, 1286 (2d Cir. 1986) (“Norris was given his
opportunity to argue his case to the arbitrator. He should not now be given another bite
of the cherry.”); Rudell v. Comprehensive Accounting Corp., 802 F.2d 926 (7th Cir. 1986);
Schattner v. Girard, Inc., 668 F.2d 1366, 1368 (D.C. Cir. 1981) (“claims that should have been
submitted to arbitration, even if they were not actually heard” are encompassed by res
judicata); Sue Klau Enter. Inc. v. American Fidelity Fire Ins., Co., 551 F.2d 882 (1st Cir.), cert.
denied, 434 U.S. 854 (1977).
225) See McDonald v. City of West Branch, 104 S.Ct. 1799 (1984) (§1983 claim not precluded by
arbitration); Alexander v. Gardner-Denver Co., 415 U.S. 36 (1974) (Title VII claim not
precluded by prior arbitration under collective bargaining agreement); Barrentine v.
Arkansas-Best Freight System Inc., 450 U.S. 728 (1981) (Fair Labor Standards Act claim not
precluded by wage claim arbitration).
226) See supra pp. 332-35, 349-53, 898-99.
227) Cf. Restatement (Second) Judgments §84(4) (1982); United States v. Woodcrest Nursing
Home, 706 F.2d 70, 79 (2d Cir. 1983), cert. denied, 464 U.S. 849 (1983).
228) See Restatement (Second) Judgments §84(1) & (3) (1982); Norris v. Grosvenor Mktg Ltd, 803
F.2d 1281, 1285 n.4 (2d Cir. 1986); Steelmet, Inc. v. Caribe Towing Corp., 747 F.2d 689 (11th Cir.
1984); American Renaissance Lines, Inc. v. Saxis SS Co., 502 F.2d 674, 678-79 (2d Cir. 1974);
Ritchie v. Landau, 475 F.2d 151, 154 (2d Cir. 1973); Lynne Carol Fashions, Inc. v. Cranston Print
Works Co., 453 F.2d 1177, 1182-83 (3d Cir. 1972); Sullivan v. American Airlines, 613 F.Supp.
226, 230 (S.D.N.Y. 1985); City of Gainesville v. Island Creek Coal Sales Co., 618 F.Supp. 513,
517 (N.D. Fla. 1984), aff'd, 771 F.2d 1495 (11th Cir. 1985); United Food etc. v. G. Bartusch
Packing Co., 546 F.Supp. 852 (D. Minn. 1982); Kamakazi Music Corp. v. Robbins Music Corp.,
534 F.Supp. 69, 80 (S.D.N.Y. 1982); Eagle Transp. Ltd v. O'Connor, 470 F.Supp. 731, 733
(S.D.N.Y. 1979).
229) Restatement (Second) Judgments §84 comment c (1982).
230) E.g., Norris v. Grosvenor Marketing Ltd, 803 F.2d 1281, 1286-87 (2d Cir. 1986) (“The fact that
plaintiffs base their claims on new legal theories does not shield them from the doctrine
of collateral estoppel as liability is premised on the same issue in both proceedings.”);
Barnes v. Oody, 514 F.Supp. 23 (E.D. Tenn. 1981); Maidman v. O'Brien, 473 F.Supp. 25 (S.D.N.Y.
1982).
Of course, the ordinary requirements for collateral estoppel must be satisfied.
Restatement (Second) Judgments §84(1) (1982). Among other things, the doctrine will not
apply where issues disposed of in an arbitration are not the “same” as those raised in
later litigation. See Tamari v. Bache & Co. (Lebanon) S.A.L., 637 F.Supp. 1333, 1338 (N.D. Ill.
1986); Lubrizol Int'l, SA v. M/V Stolt Argobay, 562 F.Supp. 565, 570-71 (S.D.N.Y. 1982); United
Food etc. v. G. Bartusch Packing Co., 546 F.Supp. 852, 856 (D. Minn. 1982); Forbo Giubiasco
SA v. Congoleum Corp., 516 F.Supp. 1210, 1214 (S.D.N.Y. 1981). Similarly, if burdens of proof
are allocated differently in judicial and arbitral proceedings, the latter will not be
preclusive. Steelmet, Inc. v. Caribe Towing Corp., 747 F.2d 689, 693-94 (11th Cir. 1984).

231) Sullivan v. American Airlines, Inc., 613 F.Supp. 226, 230-31 (S.D.N.Y. 1985); Kamakazi Corp. v.
Robbins Music Corp., 534 F.Supp. 69, 80-81 (S.D.N.Y. 1982); Barnes v. Oody, 514 F.Supp. 23,
24-25 (E.D. Tenn. 1981); United States Plywood Corp. v. Hudson Lumber Co., 127 F.Supp. 489,
494-95 (S.D.N.Y. 1984).
232) French v. Jinright & Ryan, 735 F.2d 433 (11th Cir. 1984); Murray v. Dominick Corp. of Canada,
Ltd, 631 F.Supp. 534 (S.D.N.Y. 1986); Dalow Industries, Inc. v. Jordache Enterprise, Inc., 631
F.Supp. 779 (S.D.N.Y. 1986); Tamari v. Bache & Co., 637 F.Supp. 1333, 1336-38 (N.D. Ill. 1986);
Brownko Int'l, Inc. v. Ogden Steel Co., 585 F.Supp. 1432, 1435 (S.D.N.Y. 1983) (“Where a
previous arbitration award is ambiguous in respect of what issues were decided, it
necessarily has limited value in subsequent litigation”); Ufheil Constr. Co. v. Town of New
Windsor, 478 F.Supp. 766 (S.D.N.Y. 1979) (“the absence of findings of fact render the
arbitration decision ambiguous”). Compare Norris v. Grosvenor Marketing, Ltd, 803 F.2d
1281, 1286 (2d Cir. 1986) (“the failure of the arbitrator to render detailed findings of fact
and conclusions of law does not render the award ambiguous”).
233) Restatement (Second) Judgments §84(4) (1982).
234) Compare Schattner v. Girard, Inc., 668 F.2d 1366 (D.C. Cir. 1981) (generally applicable
collateral estoppel rules apply) with Overseas Motors, Inc. v. Import Motors, Ltd, 375
F.Supp. 499 (E.D. Mich. 1974), aff'd, 519 F.2d 119 (6th Cir.), cert. denied, 423 U.S. 987 (1975)
(collateral estoppel only applicable to issues not central to non-arbitrable claims) with
Greenblatt v. Drexel Burnham Lambert, Ins., 763 F.2d 1352 (11th Cir. 1985) (collateral
estoppel only applicable where arbitral procedures protected legislative policies).
235) The Supreme Court permitted that in McDonald v. City of West Branch, Alexander v.
Gardner-Denver Co., and Barrentine v. Arkansas-Best Freight System Inc. McDonald, 466
U.S. at 292-93 n.13; Barrentine, 450 U.S. at 743-44 n.22; Alexander, 415 U.S. at 60 & n.21. See
Wilson v. Woodward Iron Co., 362 F.Supp. 886 (N.D. Ala. 1973) (arbitral award admitted as
evidence). Compare Brownko Int'l, Inc. v. Ogden Steel Co., 585 F.Supp. 1432 (S.D.N.Y. 1983)
(arbitral award not admissible in evidence).
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part Three : Chapter 14.
Provisional Measures in
International Arbitration', in
Gary B. Born , International
Commercial Arbitration:
Commentary and Materials
(Second Edition), 2nd edition
(© Kluwer Law International;
Kluwer Law International
2001) pp. 919 - 980
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
KluwerArbitration
Part Three : Chapter 14. Provisional Measures in
International Arbitration
14 Provisional Measures in International Arbitration (1)
Contemporary litigation in developed legal systems is accompanied by procedural safeguards
and opportunities for all parties to be heard. One consequence of these protections is delay in
ultimate resolution of the parties' dispute, which can prejudice one party, sometimes
irreparably. Classic examples include dissipation of assets, destruction of evidence, loss of
market value of property, disruption of a joint venture's operations, disclosure or misuse of
intellectual property, and interference with customer relations. In such circumstances,
national legislatures and courts have developed means for granting immediate “provisional
measures,” (2) designed to safeguard parties from serious injury caused by delays in the
litigation process. (3)
P "919"
P "920"
Provisional measures have particular importance in international disputes. Cases involving
litigants from different nations pose special risks, including the increased danger that vital
evidence will be taken out of the reach of relevant tribunals or that assets necessary to satisfy
a judgment will be removed to a jurisdiction where enforcement is unlikely. As a consequence,
provisional measures are often more significant in international litigation than in purely
domestic cases.
Provisional measures are at least as important in international arbitration as in international
litigation, but are often less easily obtained. This Chapter examines the availability and role of
provisional measures in international arbitration.
The Chapter first explores the extent to which arbitrators are authorized to grant provisional
relief and the circumstances in which they will be willing to do so. Second, the Chapter
considers when national courts may grant provisional relief in aid of international arbitration.
Among other things, we examine whether the New York and Inter-American Conventions forbid
judicial orders granting provisional measures in aid of arbitration, the effect of institutional
arbitration rules on court-ordered provisional measures, and the circumstances in which
national courts will exercise their powers to grant provisional relief in aid of arbitration
(whether sited locally or abroad). Finally, we consider the enforceability in national courts of
provisional measures ordered by international arbitral tribunals.
A. Provisional Measures Ordered By International Arbitral Tribunals
1. Introduction
Provisional measures include a variety of orders designed to preserve the essential rights of
the parties to a legal dispute pending the ultimate resolution of the dispute. The provisional
measures that are available in a particular national court, and the circumstances in which they
will be granted, are matters of local law. (4) For the most part, developed legal systems
provide for the same general types of provisional measures.
First, litigants may seek to freeze or sequester property in the hands of adverse parties.
Sequestration orders are designed to prevent dissipation of the property or to preserve the
condition of the property for future inspection. Alternatively, a litigant may be ordered to
deposit property into the custody of a third party. (5)
P "920"
P "921"
Second, litigants may seek injunctive relief aimed at preserving the status quo between the
parties pending resolution of the merits of their dispute. For example, a party may be ordered
not to take certain steps – terminating an agreement, disclosing trade secrets, or using
disputed intellectual property or other rights – pending a decision on the merits. (6)
Third, litigants may seek orders requiring adverse parties to post security for satisfying the
final judgment in the case. Orders for security may be for either the amount in dispute in the
underlying controversy or for the fees of legal representation and other costs to be incurred in
resolving the dispute. (7)
Fourth, litigants may seek attachment of funds owned by adverse parties, or debts owed to
them. An attachment is intended to preserve sums necessary to satisfy a final judgment (of
damages or legal costs) against the owner of the property and, in particular, to prevent the
owner or others from removing the property from the territory of the forum court. Unlike most
other provisional measures, an attachment is usually directed against third parties – such as
banks or securities brokers, holding the defendants' property, or persons owing debts to the
defendant. (8)
1
 Fifth, litigants may seek the appointment of neutral third parties to take specified actions. For
example, an independent expert or referee may be appointed to inspect goods, a site, or other
property and render a factual statement as to its condition. (9)
Parties to an international arbitration will not infrequently wish to obtain one or more of the
foregoing types of provisional relief. Provisional measures are, in principle, potentially
available from either an arbitral tribunal or a national court. This section considers the
circumstances in which arbitral tribunals will be authorized – under the parties' arbitration
agreement, any relevant arbitration rules, and applicable national law – to grant provisional
relief. It also considers whether and how an arbitrator will be willing to exercise any power he
may enjoy to order provisional relief. In the immediately following section, we consider when
national courts will grant provisional relief in aid of an international arbitration.
2. Arbitrators' Authority to Order Provisional Relief
The threshold question for a party seeking pre-award relief is whether an arbitrator possesses
the authority to order provisional measures. (10) In general, that question requires consulting
P "921" three sources: (a) any applicable international arbitration convention or treaty, such as the
P "922" New York or Inter-American Convention; (b) applicable national laws; and (c) the parties'
arbitration agreement, including any relevant institutional arbitration rules.
a. Effect of International Arbitration Conventions on Power of Arbitrators to Order Provisional
Relief
For the most part, international arbitration conventions have little to say about the authority
of arbitrators to order provisional measures. The New York Convention contains no provision
expressly referring to awards of provisional measures by arbitrators. (11) The Inter-American
Convention is the same. The 1961 European Convention does address the general subject of
provisional relief, but it only provides that “[a] request for interim measures or measures of
conservation addressed to a judicial authority shall not be deemed incompatible with the
arbitration agreement, or regarded as a submission of the substance of the case to the court.”
(12) Like the New York Convention, however, the 1961 European Convention does not address
whether or when an arbitral tribunal may grant provisional measures.
b. Effect of National Law on Authority of Arbitrator to Order Provisional Relief
An arbitrator will seldom grant provisional relief unless he is satisfied that the national
arbitration legislation applicable to the arbitral proceedings allows him to do so. Equally
important, tribunal-ordered provisional relief will generally not be enforceable in a national
court unless the procedural law of the arbitration permits such relief and the law of the
enforcement jurisdiction provides for judicial enforcement of the tribunal's orders. (13)
There are significant differences among national arbitration laws on the subject of tribunal-
ordered provisional measures. In some nations, like Argentina and Italy, local arbitration law
contains a mandatory prohibition that apparently forbids arbitrators from ordering provisional
relief; the granting of provisional measures is reserved exclusively to local courts, which are
P "922" specifically authorized to issue provisional relief in aid of arbitration. (14) Other nations, like
P "923" Switzerland and the United States, authorize arbitrators to grant provisional measures
(absent contrary agreement) and provide for judicial enforcement of such orders. (15)
The following materials illustrate the varying approaches that national laws take to tribunal-
ordered provisional measures in international arbitration. In reviewing these materials,
consider the extent to which the availability of tribunal-ordered provisional relief under
national law is left to the parties' arbitration agreement, as well as the existence of any
presumptions where the parties' agreement is not clear.
ARGENTINE NATIONAL CODE OF CIVIL AND COMMERCIAL PROCEDURE
Article 753
753. Arbitrators cannot order compulsory measures or measures leading to enforcement. They
must request them from the judge who will have to lend the support of his jurisdictional powers
for the most swift and effective carrying out of the arbitral proceedings.
ITALIAN CODE OF CIVIL PROCEDURE
Article 818
The arbitrators may not grant attachment or other interim measures of protection.
SWISS INTERCANTONAL ARBITRATION CONVENTION OF 1969
Article 26
(generally superseded by Swiss Law on Private International Law)
26(1). The public judicial authorities alone have jurisdiction to make provisional orders.
26(2). However, the parties may voluntarily submit to provisional orders proposed by the
arbitral tribunal.
P "923"
P "924"
SWISS LAW ON PRIVATE INTERNATIONAL LAW

2
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
 Article 183
[excerpted below at p. 1034]
UNCITRAL MODEL LAW
Articles 5, 9 & 17
[excerpted below at pp. 1013, 1014, 1016]
Notes on National Arbitration Legislation Concerning Tribunal-Ordered Provisional Measures
1. Rationale for prohibitions under national laws against awards of provisional measures by
arbitrators. Consider Article 26 of the Swiss Intercantonal Arbitration Convention, Article 753 of
the Argentine National Civil and Commercial Procedure Code, and Article 818 of the Italian
Code of Civil Procedure. All three sections forbid arbitrators from granting provisional relief,
and reserve that power to the courts. What is the rationale for that prohibition? If an arbitral
tribunal can be trusted to resolve the merits of the parties' dispute, why can't it be permitted
to order provisional measures that merely preserve the status quo? Are there particular
reasons to doubt the efficacy and fairness of arbitral procedures in such matters (as compared
to judicial procedures)?
What consequences does an approach forbidding arbitrators from granting provisional
measures have for the efficacy of the arbitral process? For example, what sort of issues will a
court need to decide in granting provisional measures? What effect will judicial disposition of
these issues have on the arbitrators' consideration of the merits of the parties' dispute?
2. Trend of national arbitration legislation towards permitting arbitrators to grant provisional
relief. Consider Articles 183 and 184 of the Swiss Law on Private International Law, and compare
them to Article 26 of the Swiss Intercantonal Arbitration Convention; also consider Articles 9
and 17 of the UNCITRAL Model Law. In general, most developed arbitration statutes have
moved towards a willingness to permit arbitrators to grant provisional relief. That trend
reflects the increasing acceptance of arbitration as a satisfactory mechanism for resolving
complex international commercial disputes and an increasing recognition by national courts
that interlocutory judicial interference in the arbitral process is often counterproductive.
3. Power of arbitral tribunal under most developed national arbitration statutes to order
provisional relief where parties have not otherwise agreed. Consider Article 17 of the UNCITRAL
Model Law and Article 183 of the Swiss Law on Private International Law. How does each
provision deal with the arbitral tribunal's power to grant provisional measures? Is this an issue
which the parties may regulate by agreement? If the parties' arbitration agreement does not
expressly deal with the tribunal's power to award provisional measures, then what is the
presumptive rule? What is the rationale of this approach?
4. Power of arbitral tribunal under most U.S. judicial decisions to order provisional relief where
parties have so agreed. The FAA and Uniform Arbitration Act are silent on the arbitrators'
powers to order provisional measures. Nonetheless, most U.S. courts have expressly or
impliedly recognized the power of an arbitrator under the FAA to order provisional measures in
aid of a domestic arbitration, provided that this is contemplated by the parties' agreement.
See Pacific Reinsurance Management Corp. v. Ohio Reinsurance Corp., 935 F.2d 1019, 1022-1023
(9th Cir. 1991) (“Temporary equitable relief in arbitration may be essential to preserve assets or
enforce performance which, if not preserved or enforced, may render a final award
meaningless”); Island Creek Coal Sales Co. v. Gainesville, 729 F.2d 1046, 1049 (6th Cir. 1984)
(absent contrary provision in state law or parties' agreement, tribunal may award interim
injunctive relief); Sperry Int'l Trade, Inc. v. Government of Israel, 689 F.2d 301, 306 (2d Cir. 1982)
(“Under New York law arbitrators have power to fashion relief that a court might not properly
grant”); Konkar Maritime Enter., SA v. Compagnie Belge d'Affretement, 668 F.Supp. 267, 271
P "924" (S.D.N.Y. 1987); Compania Chilena de Navegacion Interoceanica, SA v. Norton, Lilly & Co., 652
P "925" F.Supp. 1512, 1517 (S.D.N.Y. 1987); Merrill Lynch, Pierce, Fenner & Smith v. Decaro, 577 F.Supp. 616,
625 (W.D. Mo. 1983). See also J. Brooks Securities, Inc. v. Vanderbilt Securities, Inc., 484 N.Y.S.2d
472, 474 (Sup. Ct. 1985); Shay v. 746 Broadway Corp. 409 N.Y.2d 69, 70 (Sup. Ct. 1978). The question
of arbitrators' authority to order provisional measures under the FAA is related to a tribunal's
power to grant injunctive relief. See supra pp. 813-14.
5. Lower U.S. court decisions holding that arbitral tribunal has no power under FAA to order
provisional relief where parties have not expressly so agreed. Despite a general rule to the
contrary, a few lower U.S. courts have held that arbitrators generally lack the power to issue
provisional relief in aid of a domestic arbitration unless the parties have expressly authorized
them to do so. See Swift Indus., Inc. v. Botany Indus., Inc., 466 F.2d 1125, 1134 (3d Cir. 1972)
(parties' agreement did not authorize tribunal to award provisional relief); Carolina Light &
Power Co. v. Uranex, 451 F.Supp. 1044 (N.D. Cal. 1979) (dicta). See also Charles Construction Co. v.
Derderian, 586 N.E.2d 992 (Mass. 1992) (AAA Rules held not to permit tribunal-ordered
provisional measures) (excerpted below).
6. No U.S. authority that FAA forbids parties from conferring power on arbitrators to grant
provisional relief. No U.S. court appears to have held that parties are forbidden by the FAA
from agreeing to vest arbitrators with power to award provisional relief in aid of a domestic
arbitration. Most U.S. decisions impliedly reject any such conclusion. See cases cited supra p.
924. Indeed, a refusal to give effect to an agreement giving arbitrators power to grant
provisional measures would appear inconsistent with the FAA's basic rule that arbitration
agreements are enforceable. See supra pp. 161, 332-35, 351-53. (Compare the decisions,

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 discussed below, holding that Article II(3) of the New York Convention bars court-ordered
provisional relief. See infra pp. 936-37.)
7. Limits under national law on arbitrators' authority to grant provisional relief. National law
may authorize arbitrators to grant provisional measures only within specified limits. For
example, Article 17 of the UNCITRAL Model Law limits provisional measures to those that are
“necessary” and that concern the “subject-matter of the dispute.”
8. Effect of New York Convention on national law limitations on arbitrators' authority to grant
provisional relief. What effect (if any) does the New York Convention have on a nation's ability
to restrict an arbitrator's authority to grant provisional relief? Suppose that the parties'
arbitration agreement expressly authorizes the arbitrators to grant provisional measures? Does
Article II of the Convention require Contracting States to recognize agreements granting
arbitrators power to grant provisional measures? Does Article 1 of the Inter-American
Convention have such effects?
9. Arbitrators' power to grant provisional relief is ordinarily non-exclusive. Note that Articles 183
and 184 of the Swiss Law on Private International Law contemplate concurrent authority of the
arbitral tribunal and national courts to order provisional relief. Articles 9 and 17 of the
UNCITRAL Model Law are similar. As we will see below, most U.S. courts also acknowledge
concurrent authority of courts and arbitrators to grant provisional relief. See infra pp. 932, 945-
48.
Is it wise to permit two separate sources for provisional measures? or does it encourage forum-
shopping and jurisdictional disputes? Does the answer depend on whether it is the parties or
the arbitrators that may seek judicial relief? Does it depend on when judicial relief is sought?
Should parties have the freedom to exclude by agreement concurrent authority of courts and
arbitrators to grant provisional measures?
For examples of concurrent exercises of authority to order provisional measures, by both an
arbitral tribunal and a court, see Nagos Compania Maritima v. Del Bene, SACIF, 4 Soc. Mar. Arb.
297 (No. 2533) (1988); Palm Shipping v. Imbar Maritima, SA, 5 Soc. Mar. Arb. 191 (No. 2546) (1988);
Sperry International Trade v. Israel, 689 F.2d 301 (2d Cir. 1982).
10. Arbitrators generally lack authority to issue provisional measures against non-parties. An
arbitrator's powers are virtually always limited to the subject matter of the arbitration and to
the parties to the arbitration. As a consequence, the arbitrator generally can (and will) order
provisional measures only against the parties to the arbitration; he will not have the power to
order, for example, attachment of property held by a third party. Cf. Carolina Light & Power Co.
v. Uranex, 451 F.Supp. 1044 (N.D. Cal. 1979).
11. National law limits on agreements excluding the right to obtain provisional measures from a
court. In some nations, including the United States, local law may contain mandatory
provisions restricting the power of parties to agree to exclude recourse to the courts for
provisional relief. See infra p. 960.
12. Judicial enforcement and review of tribunal-ordered provisional relief. A corollary of
P "925" recognition of an arbitrator's power to grant provisional relief is the availability of judicial
P "926" enforcement of such orders. Consider briefly how Articles 35 and 36 of the UNCITRAL Model
Law, Articles 188-192 of the Swiss Law on Private International Law, and §§9 and 10 of the FAA
provide for enforcement of awards of provisional relief. See infra pp. 971-80. As discussed
below, national courts in most developed jurisdictions will enforce provisional measures
awarded by arbitral tribunals. Arbitral awards of provisional measures are subject to judicial
review, just as other arbitral awards are. For a discussion of standards of judicial review of
arbitral awards under U.S. law, see supra pp. 797-814.
13. Choice of law applicable to arbitral tribunal's power to grant provisional measures. What law
applies to determine an arbitral tribunal's power to grant provisional measures in an
international arbitration? In many cases, the most directly applicable national arbitration
legislation will be that of the arbitral situs. As we have seen, that law will ordinarily provide the
procedural law governing the arbitration. See supra pp. 411-13, 430-31. (In rare cases, the
parties will agree that a foreign law, other than that of the arbitral situs, will govern the
arbitration. See supra pp. 426-28.)
For example, what law would govern the arbitrators' power to grant provisional measures in an
arbitration sited in Argentina? Does Article 753 of the Argentine Code of Civil and Commercial
Procedure apply?
Suppose that parties agree to arbitrate in Switzerland and their dispute arises under a
contract governed by Italian law. Does Article 818 of the Italian Code of Civil Procedure apply?
Or does Article 183 of the Swiss Law on Private International Law apply? Isn't the latter choice
clearly correct? See generally supra pp. 430-31.
There is little authority on the law applicable to an arbitrator's power to grant provisional
measures. Most precedent looks to the law of the arbitral situs. See Interim Award in Case No.
1694 of 12 December 1996 (Netherlands Arbitration Institute), XXIII Y.B. Comm. Arb. 97 (1998)
(applying law of arbitral situs to arbitral tribunal's power to grant provisional measures). The
question of the law applicable to an arbitrator's power to grant provisional measures is also
discussed below, see infra pp. 932-33.
c. Effect of Institutional Arbitration Rules on Authority of Arbitrator to Order Provisional Relief

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 As described above, developed national arbitration statutes generally neither forbid
arbitrators from granting provisional measures nor require that they have the power to do so.
Rather, under most leading national arbitration statutes, arbitrators ordinarily can order
provisional relief (and courts may enforce tribunal-ordered provisional measures), provided
that this is not excluded the parties' agreement. As a consequence, an arbitrator's power to
order provisional relief often turns largely upon the terms of the parties' arbitration
agreement, any applicable institutional arbitration rules, and presumptions about the parties'
likely intentions.
In practice, it is unusual (although by no means unheard of) (16) for the parties' arbitration
agreement expressly to address the subject of provisional relief. (17) Thus, the power of an
arbitrator under most developed national laws to order provisional relief often turns upon the
institutional rules (if any) selected by the parties. Many institutional arbitration rules expressly
address the power of an arbitral tribunal to grant provisional measures. Nonetheless, in ad hoc
arbitrations, or where institutional rules do not deal with the subject of provisional relief,
interpretation of the parties' arbitration agreement and application of presumptions under
national law will be required.
P "926"
P "927"
Excerpted below are sections of leading institutional rules relating to provisional measures,
including the UNCITRAL, LCIA, ICC, and AAA Commercial Arbitration Rules. Consider how each
set of rules deals with the subject of provisional measures. Also consider the opinion in Charles
Construction Co. v. Derderian, (18) which illustrates one judicial approach to the interpretation
of institutional rules.
UNCITRAL ARBITRATION RULES
Article 26
[excerpted below at p. 1028]
LCIA RULES
Article 25
[excerpted below at p. 1084]
ICC RULES (1988 VERSION)
Article 8(5)
Before the file is transmitted to the arbitrator, and in exceptional circumstances even
thereafter, the parties shall be at liberty to apply to any competent judicial authority for
interim or conservatory measures, and they shall not by so doing be held to infringe the
agreement to arbitrate or to affect the relevant powers reserved to the arbitrator.
ICC RULES (1998 VERSION)
Article 23
[excerpted below at p. 1066]
AAA COMMERCIAL ARBITRATION RULES
Article 36 (1999 version)
[excerpted below at p. 1053]
CHARLES CONSTRUCTION COMPANY v. DERDERIAN
586 N.E.2d 992 (Mass. 1992)
WILKINS, JUDGE. Because the applicable arbitration rules did not authorize them to do so, the
P "927" arbitrators had no authority to enter an interim order directing a party to provide security
P "928" toward the payment of any award the arbitrators might eventually enter. We, therefore,
affirm Superior Court judgments vacating the arbitrators' interim order for security. That award
had directed James Derderian, as trustee of Parkman Realty Trust, to furnish a $1,000,000
irrevocable letter of credit, payable on demand, to the American Arbitration Association, as
security for the payment of any arbitration award that might be entered against Derderian, as
trustee, in the arbitration proceeding.
The course of the arbitration seems atypical because it commenced in September, 1987, and,
after seventy-three hearing days, suspended early in 1990. Charles Construction Co., Inc., seeks
enforcement of the interim arbitration award in one of the actions before us, and Derderian
seeks an order vacating that award in the other.
In October, 1984, Derderian, as owner of property in Brookline (“owner”), and Charles, as
construction manager (“contractor”), entered into an associated general contractors' standard
form of agreement pursuant to which a condominium and parking garage were to be
constructed. That agreement provided for the arbitration of certain claims, disputes, and other
matters arising out of the agreement “in accordance with the Construction Industry Arbitration
Rules of the American Arbitration Association then obtaining.”
Disputes did arise, and they were submitted to arbitration. The owner asserted claims for more
than $2,800,000, and the contractor for more than $ 1,170,000. Hearings commenced in

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 September, 1987, and continued intermittently until January, 1990, when the contractor
requested the panel to issue an order for interim security. On February 16, 1990, in an interim
order, the arbitrators, purporting to act under §34 of the construction industry arbitration
rules, ordered the owner to provide the security that we have previously described. There is no
contractual provision apart from the arbitration rules on which the contractor relies. He points
to no statutory authorization for the arbitrators' award of interim relief. The owner contends
first that, if Charles is to obtain relief before the arbitration proceeding is concluded, it must
come from a court.
We reject the owner's claim that the contractor's only avenue for obtaining interim relief is
through a court order independent of the arbitration proceeding. We have indeed upheld the
entry of protective court orders even though a dispute between the parties is subject to
arbitration. See Hull Mun. Lighting Plant v. Massachusetts Mun. Wholesale Elec. Co., 399 Mass.
640, 648-649 (1987) (preliminary injunction upheld requiring contractual payments to continue
while dispute is arbitrated pursuant to court order); Salvucci v. Sheehan, 349 Mass. 659, 663
(1965) (bill to reach and apply fraudulently conveyed property may be maintained before
arbitration proceeding is concluded). If, however, there is an express agreement that
authorizes an arbitrator to grant interim relief, including any authorization set forth in
arbitration rules incorporated by agreement of the parties, there is no reason why an arbitrator
may not act under that authority. Indeed, in such an instance, the court might be obliged both
P "928" to defer to the parties' agreement to submit the matter of interim relief to arbitration and to
P "929" give any subsequent interim order the same deferential treatment that must be accorded to
an arbitrator's final order. Of course, a statute could authorize an arbitrator to grant interim
relief. Therefore, if the arbitrators had contractual or statutory authority to issue an interim
order, the contractor properly could have sought such an order from them and was not limited
to asking for interim relief from a court.
There is little authority on the question whether, absent any controlling statute or agreement of
the parties, an arbitrator has implicit authority to order a party to provide security, during the
pendency of the arbitration, against the possibility of a decision adverse to that party. Where
there is no contractual or statutory guidance, authorities that have considered the question
have not agreed on the answer.... (19) We agree in general that, in the absence of an agreement
or statute to the contrary, an arbitrator has inherent authority to order a party to provide
security while the arbitration is continuing. It is reasonable to assume that parties, in agreeing
to arbitration, implicitly intended that the arbitration not be fruitless and that interim orders
to preserve the status quo or to make meaningful relief possible would be proper. In such a
circumstance, the arbitrator's authority to act would reasonably be implied from the
agreement to arbitrate itself.
This general principle has no application in this case because we construe the construction
industry arbitration rules of the American Arbitration Association, which the contract
incorporates by reference, to restrict the authority of an arbitrator to provide interim relief. To
justify the issuance of the interim order, the contractor relies on §34 of the arbitration rules,
the same authority that the arbitrators relied on when issuing their order. Section 34, as it was
in effect when the interim order for security was entered in February, 1990, is entitled “Interim
Measures,” and states: “The arbitrator may issue such orders for interim relief as may be
deemed necessary to safeguard the property that is the subject matter of the arbitration
without prejudice to the rights of the parties or to the final determination of the dispute.” (20)
No property was the subject matter of the arbitration. The arbitration was not a dispute over
specific property but rather concerned claims of breach of contract. The fact that the owner
would be obliged to satisfy any arbitration award against him from assets of the Parkman
Realty Trust does not make those assets “the subject matter of the arbitration.” We do not give
§34 such an expansive reading. If the drafters of §34 for the American Arbitration Association
P "929" had intended that an arbitrator have authority to issue a preliminary order than a party
P "930" provide security, the rule would not have been written as it was, referring only to property
that is the subject matter of the arbitration. (21)
There is another arbitration rule to which the contractor points but on which it relies only by a
casual assertion. Section 43 of the construction industry arbitration rules, entitled “Scope of
Award,” permits an arbitrator to “grant any remedy or relief that the arbitrator deems just and
equitable and within the scope of the agreement of the parties....” That rule cannot authorize
interim relief of the sort that the arbitrators awarded in this case. Section 43 does not
explicitly refer to interim relief, and, if were to be read to do so, it would render unnecessary
§34, a rule that appears to deal explicitly and comprehensively with the subject of interim
measures. Moreover, whatever just and equitable relief is granted must be “within the scope of
the agreement of the parties.” That language seems to be focused on the arbitrator's final
disposition (unless perhaps the parties explicitly agreed to grant the arbitrators the right to
grant interim relief). (22)
Notes on Arbitrator's Power to Grant Provisional Relief Under Institutional Arbitration Rules
1. Institutional rules relating to provisional relief. Consider the excerpted sections from the
UNCITRAL, ICC, LCIA, and AAA Commercial Arbitration Rules. What are the differences between
these various approaches? What are the respective advantages and disadvantages of each
approach?
2. Presumptions concerning parties' intentions as to provisional measures in the absence of an
express agreement. As described above, the UNCITRAL Model Law, the Swiss Law on Private

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 International Law, and the FAA (as well as most other leading national arbitration statutes)
permit arbitrators to order provisional relief – provided that the parties have not otherwise
agreed. See supra pp. 924-26. In a significant number of cases, however, neither the parties'
agreement nor the institutional arbitration rules that they designate expressly address the
power of arbitrators to order provisional measures. See, e.g., Charles Construction supra, and
ICC Rules Article 8(5) (1988 version). In the absence of evidence regarding an express or implied
agreement, what legal rule should govern the availability of tribunal-ordered provisional
measures? That is, when the parties' agreement is silent, should or should not arbitrators be
presumed to have been intended to have the power to order provisional relief?
(a) Presumption that arbitrator lacks power to grant provisional relief (unless otherwise
agreed). Some authorities hold that an arbitral tribunal lacks the power to grant
provisional measures, unless otherwise agreed. In Swift Indus., Inc. v. Botany Indus., Inc.,
466 F.2d 1125 (3d Cir. 1972), the court held that the arbitrator lacked the power to order
provisional relief:
We have sought to distill from the Agreement the essence of the arbitrator's authority.
Whatever that authority may be, it is clear to us that it does not include the authority to
P "930" award a six million dollar cash bond to cover a liability which contrary to the
P "931" requirements of the applicable breach of warranty clause, has not yet been (and may not
be) “incurred or suffered,” in a situation where the parties did not provide for such
security in their agreement, although they might have done so. In our view, to award, as
an adjunct to declaratory relief, a form of prejudgment execution which the Agreement by
its lack of reference to security seems to exclude rather than to intend, is to eclipse the
framework of the agreement and to venture onto unprotected ground. We subscribe to
the observations ... that the draftsmen may be unable to perceive in advance what
specific remedy should be awarded to meet a particular contingency and that in
arbitration flexibility is important. But the principle of flexibility of relief cannot be
permitted to obscure or to effect a metamorphosis of the claim itself. That untoward
event would occur if we were to permit the arbitrator's award to stand in this case.
Is this persuasive?
(b) Presumption that arbitrators possess power to grant provisional relief (unless otherwise
agreed). In contrast, consider again Article 17 of the UNCITRAL Model Law and Article 183
of the Swiss Law on Private International Law. See supra pp. 923-24. What presumption
does each provision adopt? Also consider the Charles Construction decision. What
approach does the Massachusetts court take to the burden of establishing the existence
or non-existence of an agreement to permit the tribunal to award provisional relief? How
does the presumption adopted in Charles Construction differ (if at all) from that in the
UNCITRAL Model Law and the Swiss Law on Private International Law?
What is the presumption in Charles Construction concerning the arbitrator's power to
order provisional measures when the parties have not agreed to institutional arbitration
rules? Would (or could) a similar approach be taken to institutional arbitration rules
under the UNCITRAL Model Law and Swiss Law on Private International Law?
If the parties have agreed to institutional arbitration rules, what does Charles
Construction presume concerning the arbitrator's power to award provisional relief?

3. What presumption should be adopted regarding arbitrator's power to grant provisional relief?
Which approach to the arbitrator's implied authority – the UNCITRAL Model Law's, Charles
Construction's, or Swift's – is preferable? Would it be better to take an approach not accepted
in either the UNCITRAL Model Law or Charles Construction – i.e., that the tribunal presumptively
does not enjoy power to award provisional relief, absent an affirmative showing of an express
or implied agreement to that effect? Is the answer to this question influenced by the
availability of provisional measures from a national court? What are the likely expectations of
the parties in the absence of express agreement? What approach is most likely to produce a
fair and efficient dispute-resolution process?
4. U.S. judicial decisions concluding that arbitrators presumptively possess implied power to
grant provisional relief (unless otherwise agreed). As noted above, most U.S. courts have
adopted a position similar to that of the UNCITRAL Model Law – i.e., that parties will generally
be presumed, absent contrary agreement, to have conferred the power to award provisional
relief on their arbitrator, even where institutional arbitration rules are involved. See supra pp.
925-26; Island Creek Coal Sales Co. v. Gainesville, 729 F.2d 1046 (6th Cir. 1984); Sperry
International Trade, Inc. v. Israel, 689 F.2d 301 (2d Cir. 1982); Konkar Maritime Enter., SA v.
Compagnie Belge d'Affretement, 668 F.Supp. 267 (S.D.N.Y. 1987); Compagnie Chilena de
Navigacion Interoceanica SA v. Norton, Lilly & Co., 652 F.Supp. 1512 (S.D.N.Y. 1987); Southern Seas
Navigation Ltd v. Petroleos Mexicanos of Mexico City, 606 F.Supp. 692 (S.D.N.Y. 1985).
Most commentators on international arbitration also conclude that arbitral tribunals should
presumptively have the power to order provisional relief (unless otherwise agreed): “The
authority of arbitrators to grant conservatory and provisional measures stems from their
inherent powers to conduct the arbitral proceedings and, more specifically, any additional
authority granted to them in the contract between the parties.” Hoellering, The Practices and
Experience of the American Arbitration Association, in ICC, Conservatory and Provisional Measures
in International Arbitration 31 (1993) (emphasis added). See also Higgins, Interim Measures in

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 Transnational Maritime Arbitration, 65 Tulane L. Rev. 1519, 1535-36 (1991) (“By expressly
consenting to the arbitration of their dispute, the parties implicitly accord to the arbitrators a
general grant of power to exercise any authority necessary to reach a determination on the
merits of the dispute.”).
5. Arbitrators' power to grant provisional measures under the ICC Rules. The ICC Rules have
recently been revised to more directly address the arbitral tribunal's power to grant
provisional measures.
P "931"
P "932" (a) Lack of express authority to order provisional measures under Article 8(5) of 1988 ICC
Rules. Consider Article 8(5) of the 1988 version of the ICC Rules. Does this provision
affirmatively grant an ICC arbitrator the power to award provisional relief? See Schwartz,
The Practices and Experiences of the ICC Court, in ICC, Conservatory and Provisional
Measures in International Arbitration 46 (1993) (“the arbitrators themselves are not
expressly authorized to issue [provisional] measures”); Paulsson, A Better Mousetrap: 1990
ICC Rules for a Pre-Arbitral Referee Procedure, 18 Int'l Bus. Law. 214 (1990). Compare ICC
Rules Article XVIII (1922) (“In all cases, the arbitrators, at the request of either of the
interested parties, shall have the right to render a provisional decision, providing for
such measures of preservation as may be indispensable....”).
How would Article 8(5) of the 1988 ICC Rules be interpreted under the analysis in Charles
Construction?

(b) Authority to order provisional measures under Article 23 of 1998 ICC Rules. Compare Article
23 of the 1998 ICC Rules to its predecessor in the 1988 ICC Rules. Note that Article 23
expressly grants the arbitral tribunal authority to order “interim or conservatory
measures.” Is this a desirable change to the ICC Rules? Compare Article 23 of the 1998 ICC
Rules with Article 25 of the 1998 LCIA Rules. Which approach is wiser?
6. Interpretation of other leading institutional arbitration rules. Consider again Article 26 of the
UNCITRAL Rules, Article 25 of the LCIA Rules, and Articles 8(5) and 23 of the 1988 and 1998 ICC
Rules. How would each be interpreted under the analysis in Charles Construction? Consider
Article 36 of the 1999 AAA Commercial Arbitration Rules, which replaced the version of the AAA
Rules at issue in Charles Construction. Would the decision be decided differently under the new
rule?
7. ICC Rules for a Pre-Arbitral Referee Procedure. Some arbitral institutions have adopted
specialized rules that seek to provide a non-judicial mechanism for obtaining urgently-needed
provisional relief. The ICC Rules for a Pre-Arbitral Referee Procedure are the leading example
of such efforts. See generally Hausmaninger, The ICC Rules for a Pre-Arbitral Referee Procedure: A
Step Towards Solving the Problem of Provisional Relief in International Commercial Arbitration, 7
ICSID Rev. 82 (1992); Paulsson, A Better Mousetrap: 1990 ICC Rules for a Pre-Arbitral Referee
Procedure, 18 Int'l Bus. Law. 214 (1990). At least to date, however, neither these rules nor other
private efforts to provide access to provisional relief have proven successful. That is because
parties must agree in writing to the use of this specialized procedure and, given the realities of
litigation, this cannot often be expected to occur after a dispute has arisen. At earlier stages,
parties have not generally been sufficiently focussed on the procedural intricacies of future
disputes to make provision for specialized issues. As a consequence, although the ICC's Pre-
Arbitral Referee Procedure has attracted substantial commentary, it has not yet been tested in
a single case.
Why has the ICC not included a pre-arbitral referee procedure in its generally-applicable
arbitration rules, to be incorporated whenever the parties agree to ICC arbitration?
8. Arbitrators' power to order security and counter-security. A key feature of provisional relief is
security – either for ultimate liability or for attorneys' fees and other legal costs – and counter-
security – for the damages caused by provisional measures granted for a party that ultimately
is unsuccessful. Consider the institutional rules set forth above; what provisions do these rules
make for security orders by tribunals? U.S. courts have generally upheld the authority of
arbitrators to make security orders. E.g., Loral Corp. v. Swiftships, Inc., 77 F.3d 420 (11th Cir. 1996)
(confirming arbitral award requiring defendant to deposit milestone payments received from
third party into escrow account); Sperry International Trade, Inc. v. Israel, 532 F.Supp. 901, 905
(S.D.N.Y. 1982), aff'd, 689 F.2d 301 (2d Cir. 1982); Compania Chilena de Navegacion Interoceanica,
SA v. Norton, Lilly & Co., 652 F.Supp. 1512, 1516 (S.D.N.Y. 1987); Konkar Maritime Enterprise, SA v.
Compagnie Belge D'Affretement, 668 F.Supp. 267, 271 (S.D.N.Y. 1987) (upholding tribunal's order,
prior to conducting hearing, that one party post security for claims against it; “The issue of
security ... was implicit in the submission of the main dispute to the Panel”). But see Swift
Indus., Inc. v. Botany Indus., Inc., 466 F.2d 1125 (3d Cir. 1972).
9. U.S. lower court decisions rejecting claims that foreign court had exclusive authority to order
provisional relief. A few cases have raised (and rejected) the claim that the arbitral tribunal
may not order provisional relief, because a foreign court enjoys the exclusive power to do so
under foreign law. See Warth Line, Ltd v. Merinda Marine Co., 778 F.Supp. 158 (S.D.N.Y. 1991); In re
Noble Navigation Corp., No. 83-3983 (S.D.N.Y. June 4, 1984).
10. Choice of law applicable to arbitral tribunal's power to grant provisional measures. Consider
P "932" again (see supra pp. 426-31, 926) what law governs an arbitral tribunal's power to grant
P "933" provisional measures. Note the presumptive applicability of the law of the arbitral situs, as
(usually) the law governing the arbitral proceedings. See supra pp. 430-31.

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 Recall, however, that under most developed arbitration legislation the arbitrator's power to
grant provisional relief will depend upon the parties' arbitration agreement. See supra pp. 924-
26. As we have seen, the arbitration agreement may be subject to a different law than that
governing the arbitral proceedings. See supra pp. 95-117. And, in interpreting the parties'
arbitration agreement on the issue of provisional measures, it is the law governing the
arbitration agreement which would ordinarily apply to determine what the parties have
agreed. How does the law governing the arbitration agreement relate in these circumstances to
the procedural law of the arbitration?
3. Arbitrators' Exercise of Authority to Order Provisional Relief
Assuming an arbitrator possesses the power to order provisional relief, how do arbitrators in
fact choose to exercise that authority? The short answer is that arbitrators are not always able
or willing to act with the expedition and vigor that provisional relief typically requires. (23)
Preliminarily, many arbitrators are more reluctant than national courts to order provisional
measures. (24) Arbitrators often are sensitive to the fact that their powers derive from private
agreement, to the legal uncertainties outlined below concerning their powers to order
provisional measures, and to the difficulties of enforcement. Similarly, arbitral tribunals will
be concerned about prejudging the merits of the parties' dispute or appearing partial. To a
much greater measure than national courts, arbitrators are reluctant to push the limits of their
authority.
Finally, the process of considering whether to order provisional measures can be time-
consuming and distracting, particularly for arbitrators who are lawyers with active private
practices. Arbitrators also act with the knowledge that their ability to enforce provisional
measures will often require resort to national courts. For all these reasons, arbitrators are
usually hesitant to order compulsory provisional measures, even in circumstances in which a
national court might do so.
P "933"
P "934"
Moreover, even when arbitrators are willing to grant provisional relief, it is often not
practicable for them to do so. Provisional measures are usually needed at the outset of the
parties' dispute. Ordinarily, however, no arbitral tribunal will be in place and functioning at
the beginning of a dispute; even after the request for arbitration has been filed, the process of
selecting and confirming the arbitrators can take several months. (25) As a consequence,
provisional measures can often not practicably be obtained from the arbitrators.
Nevertheless, arbitrators will usually want to do justice and sometimes issue awards granting
provisional relief in terms little different from that of a court. See, for example, the excerpts
from the tribunal's provisional measures in Sperry International Trade v. Israel, excerpted
above, which are indistinguishable from a district court's preliminary injunction. There are
even instances of arbitrators granting provisional measures sua sponte, without having been
requested to do so by either party. (26)
Under many nations' laws, courts have the power to order provisional relief on an ex parte
basis – in the absence of the party against whom the provisional measures are directed. Where
the potential removal of assets or destruction of evidence is at issue, ex parte proceedings are
often critical to obtaining effective practical relief. Nevertheless, most institutional arbitration
rules appear not to permit ex parte provisional measures. (27) Additionally, substantial issues
would be raised under applicable national laws concerning ex parte arbitral hearings. One of
the bases under Article V of the New York Convention and Article 5 of the Inter-American
Convention for denying recognition to an award is the tribunal's failure to allow a party to
“present his case,” which arguably would be the case if ex parte relief was granted. (28)
Finally, a party that seeks provisional measures will often face a counter-demand for security
for damages in the event that the party seeking the relief fails to prevail on the merits. For
example, if a party seeks an order forbidding certain conduct (such as sales of a licensed
product), it should anticipate a request that it provide security for lost profits on such sales.
(29)
P "934"
P "935"
B. Provisional Measures Ordered by National Courts in Aid of Arbitration (30)
The arbitral tribunal is not necessarily the sole source of provisional relief in connection with
an international arbitration. In addition, national courts may also be able and willing to grant
provisional measures. This section examines the circumstances when this will occur.
1. Introduction
Although one of the attractions of arbitration is its promise of speedy dispute resolution, the
arbitral process usually does not offer a particularly quick, or satisfactory, means of obtaining
provisional relief. As noted above, until the arbitral tribunal is in place, there is no prospect of
obtaining provisional relief from it. Moreover, at least to date, the ICC Pre-Arbitral Referee
Rules and other similar efforts have failed to provide a satisfactory non-judicial mechanism for
obtaining provisional measures in arbitration. Where attachments and other provisional
measures binding third parties are concerned, arbitrators can virtually never provide effective
relief.

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 As a consequence, parties to arbitration agreements who require urgent provisional relief often
must seek the assistance of national courts. (31) The willingness of a national court to grant
provisional relief in aid of arbitration is a matter of national law. As in most issues relating to
international arbitration, three sources of authority bear on this question: (a) the New York
Convention and other applicable international agreements; (b) applicable national arbitration
legislation; and (c) the applicable institutional arbitration rules agreed upon by the parties,
together with other relevant provisions of their arbitration agreement.
P "935"
P "936"
2. Effect of the New York Convention and Other International Agreements on the Authority of
National Courts to Grant Provisional Relief in Aid of International Arbitrations
The New York Convention does not contain any provision dealing expressly with provisional
relief (whether granted by an arbitral tribunal or a national court). As described above,
however, the Convention does contain in Article II a requirement that courts of signatory states
enforce arbitration agreements. In particular, Article II(3) provides:
The court of a Contracting State, when seized of an action in a matter in respect of which the
parties have made an agreement within the meaning of this article, shall, at the request of one
of the parties, refer the parties to arbitration, unless it finds that the said agreement is null
and void, inoperative or incapable of being performed.
The impact of Article II(3) on court-ordered provisional measures in aid of arbitration is
unsettled, particularly in the United States. A few U.S. courts have interpreted Article II(3) of
the Convention as forbidding national courts from ordering attachments prior to the
commencement of arbitration pursuant to a preexisting arbitration agreement. (32) Other U.S.
decisions have expressly refused to adopt that reading of Article II(3). (33) In contrast, non-U.S.
decisions and academic commentary almost unanimously reject the view that Article II(3)
forecloses court-ordered provisional relief in aid of arbitration. (34)
The seminal decision holding that Article II(3) forbids court-ordered provisional relief in aid of
arbitration was McCreary Tire & Rubber Co. v. CEAT, SpA. (35) The case arose from a distribution
agreement which went awry, triggering disputes which fell within a provision calling for ICC
arbitration in Belgium. The U.S. party (McCreary) then commenced litigation, on the merits, in
federal district court in Massachusetts; the district court stayed the action and ordered
arbitration. Undeterred, McCreary next commenced a new action in federal district court in
Pennsylvania, reasserting its underlying breach of contract claims against CEAT and, in
addition, seeking to attach sums owed to CEAT by a Pittsburgh bank. On appeal, the Third
Circuit held that no attachment should be granted and that arbitration should be compelled.
P "936"
P "937"
The McCreary court rested its decision on Article II(3) of the New York Convention and on its
understanding of the parties' arbitration agreement:
What is plainly there to see is that [McCreary's federal court action] is a violation of McCreary's
agreement to submit the underlying disputes to arbitration.... Quite possibly, foreign
attachment may be available for the enforcement of an arbitration award. This complaint does
not seek to enforce an arbitration award by foreign attachment. It seeks to bypass the agreed
upon method of settling disputes. Such a bypass is prohibited by the Convention.... The
Convention forbids the courts of a contracting state from entertaining a suit which violates an
agreement to arbitrate. Thus, the contention that arbitration is merely another method of trial,
to which state provisional remedies should equally apply, is unavailable.... The obvious
purpose of the enactment of [the implementing legislation of the FAA for the New York
Convention], permitting removal [to federal district court] of all cases falling within the terms
of the treaty, is to prevent the vagaries of state law from impeding its full implementation.
Permitting a continued resort to foreign attachment in breach of the agreement is inconsistent
with that purpose. (36)
In short, the McCreary court concluded that McCreary's U.S. judicial action for provisional relief
was in fact designed to frustrate the arbitral process that it had agreed to and, therefore, that
the New York Convention precluded the suit and the request for attachment.
McCreary was followed, and extended, in other lower U.S. court decisions. (37) For example, the
New York Court of Appeals held in Cooper v. Ateliers de la Motobecane, SA, (38) excerpted
below, that the Convention foreclosed an attachment action that was apparently part of an
effort to circumvent arbitration. In addition, however, subsequent decisions applied the
McCreary/Cooper rationale where court-ordered provisional measures were fairly clearly in aid
of a pending arbitration (rather than in circumvention of it). (39)
Other lower U.S. courts have refused to follow McCreary and Cooper. They have concluded that
Article II(3) of the New York Convention does not speak to the question of provisional relief in
aid of arbitration. The Uranex decision, (40) also excerpted below, is the seminal ruling in this
line of authority.
P "937" Finally, other U.S. courts have limited Cooper and McCreary by distinguishing between the
P "938" prejudgment attachment which they involved and other types of provisional relief (such as
preliminary injunctions). These courts have concluded that, whatever the rule with respect to
prejudgment attachments, other forms of provisional relief are available in aid of arbitration.
The decision in Borden, Inc. v. Meiji Milk Products Co., (41) excerpted below, is a leading

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 example of this line of authority.
COOPER v. ATELIERS DE LA MOTOBECANE, SA
442 N.E.2d 1239 (N.Y. 1982)
COOKE, CHIEF JUDGE. The [New York] Convention was drafted to minimize the uncertainty of
enforcing arbitration agreements and to avoid the vagaries of foreign law for international
traders. This policy would be defeated by allowing a party, contrary to contract, to bring
multiple suits and to obtain an order of attachment before arbitration....
Plaintiff and others not here involved entered into a contract with defendant, a French
corporation, to establish a New York corporation to distribute defendant's products. The
agreement provided that plaintiff and others could each tender his or her shares for
repurchase to defendant or the New York corporation, the two being jointly and severally
obligated to buy such shares according to a price-setting formula. Disputes over valuation were
to be resolved by arbitration in Switzerland.
In April, 1978, plaintiff tendered his shares for repurchase. Negotiations ensued until defendant
finally demanded arbitration. In September, 1978, plaintiff sought a permanent stay of
arbitration [and eventually] ... the Appellate Division ... issued a stay [in “Action I.”] ... During
the pendency of Action I, in January, 1979, plaintiff commenced this action for a money
judgment (“Action II”) and obtained an ex parte attachment of a debt owed by the New York
corporation to defendant.... [The New York] Supreme Court confirmed the attachment [as did
the Appellate Division.]....
It has long been the policy in New York to encourage the use of arbitration “as an easy,
expeditious and inexpensive method of settling disputes, and as tending to prevent
litigation.”Fudickar v. Guardian Mut. Life Ins. Co., 62 N.Y. 392, 399. This support has not
diminished over the last century. The desirability of arbitration is enhanced in the context of
international trade, where the complexity of litigation is often compounded by lack of
familiarity with foreign procedures and law. Thus, resolving disputes through arbitration allows
all parties to avoid unknown risks inherent in resorting to a foreign justice system.
The prevalent problem in international contracts containing arbitration clauses has been in
enforcing the agreement to arbitrate. The old antagonism to arbitration is shared by many
countries, so that there is often uncertainty whether a contracting party may be compelled to
P "938" arbitrate or whether an arbitrator's award may be enforced.... It was against this background
P "939" that the [New York] Convention was drafted.... Generally, the [New York] Convention eased
the difficulty in enforcing international arbitration agreements by minimizing uncertainties
and shifting the burden of proof to the party opposing enforcement. The question whether an
arbitral award is “foreign,” a matter unclear in some civil law countries, is answered by
adopting a territorial definition of domesticity. When an action is brought in court and a party
asserts the arbitration agreement, the court “shall ... refer the parties to arbitration, unless it
finds that the said agreement is null and void, inoperative or incapable of being performed.”
Article II(3). Moreover, foreign arbitration awards are to be enforced on the same terms as
domestic awards. Article III.
Of particular relevance to the present controversy are the [New York] Convention's provisions
for objecting to the award and requiring security. Unlike the earlier Geneva Treaties, the [New
York] Convention requires the party opposing enforcement to prove the award's invalidity, and
it limits the grounds for objection. Moreover, if enforcement is opposed, the proponent of the
award may request that the other party be ordered to give suitable security. This gives the
courts a tool to discourage attempts to avoid arbitration awards which attempts are made
merely as obstructionist tactics.
The provisional remedy of attachment is, in part, a device to secure the payment of a money
judgment. It is available only in an action for damages (see CPLR 6201). Under the appropriate
circumstances, it can be obtained in a matter that is subject to arbitration: an order of
attachment will remain valid if it was obtained with notice or has been confirmed in a contract
action before a defendant obtains a stay of proceedings because the underlying controversy is
subject to arbitration. See American Reserve Ins. Co. v. China Ins. Co., 297 N.Y. 322, 326-327. It
should be noted, however, that attachment would not be available in a proceeding to compel
arbitration (see CPLR 7503(a)) as that is not an action seeking a money judgment.
It is open to dispute whether attachment is even necessary in the arbitration context.
Arbitration, as part of the contracting process, is subject to the same implicit assumptions of
good faith and honesty that permeate the entire relationship. Voluntary compliance with
arbitral awards may be as high as 85%. Moreover, parties are free to include security clauses
(e.g., performance bonds or creating escrow accounts) in their agreements to arbitrate. The
[New York] Convention apparently considered the problem and saw no need to provide for
prearbitration security. Moreover, the list of signatory countries provides assurance to a
contracting party that it will be able to enforce an arbitral award almost anywhere in the
world. More important here, however, is the injection of uncertainty – the antithesis of the [New
York] Convention's purpose – that would occur by permitting attachments and judicial
proceedings. Once again, the foreign business entity would be subject to foreign laws with
which it is unfamiliar.
The [New York] Convention was implemented in the United States in 1970. This act amended
P "939" the [FAA] by re-enacting the earlier sections and denominating them “Chapter 1,” and adding
P "940"

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 P "940" “Chapter 2” to provide a vehicle for enforcing the [New York] Convention. In McCreary Tire and
Rubber Co. v. CEAT, 501 F.2d 1032, the Third Circuit ruled that the language “refer the parties to
arbitration” precludes the courts from acting in any capacity except to order arbitration, and
therefore an order of attachment could not be issued. To hold otherwise would defeat the
purpose of the [New York] Convention (see id.; accord I.T.A.D. Assoc. v. Podar Bros., 636 F.2d 75
(4th Cir.); Metropolitan World Tanker Corp. v. P.N. Pertambangan Minjakdangas Bumi Nasional,
427 F.Supp. 2 (S.D.N.Y.); Siderius, Inc. v. Compania de Acero del Pacifico, SA, 453 F.Supp. 22
(S.D.N.Y.)).
Plaintiff relies on a number of cases to the contrary (see Paramount Carriers Corp. v. Cook Inds.,
465 F.Supp. 599 (S.D.N.Y.); Compania de Navegacion y Financiera Bosnia, SA v. National Unity
Mar. Salvage Corp., 457 F.Supp 1013 (S.D.N.Y.); Atlas Chartering Serv. v. World Trade Group, 453
F.Supp. 861 (S.D.N.Y.); Carolina Power & Light Co. v. Uranex, 451 F.Supp. 1044 (N.D. Cal.)). Most of
these cases are distinguishable, however. The implementing statute provides that normal
Federal arbitration law applies to the extent it is not inconsistent with the [New York]
Convention [9 U.S.C. §208]. That law specifically permits attachment to be used in admiralty
cases [9 U.S.C. §8]. In all of the cases relied on by plaintiff, except for National Unity Mar. and
Carolina Power, the courts relied on §8 in approving attachment in a case arising out of a
maritime contract. In National Unity Mar., the court discussed neither §8 nor the [New York]
Convention in approving attachment in a maritime contract case. Only in Carolina Power did
the court allow attachment in a case not involving a maritime contract falling under the
Convention. That court rejected McCreary's reasoning that it must divest itself of jurisdiction.
Instead, concerned that the plaintiff would be unable to enforce an eventual arbitral award,
the District Court approved the security attachment, a rationale that, as discussed above, is
not compelling.
The controversy now before this court demonstrates the soundness of the decisions reached by
the Third and Fourth Circuits. Defendant agreed to arbitrate disputes, but instead has become
embroiled in two lawsuits. Action II, the instant case, is nothing more than plaintiff's attempt to
circumvent Special Term's ruling in Action I denying the stay of arbitration. Indeed, the
chronology of events indicates that the order of attachment should never have issued at all, as
the underlying dispute is subject to arbitration.
Whenever a matter of foreign relations is involved, one must consider the mirror image of a
particular situation. Is it desirable to subject American property overseas to whatever rules of
attachment and other judicial process may apply in some foreign country when our citizen has
agreed to arbitrate a dispute? It can be assumed that American business entities engaging in
international trade would not encourage such a result. Permitting this type of attachment to
stand would expose American business to that risk in other countries.
The essence of arbitration is resolving disputes without the interference of the judicial process
and its strictures. When international trade is involved, this essence is enhanced by the desire
P "940" to avoid unfamiliar foreign law. The [New York] Convention has considered the problems and
P "941" created a solution, one that does not contemplate significant judicial intervention until after
an arbitral award is made. The purpose and policy of the [New York] Convention will be best
carried out by restricting prearbitration judicial action to determining whether arbitration
should be compelled.
MEYER, DISSENTING. Respectfully, I dissent.... In response to the majority I add that: (1) nothing
in the [New York] Convention or in the history of its negotiation or its implementation by
Congress suggests that the word “refer” as used in §3 of article II of the [New York] Convention
was intended to foreclose the use of attachment where permitted by the law of the jurisdiction
in which the attachment is obtained; (2) in light of the majority's concessions that foreign
arbitration awards are enforced on the same terms as domestic awards, that there are
circumstances under which a domestic award may be enforced under our law through use of a
preaward attachment, and that the [New York] Convention speaks only in terms of postaward
security, and of the fact that the [New York] Convention does not specifically address the
subject of preaward attachment, the [New York] Convention cannot properly be said to have
proscribed such an attachment by implication; and (3) the use of attachment in maritime
contract cases arbitrated under the Federal statute cannot properly be distinguished from
arbitration-related attachment permitted under State statutory and decisional law, for the
[New York] Convention makes no distinction; it either permits or proscribes both. In my view,
absent more specific language of proscription in the [New York] Convention, it permits both....
CAROLINA POWER & LIGHT COMPANY v. URANEX
451 F.Supp. 1044 (N.D. Calif. 1977)
PECKHAM, CHIEF JUDGE. In 1973 Carolina Power & Light Company (“CP&L”), a North Carolina
public utility company, contracted with defendant Uranex for the delivery of uranium
concentrates to CP&L during the period 1977 to 1986. Uranex is a French groupement d'interet
economique that markets uranium internationally. Following the recent and dramatic rise in
the price of uranium fuel in the world market, Uranex either would not or could not deliver at
the contract price, and requested renegotiation....
Earlier this year CP&L filed the present action against Uranex, and proceeded ex parte to
attach an 85 million dollar debt owed to Uranex by Homestake Mining Company
(“Homestake”), a San Francisco based corporation that markets uranium throughout the United
States. The 85 million dollars is due to Uranex pursuant to a uranium supply contract between

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 Homestake and Uranex, and has no relationship to the present litigation except as a potential
source for CP&L to satisfy any judgement that might issue. But for the attachment the funds
would have been transferred out of the country in the ordinary course of business.
The contract between CP&L and Uranex provides that disputes are to be submitted to
P "941" arbitration in New York. At the time this lawsuit was filed CP&L sought to compel Uranex to
P "942" enter arbitration. Since that time, however, Uranex voluntarily has entered arbitration and
those proceedings are now going on in New York. Both parties agree that because of the
arbitration agreement this court cannot adjudicate the merits of the dispute, but CP&L
contends that the court should stay this action and maintain the attachment in order to
protect any award that CP&L might receive in the New York arbitration. CP&L claims that
Uranex has no other assets in this country with which to satisfy a judgment, and Uranex
apparently does not dispute this proposition. Uranex has moved the court on several grounds
to dismiss the complaint and quash the writ of attachment....
[In a portion of the opinion not excerpted here, the District Court concluded that it possessed
quasi in rem jurisdiction over Uranex sufficient to permit attachment of the debt owed to it.]
[W]here the facts show that the presence of defendant's property within the state is not merely
fortuitous, and that the attaching jurisdiction is not an inconvenient arena for defendant to
litigate the limited issues arising from the attachment, assumption of limited jurisdiction to
issue the attachment pending litigation in another forum would be constitutionally
permissible.
In this litigation CP&L has established acts by affidavit, in large part uncontroverted by
defendant, that are adequate to support jurisdiction to order the attachment. As described
above, Uranex apparently has no other assets within the United States, and Uranex's business
appears unlikely to bring such assets into the country in the future. (42) San Francisco is the
corporate headquarters of Homestake, and the presence of the debt drives necessarily from
the dealings between Homestake and Uranex. California is not an exceptional or inconvenient
forum for Uranex to litigate issues that pertain to the 85 million dollar debt due from
Homestake....
The chief difficulty with the course outlined above is that there is at present no action against
Uranex pending before any court with in personam jurisdiction. Arbitration has commenced in
New York, but the attachment in this jurisdiction cannot be predicated on such informal
proceedings. The arbitrator would not have authority to issue any attachment in New York, and
P "942" until CP&L files an action seeking to resolve the underlying controversy Uranex cannot
P "943" challenge that court's in personam jurisdiction. In the present posture of the litigation CP&L
is left in the position of a litigant who seeks an attachment premised only on the promise that
he will at some point file and prosecute the underlying action. Ordinarily such circumstances
should require this court to dismiss the action and quash the attachment. The court, however,
is mindful of the unique situation of this litigation. CP&L hardly can be faulted for failing to file
simultaneous actions, for when this action was filed in January few attorneys would have
doubted that this court would have quasi in rem jurisdiction to adjudicate the underlying
controversy. Furthermore, any dismissal of this action undoubtedly would be stayed pending
appeal by the plaintiff. Accordingly, given the exceptional circumstances of this litigation, the
court will maintain the attachment, in the amount stated [below] ... for 30 days from the date of
this order, during which time plaintiff CP&L must file an action directed to the underlying
merits in a jurisdiction that has in personam jurisdiction over defendant Uranex.
In 1970 the United States became a party to the [New York] Convention which provides
generally that member nations will enforce provisions for arbitration in international
commercial agreements and recognize arbitral awards made in other member nations. France
is also a contracting nation to the Convention. There is little question that the Convention
would apply to the contract at issue in this litigation. As described above, both Uranex and
CP&L agree that they must pursue arbitration in New York as provided in the arbitration clause
of their contract. Uranex, however, argues that it would be inconsistent with the Convention for
this court to maintain the attachment pending the arbitration. (43)
The Convention and its implementing statues contain no reference to prejudgment attachment,
and provide little guidance in this controversy. Article II of the Convention states only that a
“court of a Contracting State ... shall, at the request of one of the parties, refer the parties to
arbitration.” To implement this aspect of the Convention, §206 of Title 9 provides that “[a] court
having jurisdiction under this chapter may direct that arbitration be held in accordance with
P "943" the agreement at any place therein provided for, whether that place is within or without the
P "944" United States.” The language of these provisions provides little apparent support for
defendant's argument.
Uranex, however, relies upon the decisions of the Third Circuit in McCreary Tire & Rubber Co. v.
CEAT, SpA, 501 F.2d 1032 (3d Cir. 1974).... At least one district court has chosen to follow the
rationale of the McCreary opinion in applying the Convention to prejudgment attachments. See
Metropolitan World Tanker, Corp. v. P.N. Pertambangan Minjakdangas Bumi Nasional (P.M.
Pertamina), 427 F.Supp. 2 (S.D.N.Y. 1975).
This court, however, does not find the reasoning of McCreary convincing. As mentioned above,
nothing in the text of the Convention itself suggests that it precludes prejudgment attachment.
The [FAA], 9 U.S.C. §§1 et. seq. (1970), which operates much like the Convention for domestic
agreements involving maritime or interstate commerce, does not prohibit maintenance of a
prejudgment attachment during a stay pending arbitration:

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 After declaring (§2 [of the FAA]) such agreements [to arbitrate] to be enforceable, Congress, in
succeeding sections, implemented the declared policy. By §3 it provided that “if any suit or
proceeding be brought in any of the courts of the United States upon any issue referable to
arbitration under an agreement in writing for such arbitration, the court ... shall on application
of one of the parties stay the trial ... until such arbitration has been had” if the applicant is not
in default in proceeding with such arbitration. The section obviously envisages action in a court
on a cause of action and does not oust the court's jurisdiction of the action, though the parties
have agreed to arbitrate. And, it would seem there is nothing to prevent the plaintiff from
commencing the action by attachment if such procedure is available under the applicable law.
This section deals with suits at law or in equity. The concept seems to be that a power to grant
a stay is enough without the power to order that the arbitration proceed, for, if a stay be
granted, the plaintiff can never get relief unless he proceeds to arbitration.
Barge “Anaconda” v. American Sugar Refining Co., 322 U.S. 42, 44-45 (1944). See also Murray Oil
Products Co. v. Mitsui & Co., 146 F.2d 381 (2d Cir. 1944). The McCreary court makes two rather
elliptical comments to distinguish the [FAA] from the Convention. First, the court notes that the
[FAA] only directs courts to “stay the trial of the action,” while the Convention requires a court
to “refer the parties to arbitration.” 501 F.2d at 1038. From this difference the McCreary court
apparently concludes that while the [FAA] might permit continued jurisdiction and even
maintenance of a prejudgment attachment pending arbitration, application of the Convention
completely ousts the court of jurisdiction. The use of the general term “refer,” however, might
reflect little more than the fact that the Convention must be applied in many very different
P "944" legal systems, and possibly in circumstances where the use of the technical term “stay” would
P "945" not be a meaningful directive. Furthermore, §4 of [FAA] grants district courts the power to
actually order the parties to arbitration, but this provision has not been interpreted to deprive
the courts of continuing jurisdiction over the action.
Second, the McCreary court found support for its position in the fact that the implementing
statutes of the Convention provide for removal jurisdiction in the federal courts. See 9 U.S.C.
§205 (1970). The Third Circuit concluded that “[t]he obvious purpose [of providing for removal
jurisdiction] ... was to prevent the vagaries of state law from impeding its [the Convention's] full
implementation. Permitting a continued resort to foreign attachment ... is inconsistent with
that purpose.” It must be noted, however, that any case falling within §4 of the [FAA] also would
be subject to removal pursuant to 28 U.S.C. §1441. Furthermore, removal to federal court could
have little impact on the “vagaries” of state provisional remedies, for pursuant to Rule 64 of
the Federal Rules of Civil Procedure the district courts employ the procedures and remedies of
the states where they sit. Finally, it should be noted that in other contexts the Supreme Court
has concluded that the availability of provisional remedies encourages rather than obstructs
the use of agreements to arbitrate. See Boys Market, Inc. v. Retail Clerks Union, 398 U.S. 235
(1970).
In sum, this court will not follow the reasoning of McCreary Tire & Rubber Company v. CEAT, SpA,
supra. There is no indication in either the text or the apparent policies of the Convention that
resort to prejudgment attachment was to be precluded....
Notes on New York Convention's Effect on Court-Ordered Provisional Measures in Aid of
Arbitration
1. Cooper and McCreary: Article II(3) forbids court-ordered provisional relief in aid of arbitration.
The plain language of both the McCreary and the Cooper opinions is that Article II(3) divests a
national court of jurisdiction to order attachment in aid of arbitration, or to do anything else
other than compel arbitration. As the McCreary court concluded, “the purpose and policy of the
UN Convention will be best carried out by restricting prearbitration judicial action to
determining whether arbitration should be compelled.”
A number of lower courts have followed the language of Cooper in holding that Article II(3) of
the Convention prohibits national courts from ever ordering attachments in aid of an
international arbitration that is subject to the Convention. See I.A.T.D. Assoc. Inc. v. Podar Bros.,
636 F.2d 75 (4th Cir. 1981); Metropolitan World Tanker Corp. v. P.N. Pertambangan Minjakdangas
Bumi Nasional, 427 F.Supp. 2 (S.D.N.Y. 1975) (attachment); Drexel Burnham Lambert Inc. v.
Ruebsamen, 139 A.D.2d 323 (1st Dept. 1988); Shah v. Eastern Silk Industries Ltd, 493 N.Y.S.2d 150
(App. Div. 1985).
2. Rationale of Cooper and McCreary. It is important, in properly analyzing McCreary and
Cooper, to recall their facts. In both decisions, two circumstances were present: (a) the party
seeking attachment was vigorously resisting arbitration and was held by the court to be
seeking attachment as a means of litigating, rather than arbitrating, the parties' underlying
dispute; and (b) the arbitral situs was outside of the United States, within another signatory to
the New York Convention (Belgium in McCreary; Switzerland in Cooper).
Put aside these two factors, however, and consider for the moment only the stated rationale for
the Cooper opinion: Article II(3) of the New York Convention forbids court-ordered attachment
in aid of arbitration. Is that a sensible rule?
As we have seen, provisional relief is often necessary in order to ensure that the arbitral
process functions and that the parties' rights are respected. See supra pp. 919-21. As we have
seen, however, arbitrators often cannot provide provisional relief – especially where they are
not yet in place – and they generally cannot order attachments (as to third parties). Given this,
P "945" the Cooper rationale threatens, rather than furthers, the arbitral process, by denying what is
P "946"

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 P "946" often the only realistic means of preserving the status quo. That view is shared by the
overwhelming majority of commentators. See Ebbs, Flight of Assets From the Jurisdiction “In the
Twinkling of a Telex”: Pre- and Post-Award Conservatory Relief in International Commercial
Arbitration, 7 J. Int'l Arb. 9 (1990); Brower & Tupman, Court-Ordered Provisional Measures under
the New York Convention, 80 Am. J. Int'l L. 24 (1986); Becker, Attachments in Aid of International
Arbitration – The American Position, 1 Arb. Int'l 40 (1985); McDonnell, The Availability of
Provisional Relief in International Commercial Arbitration, 20 Colum. J. Trans. L. 273 (1984); New
York City Bar Report on the Advisability and Availability of Provisional Remedies in the
Arbitration Process, The Record December 1984, 625, 629. See also Channel Tunnel Group Ltd v.
Balfour Beatty Constr. Ltd [1993] A.C. 334 (House of Lords) (rejecting Cooper reading of Article
II(3)).
Consider the argument, advanced in Cooper, that parties to an arbitration agreement
bargained to exclude the involvement of national courts, and that permitting court-ordered
provisional measures would be inconsistent with this basic bargain. Is this a complete answer,
particularly in cases where the absence of provisional measures would render the arbitration
process ineffectual? Doesn't the court's concern go to the particular judicial forum where
provisional measures can be obtained, and not to the question whether those measures are
available at all? See infra pp. 960-71 discussing forum selection in the context of provisional
measures.
The Cooper court also reasons that provisional measures are not really very important in
arbitration. That is simply wrong. Provisional relief is often of critical importance in
international disputes. See supra pp. 919-21.
More plausible is the suggestion in Cooper that parties should be left to agree specifically to
allow national courts to order pre-award security measures. That argument at least properly
focuses attention on the primacy of the parties' agreement and the needs of the arbitral
process. But nothing in Cooper justifies the court's allocation of the burden of proof and its
requirement for an express agreement to permit court-ordered provisional measures. For the
reasons set forth above, it is more likely that, absent contrary agreement, the parties intended,
and justice would be served by, the availability of court-ordered provisional measures that are
genuinely in aid of arbitration.
3. Lower U.S. court decisions rejecting argument that Article II(3) forbids court-ordered
provisional relief. The weight of lower U.S. court authority has followed Uranex and rejected the
argument that Article II(3) flatly forbids all court-ordered provisional measures in aid of
arbitration. For other lower court decisions adopting the Uranex position, see Daye Nonferrous
Metals Co. v. Trafigura Beheer BV, 1997 WL 375680 (S.D.N.Y. 1997) (granting injunctive relief
against transfers of funds, in aid of arbitration in Paris); Alvenue Shipping v. Delta Petroleum
(U.S.A.), Ltd, 876 F.Supp. 482, 487 (S.D.N.Y. 1994) (granting preliminary injunctive relief in aid of
arbitration in New York Convention signatory); Filantro SpA v. Chilewich Int'l Corp., 789 F.Supp.
1229 (S.D.N.Y. 1992) (McCreary is “facially absurd”), app. dismissed, 984 F.2d 58 (2d Cir. 1993);
Andros Compania Maritima SA v. Andre & Cie, SA, 430 F.Supp. 88 (S.D.N.Y. 1977); Compania de
Navegacion y Financiera Bosnia SA v. National Unity Marine Salvage Corp., 457 F.Supp. 1013, 1014
(S.D.N.Y. 1978); Atlas Chartering Services, Inc. v. World Trade Group, Inc., 453 F.Supp. 861, 863
(S.D.N.Y. 1978); Atwood Navigation, Inc. v. M/V Rizal, 1989 WL 16306 (E.D. Pa. Feb. 24, 1989)
(suggesting McCreary is inapplicable to maritime attachment). See also Tampimex Oil Ltd v.
Latina Trading Corp., 558 F.Supp. 1201 (S.D.N.Y. 1983) (granting provisional relief without
discussion).
4. Authorities rejecting conclusion that Article II(3) precludes court-ordered provisional
measures in aid of arbitration. Virtually all non-U.S. authorities reject the conclusion that
Article II(3) of the New York Convention precludes court-ordered provisional measures in aid of
arbitration. A. van den Berg, The New York Arbitration Convention of 1958 139-40 (1981) (“There ...
seems to be no doubt as to the possibility of a pre-award attachment, that is to say an
attachment before or during the arbitration, in order to secure the subject matter in dispute or
the payment under the award if rendered in favor of the party who has applied for the
attachment”); Scherk Enterprises AG v. Societe des Grandes Marques, No. 3989, IV Y.B. Comm. Arb.
286 (Corte di Cassazione May 12, 1977); The Rena K, 1 Lloyd's Law Rep. 545 (1978).
5. New York legislative response to Cooper. The interpretation of the New York Convention in
Cooper was widely criticized in New York (and elsewhere). See Committee on Arbitration and
Alternative Dispute Resolution of the Association of the Bar of the City of New York, The
Advisability and Availability of Provisional Remedies in the Arbitration Process, 39 The Record 625
(1984); Becker, Attachments and International Arbitration – An Addendum, 2 Arb. Int'l 365 (1986).
P "946" As a consequence, §7502 of the New York Civil Practice Law and Rules was amended, adding a
P "947" new sub-paragraph (c), excerpted above. Subparagraph (c) permits New York state courts to
grant attachments and preliminary injunctive relief “in connection with an arbitrable
controversy,” provided that an arbitral award may be rendered ineffectual without interim
relief. Does §7502(c) affect the interpretation of the New York Convention in Cooper?
6. Rationale of Uranex: Article II(3) permits court-ordered attachments in aid of arbitration.
Consider the rationale of the Uranex decision. What exactly does the court conclude Article
II(3) means? Suppose that a foreign court entertains an attachment action in circumstances
like those in McCreary and Cooper, and grants an attachment that is plainly intended to
frustrate the arbitral process. Does that violate the New York Convention? Wouldn't Article II(3)
of the Convention forbid such actions?

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 In Uranex, however, note that there was no evidence that the pre-award attachment was
designed to do anything other than secure the arbitration award (and hence, aid the arbitral
process). Although the rationale articulated in Cooper and McCreary would not permit such an
attachment, Uranex does. Which interpretation of the Convention – Uranex or Cooper/McCreary
– is sounder?
7. McCreary and Cooper revisited: effect of Article II(3) where the parties' arbitration agreement
is violated. Consider again the specific results – as opposed to the rationale – in both McCreary
and Cooper. Was it not clear in each case that the judicial attachment action was an effort to
circumvent the arbitration process that the parties had agreed upon? Note that the McCreary
court specifically grounded its holding – that Article II(3) of the Convention would be violated
by the attachment – on its conclusion that the attachment action “breached” the parties'
arbitration agreement.
Assuming that an attachment (or other) action in a national court does violate the parties'
arbitration agreement, then the results in both Cooper and McCreary are unexceptional – and
indeed both desirable and mandated by Article II(3). It is no more inappropriate to refuse to
entertain such an action than it would be to entertain an action on the merits in violation of
the parties' arbitration agreement. Indeed, the basic reading of Article II(3) adopted by
McCreary – that Article II(3) forbids judicial actions in national courts in violation of the parties'
arbitration agreement – also appears sound.
Note that, while parts of the rationale and the specific results in Cooper and McCreary can be
explained as involving litigation that was designed to frustrate the arbitral process,
subsequent decisions following Cooper and McCreary cannot. In these cases, Article II(3) was
invoked where it was clear that court-ordered provisional measures were not intended to
circumvent the arbitral process. See Drexel Burnham Lambert Inc. v. Ruebsamen, 139 A.D.2d 323
(1st Dept. 1988) (attachment solely in aid of arbitration); Shah v. Eastern Silk Industries Ltd, 493
N.Y.S.2d 150 (App. Div. 1985); Faberge International Inc. v. Di Pino, 491 N.Y.S.2d 345 (App. Div.
1985); I.T.A.D. Associates, Inc. v. Podar Bros., 636 F.2d 75 (4th Cir. 1981). See also Lafarge Coppee v.
Venezolana de Cementos, S.A.C.A., 31 F.3d 70 (2d Cir. 1994) (discussing grant of provisional
injunctive relief in aid of arbitration).
8. Cooper and McCreary revisited again: was the parties' arbitration agreement violated? Note
that both Cooper and McCreary involved ICC arbitrations, and therefore that Article 8(5) of the
then-prevailing 1988 ICC Rules was applicable. As we have seen, supra pp. 931-32, Article 8(5) of
the 1988 ICC Rules specifically provided that “[b]efore the file is transmitted to the arbitrators,
and in exceptional circumstances even thereafter, the parties shall be at liberty to apply to
any competent judicial authority for interim or conservatory measures, and they shall not by so
doing be held to infringe the agreement to arbitrate or to affect the relevant powers reserved
to the arbitrator.” What light does Article 8(5) shed upon the correctness of the conclusion in
McCreary that the attachment action was a violation of the parties' arbitration agreement?
Even though the ICC Rules provided that seeking attachment does not in principle violate the
parties' arbitration agreement, does that mean that it never does? Even where the attachment
is plainly part of a scheme to substitute litigation for arbitration?
9. Arbitration agreements permitting court-ordered provisional relief. The Cooper court
apparently suggests that the parties could have specifically agreed to permit court-ordered
provisional measures. (The court's suggestion ignores the fact that, by agreeing to ICC
arbitration (and Article 8(5) of the 1988 ICC Rules), the parties in Cooper did just that.) Cooper
rests on Article II(3) and a court's obligation to refer the parties to arbitration; even under the
Cooper rationale, Article II(3) would appear to permit court-ordered provisional measures
when that is what the parties specifically agreed.
If the parties' agreement does expressly permit court-ordered provisional measures, it must
still be interpreted. Suppose that the parties in Cooper had agreed that “either party shall
have the right at any time to seek provisional measures from any national court in aid of
P "947" arbitration hereunder.” Would that clause, or any similar language, have allowed the
P "948" attachment actions in either Cooper or McCreary? Where judicial actions for provisional
measures are designed to frustrate the arbitral process, even general clauses permitting court-
ordered provisional measures should not apply.
10. Need for U.S. Supreme Court interpretation of Article II(3). There is a clear conflict between
the rationale of McCreary and Cooper, on the one hand, and Uranex, on the other. Moreover, as
described above, lower courts have applied the Cooper rationale to cases in which
attachments were not sought to circumvent or frustrate the arbitral process. See supra p. 947.
U.S. Supreme Court resolution of this issue would materially assist the international arbitral
regime, remove a serious uncertainty that affects the rights of U.S. companies engaged in
international commerce, and potentially bring the United States into step with other
Convention signatories, see supra p. 946. The uncertainty resulting from the Uranex versus
McCreary split is particularly serious because of the urgency that often attends requests for
provisional relief.
11. Proper application of Article II(3) to provisional relief. Resolution of the Cooper versus Uranex
division of authority also requires a more precise analytical approach to Article II(3) than that
displayed by either the lower courts or most commentators. First, a correct resolution of any
dispute over provisional relief requires a careful parsing of the parties' arbitration agreement
and any institutional rules incorporated by that agreement: do the parties' agreement and any

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 applicable rules permit pre-award court-ordered attachments, and if so, which ones?
Second, if the parties' agreement and applicable institutional rules provide no express answer,
what should the parties be presumed to have intended? Absent express contrary language, the
presumption should be that court-ordered provisional relief in aid of arbitration is permitted,
but efforts to circumvent arbitration are not.
Third, is the action for pre-award court-ordered attachment sought in a particular case
consistent with, or inconsistent with, the parties' arbitration agreement? This requires careful
analysis of both the relevant arbitration agreement and the relevant request for court-ordered
provisional measures.
Only with these three conclusions in hand can Article II(3) sensibly be considered: that
consideration should generally conclude that Article II(3) does not forbid court-ordered pre-
award attachments in aid of arbitration, except when they are contrary to the terms of the
parties' arbitration agreement or applicable institutional rules. Conversely, Article II(3) should
forbid court-ordered provisional relief that is intended to frustrate or circumvent the arbitral
process or that is contrary to the parties' agreement.
This analysis places a premium on deciding when a request for provisional relief is “in aid” of
arbitration, rather than an effort to circumvent it. Resolution of this question will depend on
the timing of a request, the availability of provisional relief from the arbitrators, the extent to
which provisional measures will effectively resolve the underlying dispute, and the hardship
suffered by the parties.
12. Lower U.S. court decisions granting maritime/admiralty remedies in aid of arbitration. Just as
some courts, see infra pp. 954-55, have distinguished between attachments and preliminary
injunctions, other decisions have distinguished traditional maritime provisional remedies
(such as vessels arrests or maritime attachments). Many of these courts have refused to apply
the McCreary/Cooper interpretation of Article II(3) of the Convention to these remedies. See
E.A.S.T., Inc. of Stamford v. M/V Alaia, 876 F.2d 1168 (5th Cir. 1989); Castelan v. M/V Mercantil
Parati, 1991 U.S. Dist. Lexis 6472 (D.N.J. 1991); Construction Exporting Enterprises v. Nikki Maritime,
Ltd, 558 F.Supp. 1372 (S.D.N.Y. 1983) (relying on Supplemental Rule B(1) and traditional
maritime attachment); Atlas Chartering Services v. World Trade Group, 453 F.Supp. 861, 863
(S.D.N.Y. 1978) (same). See Higgins, Interim Measures in Transnational Maritime Arbitration, 65
Tulane L. Rev. 1519 (1991).
Some lower courts have rejected this result. See Metropolitan World Tanker Corp. v. P.N.
Pertambangan Minjakdangas Bumi Nasional, 427 F.Supp. 2 (S.D.N.Y. 1975).
13. Which national court is competent to order an attachment in aid of an inter-national
arbitration? As noted above, in both McCreary and Cooper the parties had agreed to arbitrate
their disputes in an arbitral forum outside of the United States – Belgium and Switzerland,
respectively. What relevance, if any, does that have for the power of a U.S. court to order pre-
award attachment under the New York Convention?
Is there anything in the Convention that suggests that only the court where the arbitration
proceeding will be conducted should have the authority to order pre-award attachment?
Would that be a sensible rule? Is it likely that jurisdictional disputes, forum-shopping,
multiplicitous litigation, or other ills will result from a different rule? Is there any basis,
however, for finding such a rule in the text of the Convention? The question of what nation's
courts can or should entertain requests for provisional relief in aid of arbitration is considered
in detail below. See infra pp. 960-71.
P "948"
P "949"
14. Applicability of Cooper outside New York Convention. Suppose that an arbitration
agreement is not subject to the New York Convention, for example, because the Convention's
requirements concerning reciprocity or “non-domestic” agreements are not satisfied. In that
case, the Cooper rationale would presumably not apply – although a U.S. court might
nonetheless conclude that §§2, 3 and 4 of the FAA required the same result, or that Cooper's
underlying policy of deference to the perceived needs of the arbitral process counselled
against granting provisional relief as a matter of national law or comity.
The New York Appellate Division has held that Cooper was not applicable, and that an
attachment in aid of arbitration could be granted, where the party against whom the
attachment was sought was based in a nation that was not a signatory to the New York
Convention:
[Cooper] involved a dispute between American and French parties, both of whose Nations were
signatories to the [New York] Convention. However, the countries in which the parties to the
agreements here in dispute reside and do business are not signatories to the [New York]
Convention. So far as appears, there is nothing in the [New York] Convention which precludes
attachment, although it requires that Nations which are signatories provide for enforcement of
arbitration awards by the respective countries. The rationale of Cooper is that the signatory
Nation will appropriately provide for security for such enforcement, without prejudgment
attachment. Whatever the effect of those provisions, they cannot be binding in this case. If [the
party seeking attachment] is successful [on the merits], it will have to sue to enforce the
arbitration award in Argentina, a nonsignatory State. Intermar will not have the benefit of the
Convention's enforcement provisions....

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 Intermar Overseas, Inc. v. Argocean SA, 503 N.Y.S.2d 736 (App. Div. 1986).
The reasoning in the foregoing excerpt is flawed, but its result is sensible. The Convention's
applicability does not depend on the parties' nationality, but instead on the character of the
parties' arbitration agreement and the arbitral situs. See supra pp. 124-26, 145-48. Nonetheless,
the Intermar court does suggest a relevant consideration for the exercise of a court's discretion
to grant pre-award provisional measures – namely, to what extent does it appear that the
ultimate award will be difficult to enforce.
For other decisions holding that the McCreary/Cooper interpretation of Article II(3) is not
applicable outside the New York Convention context, see MCT Shipping Corp. v. Sabet, 497
F.Supp. 1078, 1086 (S.D.N.Y. 1980); Coastal States Trading, Inc. v. Zenith Nav. SA, 446 F.Supp. 330,
341-42 (S.D.N.Y. 1977) (holding (wrongly) that agreement had no “reasonable relation” to foreign
state under FAA §202, and therefore that Convention and Article II(3) did not apply).
15. Prohibition against court-ordered provisional measures under ICSID Convention. One arbitral
regime that excludes court-ordered provisional measures in aid of arbitration is ICSID. See
supra p. 17. Article 26 of the ICSID Convention provides:
“Consent of the parties to arbitration under this Convention shall, unless otherwise stated, be
deemed consent to such arbitration to the exclusion of any other remedy.”
Article 26 has been interpreted by several ICSID arbitral tribunals and other authorities as
precluding actions seeking provisional measures from a national court. Holiday Inns
SA/Occidental Petroleum Corp. v. Government of Morocco, ICSID Case No. Arb. 72/1; Guinea v.
Maritime Int'l Nominees Est., Case No. 6,551, 24 Int'l Legal Mat. 1639 (Tribunal of Antwerp 1985);
Guinea and Soguipêche v. Atlantic Triton Co., 24 Int'l Legal Mat. 340 (Rennes Ct. of App. 1985),
rev'd, 26 Int'l Legal Mat. 373 (Cour de Cassation 1986); Lalive, The First “World Bank” Arbitration
(Holiday Inns v. Marocco) – Some Legal Problems, 1980 Brit. Y. B. Int'l L. 123 (1982); Friedland,
Provisional Measures and ICSID Arbitrations, 2 Arb. Int'l 335 (1986); Brower & Goodman,
Provisional Measures and the Protection of ICSID Jurisdictional Exclusivity Against Municipal
Proceedings, 6 Foreign Inv. L. J. 4361 (1991).
What is the rationale for extending Article 26 of the ICSID Convention to provisional measures?
Is this wise? What aspects of the ICSID regime argue for this application of Article 26?
When might parties have “otherwise” agreed to court-ordered provisional measures in aid of an
ICSID arbitration? Should such an agreement be more heavily implied than other forms of
judicial relief?
Rule 39(5) of the ICSID Arbitration Rules provides: “Nothing in this Rule shall prevent the
P "949" parties, provided that they have so stipulated in the agreement recording their consent, from
P "950" requesting any judicial or other authority to order provisional measures, prior to the
institution of the proceedings, or during the proceeding, for the preservation of their
respective rights and interests.”
16. Court-ordered attachment or other measures in aid of execution of arbitration award.
Suppose that an arbitration goes forward, without provisional measures, and produces an
award. The prevailing party then has the award confirmed, for example, in the United States;
when the losing party refuses to pay, does the Convention interpose any obstacle to court-
ordered attachment or other measures in aid of execution? See Sanders, Consolidated
Commentary, XIV Y.B. Comm. Arb. 528, 570 (1989) (“no court has doubted that an attachment in
connection with the enforcement of an arbitral award, in order to secure payment under the
award, is compatible with the Convention.”); Cooper v. Ateliers de la Motobecane SA, 442 N.E.2d
1239 (Ct. App. 1982). In fact, not only does the Convention not preclude court-ordered
attachment in aid of execution of an arbitral award, it arguably requires such action – at least if
it is available in purely domestic arbitration matters.
3. Effect of National Arbitration Legislation on the Authority of National Courts to Grant
Provisional Relief in Aid of International Arbitration (44)
The authority and willingness of a national court to order provisional measures in aid of
arbitration is defined by national law. Even if the New York Convention does not forbid court-
ordered provisional measures in aid of arbitration, national law may do so.
For example, as discussed below, some lower U.S. courts have concluded that the domestic FAA
denies them jurisdiction to order provisional measures in aid of arbitration. (45) Moreover,
where court-ordered provisional measures are permitted, national law defines the
circumstances in which such relief may be granted; as discussed below, U.S. courts have
adopted a variety of different approaches to this issue. (46) And finally, national law defines
when a national court is the appropriate forum for issuing provisional measures in aid of an
international arbitration. (47)
Excerpted below are Article 17 of the UNCITRAL Model Law and two U.S. decisions – Dongsan
Construction Co. (48) and Borden, Inc. v. Meiji Milk Products. (49) All three authorities address
the availability of injunctive relief in aid of an international arbitration under national law.
Also excerpted below is §7502(c) of the New York Civil Practice Law and Rules, which sets out
the circumstances under New York law in which injunctive relief in aid of arbitration may be
granted.
P "950"
P "951"

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 UNCITRAL MODEL LAW
Article 17
[excerpted below at p. 1016]
ROGERS, BURGUN, SHAHINE & DESCHLER, INC. v. DONGSAN CONSTRUCTION CO.
598 F.Supp. 754 (S.D.N.Y. 1984)
KRAM, DISTRICT JUDGE. Rogers, Burgun, Shahine & Deschler, Inc. (“RBSD”) is a New York
corporation engaged in business as architectural designers of hospitals. Dongsan Construction
Company, Ltd. (“Dongsan”) is a Korean corporation, with offices in New Jersey, engaged in
business as general contractors in construction projects.
In 1982, Saudi Arabia undertook to build a hospital in Jubail. Dongsan secured the main
contract on this project. Dongsan subcontracted a portion of the architectural and engineering
design work on the project to RBSD (the “Subcontract”). Under the Subcontract, RBSD agreed to
perform certain services, some of which RBSD, in turn, subcontracted to other entities. In return
for those services, Dongsan agreed to pay RBSD some $2,596,086. Dongsan further agreed to pay
RBSD twenty per cent of that amount ($519,217) in advance of RBSD's performance. In order to
secure this advance payment, RBSD provided Dongsan a Letter to Guarantee from Bank Al-
Jazira in the full amount of the advance payment. The amount guaranteed by this letter was to
decrease periodically commensurate with the percentage of work performed by RBSD and
paid for by Dongsan. The Subcontract also provided in broad terms for resolution of disputes
by arbitration in Paris, France, under the rules of Conciliation and Arbitration of the
International Chamber of Commerce. (50)
RBSD has performed some of the services required by the Subcontract and Dongsan has paid
RBSD for that work. Pursuant to the terms of the Letter of Guarantee, the amount currently
secured is $155,766.... [A] dispute arose with respect to RBSD's performance.... RBSD claims that
the dispute concerns a very small portion of the work performed or owing.... Dongsan notified
RBSD that it intended to complete certain of RBSD's obligations itself, effecting a partial
termination of the Subcontract as modified. Additionally, Dongsan indicated that it would
P "951" withhold the remaining balance due RBSD under the Subcontract to set-off the anticipated
P "952" expenses in completing those parts of RBSD's services it had terminated. RBSD claims that it
has substantially performed all of its obligations due to date, that it is owed some $752,865 for
actual and tendered performance, and that it is entitled to the release of the remaining
$155,766 held by way of the Letter of Guarantee as security.
RBSD filed the complaint herein on November 5, 1984, alleging breach of contract by Dongsan
and seeking inter alia the $908,631 allegedly owed to RBSD by Dongsan and a preliminary
injunction enjoining Dongsan from calling the Letter of Guarantee.... RBSD moved this Court for
the preliminary injunction, pursuant to Fed.R.Civ.P. 65. The Court thereby also entered a
temporary restraining order against Dongsan enjoining it from calling the Letter of Guarantee....
On November 21, 1984, Dongsan filed its motion to dismiss or stay this action pending
arbitration of the disputes herein. [The Court first held that RBSD's substantive claims were
arbitrable.] ...
The fact that this dispute is to be arbitrated does not deprive the Court of its authority to
provide provisional remedies. See Erving v. Virginia Squires Basketball Club, 349 F.Supp. 716,
719-29 (E.D.N.Y.), aff'd, 468 F.2d 1064, 1067 (2d Cir. 1972); Boys Markets, Inc. v. Retail Clerk's Union,
398 U.S. 235 (1970). The Court must, therefore, decide if this is “a proper case” for an injunction.
Erving, 468 F.2d at 1067.
The standards governing the issuance of a preliminary injunction are well established in this
Circuit. A preliminary injunction will issue only upon
a showing of (a) irreparable harm and (b) either (1) likelihood of success on the merits or (2)
sufficiently serious questions going to the merits to make them a fair ground for litigation and a
balance of hardships tipping decidedly toward the party requesting the preliminary relief.
Jackson Dairy, Inc. v. H.P. Hood & Sons Inc., 596 F.2d 70, 72 (2d Cir. 1979). I find that the second
prong test has been met in the present case.
The relief sought in this case is minimal. RBSD seeks only to preserve the status quo with
respect to the Letter of Guarantee. “The status quo has been frequently defined as the last
uncontested status which preceded the pending controversy.”Flood v. Kuhn, 309 F.Supp. 793,
798 (S.D.N.Y. 1970), aff'd, 443 F.2d 264 (2d Cir. 1971), aff'd, 407 U.S. 258 (1972). The last uncontested
status in this case found Dongsan holding a Letter of Guarantee for $155,766 with RBSD holding
that sum to indemnify Bank Al-Jazira for the letter should it be called. Dongsan's argument that
the status quo would be preserved by allowing it to call the letter and take the $155,766
secured thereby is unavailing. (51) RBSD seeks only to prevent Dongsan from calling this letter.
(52)
P "952"
P "953"
The contract dispute involves nearly one million dollars. Dongsan is a Korean corporation with
apparently no fixed assets in the United States. Dongsan does maintain an office in New Jersey
and a large amount of liquid assets in bank accounts in New York and New Jersey. Those assets,
however, because they are all liquid, could easily be depleted or removed from the United
States. If that were to occur, RBSD's ability to recover in this Court or any arbitration award

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 obtained in Paris would be frustrated.
With respect to the Letter of Guarantee, the potential for frustration of RBSD's recovery is
doubled. The monies securing the letter are currently in RBSD's possession. If Dongsan is
permitted to call the letter, those assets would be transferred, essentially, from RBSD to
Dongsan. Any arbitral determination that RBSD is entitled to recover from Dongsan, or that
Dongsan was not entitled to call the letter, would be meaningless if Dongsan were to transfer
its liquid assets, increased by the monies securing the letter, out of the reach of this Court.
Since there would then be no adequate remedy at law for RBSD in this Court, the Court finds
that there could be irreparable harm to RBSD if Dongsan is not enjoined from calling the letter.
Dongsan's argument that RBSD would be able to enforce any arbitration award in Korea does
not change this finding. RBSD would still have no adequate remedy at law here, in this Court.
See Petroleum Exploration, Inc. v. Public Service Comm'n, 304 U.S. 209, 217 (1938). In those cases,
the federal courts held that legal remedies in state courts did not suffice to make injunctive
relief in federal courts unavailable. The absence of legal remedy is to be determined in this
Court. If the availability of legal remedies in state court is not sufficient to preclude injunctive
relief here, a fortiori the availability of a legal remedy in a foreign country is not sufficient. (53)
The parties are in hot dispute about the underlying contractual claims. Plaintiff claims it is due
nearly $1,000,000. Defendant asserts that plaintiff's obligation to indemnify could total
$10,000,000. Certainly this is sufficient to establish serious questions going to the merits for the
arbitrator's decision.
Finally, the Court finds that the balance of hardships tips decidedly toward RBSD. If the status
quo is maintained, defendant feels no hardship whatsoever. Dongsan maintains security in the
sum of $155,766 should the arbitrators determine that it is entitled to any or all of that sum (or
more), and loses nothing that it currently has. If the status quo is not maintained, and Dongsan
is permitted to call the letter RBSD stands to lose its own money (the $155,766) without
recourse here.
Accordingly, RBSD's motion is granted. RBSD is to file proof of extension of the Letter of
P "953" Guarantee for one year (to be extended further if necessary) by December 15, 1984. Dongsan,
P "954" and any of its officers, directors, controlling persons, parents, affiliates, and/or subsidiaries,
is hereby enjoined from directing the Bank Al-Jazira to honor or pay the Letter of Guarantee
involved herein.
BORDEN, INC. v. MEIJI MILK PRODUCTS CO.
919 F.2d 822 (2d Cir. 1990)
[excerpted below at pp. 966-69]
NEW YORK CIVIL PRACTICE LAW AND RULES
§7502(c)
7502(c). Provisional remedies. The supreme court in the county in which an arbitration is
pending, or, if not yet commenced, in a county specified in [§7502(a)] (54) may entertain an
application for an order of attachment or for a preliminary injunction in connection with an
arbitrable controversy, but only upon the ground that the award to which the applicant may be
entitled may be rendered ineffectual without such provisional relief.... The provisions of article
62 and 63 of this chapter [relating to attachments and injunctions] shall apply to the
application, including those relating to undertakings and to the time for commencement of an
action (arbitration shall be deemed an action for this purpose) if the application is made
before commencement, except that the sole ground for the granting of the remedy shall be
stated above.
Notes on Effect of National Law On Court-Ordered Provisional Relief in Aid of Arbitration
1. Availability of court-ordered provisional relief under UNCITRAL Model Law. Consider Article 17
of the UNCITRAL Model Law. What effect does it have on the power of a national court to grant
provisional measures in aid of an international arbitration? What other sources of law would be
relevant to determining whether a local court would be willing to grant provisional measures?
2. Dongsan and Borden – injunctive relief versus attachment under the New York Convention. In
contrast to Cooper and McCreary, the courts in Dongsan and Borden were both willing, in
principle, to grant provisional relief in aid of international arbitrations subject to the New York
Convention. Borden specifically considered the McCreary rationale and rejected it as applied
to injunctive relief (as distinguished from attachments).
P "954"
P "955"
Is there any principled basis for distinguishing between the effect of Article II(3) on an
attachment and a preliminary injunction? Consider the final footnote to the Dongsan opinion.
Is there a principled basis for holding that Article II(3) forbids attachments (because they
restrict a party's use of its property), but permits injunctions (because they may only restrict a
party's ability to acquire additional assets)? Does anything in the language of Article II(3) or the
rationale of Cooper and McCreary support such a distinction?
A number of other U.S. lower court decisions have granted injunctive relief in aid of arbitration,
notwithstanding the Cooper/McCreary interpretation of Article II(3) of the Convention. See, e.g.,
Andros Compania Maritima, SA v. Andre & Cie, SA, 430 F.Supp. 88, 92 (S.D.N.Y. 1977) (rejecting

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 McCreary's interpretation of Article II). See also supra pp. 946-47.
3. Provisional relief under N.Y. C.P.L.R. §7502(c). Section 7502(c) permits attachments in aid of
arbitration if the ultimate arbitral award “may be rendered ineffectual without such
provisional relief.” Importantly, the substantive requirements of chapter 62 of the New York
Civil Practice Law, which ordinarily defines the availability of an attachment, need not be
satisfied in order to obtain relief under §7502(c). National Telecommunication Ass'n, Ltd v.
National Communications Ass'n, Inc., 592 N.Y.S.2d 591 (App. Div. 1993).
Under N.Y. Civil Practice Law §6201, an attachment is available if one of the following four
grounds is satisfied: (a) the defendant is a foreign corporation not qualified to do business in
New York; (b) the defendant cannot, despite diligent efforts, be personally served with process;
(c) the defendant, with the intent to frustrate the award, has disposed of or removed his
property from the state; or (d) the action is to enforce another court's judgment. In addition,
the plaintiff must show that it has a cause of action, on which it will probably succeed, and that
the amount sought exceeds all known counterclaims. N.Y. Civil Practice Law §6212. Even if these
requirements are satisfied, attachment is a discretionary remedy and may be denied. Merrill
Lynch, Pierce, Fenner & Smith v. Kelly, 585 F.Supp. 1245 (S.D.N.Y. 1984).
Section 7502(c) relaxes these requirements, permitting an attachment based solely on a
showing that the arbitral award “may be rendered ineffectual without such provisional relief.”
N.Y. Civil Practice Law §7502, 1985 Supplementary Practice Commentary (McKinney 1986 Supp.).
For decisions granting relief under §7502, see Habitations Ltd, Inc. v. BKL Realty Sales Corp., 554
N.Y.S.2d 117 (App. Div. 1990) (considering only §7502(c) requirements); Saferstein v. Wendy, 523
N.Y.S.2d 725 (Sup. Ct. 1987) (granting injunction, but holding that §7502(c) “was not designed to
make the court a simple rubber stamp,” and applying traditional equitable principles).
4. Applicability of U.S. state standards for securing judgments in federal court under Rule 64. A
federal court faced with a motion for a remedy for “seizure of person or property for the
purpose of securing satisfaction of the judgment ultimately to be entered in the action,” Fed. R.
Civ. P. Rule 64, is ordinarily obliged to apply state law. See Carolina Power & Light Co. v. Uranex,
451 F.Supp. 1044 (N.D. Calif. 1977); In re Feit & Drexler, Inc., 760 F.2d 406, 415 n.2 (2d Cir. 1985); C.
Wright & A. Miller, Federal Practice and Procedure §2931-36 (1971). In an action seeking security
in aid of arbitration in New York, that would be N.Y. C.P.L.R. §7502(c). Rule 64 provides an
exception to the general applicability of state law where a federal statute applies: “any
existing statute of the United States governs to the extent to which it is applicable.”
5. Federal law generally governs availability of preliminary injunctions in federal courts. Rule
64 is, by its terms, applicable only to actions for “arrest, attachment, garnishment, replevin,
sequestration and other corresponding or equivalent remedies, however designated.” When an
action seeks provisional injunctive relief to preserve the status quo between the parties, some
courts have held Rule 64 inapplicable even where the relief ordered included prohibitions on
transfers of assets. See Commodity Futures Trading Commission v. Morgan, Harris & Scott Ltd,
484 F.Supp. 669 (S.D.N.Y. 1979); Bricklayers Fringe Benefits etc. v. North Perry Baptist Church etc.,
590 F.2d 207 (6th Cir. 1979), cert. denied, 444 U.S. 834 (1980).
Where injunctive relief is sought, and Rule 64 does not apply, federal common law is generally
held to govern the availability and scope of provisional relief (such as a temporary restraining
order or a preliminary injunction). See C. Wright & A. Miller, Federal Practice and Procedure
§2942-44 (1971); Guaranty Trust Co. v. York, 326 U.S. 99, 106-07 (1945); Direx Israel, Ltd v.
Breakthrough Medical Corp., 952 F.2d 802, 811 (4th Cir. 1992); Ferrero v. Associated Materials, Inc.,
923 F.2d 1441, 1448 (11th Cir. 1991); Equifax Services, Inc. v. Hitz, 905 F.2d 1355, 1361 (10th Cir.
1990).
6. Availability of court-ordered provisional measures in aid of arbitration under the FAA. Assume
that: (a) the New York Convention does not forbid court-ordered provisional measures in aid of
P "955" arbitration; and (b) under either Rule 64 and state law or under federal standards for
P "956" injunctive relief, provisional measures could be granted. Even then, does the FAA permit
such relief, and, if so, does the FAA alter the availability or scope of provisional measures?

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 (a) Lower court decisions holding court-ordered provisional measures available under the FAA.
A number of lower U.S. courts have held, under the domestic FAA, that they possess the
authority to order injunctive relief in aid of arbitration, at least in certain circumstances.
Peabody Coalsales Co. v. Tampa Elec. Co., 36 F.3d 46 (8th Cir. 1994) (granting injunctive
relief preserving status quo pending arbitration); Blumenthal v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 910 F.2d 1049, 1052-54 (2d Cir. 1990) (rejecting argument that §4
precludes court-ordered provisional relief); Ortho Pharmaceutical Corp. v. Amgen, Inc.,
882 F.2d 806, 812 (3d Cir. 1989); Transportes Caribe, SA v. M/V Feder Trader, 860 F.2d 637,
638 (5th Cir. 1988) (pending arbitration does not affect district court's authority to grant
security); PMS Distributing Co., Inc. v. Huber & Suhner AG, 854 F.2d 355 (9th Cir. 1988);
Merrill Lynch, Pierce, Fenner & Smith v. Dutton, 844 F.2d 726, 727-28 (10th Cir. 1988);
Teradyne, Inc. v. Mostek Corp., 797 F.2d 43, 51 (1st Cir. 1986) (“district court can grant
injunctive relief in an arbitrable dispute pending arbitration”); Merrill Lynch, Pierce,
Fenner & Smith v. Bradley, 756 F.2d 1048, 1051-54 (4th Cir. 1985) (holding that §3 did not
abrogate district court's equitable power and that injunctive relief would further FAA's
policies); Rose-Lino Bev. Distrib. v. Coca-Cola Bottling Co., 749 F.2d 124, 125 (2d Cir. 1984)
(“fact that a dispute is to be arbitrated ... does not absolve the court of its obligation to
consider the merits of a requested preliminary injunction”); Guinness-Harp Corp. v. Jos.
Schlitz Brewing Co., 613 F.2d 468 (2d Cir. 1980) (relying on parties' apparent agreement to
maintain status quo pending arbitration); Bosworth v. Ehrenreich, 823 F.Supp. 1175 (D.N.J.
1993) (granting preliminary injunction “to help stabilize the corporate operations pending
arbitration”); Organizing Committee for the 1998 Goodwill Games, Inc. v. Goodwill Games,
Inc., 919 F.Supp. 21 (D.D.C. 1995) (granting injunctive relief to preserve status quo pending
arbitration); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Kramer, 816 F.Supp. 1242 (N.D.
Ohio 1992) (“under certain circumstances, a district court has the discretion to grant one
party a preliminary injunction to preserve the status quo pending the arbitration of the
parties' dispute”); Albatross S.S. Co. v. Manning Bros., Inc., 95 F.Supp. 459, 463 (S.D.N.Y.
1951); Merrill Lynch, Pierce, Fenner & Smith v. District Court, 672 P.2d 1015 (Colo. S. Ct. 1983).
See also The Anaconda v. American Sugar Refining Co., 322 U.S. 42 (1944) (§8 of FAA
preserves right to court-ordered maritime arrest).
(b) Lower court decisions holding court-ordered provisional measures not available under FAA.
A few lower courts have concluded that §§3 and 4 of the FAA – like the McCreary/Cooper
interpretation of Article II(3) of the New York Convention – impliedly preclude court-
ordered provisional relief in aid of arbitration absent contrary agreement. E.g., Merrill
Lynch, Pierce, Fenner & Smith, Inc. v. Hovey, 726 F.2d 1286 (8th Cir. 1984) (holding that,
absent agreement permitting court-ordered provisional measures, “unmistakably clear
congressional purpose” was to bar such); Jab Indus., Inc. v. Silex SpA, 601 F.Supp. 971, 979
(S.D.N.Y. 1985); Merrill Lynch, Pierce, Fenner & Smith v. DeCaro, 577 F.Supp. 616, 625 (W.D.
Mo. 1983); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Thompson, 574 F.Supp. 1472, 1478-79
(E.D. Mo. 1983); Merrill Lynch, Pierce, Fenner & Smith Inc. v. McCollum, 666 S.W.2d 604 (Ct.
App. Tex. 1984). See also Buffalo Forge Co. v. United Steelworkers, 428 U.S. 397, 410-12
(1976) (dicta that court-ordered provisional measures might interfere with labor
arbitration).
(c) Standards under FAA for availability of preliminary injunction in aid of arbitration. There is
no language in the FAA that expressly addresses the subject of provisional relief. In
Dongsan and Borden, the courts applied generally-applicable federal standards for
injunctive relief. Is it appropriate to apply generally-applicable standards for obtaining
preliminary injunctions where the relief is in aid of arbitration? Isn't there some
particular need to take into account the possibility of obtaining relief from the arbitral
tribunal or the risk of interfering with the arbitral process? Before reaching a conclusion,
consider the following notes.
7. Wisdom of permitting court-ordered provisional measures in aid of arbitration. Should
national courts grant provisional relief in aid of arbitration? As a general matter, does it help
or harm the arbitral process? Consider:
The Courts are not limited in their equity powers to the specific function of enforcing
arbitration agreements but may exercise those powers required to preserve the status quo of
the subject matter in controversy pending the enforcement of the arbitration provision. To rule
otherwise would in effect permit a party to take the law into its own hands while the
P "956" proceeding is carried on as a result of the specific direction of the Court [compelling
P "957" arbitration].... It would be an oddity in the law if the Court, after compelling a party to live
up to his undertaking to arbitrate, had to stand idly by during the pendency of the arbitration
which it has just directed and permit him to assert his “right to breach a contract and to
substitute payment of damages for non-performance.”
Albatross S.S. Co. v. Manning Bros., 95 F.Supp. 459, 463 (S.D.N.Y. 1951).
What is the relevance of the parties' arbitration agreement in deciding whether court-ordered
provisional measures should be available? Suppose the parties specifically agree to permit
court-ordered provisional measures? To prohibit such measures? If the parties do not expressly
deal with the subject, what should they be presumed to intend?
8. Arbitration agreements expressly permitting recourse to national courts for injunctive relief.
Some contracts include provisions expressly permitting resort by the parties to national courts
for injunctive relief. Consider the following:

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 The parties may seek from the Arbitral Tribunal and from any judicial courts of proper
jurisdiction equitable relief by way of temporary and permanent injunctions.
Remy Amerique, Inc. v. Touzet Distribution SARL, 816 F.Supp. 213, 215 (S.D.N.Y. 1993). What does
this clause mean? Is it wise to include such a provision in an arbitration agreement? Why not?
The Remy Amerique court held that the clause only authorized temporary judicial relief in aid
of arbitration. Id.
Consider also:
“[T]he CLUB shall have the right in its sole discretion to institute judicial proceedings for the
purpose of obtaining an injunction or other equitable relief pursuant to paragraph 5 hereof
[relating to injunctions preventing PLAYER from “playing basketball for any person, firm ...” or
from committing “any other breach of this contract.”]
Erving v. Virginia Squires Basketball Club, 468 F.2d 1064 (2d Cir. 1972). The court upheld the
clause as “the only way to preserve the status quo during the pendency of the arbitration
proceeding.”See also Guinness-Harp Corp. v. Jos. Schlitz Brewing Co., 613 F.2d 468 (2d Cir. 1980).
Compare Jobs Industries, Inc. v. Silex SpA, 601 F.Supp. 971 (S.D.N.Y. 1985) (declining to grant
court-ordered provisional relief, notwithstanding clause in arbitration agreement that nothing
in it “shall limit the ability of any party ... from seeking from a court of competent jurisdiction,
any provisional remedy”); G. Born, International Arbitration and Forum Selection Agreements 42-
43 (1999).
9. Standards under the FAA for the issuance of court-ordered provisional measures in aid of
arbitration. Assuming that U.S. courts have the power to grant provisional relief in aid of
arbitration under the FAA, what standards should govern the exercise of that power? Lower U.S.
courts have reached divergent conclusions.
(a) Provisional measures must be absolutely necessary. Some lower U.S. courts have held that
provisional relief will not be granted unless it is absolutely necessary to protect the
arbitral process. E.g., Merrill Lynch, Pierce, Fenner & Smith v. Bradley, 756 F.2d 1048, 1053
(4th Cir. 1985) (“where a dispute is subject to mandatory arbitration under the Federal
Arbitration Act, a district court has the discretion to grant a preliminary injunction to
preserve the status quo pending the arbitration of the parties' dispute if the enjoined
conduct would render that process a ‘hollow formality.’”).
(b) Generally-applicable standards for preliminary injunctive relief. Other courts, however,
have refused to acknowledge any such limits on the traditionally broad equitable powers
of district courts, and have instead held that ordinary standards governing the grant of
preliminary injunctive relief are applicable. Among other things, the district court enjoys
substantial discretion in deciding whether to grant relief. E.g., Teradyne, Inc. v. Mostek
Corp., 797 F.2d 43, 51 (1st Cir. 1986); Roso-Lino Beverage Distributors, Inc. v. Coca-Cola
Bottling Co., 749 F.2d 124 (2d Cir. 1984); Sauer-Getriebe KG v. White Hydraulics, Inc., 715 F.2d
348 (7th Cir. 1984), cert. denied, 464 U.S. 1070 (1984); Merrill Lynch, Pierce, Fenner & Smith,
Inc. v. Kramer, 816 F.Supp. 1242 (N.D. Ohio 1992) (granting preliminary injunction in aid of
P "957" arbitration, applying generally applicable preliminary injunction standards, forbidding
P "958" disclosure of trade secrets and solicitation of clients).
(c) Sui generis standards. And finally, some U.S. lower courts have considered a blend of
traditional equitable standards, implied expectations of the parties, and needs of the
arbitral process. Ortho Pharmaceutical Corp. v. Amgen, Inc., 882 F.2d 806, 813-14 (3d Cir.
1989) (in applying traditional equitable standards, “the district court must focus on
preservation of the integrity of the arbitration process”); Guinness-Harp Corp. v. Jos.
Schlitz Brewing Co., 613 F.2d 468 (2d Cir. 1980) (relying on provisions in contract suggesting
that status quo was to be preserved pending arbitration).
(d) Importance of parties' arbitration agreement to availability of court-ordered provisional
measures in aid of arbitration. Properly understood, the FAA should permit courts to grant
provisional relief in aid of arbitration where such relief was contemplated by the parties'
agreement and satisfies applicable standards for granting equitable relief. Thus, if the
parties' arbitration agreement expressly provides for court-ordered provisional
measures, it should be available when general equitable standards are met. Lower courts
have generally acted consistently with this proposition. See Connecticut Resources
Recovery Authority v. Occidental Petroleum Corp., 705 F.2d 31, 33-35 (2d Cir. 1983); Guinness
Harp Corp. v. Jos. Schlitz Brewing Corp., 613 F.2d 468 (2d Cir. 1980) (federal court “is
empowered to grant specific performance of the agreement to arbitrate” and “[h]ere
maintenance of the status quo pending arbitration relates in a substantial way to the
performance of the agreement”); Erving v. Virginia Squires Basketball Club, 468 F.2d 1064
(2d Cir. 1972); Detroit Newspaper Publishers' Ass'n v. Detroit Typographical Union No. 18, 471
F.2d 872 (6th Cir. 1972), cert. denied, 411 U.S. 967 (1973) (reversing court-ordered
preliminary injunction on grounds that parties' agreement did not contemplate such
relief; relying, dubiously, on fact that “status quo” provision was not part of arbitration
clause). But compare Teradyne, Inc. v. Mostek Corp., 797 F.2d 43 (1st Cir. 1986) (not
considering parties' agreement).

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 (e) Presumptions concerning parties' intentions to permit court-ordered provisional measures.
Often, the parties' agreement will not expressly address the availability of court-ordered
provisional measures in aid of arbitration. In those circumstances, courts must adopt
presumptions concerning what the parties likely intended. Most U.S. lower courts have
presumed that the parties intended to permit court-ordered provisional measures,
provided that they are genuinely in aid of arbitration. Blumenthal v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 910 F.2d 1049, 1052-53 (2d Cir. 1990) (rejecting argument that “district
court injunctions pending arbitration are available only when the contract expressly so
provides”); Roso-Lino Beverage Distributors, Inc. v. Coca-Cola Bottling Co., 749 F.2d 124, 125
(2d Cir. 1984); Ortho Pharmaceutical Corp. v. Amgen, Inc., 882 F.2d 806, 812 (3d Cir. 1989)
(“an arbitration agreement reflects the parties' intention to adhere to an orderly process
of alternative dispute resolution [and] we do not construe such an agreement as
constituting a ‘waiver’ by either party of the right to seek preliminary injunctive relief
necessary to prevent one party from unilaterally eviscerating the significance of the
agreed-upon procedures”). Compare the discussions above of the parties' intentions
regarding provisional relief under the New York Convention. See supra pp. 947-48.
10. Court-ordered provisional measures under leading institutional arbitration rules. Consider
Article 26(3) of the UNCITRAL Rules, Article 25(3) of the 1998 LCIA Rules, Article 23(2) of the 1998
ICC Rules, and Article 36(c) of the AAA Commercial Arbitration Rules. Which, if any, of these
provisions satisfy some of the more stringent standards adopted under the FAA for grants of
court-ordered provisional measures in aid of arbitration? Do the clauses authorize a national
court to issue provisional relief?
11. Limitations imposed by parties' arbitration agreement or applicable institutional rules on
national court's power to grant pre-award provisional measures. The parties' arbitration
agreement or institutional rules incorporated by it may impose, or purport to impose, limits on
the authority of national courts to grant provisional measures. These limits may be expressly
included in the parties' arbitration agreement. More likely, they will be included in
institutional arbitration rules incorporated into the parties' agreement or implied by national
law.
(a) ICC Rules. A leading example of institutional rules limiting court-ordered provisional
measures is Article 23(2) of the 1998 ICC Rules. (Article 8(5) of the 1988 ICC Rules was
broadly similar.) Article 23(2) of the 1998 ICC Rules imposes limits on the right of the
parties to seek provisional relief from national courts. The provision attempts to make it
clear that, prior to constitution of the arbitral tribunal, requests for court-ordered
provisional measures are permitted; after the tribunal is constituted, however, judicial
relief is permitted only in “appropriate circumstances.” And, under Article 23(2), only
“interim or conservatory measures” are provided for.
What should qualify as “appropriate circumstances”? Note that Article 8(5) of the 1988 ICC
P "958" Rules permitted court-ordered provisional measures, after the arbitral tribunal had
P "959" received the file, only in “exceptional circumstances.” What weight should be
attributed to the revision of the ICC Rules? Note also that, even after a tribunal is in
place, it may be difficult to convene a meeting of the tribunal on short notice. It is
feasible for the parties to make written submissions on extremely short notice, but oral or
evidentiary hearing are usually not possible. That may, as a practical matter, make it
difficult to obtain provisional relief from the tribunal.
Who decides whether or not “appropriate” or “exceptional” circumstances, permitting
court-ordered provisional measures, is satisfied? The arbitral tribunal? A national court?
Someone else? Suppose that, after a tribunal is constituted and the Terms of Reference
are finalized, a party seeks court-ordered provisional measures. What is the party's
obligation to inform the arbitral tribunal? What if the arbitral tribunal orders a party to
withdraw its application for court-ordered provisional measures? What if the arbitral
tribunal indicates that the party “ought” to suspend its application for court-ordered
provisional measures?

(b) UNCITRAL Rules. Consider Article 26(3) of the UNCITRAL Rules. What effect does it have on
requests for court-ordered provisional measures? Is there any difference, express or
implied, between requests made before and those made after a tribunal is constituted.
(c) LCIA Rules. Consider Article 25(1) of the 1998 LCIA Rules. What effect does it have on
requests for court-ordered provisional measures? Compare Article 25(1) to the present ICC
Rules. Which is preferable?
12. Preemption by the FAA of state laws permitting provisional measures in aid of arbitration. As
we have seen, if the New York Convention prohibits court-ordered provisional measures in aid
of arbitration, then it preempts inconsistent state laws providing that such measures are
available. See, e.g., Cooper v. Ateliers de la Motobecane, 442 N.E.2d 1239 (Ct. App. 1982); supra
pp. 945-46.
Similarly, if the FAA prohibits provisional relief in aid of arbitration, it should preempt
inconsistent state law. And, where the FAA is held to set forth standards for provisional
measures in aid of arbitration, those standards should preempt state law.

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 It is not clear what effect a state choice-of-law clause will have, under Volt Information, on the
availability of court-ordered provisional measures pursuant to state law. See supra pp. 358-80.
13. Decisions refusing to limit court-ordered relief to cases where tribunal cannot act. Some
parties have argued that, even if the FAA permits provisional measures pending arbitration,
“such injunctions should issue only after the movant has proved that the arbitrators are unable
to provide the requested relief in a timely fashion.”Blumenthal v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 910 F.2d 1049, 1054 (2d Cir. 1990). Courts have rejected those efforts. Id.
14. Intra-state forum-shopping after Cooper and Borden. Under Cooper, a New York state court
is bound to interpret Article II(3) of the federal New York Convention as precluding provisional
measures in aid of arbitration; under Borden, a federal court in New York is apparently free
under Article II(3) of the Convention to grant at least some provisional measures. The converse
may be true in the Third Circuit, where the federal courts are required by McCreary to deny
provisional relief, and state courts may not be. Hence, whether a request for provisional relief
is litigated in state or federal court may very well be outcome-determinative in some
jurisdictions. Isn't this absurd?
15. Arbitrator's power to “vacate” court-ordered provisional measures. Suppose that a court
orders provisional relief in aid of arbitration, and that the arbitral tribunal thereafter is
constituted and concludes that the court-ordered relief is inappropriate. Can the arbitrators
“vacate” the relief? For one decision holding that they may, see Blumenthal v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 910 F.2d 1049 (2d Cir. 1990).
16. When is a request for court-ordered provisional measures a waiver of a party's right to
arbitrate? As we have seen, the right to arbitrate can be waived. See supra pp. 239-42. Parties
that seek provisional measures from a court must exercise particular care to ensure that they
are not, in pursuing such relief, deemed to have waived their right to enforce the parties'
arbitration agreement. In general, however, U.S. courts have not construed requests for court-
ordered provisional measures in that manner. E.g., Valero Refining, Inc. v. M/T Lauberhorn, 813
F.2d 60, 65-66 (5th Cir. 1987) (party “sought judicial assistance to further the arbitration process
when [adverse party] refused to name an arbitrator”); Sauer-Getriebe KG v. White Hydraulics,
Inc., 715 F.2d 348, 349-50 (7th Cir. 1984), cert. denied, 464 U.S. 1070 (1984); Rogers, Burgun,
Shahine & Deschler, Inc. v. Dongsan Construction Co., Ltd, 598 F.Supp. 754, 757-58 (S.D.N.Y. 1984);
United Nuclear Corp. v. General Atomic Co., 597 P.2d 290 (N.M. 1979).
Note that leading institutional arbitration rules specifically provide for the possibility of
P "959" seeking court-ordered provisional measures, and that seeking such relief is not necessarily a
P "960" waiver of arbitration. See UNCITRAL Rules Article 26; AAA International Rules Article 22(3); ICC
Rules Article 23(2). Nevertheless, on particular facts (and under a particular arbitration
agreement) seeking court-ordered provisional relief might constitute a waiver. See supra pp.
239-42 for a discussion of the standards for finding a waiver under the FAA.
17. Damages for wrongful attachment. A party who obtains an attachment will be strictly liable
under New York law (and that of some other jurisdictions) for damages caused by a wrongful
attachment. N.Y. Civil Practice Law §6212.
18. Enforceability of agreements limiting or excluding court-ordered provisional measures.
Suppose that the parties' arbitration agreement excludes all recourse to national courts for
interim relief. Is such an exclusion subject to challenge as contrary to public policy? See
Hausmaninger, The ICC Rules for a Pre-Arbitral Referee Procedure: A Step Towards Solving the
Problem of Provisional Relief in International Commercial Arbitration, 7 ICSID Rev. 82 (1992)
(suggesting that parties cannot exclude court-ordered provisional relief because arbitral
measures are inadequate substitute); Anaconda v. American Sugar Refining Co., 322 U.S. 42
(1944). Note, however, that under McCreary, the exclusion of court-ordered provisional
measures is not merely permitted, but is required, by public policy. See also Mills, State
International Arbitration Statutes and the U.S. Arbitration Act: Unifying the Availability of Interim
Relief, 13 Ford. L. Rev. 604 (1989).
19. Due process limits on U.S. courts' power to grant provisional relief in aid of arbitration. The
due process clauses of the 5th and 14th amendments impose limits on assertions of judicial
jurisdiction by U.S. courts. See G. Born, International Civil Litigation in United States Courts 67-78
(3d ed. 1996). Those limits apply, albeit in special forms, in the context of actions for
provisional relief in aid of foreign suits. In general, the presence of assets, not transitorily in
the jurisdiction, should be sufficient to support quasi in rem jurisdiction solely for the purpose
of ordering provisional relief. Shaffer v. Heitner, 433 U.S. 186, 210-11 (1977). For a peculiar
decision, apparently requiring an action in a U.S. court (rather than an arbitral proceeding) to
support a request for provisional relief, see Carolina Power & Light Co. v. Uranex, 451 F.Supp.
1044 (N.D. Calif. 1977).

C. Appropriate National Court to Grant Pre-Award Provisional Measures in Aid of an

International Arbitration
Assuming that Article II(3) of the New York Convention does not impose a blanket prohibition
on court-ordered pre-award provisional measures and that national law permits such
measures in domestic matters, there remains the further question of which national courts
should be willing to order that relief in aid of a particular international arbitration. That
question in turn prompts inquiry into two subsidiary questions: (a) which nation's (or nations')
courts are competent to order such provisional relief in aid of a particular international

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 arbitration; and (b) in what circumstances should a national court which has competence to
order provisional measures in aid of an international arbitration be willing to order such relief?
For example, should courts in State A grant provisional measures only in aid of arbitrations
conducted in State A, or should relief also be available in aid of arbitrations sited elsewhere?
The following materials explore how national courts approach these questions. The Channel
Tunnel decision illustrates an English court's response to a request for provisional measures in
aid of a Belgian arbitration. The Borden decision, excerpted below, illustrates the same
problem from a U.S. perspective.
P "960"
P "961"
CHANNEL TUNNEL GROUP LIMITED v. BALFOUR BEATTY CONSTRUCTION LIMITED
[1993] A.C. 334 (House of Lords)
LORD MUSTILL. [Channel Tunnel Group Limited (“appellants”) won a concession from the U.K.
and French governments to construct and operate a tunnel under the English Channel. Balfour
Beatty Construction Limited and others (“respondents”) entered into a construction contract
with appellants to design and commission the Tunnel. The construction contract contained the
following arbitration and choice of law clauses:
Clause 67 – Settlement of Disputes
67(1). If any dispute or difference shall arise between the employer and the contractor during
the progress of the works ... then ... such dispute or difference shall at the instance of either the
employer or the contractor in the first place be referred in writing to and be settled by a panel
of three persons (acting as independent experts but not as arbitrators) who shall unless
otherwise agreed by both the employer and the contractor within a period of 90 days after
being requested in writing by either party to do so, and after such investigation as the panel
think fit, state their decision in writing and give notice of the same to the employer and the
contractor....
67(2). The contractor shall in every case continue to proceed with the works with all due
diligence and the contractor and the employer shall both give effect forthwith to every such
decision of the panel (provided that such decision shall have been made unanimously) unless
and until the same shall be revised by arbitration as hereinafter provided. Such unanimous
decision shall be final and binding upon the contractor and the employer unless the dispute or
difference has been referred to arbitration as hereinafter provided.
67(3) ... [If either party is dissatisfied with the experts' decision, or if the experts render no
decision, or if the experts' decision is not obeyed,] then either the employer or the contractor
may ... notify the other party in writing that the dispute or difference is to be referred to
arbitration....
67(4). All disputes or differences in respect of which a notice has been given under Clause 67(3)
by either party that such dispute or difference is to be referred to arbitration and any other
dispute or difference of any kind whatsoever which shall arise between the employer or the
Maitre d'Oeuvre and the contractor in connection with or arising out of the contract, or the
execution of the works or after their completion and whether before or after the termination,
abandonment, or breach of the contract shall be finally settled under the Rules of Conciliation
P "961" and Arbitration of the International Chamber of Commerce by three arbitrators appointed
P "962" under such Rules. The employer and the contractor shall each nominate and appoint one
arbitrator and the third arbitrator shall be appointed by the International Chamber of
Commerce. The seat of such arbitration shall be Brussels....
Clause 68
The construction, validity and performance of the contract shall in all respects be governed by
and interpreted in accordance with the principles common to both English law and French law,
and in the absence of such common principles by such general principles of international
trade law as have been applied by national and international tribunals. Subject in all cases,
with respect to the works to be respectively performed in the French and in the English part of
the site, to the respective French or English public policy (order public) provisions.
Disputes arose over the price that would be payable for work relating to the cooling system.
The respondents demanded more money in progress payments than the appellants were
willing to pay, and when that demand failed, threatened to cease work. In response, the
appellants commenced an action in the English courts, seeking an injunction forbidding the
respondents from ceasing work. The respondents moved to stay the English judicial
proceedings under the English Arbitration Act, 1975. The trial judge held that he would have
granted an injunction, but accepted respondents' undertaking that they would not cease work.
The Court of Appeal reversed, staying the injunction proceeding and indicating that it would
not have entered an injunction. On April 23, 1992, the appellants filed a request for arbitration
with the ICC pursuant to ICC Rules.
The House of Lords first held that the English courts had the power to stay the injunction
proceedings in favor of the expert/arbitration mechanism contemplated by the construction
contract. First, English courts possess inherent discretionary power to stay their proceedings in
deference to foreign judicial or arbitral proceedings; that discretion should be exercised where
“large commercial enterprises, negotiating at arms length in the light of long experience of
construction contracts,” agree to arbitration. Second, §1 of the 1975 Arbitration Act would

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 appear to require a stay. Although Article II(3) of the New York Convention would not appear to
apply, because it provides only for a court to “refer the parties to arbitration,” not an experts'
review, the English Arbitration Act was more broadly cast. The House of Lords then went on to
consider whether an interim injunction, pending the experts' decision or the arbitration
decision, could be issued by an English court.]
Thus far, the question has been whether the appellant's claim for a final injunction should be
allowed to proceed to trial in the High Court. [If not,] a difficult and important question will
arise concerning the power of the court to order the respondents back to work pending the
decision of the panel or, as the case may be, the arbitrators.... [First, appellants argue that an
P "962" injunction could issue under §12(6)(h) of the Arbitration Act 1950, which provides that “The High
P "963" Court shall have, for the purpose of and in relation to a reference, the same power of making
orders in respect of ... (h) interim injunction ... as it has for the purpose of and in relation to an
action in the High Court.” ]
It is by now firmly established that more than one national system of law may bear upon an
international arbitration. Thus, there is the proper law which regulates the substantive rights
and duties of the parties to the contract from which the dispute has arisen. Exceptionally, this
may differ from the national law governing the interpretation of the agreement to submit the
dispute to arbitration. Less exceptionally it may also differ from the national law which the
parties have expressly or by implication selected to govern the relationship between
themselves and the arbitrator in the conduct of the arbitration: the “curial law” of the
arbitration as it is often called. The construction contract [in this case] provides an example.
The proper substantive law of this contract is the law, if such it can be called, chosen in clause
68. But the curial law must I believe be the law of Belgium. Certainly there may sometimes be
an express choice of a curial law which is not the law of the place where the arbitration is to be
held: but in the absence of an explicit choice of this kind, or at least some very strong pointer
in the agreement to show that such a choice was intended, the inference that the parties when
contracting to arbitrate in a particular place consented to having the arbitral process
governed by the law of that place is irresistible.
In all these instances one or more national law may be relevant because they are expressly or
impliedly chosen by the parties to govern the various aspects of their relationship. As such,
they govern the arbitral process from within. But national laws may also apply ab extra, when
the jurisdiction of the national court is invoked independently of any prior consent by the
parties. An obvious case exists where the claimant, in face of an arbitration agreement, brings
an action before a national court which must apply its own local law to decide whether the
action should be stayed, or otherwise interfered with.... But a national court may also be
invited, as in the present case, to play a secondary role, not in the direct enforcement of the
contract to arbitrate, but in the taking of measures to make the work of the chosen tribunal
more effective. Here, the matter is before the court solely because the court happens to have
under its own procedural rules the power to assert a personal jurisdiction over the parties, and
to enforce protective measures against them. Any court satisfying this requirement will serve
the purpose, whether or not it has any prior connection with the arbitral agreement or the
arbitral process. In the present case, the English court has been drawn into this dispute only
because it happens to have territorial jurisdiction over the respondents, and the means to
enforce its order against them. The French court would have served just as well, and if the
present application had been made in Paris we should have found the French court
considering the same questions as have been canvassed on this appeal....
The distinction between the internal and external application of national arbitration laws is
P "963" important. In my opinion, when deciding whether a statutory or other power is capable of
P "964" being exercised by the English court in relation to clause 67, and if it is so capable whether it
should in fact be so exercised, the court should bear constantly in mind that English law, like
French law, is a stranger to this Belgian arbitration, and that the respondents are not before
the English court by choice. In such a situation the court should be very cautious in its
approach both to the existence and to the exercise of supervisory and supportive measures,
lest it cut across the grain of the chosen curial law. Thus, in the present instance I believe that
we should approach §12 of the Act of 1950 by asking – Can Parliament have intended that the
power to grant an interim injunction should be exercised in respect of an arbitration
conducted abroad under a law which is not the law of England? ... It seems to me absolutely
plain ... that Parliament cannot have intended these provisions to apply to a foreign
arbitration. I can see no reason why Parliament should have had the least concern to regulate
the conduct of an arbitration carried on abroad pursuant to a foreign arbitral law....
[Second, appellants relied on §37(1) of the Supreme Court Act 1981 as providing authority to
issue an interim injunction. Section 37(1) provides that “the High Court may be order (whether
interlocutory or final) grant an injunction in all cases in which it appears to the court to be just
and convenient to do so.” The House of Lords concluded that the High Court possessed the
power under this provision to issue an injunction in aid of a foreign arbitration. In addition, the
House of Lords reasoned:] I am unable to agree with those decisions in the United States (there
has been no citation of authority on this point from any other foreign source) which form one
side of a division of authority as yet unresolved by the Supreme Court. These decisions are to
the effect that interim measures must necessarily be in conflict with the obligations assumed
by the subscribing nations to the New York Convention, because they “bypass the agreed upon
method of settling disputes”: see McCreary Tire & Rubber Co. v. CEAT SpA, (1974) 501 F.2d 1032,
1038. I prefer the view that when properly used such measures serve to reinforce the agreed

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 method, not to bypass it....
On the assumption that the court does have power to grant the appellants an injunction, a
decision on whether the power should be exercised requires the making of certain
assumptions.... Only one item of substantive relief was claimed by the writ, and although this
was cast in negative form it was in substance a claim for a final mandatory injunction: or, what
seems to me the same thing, an order for specific performance of the respondents' obligation
to work continuously on the contract. Absent any evidence of Belgian law, we must also assume
that this is an order which the panel and arbitrators would have power to make, if minded to
do so. How long the proceedings will take is impossible to predict, apart from saying that if the
appellants had gone straight to the panel in October 1991 rather than starting an action, the
clause 67 proceedings would no doubt have been comfortably finished by now. At all events,
we should in my opinion assume that if the panel rules in favor of the appellants the
respondents will appeal to the arbitrators, and that a final ruling on the claim is not likely to
emerge for some considerable time....
P "964" Amidst all these assumptions, there is one hard fact which I believe to be conclusive, namely
P "965" that the injunction claimed from the English court is the same as the injunction to be
claimed from the panel and the arbitrators, except that the former is described as
interlocutory or interim. In reality its interim character is largely illusory, for as it seems to me
an injunction granted in November 1991, and a fortiori an injunction granted today, would
largely pre-empt the very decision of the panel and arbitrators whose support forms the raison
d'etre of the injunction. By the time that the award of the panel or arbitrators is ultimately
made, with the respondents having continued to work meanwhile it will be of very modest
practical value, except as the basis for a claim in damages by the respondents....
In these circumstances, I do not consider that the English court would be justified in granting
the very far-reaching relief which the appellants claim. It is true that mandatory interlocutory
relief may be granted even where it substantially overlaps the final relief claimed in the
action; and I also accept that it is possible for the court at the pre-trial stage of a dispute
arising under a construction contract to order the defendant to continue with a performance of
the works. But the court should approach the making of such an order with the utmost caution,
and should be prepared to act only when the balance of advantage plainly favors the grant of
relief. In the combination of circumstances which we find in the present case I would have
hesitated long before proposing that such an order should be made, even if the action had
been destined to remain in the High Court. These hesitations are multiplied by the presence of
clause 67. There is always a tension when the court is asked to order, by way of interim relief in
support of an arbitration, a remedy of the same kind as will ultimately be sought from the
arbitrators: between, on the one hand, the need for the court to make a tentative assessment
of the merits in order to decide whether the plaintiff's claim is strong enough to merit
protection, and on the other the duty of the court to respect the choice of tribunal which both
parties have made, and not to take out of the hands of the arbitrators (or other decision-
makers) a power of decision which the parties have entrusted to them alone. In the present
instance I consider that the latter consideration must prevail. The court has stayed the action
so that the panel and the arbitrators can decide whether to order a final mandatory injunction.
If the court now itself orders an interlocutory mandatory injunction, there will be very little left
for the arbitrators to decide.
Any doubts on this score are to my mind resolved by the choice of the English rather than the
Belgian courts as the source of interim relief. Whatever exactly is meant by the words
“competent judicial authority” in article 8.5 of the ICC Rules, the Belgian court must surely be
the natural court for the source of interim relief. If the appellants wish the English court to
prefer itself to this natural forum it is for them to show the reason why, in the same way as a
plaintiff who wishes to pursue a substantive claim otherwise than in a more convenient foreign
court: Spiliada Maritime Corporation v. Cansulex Ltd [1987] A.C. 460, 476E. They have not done so.
Apparently no application for interim relief has been made to the court in Brussels. It is
perhaps just permissible to take notice that the contemporary Belgian law of arbitration
P "965" differs from the law of other European countries, but beyond this I would certainly not be
P "966" willing to go since, most remarkably, no evidence of Belgian law is before the court. If the
appellants had wished to say that the Belgian court would have been unable or unwilling to
grant relief, and that the English court is the only avenue of recourse, it was for them to prove
it, and they have not done so. Moreover, even if evidence to this effect had been adduced I
doubt whether it would have altered my opinion. This is not a case where a party to a standard
form of contract finds himself burdened with an inappropriate arbitration clause to which he
had not previously given his attention. I have no doubt that the dispute-resolution mechanisms
of clause 67 were the subject of careful thought and negotiation. The parties chose an
indeterminate “law” to govern their substantive rights; an elaborate process for ascertaining
those rights; and a location for that process outside the territories of the participants. This
conspicuously neutral, “anational” and extra-judicial structure may well have been the right
choice for the special needs of the Channel Tunnel venture. But whether it was right or wrong, it
is the choice which the parties have made. The appellants now regret that choice. To push their
claim for mandatory relief through the mechanisms of clause 67 is too slow and cumbersome to
suit their purpose, and they now wish to obtain far reaching relief through the judicial means
which they have been so scrupulous to exclude. Notwithstanding that the court can and should
in the right case provide reinforcement for the arbitral process by granting interim relief I am
quite satisfied that this is not such a case, and that to order an injunction here would be to act
contrary both to the general tenor of the construction contract and to the spirit of international

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 arbitration.
BORDEN, INC. v. MEIJI MILK PRODUCTS CO., LTD
919 F.2d 822 (2d Cir. 1990)
TIMBERS, CIRCUIT JUDGE. Borden, Inc. (“Borden”) commenced this action on August 30, 1990,
seeking a preliminary injunction in aid of arbitration. The court granted the motion of appellee
Meiji Milk Products Co., Ltd. (“Meiji”) to dismiss [on forum non conveniens grounds. Borden
appealed.] Borden, a New Jersey corporation with offices in New York City, is a multi-national
corporation engaged in the manufacture and distribution of food, dairy and consumer products
... throughout the world. Meiji, a Japanese corporation with offices in New York City, is engaged
in the manufacture of ... milk products in Japan and other parts of the world. In 1983, Borden
and Meiji entered into a Trademark License and Technical Assistance Agreement (the
“agreement”), pursuant to which Borden licensed the use of its name and logo to Meiji to be
used on a variety of margarine products manufactured and sold by Meiji in Japan for a period
of seven years. The agreement, which was performed entirely in Japan, expired by its terms on
October 3, 1990.
For the past seven years, Meiji has sold a number of margarine products bearing the Borden
P "966" trademark. The formulas and techniques used to manufacture the margarine products are
P "967" owned by Meiji. Meiji has obtained protection under Japanese Design Patent law for the
margarine packaging it has used. Although the agreement has now expired, Meiji continues to
market margarine, in Japan, in the packaging it had been using while the agreement was in
force, but now without any use of the Borden trademark or logo. Borden contends that the use
of the packaging is an “appropriation” in violation of the agreement.
Section 16 of the agreement specifically provides that all disputes arising in connection with
the agreement shall be finally settled by arbitration pursuant to the Japanese-American Trade
Arbitration Agreement of September, 1952. Accordingly, on August 24, 1990, Borden filed a
demand for arbitration, alleging that Meiji had breached the agreement and unfairly
competed with Borden. Meiji contends that Japanese patent law authorizes its continued use
of the packaging and asserts that the agreement between the parties is silent as to any use by
Meiji of packaging after termination of that agreement. The site of arbitration – which will be
either New York or Japan – has not yet been determined.
On August 30, 1990, Borden commenced this action in the Southern District of New York,
alleging claims for breach of contract and wrongful destruction of goodwill. Borden sought to
compel arbitration pursuant to 9 U.S.C. §206 (1988). It also sought a preliminary injunction
against Meiji's use of the disputed packaging. Jurisdiction was based both on diversity and the
[New York] Convention. [The district court judge had granted a temporary restraining order, but
refused to grant a preliminary injunction, instead dismissing Borden's action on forum non
conveniens grounds. Borden appealed.] ...
As a threshold matter, we address the question of the court's subject matter jurisdiction to
entertain the application for preliminary injunctive relief in aid of arbitration.... Meiji's
argument is that, since the agreement between the parties contains an arbitration clause, the
Convention is applicable. Article II(3) of the Convention provides that “the court of a
Contracting State, when seized of an action in a matter in respect of which the parties have
made an agreement within the meaning of this article, shall, at the request of one of the
parties, refer the parties to arbitration....” ... Borden concedes that the Convention is
applicable, but argues that the Convention does not oust the court of jurisdiction to issue an
injunction in aid of arbitration. We agree.
Federal courts are charged with enforcing the Convention. 9 U.S.C. §201 (1988). Specifically, a
court may direct that arbitration be held in accordance with the agreement at any place
therein provided for.... Such court may also appoint arbitrators....” Id. at §206. Furthermore, the
courts are empowered to confirm an arbitration award once rendered. Id. at §207.
Meiji argues that a court's jurisdiction is limited to compelling arbitration or confirming an
arbitration award. In the instant case, however, Borden specifically invoked §206, seeking to
have the district court compel arbitration and appoint arbitrators. We hold that entertaining
an application for a preliminary injunction in aid of arbitration is consistent with the court's
P "967" powers pursuant to §206. Cf. McCreary Tire & Rubber Co. v. CEAT SpA, 501 F.2d 1032, 1037-38 (3d
P "968" Cir. 1974) (district court order refusing to vacate an attachment reversed, because underlying
complaint sought to bypass arbitration altogether and “the Convention forbids the courts of a
contracting state from entertaining a suit which violates an agreement to arbitrate”);
International Shipping Co. v. Hydra Offshore, Inc., 875 F.2d 388, 391 n.5 (2d Cir.) (district court
properly held that jurisdiction could not be premised on the Convention because “the party
invoking its provisions did not seek either to compel arbitration or to enforce an arbitral
award”), cert. denied, 493 U.S. 1003 (1989).
In the instant case, far from trying to bypass arbitration, Borden sought to have the court
compel arbitration. New York law specifically provides for provisional remedies in connection
with an arbitrable controversy, N.Y. Civil Practice Law & Rules (“CPLR”) §7502(c) (McKinney
Supp. 1990), and the equitable powers of federal courts include the authority to grant it. Murray
Oil Products Co. v. Mitsui & Co., 146 F.2d 381 (2d Cir. 1944) Entertaining an application for such a
remedy, moreover, is not precluded by the Convention but rather is consistent with its
provisions and its spirit. In Murray, we held that an arbitration clause “does not deprive the
promisee of the usual provisional remedies....”Id. at 384. We held that the desire for speedy

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 decisions in arbitration “is entirely consistent with a desire to make as effective as possible
recovery upon awards, after they have been made, which is what provisional remedies do.”Id.
We hold that the district court properly exercised subject matter jurisdiction.
We deal next with Borden's claim that state procedural rules precluded the district court from
dismissing this action on the ground of forum non conveniens. Borden relies on a state law
provision, N.Y. CPLR §327(b) (McKinney 1990), which provides that a court “shall not ... dismiss ...
on the ground of inconvenient forum, where the action arises out of or relates to a contract,
agreement or undertaking to which §5-1402 of the general obligations law applies....” By its
terms, however, N.Y. General Obligations Law §5-1402 (McKinney 1989) applies only when a
contract contains a provision whereby a foreign corporation “agrees to submit to the
jurisdiction of the courts of this state.”Id. at §5-1402(1)(b). The district court correctly concluded
that Meiji did not submit to the jurisdiction of the New York state courts simply by agreeing to
be bound by arbitration that might or might not be in New York. Moreover, the New York
choice-of-law clause in the parties' agreement is not the equivalent of a choice-of-forum
clause. Oil Basins Ltd v. Broken Hill Proprietary Co., 613 F.Supp. 483, 487 (S.D.N.Y. 1985). For this
same reason, the provision in the agreement that the contract is deemed to have been made
in New York is not equivalent to an express choice of forum clause.
We hold that N.Y. CPLR §327(b) is inapplicable to the instant case. We accordingly need not
reach the issue of whether the mandate of §327(b) would control in this case.... We may thus
proceed by applying federal law to the forum non conveniens issue.
P "968" This brings us finally to the merits of the forum non conveniens issue. Our review of the district
P "969" court's dismissal on that basis is extremely limited. [Piper Aircraft Co. v. Reyno, 454 U.S. 235,
257 (1981)].... The district court in the instant case carefully considered the ... factors [set forth
in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09 (1947).] It found that only the Japanese market
and consumers are affected by the parties' dispute and that all necessary fact witnesses are in
Japan. The court found further that an injunction issued in Japan clearly would be enforceable
there, whereas one obtained in this country might not be. Examining the public interests at
stake, the court found that Japan has a much greater interest in the litigation than does the
United States.... Under the circumstances of the instant case, we hold that the court's decision
to dismiss in light of the Gilbert factors was sufficiently justified.
Borden asserts that the court's application of the Gilbert factors was “misplaced” in the first
instance because Meiji allegedly failed to meet, “at the outset”, its burden of showing the
availability of an adequate remedy in Japan. We reject this contention....
Borden claims that the district court failed to recognize the limited, emergency nature of the
relief it was seeking, i.e., a preliminary injunction in aid of arbitration. Borden claims that there
is no provision for such a remedy in Japan when the arbitration is pending outside Japan.
Borden's implication that arbitration currently is pending in New York is itself disingenuous. In
fact, a determination has not yet been made whether the underlying arbitration will be in New
York or in Japan. Moreover, even if the arbitration were to proceed in the United States, the
record relied upon by the court indicates a good possibility that a Japanese court would grant
preliminary relief even if the underlying arbitration were going forward in New York. The court
explicitly found that “there has been an adequate showing on Meiji's part that there is an
alternative remedy available to Borden in the Japanese courts.” This finding is adequately
supported by the record.
Third, although Borden suggests that, in order for Japan to be considered an adequate forum,
Japan must provide precisely the same remedies and in the same time-frame, this simply is
not so. Rather, “some inconvenience or the unavailability of beneficial litigation procedures
similar to those available in the federal district courts does not render an alternative forum
inadequate.”Shields v. Mi Ryung Constr. Co., 508 F.Supp. 891, 895 (S.D.N.Y. 1981).
We do agree with Borden, however, that its rights would be unduly prejudiced if it were forced
to wait years or even months to have a Japanese court review its application for some measure
of temporary relief. The district court ordered that Borden may move to restore this action if
preliminary injunctions prove to be unavailable in Japan. In dismissing the action only
conditionally, the court sought to protect Borden's rights. Calavo Growers v. Belgium, 632 F.2d
963, 968 (2d Cir. 1980), cert. denied, 449 U.S. 1084 (1981). In order to provide a further measure of
protection to Borden, we modify the district court's order so that Borden may reapply for a
preliminary injunction in the Southern District of New York if the Japanese court does not
decide Borden's application within 60 days after it is submitted. Meiji agreed to this
modification of the district court's order at oral argument....
P "969"
P "970"
Notes on Forum Selection Issues Relating to Court-Ordered Provisional Measures In Aid of
International Arbitration
1. Should a national court ever order provisional measures in aid of an international arbitration
seated in another country? Consider the various arguments set out in the Channel Tunnel case
against an English court's interference in a Belgian arbitration. “English law, like French law, is
a stranger to this Belgian arbitration, and ... the respondents are not before the English court
by choice. In such a situation, the court should be very cautious in its approach both to the
existence and to the exercise of supervisory and supportive measures, lest it cut across the
grain of the chosen curial law.” Should a court in State A ever grant provisional measures in aid
of an arbitration to be conducted in State B with the law of State B as the curial law? If a court

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 does so, will it not risk intruding unacceptably upon the supervisory functions of the courts of
State B? Why can't the courts of State B be left to issue all provisional relief?
2. “Foreign” court-ordered provisional measures when the “domestic” court cannot grant
effective relief. Note that the courts of the state where the arbitration is being conducted may
not be in a position to grant effective provisional relief. Particularly where attachment or
similar remedies are sought, only the jurisdiction where the defendant's assets are located
may be able to grant meaningful provisional relief. That is because security measures often
have only territorial effect and, even when they purport to apply extraterritorially,
enforcement may be impossible. See G. Born, International Civil Litigation in United States
Courts 935-36 (3d ed. 1996). In those circumstances, according exclusive jurisdiction to the state
where the arbitration is pending may not be warranted. Even assuming that this is correct, and
proven, is it not relevant whether the state where the arbitration is pending would grant
provisional measures if the asset in question were within its jurisdiction?
In cases involving in personam relief – as in Borden and Channel Tunnel – is there any reason
that courts of nations other than the arbitral situs should entertain actions for provisional
relief? Both Borden and Channel Tunnel resolve this question by concluding (under U.S. and
English law, respectively) that a court has the power to grant provisional relief in aid of a
foreign (or potentially foreign) arbitration. Is that resolution persuasive? What are the reasons
for and against it?
3. Exercise of discretion to order provisional relief. While asserting the power to order
provisional measures in aid of a “foreign” arbitration, both Borden and Channel Tunnel refused
to exercise that power in the case before them. Both courts cited a variety of factors
counselling against the exercise of this authority.
(a) Factors relevant to issuance of provisional relief in aid of foreign arbitration. Consider the
various factors cited by the English and U.S. courts. Are the factors the same? Which are
more relevant to the issue of injunctive relief in aid of arbitration?
(b) Channel Tunnel factors. The Channel Tunnel court considered: (a) the situs of the
arbitration; (b) the curial law; (c) the substantive law governing the parties' relations; (d)
the fortuitous involvement of English courts, merely because the defendants were
domiciled there; (e) the fact that the requested “interim” relief in fact would have
resolved much of the parties' dispute; (f) the fact that courts should generally be
reluctant to grant provisional relief in aid of any arbitration; and (g) the fact that a
Belgian court was the “natural court” to consider the issue, since the arbitration was sited
in Belgium.
(c) Borden factors. In contrast, the Borden court considered: (a) the location of the conduct
giving rise to the parties' underlying dispute; (b) the location of the evidence and
witnesses; (c) the respective interests of the possible judicial fora in issuing relief; and (d)
the ease of enforcing the court's order.
(d) Appropriate factors. Although answering the same basic question, the Channel Tunnel and
Borden court considered entirely different sets of factors. Which set of factors is more
relevant to the question whether a particular national court should grant relief? Are all of
the factors relevant? In addition, is it not relevant whether (a) the arbitral panel is
constituted and functioning; (b) if not, the reasons for that; (c) the attitude of the tribunal
towards the request for relief; and (d) the availability of effective provisional measures
from other courts? If you could consider only one of the above factors, which would it be?
What factors should be relevant to a decision by a court in one country to grant
provisional measures in aid of an arbitration conducted in another country? Is it not
relevant, as suggested above, that the court is asked to take action with respect to an
asset located within its jurisdiction, which the courts of the arbitral forum could not
reach?
P "970"
P "971"
4. Borden revisited – provisional relief when arbitral forum has not been selected. Finally, note
that in Borden the arbitral forum had not yet been designated, and New York might well have
been the arbitral situs. If the arbitral situs were New York, what effect should this have on the
availability of provisional measures in a U.S. court?
Was Borden correctly decided? Suppose that the arbitration were conducted in New York. In
that case, should the New York court have granted the requested relief?
5. U.S. decisions granting provisional measures in aid of a “foreign” arbitration. In contrast to
Borden, a number of lower U.S. courts have granted provisional relief in aid of arbitrations
being conducted in a foreign country, under the arbitration law of that country, albeit often
without analysis. E.g., Tampimex Oil Ltd v. Latina Trading Corp., 558 F.Supp. 1201 (S.D.N.Y. 1983)
(granting attachment of New York bank account in aid of arbitration in London); Atlas
Chartering Services v. World Trade Group, 453 F.Supp. 861, 863 (S.D.N.Y. 1978) (granting
attachment of funds in two accounts in New York banks in aid of arbitration in London); Andros
Compania Maritima SA v. Andre and Cie, 430 F.Supp. 88 (S.D.N.Y. 1977) (granting maritime
attachment in aid of arbitration pending in London); Paramount Carriers Corp. v. Cook
Industries, 456 F.Supp. 598 (S.D.N.Y. 1979) (same); Carolina Power & Light Co. v. Uranex, 451
F.Supp. 1044 (N.D. Calif. 1977).

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 For an extreme statement of this, consider Castelan v. M/V Mercantil Parati, 1991 U.S. Dist. Lexis
6472 (D.N.J. 1991), where the parties' agreement provided for arbitration in London, under
English law. The district court concluded that, under English law, the plaintiff in the U.S. action
could not have obtained provisional relief from an English court; nevertheless, because U.S.
standards for maritime arrest were satisfied, the court arrested the defendant's vessel in aid of
the arbitration. Is that wise?
6. Law governing request for provisional measures in aid of a “foreign” arbitration. If a U.S.
court can grant provisional relief in aid of a “foreign” arbitration, should it apply U.S. or foreign
law? As a practical matter, U.S. courts have uniformly applied U.S. law. See the cases cited
above, supra p. 955-58. That is also consistent with traditional conflict of laws rules.
Restatement (Second) Conflict of Laws §130 (1971). Is it right? If the primary reason to permit
courts to aid foreign arbitrations is necessity and convenience, shouldn't the courts apply the
same substantive rules as those under the curial law?
7. Availability of forum non conveniens argument in response to action in U.S. courts for
provisional measures in aid of arbitration. As Borden illustrates, in an action in federal court for
provisional measures in aid of arbitration, the forum non conveniens doctrine is available as a
defense. That decision is consistent with many lower U.S. court decisions in other contexts,
such as the enforcement of arbitration agreements, see supra pp. 400-07.
8. Basis for federal subject matter jurisdiction over action seeking provisional measures in aid
of arbitration. According to Borden, “an application for a preliminary injunction in aid of
arbitration” falls within the court's power to compel arbitration and appoint arbitrators under
§206 of the FAA. That is a sensible reading of §206, although other lower courts have adopted
narrower views of comparable provisions. Tesoro Petroleum Corp. v. Asamera (South Sumutra)
Ltd, 798 F.Supp. 400 (W.D. Tex. 1992); supra pp. 767-68.
If §206 is not available, then §4 of the FAA would presumably apply, but as discussed
elsewhere, the domestic FAA does not provide an independent basis for federal subject matter
jurisdiction. See supra p. 387. Alienage or some other independent jurisdictional basis would be
required.

D. Judicial Enforcement of Provisional Measures Ordered by Arbitrators

Notwithstanding the practical and legal obstacles, discussed above, arbitral tribunals
sometimes do order provisional relief in aid of a international arbitration. When they do, the
issue of enforcement often arises: how can a recalcitrant party be required to comply with
provisional measures ordered by an arbitral tribunal?
P "971" The starting point for exploration of the issue of enforceability is the general proposition that
P "972" arbitrators lack the legal authority, under virtually all national legal regimes, coercively to
enforce their orders. “The most important and obvious such difference [between court-ordered
and tribunal-ordered provisional measures] is that orders given by arbitrators are not self-
executing, like those of courts, and must generally take the form of directions to the parties to
perform or refrain from performing certain acts.” (55)
That general proposition is, however, not strictly accurate. First, the ability of an arbitrator
actually to enforce his orders is a matter of national law, and there may be circumstances in
which local law permits the functional equivalent of judicial enforcement. For example, when
the parties have previously posted security, or put evidence or other property into the
tribunal's custody, the tribunal may possess the power, subject to judicial challenge, to
“enforce” its orders by withholding or transferring the funds or property.
Second, it is at least arguable under some national laws, that arbitrators have the power to
impose sanctions on a party for failing to comply with their interim orders. (56) Those sanctions
would, if not themselves obeyed, require judicial enforcement, however, and it is not clear
whether most national courts would grant such enforcement. (57)
Third, the arbitrators' most potent enforcement mechanisms are their ability to draw adverse
inferences of fact from a party's non-compliance with their orders and to form a negative view
of a parties' substantive case. That threat is most pointed, and most justifiable, where a
tribunal's discovery orders are flouted. (58) But any party that willfully refuses to comply with
an arbitrator's orders must reckon with the consequences that its refusal will almost inevitably
have for the tribunal's view of it and, for better or worse, the party's legal position.
Beyond these mechanisms for “self-enforcement,” however, is the possibility of judicial
enforcement of an arbitrator's award of provisional measures. In principle, the FAA permits the
enforcement of tribunal-ordered provisional measures in U.S. courts. (59) Judicial enforcement
actions for provisional measures will typically arise in the same procedural context as actions
to enforce final awards. Thus, one party will seek to confirm, or the opposing party will seek to
vacate, an interim award of provisional measures in a national court. In the United States, this
will result in actions under the FAA (or state law) either to enforce or to vacate the award – a
subject discussed in detail above. (60)
Actions to enforce provisional measures raise many of the same issues that are present in other
P "972" enforcement contexts – such as the appropriate standard of judicial review. In addition,
P "973" however, the enforcement of tribunal-ordered provisional measures is particularly likely to
raise questions as to whether the arbitral tribunal exceeded its authority, whether judicial
review or enforcement of an interim award (rather than a final award) is appropriate, and the

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 extent to which the tribunal's measures are consistent with court-ordered measures.
Excerpted below are provisions from the UNCITRAL Model Law and the Swiss Law on Private
International Law dealing with the enforceability of awards of provisional measures. In
addition, reread the Charles Construction decision, excerpted above, (61) which illustrates how
national courts must consider whether the parties' arbitration agreement contemplated an
award of provisional measures. Finally, consider the opinion in Sperry International Trade, Inc.
v. Israel, which suggests some of the questions which can arise concerning other aspects of
enforcement of tribunal-ordered provisional measures.
UNCITRAL MODEL LAW
Articles 35 & 36
[excerpted below at pp. 1020-21]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Articles 188-192
[excerpted below at pp. 1034-35]
SPERRY INTERNATIONAL TRADE, INC. v. ISRAEL
689 F.2d 301 (2d Cir. 1982)
KEARSE, CIRCUIT JUDGE. The principal question on these appeals concerns the power of
arbitrators to make certain rulings, in light of a prior decision of this Court in this litigation
reversing the district court's granting of a preliminary injunction on the ground that the moving
party had failed to prove irreparable injury. [The] Government of Israel (“Israel”) appeals from
an order of the United States District Court for the Southern District of New York ... confirming
an arbitration award in a proceeding between Israel and petitioner-appellee Sperry
International Trade, Inc. (“Sperry”). Because we conclude that the award was within the
arbitrators' powers and did not disregard the law, we affirm....
In July 1978, [Sperry] ... and Israel executed a contract (the “Contract”) requiring Sperry to
design and construct a communication system for the Israeli Air Force. As contemplated by
paragraph 59 of the Contract, Sperry caused Citibank, N.A. (“Citibank”) to open a clean
P "973" irrevocable letter of credit in Israel's favor for a sum eventually set at approximately $15
P "974" million. Paragraph 59 gave Israel the right to draw on this letter of credit, to the extent of its
payments to Sperry, upon presentation of a sight draft and Israel's own “certification that it is
entitled to the amount covered by such draft by reason of a clear and substantial breach” of
the Contract. The provision for payment in the letter of credit itself stated, somewhat
differently, as follows:
FUNDS UNDER THIS CREDIT ARE AVAILABLE TO YOU AGAINST YOUR SIGHT DRAFT DRAWN ON US ...
PROVIDED SUCH DRAFT IS ACCOMPANIED BY YOUR CERTIFICATION THAN YOU ARE ENTITLED TO
THE AMOUNT COVERED BY SUCH DRAFT BY REASON OF NONDELIVERY IN ACCORDANCE WITH
CONTRACT NO. 6977 OR BY REASON OF DENIAL OF THE NECESSARY LICENSES.
Paragraph 45 of the Contract provided that all Contract disputes that could not be resolved by
negotiation were to be submitted to arbitration in accordance with the rules of the American
Arbitration Association. On August 3, 1981, Sperry initiated arbitration proceedings, seeking a
declaration that Israel had breached its contractual obligations and demanding damages of
approximately $10 million. Sperry alleged that its attempts to perform its obligations under
the Contract had been seriously and substantially frustrated by wrongful actions and inactions
of Israel. Israel denied Sperry's allegations and asserted eleven counterclaims, claiming, inter
alia, nonperformance of the Contract by Sperry.
On September 11, 1981, Sperry instituted suit in the district court to compel arbitration and to
enjoin Israel from drawing on the letter of credit pending a decision by the arbitrators. The
district court enjoined Israel from making the certification that would enable it to draw on the
letter of credit, “pending an early ruling by the arbitrators” as to “whether it is equitable and
proper in the circumstances that Israel shall or shall not draw on the letter of credit.” On
January 21, 1982, we reversed the district court's order granting the preliminary injunction
because Sperry had made no showing that it would be irreparably injured in the absence of
such an injunction. We declined to express a view as to the merits of the controversy. Sperry I,
670 F.2d at 11 & n.4.
On January 27, 1981, Israel furnished Citibank with a sight draft and certification acceptable to
Citibank for drawing down the letter of credit, and requested Citibank to transmit the proceeds
to an account at another bank in New York. On January 31, however, before the proceeds had
been transmitted, Sperry obtained an ex parte order of attachment in New York State Supreme
Court. Israel removed the action to federal court pursuant to 28 U.S.C. §1441(d) (1976) and
moved to vacate the order of attachment; Sperry cross-moved to confirm the attachment.
Argument on these motions was scheduled for February 9, with the expectation that by that
time the arbitrators would have ruled on the letter of credit question. On February 8, the
arbitration panel held its first hearing and considered Sperry's motion to require Israel to
P "974" withdraw its certification and demand for payment, and to enjoin it permanently from drawing
P "975" down the letter of credit. Early on the morning of February 9, the arbitrators made their
award on these issues (the “Award”), ordering that the proceeds of the letter of credit be held
in an escrow account in the joint names of Israel and Sperry. (62)

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 This action was promptly reported to Judge John M. Cannella, before whom the parties argued
the motions to vacate or confirm Sperry's attachment. Sperry stated that it would move for an
order confirming the arbitrators' Award, and that if the Award were confirmed, the attachment
would become “essentially moot and unnecessary.” On February 10 Judge Cannella vacated the
attachment on the ground “that the attachment [was] unnecessary to the security of [Sperry].”
N.Y. Civ. Prac. Law §6223(a) (McKinney 1980); see Fed. R. Civ. P. 64 (law of forum state applicable
to attachment). Judge Cannella also stayed Israel “from taking any further action to collect the
proceeds of [the] letter of credit ... or to remove the proceeds resulting from any payment of
that letter of credit from their present location at Citibank” pending a hearing on Sperry's
motion to confirm the arbitrators' award.
Sperry's motion to confirm the Award was heard before Judge Pollack on February 18, and was
P "975" opposed by Israel principally on the ground that the Award was inconsistent with our decision
P "976" in Sperry I, since the arbitrators allegedly had granted substantially the same relief Israel
claimed we had held impermissible. Judge Pollack rejected all of Israel's arguments (63) in a
reasoned opinion and confirmed the Award. On this appeal, Israel renews its contention that
our decision in Sperry I bars the arbitrators' Award. We disagree and affirm the order of the
district court.
It is beyond cavil that the scope of the district court's review of an arbitration award is limited.
Under 9 U.S.C. §9, “the court must grant ... an order [confirming an arbitration award] unless the
award is vacated, modified, or corrected as prescribed in [9 U.S.C. §§10 and 11].” Section 10
permits the court to vacate an award only in specific situations, such as “[w]here the award was
procured by corruption, fraud, or undue means,” §10(a); “[w]here there was evident partiality or
corruption in the arbitrators,” §10(b); “[w]here the arbitrators were guilty of [certain types of]
misconduct ... or of any other misbehavior by which the rights of any party have been
prejudiced,” §10(c); or “[w]here the arbitrators exceeded their powers,” or failed to make “a
mutual, final, and definite award upon the subject matter submitted,” §10(d). In addition, an
award may be set aside on “the nonstatutory ground of ‘manifest disregard’ of the law,”Drayer
v. Krasner, 572 F.2d 348, 352 (2d Cir.), cert. denied, 436 U.S. 948 (1978).... (64)
In the present case Israel argues that the arbitrators exceeded their powers, in violation of
§10(d), and that the Award was made in manifest disregard of the law. Israel bases these
contentions on our decision in Sperry I, vacating the preliminary injunction issued by the
district court and issuing our mandate promptly, which it construes as having established (a)
that, as a matter of law, Sperry was not entitled to any restraint for any period of time on
Israel's right to the $15 million represented by the letter of credit, and (b) that Israel should
have the immediate right to those funds without having to relitigate the issue before the
Arbitrators.
On this view of Sperry I, Israel argues that the arbitrators were barred from prohibiting Israel
from drawing down the letter of credit, and that in making the Award the arbitrators exceeded
their powers and manifestly disregarded such principles as res judicata, collateral estoppel,
and law of the case. Israel's attack on the Award as violative of Sperry I must fail, however, for
Israel has rather badly misstated our decision. In Sperry I we reiterated the standard criteria
that govern the district courts' granting of preliminary injunctions, see Jackson Dairy, Inc. v. H.P.
P "976" Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979) (per curiam), and ruled that Sperry had failed to
P "977" prove the likelihood of irreparable injury required to obtain such relief, because the only
potential harm it had shown was strictly monetary. Sperry I, 670 F.2d at 11-13. This was the only
ground of our decision. Nowhere did we state that Israel had a right to the funds or suggest that
Sperry had breached the Contract in such a way as to give Israel the right to draw down the
letter of credit. Indeed, we expressly declined to state a view as to such issues as Sperry's
likelihood of prevailing on the merits and the seriousness of the dispute as to the merits of
Sperry's claim. See id. at 11 n.4. And the question of what powers the arbitrators might have to
interpret the Contract or to rule in any way on the propriety of any certification Israel might
make was not before us. To the extent, therefore, that Israel's contention that the arbitrators
exceeded their powers or manifestly disregarded the law depends on the proposition that the
Award was somehow foreclosed by Sperry I, it fails because of Israel's false premise.
Nor do we find merit in Israel's contention that under New York law the arbitrators had no
power to prevent Israel's sole possession of proceeds of the letter of credit pending a decision
on the merits of the contractual claims and counterclaims. Preliminarily, we note that, “in
keeping with the practice that is customary for arbitration under the [American Arbitration]
Association's Rules,” (Israel's Brief in No. 82-7181, at 14) the arbitrators gave no explanation for
the Award. We are thus left to theorize as to the basis of the Award, and New York law requires
that all reasonable efforts be made to find a ground on which to sustain it. See Moyer v. Van-
Dye-Way Corp., 126 F.2d 339, 341 (3d Cir. 1942) (applying New York law); Fudickar v. Guardian
Mutual Life Insurance Co., 62 N.Y. 392, 401 (1875) (“It is a settled principle governing this subject,
and which ought never to be lost sight of, that all reasonable intendments and presumptions
are indulged in support of awards.”). One quite reasonable explanation of the Award comes
quickly to mind: that is, that the arbitrators' view was that any breach of the Contract by Sperry
had not been so “clear and substantial” (Contract paragraph 59) as to allow Israel in good faith
to draw down the letter of credit, and that any breach of the Contract by Israel was not so
egregious as to relieve Sperry of its contractual obligation to provide security for its own
performance of the Contract. We have been cited to no principle of law, from New York or
elsewhere, preventing the arbitrators in such circumstances from ruling that the $15 million be
held in the names of both parties until the contract disputes are determined.

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 Rather, New York law gives arbitrators substantial power to fashion remedies that they believe
will do justice between the parties. Thus, in Sprinzen v. Nomberg, 415 N.Y.S.2d 974, the New York
Court of Appeals stated as follows:
An arbitrator's paramount responsibility is to reach an equitable result, and the courts will not
assume the role of overseers to mould the award to conform to their sense of justice. Thus, an
arbitrator's award will not be vacated for errors of law and fact committed by the arbitrator....
P "977" Under New York law arbitrators have power to fashion relief that a court might not properly
P "978" grant. In Rochester City School District v. Rochester Teachers Association, 394 N.Y.S.2d 179
(1977), the court reversed the vacation of an arbitration award that ordered the petitioner
school district to grant sabbaticals to certain teachers, stating as follows:
In the final analysis ‘Arbitrators may do justice’ and the award may well reflect the spirit rather
than the letter of the agreement.... Thus courts may not set aside an award because they feel
that the arbitrator's interpretation disregards the apparent, or even the plain, meaning of the
words or resulted from a misapplication of settled legal principles. In other words a court may
not vacate an award because the arbitrator has exceeded the power the court would have, or
would have had if the parties had chosen to litigate, rather than to arbitrate the dispute. Those
who have chosen arbitration as their forum should recognize that arbitration procedures and
awards often differ from what may be expected in courts of law.
In sum, Sperry I did not foreclose the arbitrators' Award, and we are aware of no provision of
law contravened by the Award. Accordingly, we concur in the district court's ruling that Israel
has failed to advance any valid basis for denying Sperry's motion to confirm the Award.
CHARLES CONSTRUCTION COMPANY v. DERDERIAN
586 N.E.2d 992 (Mass. 1992)
[excerpted above at pp. 927-30]
Notes on Judicial Enforcement of Provisional Measures Ordered By Arbitral Tribunal
1. General availability of U.S. enforcement of tribunal-ordered provisional measures. Although
there are few decided cases, lower U.S. courts generally have been willing to recognize and
enforce arbitral awards of provisional measures. In addition to Sperry, see Island Creek Coal
Sales Co. v. City of Gainesville, 729 F.2d 1046 (6th Cir. 1984) (confirming award requiring party to
perform contract during pendency of arbitration); Konkar Maritime Enter., SA v. Compagnie
Belge D'Affretement, 668 F.Supp. 267 (S.D.N.Y. 1987) (upholding order to escrow funds); Southern
Seas Navigation Ltd v. Pemex, 606 F.Supp. 692 (S.D.N.Y. 1985) (“if an arbitral award of equitable
relief based upon a finding of irreparable harm is to have any meaning at all, the parties must
be capable of enforcing or vacating it at the time it is made”); Zephyros Maritime Agencies, Inc.
v. Mexicana de Cobre, SA, 662 F.Supp. 892 (S.D.N.Y. 1987); Compania Chilena de Nav. v. Norton,
Lilly & Co., 652 F.Supp. 1512, 1516 (S.D.N.Y. 1987) (upholding security order); Onyx Development
Corp. v. Ministry of Finance, 1989 U.S. Dist. Lexis 11995 (S.D.N.Y. June 24, 1988); Puerto Rico
Maritime Shipping Authority v. Star Lines Ltd, 454 F.Supp. 368, 375 (S.D.N.Y. 1978) (confirming
award for an accounting). Compare Pilkington Brothers plc v. AFG Indus Inc., 581 F.Supp. 1039 (D.
Del. 1984) (provisional injunctive relief issued by English court in aid of international
arbitration sited in London is not “award” entitled to recognition under New York Convention or
FAA).
2. Is an arbitral award of provisional relief sufficiently “binding” or “final” to be the subject of
judicial review? As discussed previously, national law sometimes permits enforcement only of
P "978" “final” awards. In Sperry, Israel argued in the district court that the tribunal's order of
P "979" provisional relief was not reviewable (or enforceable) because it was only an interim, and
not a final, award. Other lower courts have accepted similar arguments that review of
interlocutory arbitral orders is inappropriate, albeit not in the context of provisional relief. See
Michaels v. Mariforum Shipping SA, 624 F.2d 411 (2d Cir. 1980) (no judicial review of “Decision
and Interim Award” disposing of some, but not all, issues in dispute on the merits); supra pp.
466-67, for a discussion of the requirement of a “final” award.
As Sperry squarely held, most lower U.S. courts have concluded that arbitral awards of
provisional measures can be enforced under the FAA. See also Metallgesellschaft AG v. M/V
Capitan Constante, 790 F.2d 280 (2d Cir. 1986) (apparently provisional relief); Island Creek Coal
Sales Co. v. City of Gainesville, 729 F.2d 1046 (6th Cir. 1984); Southern Seas Navigation Ltd v.
Petroleos Mexicanos of Mexico City, 606 F.Supp. 692, 694-5 (S.D.N.Y. 1985) (“This award is not a
partial resolution of the parties' claims as an intermediate step in an ongoing arbitral process
but, in effect, the grant of a preliminary injunction.... To ... preclude Southern from enforcing
the award would render meaningless the arbitrators' power to grant such equitable relief”);
Puerto Rico Maritime Shipping Auth. v. Star Lines Ltd, 454 F.Supp. 368, 375 (S.D.N.Y. 1978).
Are these decisions correct? In what sense is an interim award of “provisional” measures
“final”?
3. Standard of judicial review of arbitrators' substantive decision to award provisional
measures. As Sperry illustrates, the standard for judicial review of an arbitrators' award of
provisional measures is similar to that of a final award on the merits of the case. Only a
showing of “manifest disregard,” or similar defects, see supra pp. 797-814, will permit non-
recognition of an award.
4. Arbitrators' discretion to fashion appropriate remedies. As discussed in detail elsewhere, see

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 supra p. 813, most developed national arbitration regimes permit arbitrators broad discretion
to fashion appropriate remedies. As Sperry illustrates, that discretion extends to matters of
provisional relief.
5. Excess of authority in ordering provisional measures. As in other arbitration contexts,
questions of enforcement often return one to the arbitration agreement. One basis for denying
enforcement of an arbitral award is the arbitrators' excess of authority. See supra pp. 849-59. As
Charles Construction illustrates, the “excess of authority” defense raises special issues in the
context of provisional measures. We have discussed those in detail above, see supra pp. 930-33.
6. State arbitration statutes dealing with enforcement of awards of interim relief. A number of
the U.S. states that have enacted state international arbitration statutes have specifically
addressed the subject of judicial enforcement of tribunal-ordered provisional measures. For
descriptions, see generally Mills, State International Arbitration Statutes and the U.S. Arbitration
Act: Unifying the Availability of Interim Relief, 13 Fordham Int'l L. J. 604, 637-38 (1990).
7. National arbitration legislation dealing with enforcement of awards of interim relief. The
willingness of a national court to enforce an arbitral award of provisional relief is, in the first
instance, a matter of national law. Consider, in addition to the sections of the FAA relied on in
Sperry and the state arbitration statutes cited above, Article 183 of the Swiss Law on Private
International Law. Article 183(2) provides that if party does not comply with tribunal-ordered
protective or provisional measures, “the arbitral tribunal may request the assistance of the
competent court.” Compare this to the FAA, which contemplates that a party to the arbitration,
as opposed to the tribunal, will seek to enforce interim arbitral awards. Which approach is
wiser? How will the tribunal “appear” before Swiss (or other) courts? Will it hire lawyers, and if
so, who will pay for them?
8. Form of provisional measures and review under ICC Rules. Tribunal-ordered provisional
measures do not always take the form of “awards.” Rather, provisional measures are issued in
the form of procedural directions to the parties. This can have important practical
implications, because the process of issuing an “award” – as opposed to less formal procedural
directions – can be time-consuming.
For example, the ICC Rules require that the ICC International Court of Arbitration approve all
“awards.” See ICC Rule 27 (“Before signing any Award, the Arbitral Tribunal shall submit it in
draft form to the Court....”). Article 23 of the 1998 ICC Rules permits arbitrators to grant
provisional measures either by order or by award. ICC arbitrators who have awarded
provisional relief have typically done so in the form of interim awards, approved by the ICC
International Court of Arbitration. But, the process of obtaining approval of an award is often
fairly slow – requiring up to a month, even if the award is approved without comment. And in
cases requiring provisional relief, this delay is often unacceptable.
A Working Party of the ICC Commission on International Arbitration, established in the late
1980's, concluded that provisional measures could properly take the form of interim awards,
P "979" approved under Article 21. Final Report on Interim and Partial Awards, ICC International Court of
P "980" Arbitration Bulletin at 26 (Dec. 1990). But the Working Party also concluded that the better
practice was only to issue procedural directions, and not an interim award, in order to avoid
the delays accompanying ICC review. Suppose that this recommendation is followed. Would
the resulting directions be enforceable as awards?
9. Relation between request for court-ordered provisional relief and request for tribunal-
ordered provisional relief. In Sperry, Sperry initially sought injunctive relief from the federal
courts in New York; that request was ultimately denied. See Sperry I, 670 F.2d at 11 & n.4. What
effect did the denial of court-ordered provisional measures have on Sperry's request for
tribunal-ordered provisional measures? What effect should the denial of court-ordered
provisional relief have had? Are the issues in the two fora the same? If Sperry elected to seek
provisional relief first from a court, should it not be bound by that refusal?
What if a court grants provisional relief in aid of arbitration. Can the tribunal subsequently
“vacate” that relief? For authority suggesting that it can, see Blumenthal v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 910 F.2d 1049, 1054 (2d Cir. 1990).
10. Res judicata effect of judicial denial of provisional measures in subsequent consideration of
provisional measures by arbitral tribunal. The issues in Sperry's two requests for provisional
relief were presumably substantially identical. The Second Circuit denied Sperry's request, on
the grounds that it had not established a sufficient likelihood of success on the merits. What
preclusive effect, if any, should this conclusion have in subsequent arbitral proceedings on
substantially the same issue? For an ICC arbitral tribunal's decision, refusing to grant interim
relief that would modify provisional measures previously granted by the national court in the
arbitral situs, see ICC Case No. 4998 of 1985, 1986 Journal du Droit International 1139.
Many requests for provisional relief require some sort of showing of likelihood of success on the
merits; the court will not grant provisional measures (such as attachment) unless the
requesting party makes some reasonable showing that it will prevail on the merits. What status
should factual findings by a court concerning likelihood of success on the merits have in an
arbitration between the same parties? Note that in many cases, the court's findings will not
purport to resolve disputed issues – but merely to indicate the existence of reasonable
arguments for particular positions. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bradley, 756
F.2d 1048, 1054 (4th Cir. 1985) (“Nor can we accept ... that the district court's preliminary
injunction will prejudice the arbitrator's subsequent decision on the merits. The arbitrators are

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 sworn to render a decision based solely on the evidence presented to them.”).
11. Arbitrators' power to award damages for wrongfully obtained court-ordered provisional
measures. If a party does obtain provisional relief from a national court, and it subsequently
transpires that the relief was not justified, the aggrieved party generally can seek damages.
That is the case, for example, under New York law. See supra p. 960. In addition, the arbitral
tribunal itself may have the power to award damages for wrongfully obtained court-ordered
provisional relief. See, e.g., Warth Line, Ltd v. Merinda Marine Co., Ltd, 778 F.Supp. 158 (S.D.N.Y.
1991) (confirming New York arbitral tribunal's award of damages from arrest of vessel by
Belgian courts); In re Noble Navigation Corp., No. 83-3983 (S.D.N.Y. June 4, 1984). See also
Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 F.2d 1049, 1054-56 (2d Cir. 1990)
(arbitrators “vacated” court-ordered preliminary injunction, but did not award damages; court
permitted award of damages under F.R.Civ.P. 65(c)).
12. Does the New York Convention limit judicial enforcement of tribunal-ordered provisional
measures? As described above, some U.S. courts have held that Article II(3) of the New York
Convention forbids national courts from granting provisional relief in aid of arbitration; the
sole course of action available to national courts is to refer the parties to arbitration. See supra
pp. 945-46. Does the breadth of this rationale suggest that courts are also precluded from
enforcing provisional relief ordered by arbitrators? The only U.S. case that appears to have
considered the point concluded that the Convention did not restrict its ability to recognize and
enforce tribunal-ordered provisional measures. Ministry of Finance and Planning v. Onyx
Development Corp., 1989 U.S. Dist. Lexis 11995 (S.D.N.Y. June 24, 1988).
P "980"

References
1) For commentary, see Becker, Attachments in Aid of International Arbitration – The American
Position, 1 Arb. Int'l 40 (1985); Brody, An Argument for Pre-Award Attachment in International
Arbitration Under the New York Convention, 18 Cornell Int'l L. J. 99 (1985); Brower & Tupman,
Court-Ordered Provisional Measures Under the New York Convention, 80 Am. J. Int'l L. 24
(1986); Ebb, Flight of Assets From the Jurisdiction “In the Twinkling of a Telex”: Pre- and Post-
Award Conservatory Relief in International Commercial Arbitration, 7 J. Int'l Arb. 9 (1990);
Hausmaninger, The ICC Rules for a Pre-Arbitral Referee Procedure: A Step Towards Solving the
Problem of Provisional Relief in International Commercial Arbitration, 7 ICSID Rev. 82 (1992);
Hoellering, Interim Measures and Arbitration: The Situation in the United States, Arb. J. 22
(June 1991); Hoellering, Interim Relief in Aid of Commercial Arbitration, 1 Wisc. Int'l L. J. 1
(1984); International Bar Ass'n, Interim Court Remedies in Support of Arbitration (1987 eds. D.
Shenton & W. Kuhn); ICC, Conservatory and Provisional Measures in International Arbitration
(1993); Jarvin, Is Exclusion of Concurrent Courts' Jurisdiction Over Conservatory Measures to
be Introduced by a Revision of the Convention?, 6 J. Int'l Arb. 171 (1989); Karmel, Injunctions
Pending Arbitration and the Federal Arbitration Act: A Perspective From Contract Law, 54 U.
Chi. L. Rev. 1373 (1987); McDonnell, The Availability of Provisional Relief in International
Commercial Arbitration, 22 Colum. J. Transn. L. 273 (1984); Mills, State International
Arbitration Statutes and the U.S. Arbitration Act: Unifying the Availability of Interim Relief, 13
Ford. Int'l L. J. 604 (1989); Pew-Jarvis, Pre-Award Attachment in International Arbitration: The
Law in New York, 7 J. Int'l Arb. 31 (1990); Reichert, Provisional Remedies in the Context of
International Commercial Arbitration, 3 Int'l Tax & Bus. Law. 373 (1986); Note, Attachment
Under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, 36 Wash. & Lee L. Rev. 1135 (1979); Note, Pre-Award Attachment Under the U.N.
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 21 Va. J. Int'l L.
785 (1981).
2) Provisional measures are also variously referred to as provisional relief or remedies,
interim relief or remedies, conservatory measures, or prejudgment or pre-award relief.
3) See generally International Bar Ass'n, Interim Court Remedies in Support of Arbitration (1987
eds. D. Shenton & W. Kuhn).
4) In some jurisdictions, it is possible to obtain provisional measures with extraterritorial
effect. For example, both U.S. and English courts will issue injunctions requiring or
forbidding a party from engaging in certain conduct abroad. See G. Born, International Civil
Litigation in United States Courts 484-85 (3d ed. 1996); United States v. First Nat'l City Bank,
379 U.S. 378 (1965). The enforcement of court-ordered provisional measures outside the
issuing court's territorial jurisdiction is often problematic.
5) UNCITRAL Rules Article 26(1); AAA International Rules Article 22(1).
6) E.g., Borden, Inc. v. Meiji Milk Products Co., 919 F.2d 822 (2d Cir. 1990); Albatross S.S. Co. v.
Manning Bros., 95 F.Supp. 459 (S.D.N.Y. 1951).
7) E.g., Sperry International Trade, Inc. v. Government of Israel, 689 F.2d 301 (2d Cir. 1982).
8) E.g., Carolina Power & Light Co. v. Uranex, 451 F.Supp. 1044 (N.D. Calif. 1977).
9) ICC Rules Article 20(4).
10) The arbitral tribunal's authority to order provisional measures is often related to its power
to grant injunctive relief. See supra pp. 813-14.

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 11) As discussed in detail below, some U.S. courts have interpreted Article II of the New York
Convention as forbidding the courts of signatory states from ordering prejudgment
attachment. See infra pp. 936-38. Those courts have not expressly held that the Convention
addresses the availability of provisional relief from arbitrators, although a likely premise
of their analysis is that arbitral tribunals generally do enjoy the authority to order
preliminary relief. An alternative result would produce the unattractive situation in which
provisional relief was available neither from a court nor an arbitrator.
12) See Article VI(4).
13) Where provisional measures take effect at places outside the arbitral situs, arbitrators will
often also inquire whether they are permitted to issue and enforce provisional measures in
such places.
14) National Code of Civil and Commercial Procedure Article 753 (Argentina); Italian Code of
Civil Procedure Article 818.
15) Swiss Law on Private International Law Articles 183 and 184 (superseding former Swiss
Intercantonal Arbitration Convention of 1969, Article 26); UNCITRAL Model Law on
International Commercial Arbitration Article 17.
16) See infra p. 957.
17) The enforceability and effect of such agreements of course depends on national law,
although, as described above, most developed national arbitration statutes give effect to
agreements authorizing tribunal-ordered provisional measures. See supra pp. 924-25.
18) 586 N.E.2d 992 (Mass. 1997).
19) ... Compare Rodman, Commercial Arbitration §26.1 (West 1984 & Supp. 1989) (“Generally,
with the exception of maritime cases, provisional remedies such as attachments or
compulsory bonds are not available in arbitration”) with 4 Business Law Monographs 5-6
(M. Bender 1989) (“Once the parties agree to submit their dispute to arbitration, the power
of the arbitrator to govern the proceedings before him includes the power to grant
provisional remedies”).
20) Previously §34, in effect on January 1, 1986 (and perhaps earlier), was headed “Conservation
of Property” instead of “Interim Measures,” but it was substantially the same as the rule
quoted above. The prior rule did not have the words “for interim relief” after the word
“orders.” The parties do not argue which rules are applicable, and we need not decide.
21) The conclusion of the court in Pacific Reinsurance Management Corp. v. Ohio Reinsurance
Corp., 935 F.2d. 1019, 1022-1023 & n.1 (9th Cir. 1991), that the rule identical to §34 in the AAA
commercial arbitration rules “contemplates interim equitable relief in appropriate
circumstances” is correct, but that rule does not justify an interim order that a party
provide security pending the arbitrator's decision.
22) The statement in Island Creek Coal Sales Co. v. Gainesville, 729 F.2d 1046, 1049 (6th Cir.
1984), that §43 authorizes an arbitrator to order specific performance to preserve the
status quo during arbitration may be correct (unless the contract expressly prevents such
relief), especially as to the party who commenced the proceeding in order to discover
whether he could depart from the status quo. That opinion does not, however, say that §43
supports an order of the sort entered in the case before us.
23) Tribunal-ordered provisional measures are not common. The Secretary General of the ICC
International Court of Arbitration reported in 1994 that in the past 15 years, only 25 ICC
cases had addressed the subject of provisional relief. For published examples of such
awards, see ICC Case No. 2444, 1977 Clunet 932; ICC Case No. 3540, VII Y.B. Comm. Arb. 124
(1982); ICC Case No. 2896, X Y.B. Comm. Arb. 47; ICC Case No. 4126, 1984 Clunet 934; ICC Case
No. 4156, 1984 Clunet 937; ICC Case No. 4415, 1984 Clunet 530; ICC Case No. 4998, 1986 Clunet
1139; ICC Case No. 5103, 1988 Clunet 1206; ICC Case No. 5650, XVI Y.B. Comm. Arb. 855 (1991).
24) Southern Seas Navigation Ltd v. Petroleos Mexicanos of Mexico City, 606 F.Supp. 692, 693
(S.D.N.Y. 1985) (quoting arbitrators' interim award “This tribunal has anguished over the
wisdom of granting interim relief.... Case law, however, supports our authority as arbitrators
to engage in equitable type relief.”); Partial Award of December 23, 1982 in ICC Case No.
3896, X Y.B. Comm. Arb. 47 (1985) (“In conclusion, the Arbitral Tribunal considers that there
exists, undeniably, the risk of the dispute before it becoming aggravated or magnified, and
that the parties should, in the same spirit of goodwill that they have already demonstrated
in signing the Terms of Reference, refrain from any action likely to widen or aggravate the
dispute, or to complicate the task of the Tribunal or even to make more difficult, one way
or another, the observance of the final arbitral award.”).
25) Challenges to arbitrators can delay the process even longer.
26) For a description of one such occurrence, and the issues of enforceability that a sua sponte
order raises, see Hoellering, The Practices and Experience of the American Arbitration
Association in ICC, Conservatory and Provisional Measures in International Arbitration 33-34
(1993). Most arbitral rules appear to contemplate that provisional measures will be
granted at the request of a party. See UNCITRAL Rules 26; AAA International Rules Article 22;
LCIA Rules Article 25.
27) See ICC Rules Article 21; ICC Rules for a Pre-Arbitral Referee Procedure Article 3(2) (no ex
parte proceedings).
28) Compare Schwartz, The Practices and Experience of the ICC Court in ICC, Conservatory and
Provisional Measures in International Arbitration 59 n.48 (1993).
29) See W. Craig, W. Park & J. Paulsson, International Chamber of Commerce Arbitration §26.05
(2d ed. 1990).

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 30) For commentary, see Becker, Attachments in Aid of International Arbitration – The American
Position, 1 Arb. Int'l 40 (1985); Brody, An Argument for Pre-Award Attachment in International
Arbitration Under the New York Convention, 18 Cornell Int'l L. J. 99 (1985); Brower & Tupman,
Court-Ordered Provisional Measures Under the New York Convention, 80 Am. J. Int'l L. 24
(1986); Hoellering, Interim Measures and Arbitration: The Situation in the United States, Arb.
J. 22 (June 1991); Jarvin, Is Exclusion of Concurrent Courts' Jurisdiction Over Conservatory
Measures to be Introduced by a Revision of the Convention?, 6 J. Int'l Arb. 171 (1989);
McDonnell, The Availability of Provisional Relief in International Commercial Arbitration, 22
Colum. J. Transn. L. 273 (1984); Reichert, Provisional Remedies in the Context of International
Commercial Arbitration, 3 Int'l Tax & Bus. Law. 373 (1986).
31) E.g., Jarvin, Is Exclusion of Concurrent Courts' Jurisdiction Over Conservatory Measures to be
Introduced by a Revision of the Convention?, 6 J. Int'l Arb. 171 (1989) (“Intervention by state
courts offers the only effective means for implementing conservatory measures during an
arbitration.”).
32) See infra pp. 945-46; I.A.T.D. Assoc. Inc. v. Podar Bros., 636 F.2d 75 (4th Cir. 1981); McCreary
Tire & Rubber Co. v. CEAT SpA, 501 F.2d 1032 (3d Cir. 1974); Cooper v. Ateliers de la
Motobecane, SA, 442 N.E.2d 1239 (N.Y. Ct. App. 1982).
33) See infra pp. 945-46; Carolina Power & Light Co. v. Uranex, 451 F.Supp. 1044 (N.D. Cal. 1977);
Rhone Mediterranee etc. v. Lauro, 555 F.Supp. 481 (D.V.I. 1982).
34) See authorities cited at infra pp. 946-47.
35) 501 F.2d 1032 (3d Cir. 1974).
36) 501 F.2d at 1038.
37) See infra pp. 945-46.
38) 456 N.Y.S.2d 728 (Ct. App. 1982).
39) See infra pp. 947-48; Drexel Burnham Lambert Inc. v. Ruebsamen, 139 A.D.2d 323 (1st Dept.
1988).
40) See infra pp. 946-47; Carolina Power & Light Co. v. Uranex, 451 F.Supp. 1044 (N.D. Calif. 1977).
41) Borden, Inc. v. Meiji Milk Products Co., 919 F.2d 822 (2d Cir. 1990).
42) If the courts of some other jurisdiction were able to obtain in personam jurisdiction over
both Uranex and Homestake, then it would be appropriate for this court to dismiss the
instant action and leave CP&L to its remedies in that jurisdiction. There appears to be
little question that a federal district court with in personam jurisdiction over both the
alleged debtor and the stakeholder could issue orders for security purposes that would
have extraterritorial effect. United States v. First Nat'l City Bank, 379 U.S. 378 (1965); Fleming
v. Gray Mfg. Co., 352 F.Supp. 724 (D. Conn. 1973). Neither party, however, has suggested that
there is any state where in personam jurisdiction could be obtained over both Homestake
and Uranex. If the courts of another jurisdiction could obtain in personam jurisdiction only
over Uranex, it is possible that an order running against Uranex would also bind
Homestake in the sense that Homestake could be an “aider and abettor” in the violation of
the injunction if after notice of the injunction it simply transferred the funds to France.
South Cent. Bell Tel. Co. v. Constant Inc., 304 F.Supp. 732 (E.D. La. 1969), aff'd, 437 F.2d 1207
(5th Cir. 1971); Fed.R.Civ.P. 65. Such courts, however, would be unable to undertake civil
contempt proceedings as to Homestake without personal jurisdiction, and after removal of
the assets contempt procedures against Uranex would be an empty formality. The court is
unwilling to send CP&L on this more hazardous procedural route.
43) Uranex also argues that a prejudgment attachment is inconsistent with the agreement of
the parties. Article 11 of the contract between Uranex and CP&L, however, provides only
that:
Arbitration. Any controversy or claim arising out of this Agreement, or the breach thereof,
which the parties are unable to settle by mutual consultation, shall be settled by
arbitration by three impartial Arbitrators, all of whom shall be attorneys, in accordance
with the Rules of the American Arbitration Association, and judgment upon the award
rendered by the Arbitrators may be entered in any court having jurisdiction thereof. The
arbitration shall take place in New York, New York.
Hence, prejudgment attachment can be considered inconsistent with the agreement only if
one decides that such attachment is inherently inconsistent with any agreement to
arbitrate. In that sense defendant's argument premised on the contract is actually
identical with defendant's argument premised on the Convention. Insofar as defendant's
contractual argument might be considered separately, the court finds it to be without
basis.
44) For commentary, see Karmel, Injunctions Pending Arbitration and the Federal Arbitration Act:
A Perspective From Contract Law, 54 U. Chi. L. Rev. 1373 (1987); Note, The United States
Arbitration Act and Preliminary Injunctions: A New Interpretation of an Old Statute, 66 B.U. L.
Rev. 1041 (1986); Pike, The Federal Arbitration Act: A Threat to Injunctive Relief, 21 Willamette
L. Rev. 674 (1985); Note, Availability of Provisional Remedies in Arbitration Proceedings, 17
N.Y.U.L.Q. Rev. 638 (1940).
45) See infra p. 956.
46) See infra pp. 957-58.
47) See infra pp. 960-71.
48) Rogers, Burgan, Shahine & Deschler, Inc. v. Dongsan Construction Co., 598 F.Supp. 754
(S.D.N.Y. 1984).
49) Borden, Inc. v. Meiji Milk Products Co., 919 F.2d 822 (2d Cir. 1990).

39
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
 50) Article XVI of the subcontract provides as follows: “If at any time either party considers that
any question, dispute or difference whatsoever has arisen between the parties herein in
relation to or in conjunction with this Agreement then that party may give to the other
party notice in writing of the existence of such question, dispute or difference and, unless
it shall have been amicably resolved within one month from the date of such notice, the
same shall be referred to arbitration to be finally settled under the Rules of Conciliation
and Arbitration of the International Chamber of Commerce, unless otherwise agreed, in
Paris, France.”
51) Dongsan also argues that the status quo will be upset if it “is unable to maintain its security
in the form of the Letter of Guarantee” (emphasis added), presumably because the Letter
might expire by its own terms and Dongsan would be left with nothing. RBSD has, however,
agreed to secure an extension of the Letter for the duration of the arbitration. RBSD is
directed to do so and to file proof of such extension with the Court by December 15, 1984.
Thus, the status quo will be maintained.
52) The underlying dispute involves nearly one million dollars, RBSD has not attempted to
restrain Dongsan from doing anything with assets valued near that amount to secure any
potential judgment. Rather it has merely sought to avoid increasing the amounts
potentially unrecoverable from Dongsan.
53) The Court notes that there is some question about the availability of prejudgment
attachment under the Convention. Compare Carolina Power & Light v. Uranex, 451 F.Supp.
1044 (N.D.Cal. 1977) (yes) with Metropolitan World Tanker Corp. v. P.N. Pertambangan
Minjakdangas Bumi Nasional, 427 F.Supp. 2 (S.D.N.Y. 1975) (no). However, the relief sought
here is not an attachment. Dongsan is in no way restricted in its use or possession of its
assets, but only in its power to gather more assets from RBSD leaving RBSD with only the
recourse of recovery in Korea.
54) Subsection 7502(a) provides that:
A special proceeding shall be used to bring before a court the first application arising out
of an arbitrable controversy which is not made by motion in a pending action. The
proceeding shall be brought in the court and county specified in the agreement; or, if none
be specified, in a court in the county in which one of the parties resides or is doing
business, or if there is no such county, in a court in any county; or in a court in the county in
which the arbitration was held....
55) Schwartz, The Practices and Experience of the ICC Court, in ICC, Conservatory and Provisional
Measures in International Arbitration 59 (1993).
56) Some national laws expressly permit arbitrators to impose enforceable sanctions.
Netherlands Arbitration Act of 1986 Article 1056.
57) A. Redfern & M. Hunter, International Commercial Arbitration 361-63 (2d ed. 1991).
58) See supra p. 489.
59) E.g., Sperry Int'l Trade, Inc. v. Israel, 689 F.2d 301 (2d Cir. 1982); Island Creek Coal Sales Co. v.
Gainesville, 729 F.2d 1046 (6th Cir. 1984). See infra pp. 978-79.
60) See supra pp. 704-11.
61) See supra pp. 927-30.

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 62) The Award provided, in relevant part, as follows:
Upon the motion of [Sperry], in an arbitration before this Tribunal commenced by a
Demand for Arbitration dated August 3, 1981 (as amended), for injunctive relief with respect
to a Letter of Credit (no. WCG-150297) purchased by [Sperry] from Citibank, N.A., or the
proceeds thereof, and for other relief, and upon hearing and considering the arguments
presented and the large number of documents submitted (directly or, during the month
prior to the hearing, through the American Arbitration Association) on behalf of [Sperry]
and [Israel] in favor of and in opposition to such injunctive and other relief;
Now, upon due consideration, the arbitrators order as follows:
1. The proceeds of said Letter of Credit shall be paid into an escrow account (“Escrow
Account”) in the joint names of [Sperry] and [Israel] with such bank or other entity in the
United States of America as shall be agreed upon in writing by [Sperry] and [Israel] prior to
the release of such proceeds by Citibank, N.A. or, in default of such agreement, with
Citibank, N.A.
2. [Sperry] and [Israel] shall maintain the Escrow Account in their joint names as aforesaid
and the moneys or other investments standing to the credit thereof, including all interest
or other income which may be earned thereon, shall not be withdrawn or transferred until
(and then only in such manner, on such terms and in such amount, whether as to the whole
or in part, as) [Sperry] and [Israel] shall so agree in writing or, in default of such agreement,
this Tribunal or a Court in the State of New York or Federal Court in the United States of
America shall finally so determine.
3. [Sperry] and [Israel] shall not permit the Escrow Account to become subject to any lien or
incumbrance without the leave of this Tribunal or of a Court in the State of New York or
Federal Court in the United States of America....
6. Any dispute or difference with respect to the terms of this order shall be promptly
referred to this Tribunal for decision by the arbitrators.
7. This Tribunal reserves for further consideration upon the application of either party all
other claims and issues arising under or in connection with [Sperry's] motion.
8. This order shall constitute an Award of the arbitrators and either party is at liberty to
apply forthwith to the United States District Court for the Southern District of New York for
confirmation and/or enforcement thereof.
63) Israel also contended that the Award was an interim decision not ripe for confirmation,
Michaels v. Mariforum Shipping, SA, 624 F.2d 411, 413-15 (2d Cir. 1980).... On this appeal
Israel has abandoned its prematurity argument, which had been rejected by Judge Pollack
because (a) the Award itself stated that either party could seek confirmation, indicating
that it was a final decision as to the severable issues regarding the letter of credit, see
Moyer v. Van-Dye-Way Corp., 126 F.2d 339, 341 (3d Cir. 1942); Puerto Rico Maritime Shipping
Authority v. Star Lines Ltd, 454 F.Supp. 368, 372-73 (S.D.N.Y. 1978), and (b) the Contract
provides that any arbitration award “shall be deemed final and may be enforced.” ...
64) Paragraph 45 of the Contract requires the arbitrators to “interpret the contract in
accordance with the substantive laws of the State of New York,” and paragraph 62 provides
that the Contract “shall be interpreted, and the legal rights of the parties ... shall be
determined, in accordance with the laws [of the State of New York].” Under New York law
the power of a court to vacate an arbitrator's award is no greater than the power of a
federal court under 9 U.S.C. §§9 and 10....

41
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Document information
Publication
French Arbitration Law and
Practice: A Dynamic Civil Law
Approach to International
Arbitration (Second Edition)
Promulgation
21 April 1961
Bibliographic reference
'European Convention
(Geneva)', in Jean Rouche ,
Gerald H. Pointon , et al.,
French Arbitration Law and
Practice: A Dynamic Civil Law
Approach to International
Arbitration (Second Edition),
2nd edition (© Kluwer Law
International; Kluwer Law
International 2009) pp. 336 -
353
KluwerArbitration
European Convention (Geneva)
European Convention of 1961 List of Contracting States and Signatories
Convention européenne sur l'arbitrage commercial international, 21 avril 1961 (Convention de
European du 21 avril 1961)
European Convention on International Commercial Arbitration of 1961
Done at Geneva, April 21, 1961 United Nations, Treaty Series, vol. 484, p. 364 No. 7041 (1963-1964)
THE UNDERSIGNED, DULY AUTHORIZED,
Convened under the auspices of the Economic Commission for Europe of the United Nations.
Having noted that on 10th June 1958 at the United Nations Conference on International
P 865 Commercial Arbitration has been signed in New York a Convention on the Recognition and
P 867 Enforcement of Foreign Arbitral Awards,
Desirous of promoting the development of European trade by, as far as possible, removing
certain difficulties that may impede the organization and operation of international
commercial arbitration in relations between physical or legal persons of different European
countries,
Have agreed on the following provisions:
Article I -SCOPE OF THE CONVENTION
1. This Convention shall apply:
(a) to arbitration agreements concluded for the purpose of settling disputes arising from
international trade between physical or legal persons having, when concluding the agreement,
their habitual place of residence or their seat in different Contracting States;
(b) to arbitral procedures and awards based on agreements referred to in paragraph 1(a)
above.
2. For the purpose of this Convention,
(a) the term: “arbitration agreement” shall mean either an arbitral clause in a contract or an
arbitration agreement, the contract or arbitration agreement being signed by the parties, or
contained in an exchange of letters, telegrams, or in a communication by teleprinter and, in
relations between States whose laws do not require that an arbitration agreement be made in
writing, any arbitration agreement concluded in the form authorized by these laws;
(b) the term “arbitration” shall mean not only settlement by arbitrators appointed for each
case (ad hoc arbitration) but also by permanent arbitral institutions;
(c) the term “seat” shall mean the place of the situation of the establishment that has made
the arbitration agreement.
Article II -RIGHT OF LEGAL PERSONS OF PUBLIC LAW TO RESORT TO ARBITRATION
1. In cases referred to in Article I, paragraph 1, of this Convention, legal persons considered by
the law which is applicable to them as “legal persons of public law” have the right to conclude
valid arbitration agreements.
P 867 2. On signing, ratifying or acceding to this Convention any State shall be entitled to declare
P 868 that it limits the above faculty to such conditions as may be stated in its declaration.
Article III -RIGHT OF FOREIGN NATIONALS TO BE DESIGNATED AS ARBITRATORS
In arbitration covered by this Convention, foreign nationals may be designated as arbitrators.
Article IV -ORGANIZATION OF THE ARBITRATION
1. The parties to an arbitration agreement shall be free to submit their disputes:
(a) to a permanent arbitral institution; in this case, the arbitration proceedings shall be held
in conformity with the rules of the said institution;
(b) to an ad hoc arbitral procedure; in this case, they shall be free inter alia
(i) to appoint arbitrators or to establish means for their appointment in the event of an actual
dispute;
(ii) to determine the place of arbitration; and
(iii) to lay down the procedure to be followed by the arbitrators.
 2. Where the parties have agreed to submit any disputes to an ad hocarbitration, and where
within thirty days of the notification of the request for arbitration to the respondent one of the
parties fails to appoint his arbitrator, the latter shall, unless otherwise provided, be appointed
at the request of the other party by the President of the competent Chamber of Commerce of
the country of the defaulting party's habitual place of residence or seat at the time of the
introduction of the request for arbitration. This paragraph shall also apply to the replacement
of the arbitrator(s) appointed by one of the parties or by the President of the Chamber of
Commerce above referred to.
3. Where the parties have agreed to submit any disputes to an ad hocarbitration by one or
more arbitrators and the arbitration agreement contains no indication regarding the
organization of the arbitration, as mentioned in paragraph 1 of this Article, the necessary steps
shall be taken by the arbitrator(s) already appointed, unless the parties are able to agree
thereon and without prejudice to the case referred to in paragraph 2 above. Where the parties
cannot agree on the appointment of the sole arbitrator or where the arbitrators appointed
cannot agree on the measures to be taken, the claimant shall apply for the necessary action,
where the place of arbitration has been agreed upon by the parties, at his option to the
President of the Chamber of Commerce of the place of arbitration agreed upon or to the
President of the competent Chamber of Commerce of the respondent's habitual place of
residence or seat at the time of the introduction of the request for arbitration. Where such a
P 868 place has not been agreed upon, the claimant shall be entitled at his option to apply for the
P 869 necessary action either to the President of the competent Chamber of Commerce of the
country of the respondent's habitual place of residence or seat at the time of the introduction
of the request for arbitration, or to the Special Committee whose composition and procedure
are specified in the Annex to this Convention. Where the claimant fails to exercise the rights
given to him under this paragraph the respondent or the arbitrator(s) shall be entitled to do so.
4. When seized of a request the President or the Special Committee shall be entitled as need
be:
(a) to appoint the sole arbitrator, presiding arbitrator, umpire, or referee;
(b) to replace the arbitrator(s) appointed under any procedure other than that referred to in
paragraph 2 above;
(c) to determine the place of arbitration, provided that the arbitrator(s) may fix another place
of arbitration;
(d) to establish directly or by reference to the rules and statutes of a permanent arbitral
institution the rules of procedure to be followed by the arbitrator(s), provided that the
arbitrators have not established these rules themselves in the absence of any agreement
thereon between the parties.
5. Where the parties have agreed to submit their disputes to a permanent arbitral institution
without determining the institution in question and cannot agree thereon, the claimant may
request the determination of such institution in conformity with the procedure referred to in
paragraph 3 above.
6. Where the arbitration agreement does not specify the mode of arbitration (arbitration by a
permanent arbitral institution or an ad hoc arbitration) to which the parties have agreed to
submit their dispute, and where the parties cannot agree thereon, the claimant shall be
entitled to have recourse in this case to the procedure referred to in paragraph 3 to determine
the question. The President of the competent Chamber of Commerce or the Special Committee,
shall be entitled either to refer the parties to a permanent arbitral institution or to request the
parties to appoint their arbitrator within such time-limits as the President of the competent
Chamber of Commerce or the Special Committee may have fixed and to agree within such
time-limits on the necessary measures for the functioning of the arbitration. In the latter case,
the provisions of paragraphs 2, 3 and 4 of this Article shall apply.
7. Where within a period of sixty days from the moment when he was requested to fulfil one of
the functions set out in paragraphs 2, 3, 4, 5 and 6 of this Article, the President of the Chamber
of Commerce designated by virtue of these paragraphs has not fulfilled one of these functions,
the party requesting shall be entitled to ask the Special Committee to do so.

Article V -PLEA AS TO ARBITRAL JURISDICTION

1. The party which intends to raise a plea as to the arbitrator's jurisdiction based on the fact
that the arbitration agreement was either non-existent or null and void or had lapsed shall do
P 869 so during the arbitration proceedings, not later than the delivery of its statement of claim or
P 870 defence relating to the substance of the dispute; those based on the fact that an arbitrator has
exceeded his terms of reference shall be raised during the arbitration proceedings as soon as
the question on which the arbitrator is alleged to have no jurisdiction is raised during the
arbitral procedure. Where the delay in raising the plea is due to a cause which the arbitrator
deems justified, the arbitrator shall declare the plea admissible.
2. Pleas to the jurisdiction referred to in paragraph 1 above that have not been raised during
the time-limits there referred to, may not be entered either during a subsequent stage of the
arbitral proceedings where they are pleas left to the sole discretion of the parties under the
law applicable by the arbitrator, or during subsequent court proceedings concerning the
substance or the enforcement of the award where such pleas are left to the discretion of the
parties under the rule of conflict of the court seized of the substance of the dispute or the
enforcement of the award. The arbitrator's decision on the delay in raising the plea, will,
 however, be subject to judicial control.
3. Subject to any subsequent judicial control provided for under the lex fori, the arbitrator
whose jurisdiction is called in question shall be entitled to proceed with the arbitration, to rule
on his own jurisdiction and to decide upon the existence or the validity of the arbitration
agreement or of the contract of which the agreement forms part.

Article VI -JURISDICTION OF COURTS OF LAW

1. A plea as to the jurisdiction of the court made before the court seized by either party to the
arbitration agreement, on the basis of the fact that an arbitration agreement exists shall,
under penalty of estoppel, be presented by the respondent before or at the same time as the
presentation of his substantial defence, depending upon whether the law of the court seized
regards this plea as one of procedure or of substance.
2. In taking a decision concerning the existence or the validity of an arbitration agreement,
courts of Contracting States shall examine the validity of such agreement with reference to the
capacity of the parties, under the law applicable to them, and with reference to other
questions.
(a) under the law to which the parties have subjected their arbitration agreement;
(b) failing any indication thereon, under the law of the country in which the award is to be
made;
(c) failing any indication as to the law to which the parties have subjected the agreement, and
where at the time when the question is raised in court the country in which the award is to be
made cannot be determined, under the competent law by virtue of the rules of conflict of the
court seized of the dispute.
P 870 The courts may also refuse recognition of the arbitration agreement if under the law of their
P 871 country the dispute is not capable of settlement by arbitration.
3. Where either party to an arbitration agreement has initiated arbitration proceedings before
any resort is had to a court, courts of Contracting States subsequently asked to deal with the
same subject-matter between the same parties or with the question whether the arbitration
agreement was non-existent or null and void or had lapsed, shall stay their ruling on the
arbitrator's jurisdiction until the arbitral award is made, unless they have good and substantial
reasons to the contrary.
4. A request for interim measures or measures of conservation addressed to a judicial
authority shall not be deemed incompatible with the arbitration agreement, or regarded as a
submission of the substance of the case to the court.

Article VII -APPLICABLE LAW

1. The parties shall be free to determine, by agreement, the law to be applied by the
arbitrators to the substance of the dispute. Failing any indication by the parties as to the
applicable law, the arbitrators shall apply the proper law under the rule of conflict that the
arbitrators deem applicable. In both cases the arbitrators shall take account of the terms of
the contract and trade usages.
2. The arbitrators shall act as amiables compositeurs if the parties so decide and if they may
do so under the law applicable to the arbitration.

Article VIII -REASONS FOR THE AWARD

The parties shall be presumed to have agreed that reasons shall be given for the award unless
they
(a) either expressly declare that reasons shall not be given; or
(b) have assented to an arbitral procedure under which it is not customary to give reasons for
awards, provided that in this case neither party requests before the end of the hearing, or if
there has not been a hearing then before the making of the award, that reasons be given.

Article IX -SETTING ASIDE OF THE ARBITRAL AWARD

1. The setting aside in a Contracting State of an arbitral award covered by this Convention shall
only constitute a ground for the refusal of recognition or enforcement in another Contracting
P 871 State where such setting aside took place in a State in which, or under the law of which, the
P 872 award has been made and for one of the following reasons:
(a) the parties to the arbitration agreement 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
(b) the party requesting the setting aside of the award was not given proper notice of the
appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to
present his case; or
(c) the award deals with a difference not contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on matters beyond the scope of the
 submission to arbitration, provided that, if the decisions on matters submitted to arbitration
can be separated from those not so submitted, that part of the award which contains decisions
on matters submitted to arbitration need not be set aside;
(d) the composition of the arbitral authority or the arbitral procedure was not in accordance
with the agreement of the parties, or failing such agreement, with the provisions of Article IV of
this Convention.
2. In relations between Contracting States that are also parties to the New York Convention on
the Recognition and Enforcement of Foreign Arbitral Awards of 10th June 1958, paragraph 1 of
this Article limits the application of Article V (1) (e) of the New York Convention solely to the
cases of setting aside set out under paragraph 1 above.

Article X -FINAL CLAUSES

1. This Convention is open for signature or accession by countries members of the Economic
Commission for Europe and countries admitted to the Commission in a consultative capacity
under paragraph 8 of the Commission's terms of reference.
2. Such countries as may participate in certain activities of the Economic Commission for
Europe in accordance with paragraph 11 of the Commission's terms of reference may become
Contracting Parties to this Convention by acceding thereto after its entry into force.
3. The Convention shall be open for signature until 31 December 1961 inclusive. Thereafter, it
shall be open for accession.
4. This Convention shall be ratified.
5. Ratification or accession shall be effected by the deposit of an instrument with the
Secretary-General of the United Nations.
6. When signing, ratifying or acceding to this Convention, the Contracting Parties shall
communicate to the Secretary-General of the United Nations a list of the Chambers of
Commerce or other institutions in their country who will exercise the functions conferred by
P 872 virtue of Article IV of this Convention on Presidents of the competent Chambers of Commerce.
P 873
7. The provisions of the present Convention shall not affect the validity of multi-lateral or
bilateral agreements concerning arbitration entered into by Contracting States.
8. This Convention shall come into force on the ninetieth day after five of the countries
referred to in paragraph 1 above have deposited their instruments of ratification or accession.
For any country ratifying or acceding to it later this Convention shall enter into force on the
ninetieth day after the said country has deposited its instrument of ratification or accession.
9. Any Contracting Party may denounce this Convention by so notifying the Secretary-General
of the United Nations. Denunciation shall take effect twelve months after the date of receipt by
the Secretary-General of the notification of denunciation.
10. If, after the entry into force of this Convention, the number of Contracting Parties is
reduced, as a result of denunciations, to less than five, the Convention shall cease to be in
force from the date on which the last of such denunciations takes effect.
11. The Secretary-General of the United Nations shall notify the countries referred to in
paragraph 1, and the countries which have become Contracting Parties under paragraph 2
above, of
(a) declarations made under Article II, paragraph 2;
(b) ratifications and accessions under paragraphs 1 and 2 above;
(c) communications received in pursuance of paragraph 6 above;
(d) the dates of entry into force of this Convention in accordance with paragraph 8 above;
(e) denunciations under paragraph 9 above;
(f) the termination of this Convention in accordance with paragraph 10 above.
12. After 31 December 1961, the original of this Convention shall be deposited with the
Secretary-General of the United Nations, who shall transmit certified true copies to each of the
countries mentioned in paragraphs 1 and 2 above.

IN WITNESS THEREOF the undersigned, being duly authorized thereto, have signed this
Convention.
P 873 DONE at Geneva, this twenty-first day of April, one thousand nine hundred and sixty-one, in a
P 874 single copy in the English, French and Russian languages, each text being equally authentic.

AnnexCOMPOSITION AND PROCEDURE OF THE SPECIAL COMMITTEE REFERRED TO IN ARTICLE IV

OF THE CONVENTION
1. The Special Committee referred to in Article IV of the Convention shall consist of two regular
members and a Chairman. One of the regular members shall be elected by the Chambers of
Commerce or other institutions designated, under Article X, paragraph 6, of the Convention, by
States in which at the time when the Convention is open to signature national Committees of
the International Chamber of Commerce exist, and which at the time of the election are parties
 to the Convention. The other member shall be elected by the Chambers of Commerce or other
institutions designated, under Article X, paragraph 6, of the Convention, by States in which at
the time when the Convention is open to signature no National Committees of the International
Chamber of Commerce exist and which at the time of the election are parties to the
Convention.
2. The persons who are to act as Chairman of the Special Committee pursuant to paragraph 7 of
this Annex shall also be elected in like manner by the Chambers of Commerce or other
institutions referred to in paragraph 1 of this Annex.
3. The Chambers of Commerce or other institutions referred to in paragraph 1 of this Annex
shall elect alternates at the same time and in the same manner as they elect the Chairman and
other regular members, in case of the temporary inability of the Chairman or regular members
to act. In the event of the permanent inability to act or of the resignation of a Chairman or of a
regular member, then the alternate elected to replace him shall become, as the case may be,
the Chairman or regular member, and the group of Chambers of Commerce or other institutions
which had elected the alternate who has become Chairman or regular member shall elect
another alternate.
4. The first elections to the Committee shall be held within ninety days from the date of the
deposit of the fifth instrument of ratification or accession. Chambers of Commerce and other
institutions designated by Signatory States who are not yet parties to the Convention shall also
be entitled to take part in these elections. If however it should not be possible to hold
elections within the prescribed period, the entry into force of paragraphs 3 to 7 of Article IV of
the Convention shall be postponed until elections are held as provided for above.
5. Subject to the provisions of paragraph 7 below, the members of the Special Committee shall
be elected for a term of four years. New elections shall be held within the first six months of
the fourth year following the previous elections. Nevertheless, if a new procedure for the
election of the members of the Special Committee has not produced results, the members
previously elected shall continue to exercise their functions until the election of new members.
P 874 6. The results of the elections of the members of the Special Committee shall be
P 745 communicated to the Secretary-General of the United Nations who shall notify the States
referred to in Article X, paragraph 1, of the Convention and the States which have become
Contracting Parties under Article X, paragraph 2. The Secretary-General shall likewise notify the
said States of any postponement and of the entry into force of paragraphs 3 and 7 of Article IV
of the Convention in pursuance of paragraph 4 of this Annex.
7. The persons elected to the office of Chairman shall exercise their functions in rotation, each
during a period of two years. The question which of these two persons shall act as chairman
during the first two-year period after entry into force of the Convention shall be decided by the
drawing of lots. The office of Chairman shall thereafter be vested, for each successive two year
period, in the person elected Chairman by the group of countries other than that by which the
Chairman exercising his functions during the immediately preceding two-year period was
elected.
8. The reference to the Special Committee of one of the requests referred to in paragraphs 3 to
7 of the aforesaid Article IV shall be addressed to the Executive Secretary of the Economic
Commission for Europe. The Executive Secretary shall in the first instance lay the request
before the member of the Special Committee elected by the group of countries other than that
by which the Chairman holding office at the time of the introduction of the request was
elected. The proposal of the member applied to in the first instance shall be communicated by
the Executive Secretary to the other member of the Committee and, if that other member
agrees to this proposal, it shall be deemed to be the Committee's ruling and shall be
communicated as such by the Executive Secretary to the person who made the request.
9. If the two members of the Special Committee applied to by the Executive Secretary are
unable to agree on a ruling by correspondence, the Executive Secretary of the Economic
Commission for Europe shall convene a meeting of the said Committee at Geneva in an
attempt to secure a unanimous decision of unanimity, the Committee's decision shall be given
by a majority vote and shall be communicated by the Executive Secretary to the person who
made the request.
10. The expenses connected with the Special Committee's action shall be advanced by the
person requesting such action but shall be considered as costs in the cause.
Composition and Procedure of the Special Committee Referred to in Article IV of the
Convention

(1) The Special Committee referred to in Article IV of the Convention shall consist of two
regular members and a Chairman. One of the regular members shall be elected by the
Chambers of Commerce or other institutions designated, under Article X, paragraph 6, of the
Convention, by States in which at the time when the Convention is open to signature National
Committees of the International Chamber of Commerce exist, and which at the time of the
election are parties to the Convention. The other member shall be elected by the Chambers of
Commerce or other institutions designated, under Article X, paragraph 6, of the Convention, by
States in which at the time when the Convention is open to signature no National Committees
of the International Chamber of Commerce exist and which at the time of the election are
parties to the Convention.
(2) The persons who are to act as Chairman of the Special Committee pursuant to paragraph 7
of this Annex shall also be elected in like manner by the Chambers of Commerce or other
 institutions referred to in paragraph 1 of this Annex.
(3) The Chambers of Commerce or other institutions referred to in paragraph 1 of this Annex
shall elect alternates at the same time and in the same manner as they elect the Chairman
and other regular members, in case of the temporary inability of the Chairman or regular
members to act. In the event of the permanent inability to act or of the resignation of a
Chairman or of a regular member, then the alternate elected to replace him shall become, as
the case may be, the Chairman or regular member, and the group of Chambers of Commerce
or other institutions which had elected the alternate who has become Chairman or regular
member shall elect another alternate.
(4) The first elections to the Committee shall be held within ninety days from the date of the
deposit of the fifth instrument of ratification or accession. Chambers of Commerce and other
institutions designated by Signatory States who are not yet parties to the Convention shall
also be entitled to take part in these elections. If however it should not be possible to hold
elections within the prescribed period, the entry into force of paragraphs 3 to 7 of Article IV of
the Convention shall be postponed until elections are held as provided for above.
(5) Subject to the provisions of paragraph 7 below, the members of the Special Committee
shall be elected for a term of four years. New elections shall be held within the first six
P 745 months of the fourth year following the previous elections. Nevertheless, if a new procedure
P 746 for the election of the members of the Special Committee has not produced results, the
members previously elected shall continue to exercise their functions until the election of
new members.
[Paragraph 6 which concerns communication to the Secretary General of the United Nations of
the results of the elections to the Special Committee is not reproduced here].
(7) The persons elected to the office of Chairman shall exercise their functions in rotation,
each during a period of two years. The question which of these two persons shall act as
Chairman during the first two-year period after the entry into force of the Convention shall be
decided by the drawing of lots. The office of Chairman shall thereafter be vested, for each
successive two-year period, in the person elected Chairman by the group of countries other
than that by which the Chairman exercising his functions during the immediately preceding
two-year period was elected.
(8) The reference to the Special Committee of one of the requests referred to in paragraph 3
to 7 of the aforesaid Article IV shall be addressed to the Executive Secretary of the Economic
Commission for Europe. The Executive Secretary shall in the first instance lay the request
before the member of the Special Committee elected by the group of countries other than
that by which the Chairman holding office at the time of the introduction of the request was
elected. The proposal of the member applied to in the first instance shall be communicated
by the Executive Secretary to the other member of the Committee and, if that other member
agrees to this proposal, it shall be deemed to be the Committee's ruling and shall be
communicated as such by the Executive Secretary to the person who made the request.
(9) If the two members of the Special Committee applied to by the Executive Secretary are
unable to agree on a ruling by correspondence, the Executive Secretary of the Economic
Commission for Europe shall convene a meeting of the said Committee at Geneva in an
attempt to secure a unanimous decision on the request. In the absence of unanimity, the
Committee's decision shall be given by majority vote and shall be communicated by the
Executive Secretary to the person who made the request.
P 746 (10) The expenses connected with the Special Committee's action shall be advanced by the
person requesting such action but shall be considered as costs in the cause.
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Document information
Publication
ICCA International Handbook
on Commercial Arbitration
Promulgation
10 June 1958
Bibliographic reference
'Convention on the
Recognition and
Enforcement of Foreign
Arbitral Awards (New York
Convention, 1958)', in Jan
Paulsson and Lise Bosman
(eds), ICCA International
Handbook on Commercial
Arbitration, (© Kluwer Law
International; Kluwer Law
International 1984,
Supplement No. 29,
December 1999) pp. 1 - 6
KluwerArbitration
Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (New York Convention, 1958)
Previous version (#)
Done at New York, 10 June 1958 United Nations, Treaty Series, vol. 330, p. 38 No. 4739 (1959)
United Nations Convention on Recognition and Enforcement of Foreign Arbitral Awards (1)
Convention pour la reconnaissance et l'exécution des sentences arbitrales étrangères, 10 juin
1958 (Convention de New York du 10 juin 1958)
Article I
1. This Convention shall apply to the recognition and enforcement of arbitral awards made in
the territory of a State other than the State where the recognition and enforcement of such
awards are sought, and arising out of differences between persons, whether physical or legal. It
shall also apply to arbitral awards not considered as domestic awards in the State where their
recognition and enforcement are sought.
2. The term “arbitral awards” shall include not only awards made by arbitrators appointed for
each case but also those made by permanent arbitral bodies to which the parties have
submitted.
3. When signing, ratifying or acceding to this Convention, or notifying extension under Article X
hereof, any State may on the basis of reciprocity declare that it will apply the Convention to
the recognition and enforcement of awards made only in the territory of another Contracting
State. It may also declare that it will apply the Convention only to differences arising out of
legal relationships, whether contractual or not, which are considered as commercial under the
national law of the State making such declaration.
Article II
1. Each Contracting State shall recognize an agreement in writing under which the parties
undertake to submit to arbitration all or any differences which have arisen or which may arise
between them in respect of a defined legal relationship, whether contractual or not,
concerning a subject matter capable of settlement by arbitration.
2. The term “agreement in writing” shall include an arbitral clause in a contract or an
arbitration agreement, signed by the parties or contained in an exchange of letters or
telegrams.
3. The court of a Contracting State, when seized of an action in a matter in respect of which the
parties have made an agreement within the meaning of this article, shall, at the request of one
of the parties, refer the parties to arbitration, unless it finds that the said agreement is null
and void, inoperative or incapable of being performed.
Article III
Each Contracting State shall recognize arbitral awards as binding and enforce them in
accordance with the rules of procedure of the territory where the award is relied upon, under
the conditions laid down in the following articles. There shall not be imposed substantially
more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral
awards to which this Convention applies than are imposed on the recognition or enforcement
of domestic arbitral awards.
Article IV
1. To obtain the recognition and enforcement mentioned in the preceding article, the party
applying for recognition and enforcement shall, at the time of application, supply:
(a) The duly authenticated original award or a duly certified copy thereof;
(b) The original agreement referred to in Article II or a duly certified copy thereof.
2. If the said award or agreement is not made in an official language of the country in which
the award is relied upon, the party applying for recognition and enforcement of the award shall
produce a translation of these documents into such language. The translation shall be certified
by an official or sworn translator or by a diplomatic or consular agent.
Article V
1. 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
(b) the party against whom the award is invoked was not given proper notice of the
appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to
present his case; or
(c) The award deals with a difference not contemplated by or not falling within the terms of
the submission to arbitration, or it contains decisions on matters beyond the scope of the
submission to arbitration, provided that, if the decisions on matters submitted to arbitration
can be separated from those not so submitted, that part of the award which contains decisions
on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance
with the agreement of the parties, or, failing such agreement, was not in accordance with the
law of the country where the arbitration took place; or
(e) The award has not yet become binding on the parties or has been set aside or suspended
by a competent authority of the country in which, or under the law of which, that award was
made.
2. Recognition and enforcement of an arbitral award may also be refused if the competent
authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the
law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that
country.

Article VI
If an application for the setting aside or suspension of the award has been made to a
competent authority referred to in Article V(1)(e), the authority before which the award is
sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement
of the award and may also, on the application of the party claiming enforcement of the award,
order the other party to give suitable security.

Article VII
1. The provisions of the present Convention shall not affect the validity of multilateral or
bilateral agreements concerning the recognition and enforcement of arbitral awards entered
into by the Contracting States nor deprive any interested party of any right he may have to
avail himself of an arbitral award in the manner and to the extent allowed by the law or the
treaties of the country where such award is sought to be relied upon.
2. The Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the
Execution of Foreign Arbitral Awards of 1927 shall cease to have effect between Contracting
States on their becoming bound and to the extent that they become bound, by this Convention.

Article VIII
1. This Convention shall be open until 31 December 1958 for signature on behalf of any Member
of the United Nations and also on behalf of any other State which is or hereafter becomes a
member of any specialized agency of the United Nations, or which is or hereafter becomes a
party to the Statute of the International Court of Justice, or any other State to which an
invitation has been addressed by the General Assembly of the United Nations.
2. This Convention shall be ratified and the instrument of ratification shall be deposited with
the Secretary-General of the United Nations.

Article IX
1. This Convention shall be open for accession to all States referred to in Article VIII.
2. Accession shall be effected by the deposit of an instrument of accession with the Secretary-
General of the United Nations.

Article X
1. Any State may, at the time of signature, ratification or accession, declare that this
Convention shall extend to all or any of the territories for the international relations of which it
is responsible. Such a declaration shall take effect when the Convention enters into force for
the State concerned.
2. At any time thereafter any such extension shall be made by notification addressed to the
Secretary-General of the United Nations and shall take effect as from the ninetieth day after
the day of receipt by the Secretary-General of the United Nations of this notification, or as
from the date of entry into force of the Convention for the State concerned, whichever is the
later.
3. With respect to those territories to which this Convention is not extended at the time of
signature, ratification or accession, each State concerned shall consider the possibility of
taking the necessary steps in order to extend the application of this Convention to such
territories, subject, where necessary for constitutional reasons, to the consent of the
Governments of such territories.

Article XI
In the case of a federal or non-unitary State, the following provisions shall apply:
(a) With respect to those articles of this Convention that come within the legislative
jurisdiction of the federal authority, the obligations of the federal Government shall to this
extent be the same as those of Contracting States which are not federal States;
(b) With respect to those articles of this Convention that come within the legislative
jurisdiction of constituent states or provinces which are not, under the constitutional system of
the federation, bound to take legislative action, the federal Government shall bring such
articles with a favourable recommendation to the notice of the appropriate authorities of
constituent states or provinces at the earliest possible moment;
(c) A federal State Party to this Convention shall, at the request of any other Contracting State
transmitted through the Secretary-General of the United Nations, supply a statement of the
law and practice of the federation and its constituent units in regard to any particular
provision of this Convention, showing the extent to which effect has been given to that
provision by legislative or other action.

Article XII
1. This Convention shall come into force on the ninetieth day following the date of deposit of
the third instrument of ratification or accession.
2. For each State ratifying or acceding to this Convention after the deposit of the third
instrument of ratification or accession, this Convention shall enter into force on the ninetieth
day after deposit by such State of its instrument of ratification or accession.

Article XIII
1. Any Contracting State may denounce this Convention by a written notification to the
Secretary-General of the United Nations. Denunciation shall take effect one year after the date
of receipt of the notification by the Secretary-General.
2. Any State which has made a declaration or notification under Article X may, at any time
thereafter, by notification to the Secretary-General of the United Nations, declare that this
Convention shall cease to extend to the territory concerned one year after the date of the
receipt of the notification by the Secretary-General.
3. This Convention shall continue to be applicable to arbitral awards in respect of which
recognition or enforcement proceedings have been instituted before the denunciation takes
effect.

Article XIV
A Contracting State shall not be entitled to avail itself of the present Convention against other
Contracting States except to the extent that it is itself bound to apply the Convention.

Article XV
The Secretary-General of the United Nations shall notify the States contemplated in Article VIII
of the following:
(a) Signatures and ratifications in accordance with Article VIII;
(b) Accessions in accordance with Article IX;
(c) Declarations and notifications under Articles I, X, and XI;
(d) The date upon which this Convention enters into force in accordance with Article XII;
(e) Denunciations and notifications in accordance with Article XIII.

Article XVI
1. This Convention, of which the Chinese, English, French, Russian and Spanish texts shall be
equally authentic, shall be deposited in the archives of the United Nations.
2. The Secretary-General of the United Nations shall transmit a certified copy of this
Convention to the States contemplated in Article VIII.
References
#) For a copy of a previous version of this document, should this be available, please contact
customer support: Contact
1) The Convention entered into force on 7 June 1959.
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Document information
Publication
ICCA International Handbook
on Commercial Arbitration
Promulgation
30 January 1975
Bibliographic reference
'Inter-American Convention
on International Commercial
Arbitration (Panama
Convention, 1975)', in Jan
Paulsson and Lise Bosman
(eds), ICCA International
Handbook on Commercial
Arbitration, (© Kluwer Law
International; Kluwer Law
International 1984,
Supplement No. 2, August
1984) pp. 1 - 4
P1
P2
KluwerArbitration
Inter-American Convention on International Commercial
Arbitration (Panama Convention, 1975)
Previous version (#)
(Panama Convention, January 30 1975)
Inter-American Convention on International Commercial Arbitration
The Governments of the Member States of the Organization of American States, desirous of
concluding a convention on international commercial arbitration, have agreed as follows:
Article 1
An agreement in which the parties undertake to submit to arbitral decision any differences
that may arise or have arisen between them with respect to a commercial transaction is valid.
The agreement shall be set forth in an instrument signed by the parties, or in the form of an
exchange of letters, telegrams, or telex communications.
Article 2
Arbitrators shall be appointed in the manner agreed upon by the parties. Their appointment
may be delegated to a third party, whether a natural or juridical person. Arbitrators may be
nationals or foreigners.
Article 3
In the absence of an express agreement between the parties, the arbitration shall be
conducted in accordance with the rules of procedure of the Inter-American Commercial
Arbitration Commission.
Article 4
An arbitral decision or award that is not appealable under the applicable law or procedural
rules shall have the force of a final judicial judgment. Its execution or recognition may be
ordered in the same manner as that of decisions handed down by national or foreign ordinary
courts, in accordance with the procedural laws of the country where it is to be executed and
the provisions of international treaties.
Article 5
1. The recognition and execution of the decision may be refused, at the request of the party
against which it is made, only if such party is able to prove to the competent authority of the
State in which recognition and execution are requested:
a. That the parties to the agreement were subject to some incapacity under the applicable
law or that the agreement is not valid under the law to which the parties have submitted
it, or, if such law is not specified under the law of the State in which the decision was
made; or
b. That the party against which the arbitral decision has been made was not duly notified of
the appointment of the arbitrator or of the arbitration procedure to be followed, or was
unable, for any other reason, to present his defense; or
c. That the decision concerns a dispute not envisaged in the agreement between the parties
to submit to arbitration; nevertheless, if the provisions of the decision that refer to issues
submitted to arbitration can be separated from those not submitted to arbitration, the
former may be recognized and executed; or
d. That the constitution of the arbitral tribunal or the arbitration procedure has not been
carried out in accordance with the terms of the agreement signed by the parties or, in the
absence of such agreement, that the constitution of the arbitral tribunal or the
arbitration procedure has not been carried out in accordance with the law of the State
where the arbitration took place; or
e. That the decision is not yet binding on the parties or has been annulled or suspended by a
competent authority of the State in which, or according to the law of which, the decision
has been made.
2. The recognition and execution of an arbitral decision may also be refused if the competent
authority of the State in which the recognition and execution is requested finds:
 a. That the subject of the dispute cannot be settled by arbitration under the law of that
State; or
b. That the recognition or execution of the decision would be contrary to the public policy
(“ordre public”) of that State.

Article 6
If the competent authority mentioned in Article 5.1.e has been requested to annul or suspend
the arbitral decision, the authority before which such decision is invoked may, if it deems it
appropriate, postpone a decision on the execution of the arbitral decision and, at the request
of the party requesting execution, may also instruct the other party to provide appropriate
guaranties.

Article 7
This Convention shall be open for signature by the Member States of the Organization of
American States.

Article 8
This Convention is subject to ratification. The instruments of ratification shall be deposited
with the General Secretariat of the Organization of American States.

Article 9
This Convention shall remain open for accession by any other State. The instruments of
accession shall be deposited with the General Secretariat of the Organization of American
States.

Article 10
This Convention shall enter into force on the thirtieth day following the date of deposit of the
second instrument of ratification.
For each State ratifying or acceding to the Convention after the deposit of the second
instrument of ratification, the Convention shall enter into force on the thirtieth day after
deposit by such State of its instrument of ratification or accession.

Article 11
If a State Party has two or more territorial units in which different systems of law apply in
relation to the matters dealt with in this Convention, it may, at the time of signature,
ratification or accession, declare that this Convention shall extend to all its territorial units or
only to one or more of them.
Such declaration may be modified by subsequent declarations, which shall expressly indicate
the territorial unit or units to which the Convention applies. Such subsequent declarations
shall be transmitted to the General Secretariat of the Organization of American States, and
shall become effective thirty days after the date of their receipt.

Article 12
P 2 This Convention shall remain in force indefinitely, but any of the States Parties may denounce
P 3 it. The instrument of denunciation shall be deposited with the General Secretariat of the
Organization of American States. After one year from the date of deposit of the instrument of
denunciation, the Convention shall no longer be in effect for the denouncing State, but shall
remain in effect for the other States Parties.

Article 13
The original instrument of this Convention, the English, French, Portuguese and Spanish texts of
which are equally authentic, shall be deposited with the General Secretariat of the
Organization of American States. The Secretariat shall notify the Member States of the
Organization of American States and the States that have acceded to the Convention of the
signatures, deposits of instruments of ratification, accession, and denunciation as well as of
reservations, if any. It shall also transmit the declarations referred to in Article 11 of this
Convention.
IN WITNESS WHEREOF the undersigned Plenipotentiaries, being duly authorized thereto by
their respective Governments, have signed this Convention.
P 3 DONE AT PANAMA CITY, Republic of Panama, this thirtieth day of January one thousand nine
hundred and seventy-five.

References
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customer support: Contact
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.

Kluwer Arbitration is made available for personal use only. All content is protected by copyright and other intellectual property
laws. No part of this service or the information contained herein may be reproduced or transmitted in any form or by any means, or
used for advertising or promotional purposes, general distribution, creating new collective works, or for resale, without prior
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KluwerArbitration

Document information
Publication
ICCA International Handbook
on Commercial Arbitration
Jurisdiction
United States of America
Promulgation
12 February 1925
Bibliographic reference
'United States Arbitration
Act (Federal Arbitration Act)
(9 U.S.C. Sect. 1 et seq.)', in
Jan Paulsson and Lise
Bosman (eds), ICCA
International Handbook on
Commercial Arbitration,
(© Kluwer Law International;
Kluwer Law International
1984, Supplement No. 28,
January 1999) pp. 1 - 8
P 2 referable to arbitration under such an agreement, shall on application of one of the parties
P 3 stay the trial of the action until such arbitration has been had in accordance with the terms
KluwerArbitration
United States Arbitration Act (Federal Arbitration Act) (9
U.S.C. Sect. 1 et seq.)
Previous version (#)
Title 9, United States Code, Sects. 1-14, was first enacted 12 February 1925 (43 Stat. 883),
codified 30 July 1947 (61 Stat. 669), and amended 3 September 1954 (68 Stat. 1233). Chap. 2 was
added 31 July 1970 (84 Stat. 692), two new Sects., 15 and 16, were passed by the Congress in
October of 1988. (When adopted in 1988 the current Sect. 16 was designated Sect. 15, resulting
in two “Sect. 15”. The numbering was revised in 1990, producing the current Sect. 15 and Sect. 16
(104 Stat. 5120)). Chap. 3 was added on 31 May 1990.
Chapter 1. General Provisions
Section 1 “MARITIME TRANSACTIONS” AND “COMMERCE” DEFINED; EXCEPTIONS TO OPERATION
OF TITLE
“Maritime transaction”, as herein defined, means charter parties, bills of lading of water
carriers, agreements relating to wharfage, supplies furnished vessels or repairs to vessels,
collisions, or any other matters in foreign commerce which, if the subject of controversy, would
be embraced within admiralty jurisdiction; “commerce”, as herein defined, means commerce
among the several States or with foreign nations, or in any Territory of the United States or in
the District of Columbia, or between any such Territory and another, or between any such
Territory and any State or foreign nation, or between the District of Columbia and any State or
Territory or foreign nation, but nothing herein contained shall apply to contracts of
employment of seamen, railroad employees, or any other class of workers engaged in foreign or
interstate commerce.
Section 2 VALIDITY, IRREVOCABILITY, AND ENFORCEMENT OF AGREEMENTS TO ARBITRATE
A written provision in any maritime transaction or a contract evidencing a transaction involving
commerce to settle by arbitration a controversy thereafter arising out of such contract or
transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing
to submit to arbitration an existing controversy arising out of such a contract, transaction, or
refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or
in equity for the revocation of any contract.
Section 3 STAY OF PROCEEDINGS WHERE ISSUE THEREIN REFERABLE TO ARBITRATION
If any suit or proceeding be brought in any of the courts of the United States upon any issue
referable to arbitration under an agreement in writing for such arbitration, the court in which
such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is
of the agreement, providing the applicant for the stay is not in default in proceeding with such
arbitration.
Section 4 FAILURE TO ARBITRATE UNDER AGREEMENT; PETITION TO UNITED STATES COURT
HAVING JURISDICTION FOR ORDER TO COMPEL ARBITRATION; NOTICE AND SERVICE THEREOF;
HEARING AND DETERMINATION
A party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a
written agreement for arbitration may petition any United States district court which, save for
such agreement, would have jurisdiction under Title 28, in a civil action or in admiralty of the
subject matter of a suit arising out of the controversy between the parties, for an order
directing that such arbitration proceed in the manner provided for in such agreement. Five
days' notice in writing of such application shall be served upon the party in default. Service
thereof shall be made in the manner provided by the Federal Rules of Civil Procedure. The
court shall hear the parties, and upon being satisfied that the making of the agreement for
arbitration or the failure to comply therewith is not in issue, the court shall make an order
directing the parties to proceed to arbitration in accordance with the terms of the agreement.
The hearing and proceedings, under such agreement, shall be within the district in which the
petition for an order directing such arbitration is filed. If the making of the arbitration
agreement or the failure, neglect, or refusal to perform the same be in issue, the court shall
proceed summarily to the trial thereof. If no jury trial be demanded by the party alleged to be
in default, or if the matter in dispute is within admiralty jurisdiction, the court shall hear and
determine such issue. Where such an issue is raised, the party alleged to be in default may,
except in cases of admiralty, on or before the return day of the notice of application, demand
a jury trial of such issue, and upon such demand the court shall make an order referring the
 issue or issues to a jury in the manner provided by the Federal Rules of Civil Procedure, or may
specially call a jury for that purpose. If the jury find that no agreement in writing for arbitration
was made or that there is no default in proceeding thereunder, the proceeding shall be
dismissed. If the jury find that an agreement for arbitration was made in writing and that there
is a default in proceeding thereunder, the court shall make an order summarily directing the
parties to proceed with the arbitration in accordance with the terms thereof.

Section 5 APPOINTMENT OF ARBITRATORS OR UMPIRE

If in the agreement provision be made for a method of naming or appointing an arbitrator or
arbitrators or an umpire, such method shall be followed; but if no method be provided therein,
or if a method be provided and any party thereto shall fail to avail himself of such method, or
if for any other reason there shall be a lapse in the naming of an arbitrator or arbitrators or
umpire, or in filling a vacancy, then upon the application of either party to the controversy the
court shall designate and appoint an arbitrator or arbitrators or umpire, as the case may
require, who shall act under the said agreement with the same force and effect as if he or they
had been specifically named therein; and unless otherwise provided in the agreement the
arbitration shall be by a single arbitrator.

Section 6 APPLICATION HEARD AS MOTION

Any application to the court hereunder shall be made and heard in the manner provided by
law for the making and hearing of motions, except as otherwise herein expressly provided.

Section 7 WITNESSES BEFORE ARBITRATORS; FEES; COMPELLING ATTENDANCE

P 3 The arbitrators selected either as prescribed in this title or otherwise, or a majority of them,
P 4 may summon in writing any person to attend before them or any of them as a witness and in
a proper case to bring with him or them any book, record, document, or paper which may be
deemed material as evidence in the case. The fees for such attendance shall be the same as
the fees of witnesses before masters of the United States courts. Said summons shall issue in
the name of the arbitrator or arbitrators, or a majority of them, and shall be signed by the
arbitrators, or a majority of them, and shall be directed to the said person and shall be served
in the same manner as subpoenas to appear and testify before the court; if any person or
persons so summoned to testify shall refuse or neglect to obey said summons, upon petition
the United States district court for the district in which such arbitrators, or a majority of them,
are sitting may compel the attendance of such person or persons before said arbitrator or
arbitrators, or punish said person or persons for contempt in the same manner provided by law
for securing the attendance of witnesses or their punishment for neglect or refusal to attend in
the courts of the United States.

Section 8 PROCEEDINGS BEGUN BY LIBEL IN ADMIRALTY AND SEIZURE OF VESSEL OR PROPERTY

If the basis of jurisdiction be a cause of action otherwise justiciable in admiralty, then,
notwithstanding anything herein to the contrary, the party claiming to be aggrieved may begin
his proceeding hereunder by libel and seizure of the vessel or other property of the other party
according to the usual course of admiralty proceedings, and the court shall then have
jurisdiction to direct the parties to proceed with the arbitration and shall retain jurisdiction to
enter its decree upon the award.

Section 9 AWARD OF ARBITRATORS; CONFIRMATION; JURISDICTION; PROCEDURE

If the parties in their agreement have agreed that a judgment of the court shall be entered
upon the award made pursuant to the arbitration, and shall specify the court, then at any time
within one year after the award is made any party to the arbitration may apply to the court so
specified for an order confirming the award, and thereupon the court must grant such an order
unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this
title. If no court is specified in the agreement of the parties, then such application may be
made to the United States court in and for the district within which such award was made.
Notice of the application shall be served upon the adverse party, and thereupon the court
shall have jurisdiction of such party as though he had appeared generally in the proceeding. If
the adverse party is a resident of the district within which the award was made, such service
shall be made upon the adverse party or his attorney as prescribed by law for service of notice
of motion in an action in the same court. If the adverse party shall be a nonresident, then the
notice of the application shall be served by the marshal of any district within which the
adverse party may be found in like manner as other process of the court.

Section 10 SAME; VACATION; GROUNDS; REHEARING

In either of the following cases the United States court in and for the district wherein the award
was made may make an order vacating the award upon the application of any party to the
arbitration:
(a) Where the award was procured by corruption, fraud, or undue means.
(b) Where there was evident partiality or corruption in the arbitrators, or either of them.
 (c) Where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon
sufficient cause shown, or in refusing to hear evidence pertinent and material to the
controversy; or of any other misbehavior by which the rights of any party have been
prejudiced.
P 4 (d) Where the arbitrators exceeded their powers, or so imperfectly executed them that a
P5 mutual, final, and definite award upon the subject matter submitted was not made.
(e) Where an award is vacated and the time within which the agreement required the award
to be made has not expired the court may, in its discretion, direct a rehearing by the
arbitrators.

Section 11 SAME; MODIFICATION OR CORRECTION GROUNDS; ORDER

In either of the following cases the United States court in and for the district wherein the award
was made may make an order modifying or correcting the award upon the application of any
party to the arbitration:
(a) Where there was an evident material miscalculation of figures or an evident material
mistake in the description of any person, thing, or property referred to in the award.
(b) Where the arbitrators have awarded upon a matter not submitted to them, unless it is a
matter not affecting the merits of the decision upon the matter submitted.
(c) Where the award is imperfect in matter of form not affecting the merits of the
controversy.
The order may modify and correct the award, so as to effect the intent thereof and promote
justice between the parties.

Section 12 NOTICE OF MOTIONS TO VACATE OR MODIFY; SERVICE; STAY OF PROCEEDINGS

Notice of a motion to vacate, modify, or correct an award must be served upon the adverse
party or his attorney within three months after the award is filed or delivered. If the adverse
party is a resident of the district within which the award was made, such service shall be made
upon the adverse party or his attorney as prescribed by law for service of notice of motion in
an action in the same court. If the adverse party shall be a nonresident then the notice of the
application shall be served by the marshal of any district within which the adverse party may
be found in like manner as other process of the court. For the purposes of the motion any judge
who might make an order to stay the proceedings in an action brought in the same court may
make an order, to be served with the notice of motion, staying the proceedings of the adverse
party to enforce the award.

Section 13 PAPERS FILED WITH ORDER ON MOTIONS; JUDGMENT; DOCKETING; FORCE AND EFFECT;
ENFORCEMENT
The party moving for an order confirming, modifying, or correcting an award shall, at the time
such order is filed with the clerk for the entry of judgment thereon, also file the following
papers with the clerk:
(a) The agreement; the selection or appointment, if any, of an additional arbitrator or
umpire; and each written extension of the time, if any, within which to make the award.
(b) The award.
(c) Each notice, affidavit, or other paper used upon an application to confirm, modify, or
correct the award, and a copy of each order of the court upon such an application.
The judgment shall be docketed as if it was rendered in an action.
The judgment so entered shall have the same force and effect, in all respects, as, and be
P 5 subject to all the provisions of law relating to, a judgment in an action; and it may be enforced
P 6 as if it had been rendered in an action in the court in which it is entered.

Section 14 CONTRACTS NOT AFFECTED

This title shall not apply to contracts made prior to January 1, 1926.

Section 15 INAPPLICABILITY OF THE ACT OF STATE DOCTRINE

Enforcement of arbitral agreements, confirmation of arbitral awards, and execution upon
judgments based on orders confirming such awards shall not be refused on the basis of the Act
of State doctrine.

Section 16 APPEALS
(a) An appeal may be taken from:
 (1) an order:
(A) refusing a stay of any action under section 3 of this title,
(B) denying a petition under section 4 of this title to order arbitration to proceed,
(C) denying an application under section 206 of this title to compel arbitration,
(D) confirming or denying confirmation of an award or partial award, or
(E) modifying, correcting, or vacating an award;
(2) an interlocutory order granting, continuing, or modifying an injunction against an
arbitration that is subject to this title; or
(3) a final decision with respect to an arbitration that is subject to this title.
(b) Except as otherwise provided in section 1292(b) of Title 28, an appeal may not be taken
from an interlocutory order:
(1) granting a stay of any action under section 3 of this title;
(2) directing arbitration to proceed under section 4 of this title;
(3) compelling arbitration under section 206 of this title; or
(4) refusing to enjoin an arbitration that is subject to this title.

Chapter 2. Convention on the Recognition and Enforcement of

Foreign Arbitral Awards
Section 201 ENFORCEMENT OF CONVENTION
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958,
shall be enforced in United States courts in accordance with this chapter.

Section 202 AGREEMENT OR AWARD FALLING UNDER THE CONVENTION

An arbitration agreement or arbitral award arising out of a legal relationship, whether
contractual or not, which is considered as commercial, including a transaction, contract, or
agreement described in section 2 of this title, falls under the Convention. An agreement or
award arising out of such a relationship which is entirely between citizens of the United States
shall be deemed not to fall under the Convention unless that relationship involves property
located abroad, envisages performance or enforcement abroad, or has some other reasonable
relation with one or more foreign states. For the purpose of this section a corporation is a
citizen of the United States if it is incorporated or has its principal place of business in the
United States.

Section 203 JURISDICTION; AMOUNT IN CONTROVERSY

An action or proceeding falling under the Convention shall be deemed to arise under the laws
and treaties of the United States. The district courts of the United States (including the courts
P 6 enumerated in section 460 of Title 28) shall have original jurisdiction over such an action or
P 7 proceeding, regardless of the amount in controversy.

Section 204 VENUE

An action or proceeding over which the district courts have jurisdiction pursuant to section 203
of this title may be brought in any such court in which save for the arbitration agreement an
action or proceeding with respect to the controversy between the parties could be brought, or
in such court for the district and division which embraces the place designated in the
agreement as the place of arbitration if such place is within the United States.

Section 205 REMOVAL OF CASES FROM STATE COURTS

Where the subject matter of an action or proceeding pending in a State court relates to an
arbitration agreement or award falling under the Convention, the defendant or the defendants
may, at any time before the trial thereof, remove such action or proceeding to the district
court of the United States for the district and division embracing the place where the action or
proceeding is pending. The procedure for removal of cases otherwise provided by law shall
apply, except that the ground for removal provided in this section need not appear on the face
of the complaint but may be shown in the petition for removal. For the purposes of Chapter 1 of
this title any action or proceeding removed under this section shall be deemed to have been
brought in the district court to which it is removed.

Section 206 ORDER TO COMPEL ARBITRATION; APPOINTMENT OF ARBITRATORS

A court having jurisdiction under this chapter may direct that arbitration be held in
accordance with the agreement at any place therein provided for, whether that place is within
or without the United States. Such court may also appoint arbitrators in accordance with the
 provisions of the agreement.

Section 207 AWARD OF ARBITRATORS; CONFIRMATION; JURISDICTION; PROCEEDING

Within three years after an arbitral award falling under the Convention is made, any party to
the arbitration may apply to any court having jurisdiction under this chapter for an order
confirming the award as against any other party to the arbitration. The court shall confirm the
award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of
the award specified in the said Convention.

Section 208 CHAPTER 1; RESIDUAL APPLICATION

Chapter 1 applies to actions and proceedings brought under this chapter to the extent that
chapter is not in conflict with this chapter or the Convention as ratified by the United States.

Chapter 3. Inter-American Convention on International

Commercial Arbitration
Section 301 ENFORCEMENT OF CONVENTION
The Inter-American Convention on International Commercial Arbitration of January 30, 1975,
shall be enforced in United States courts in accordance with this chapter.

Section 302 INCORPORATION BY REFERENCE

Sections 202, 203, 204, 205, and 207 of this title shall apply to this chapter as if specifically set
P 7 forth herein, except that for the purposes of this chapter “the Convention” shall mean the Inter-
P 8 American Convention.

Section 303 ORDER TO COMPEL ARBITRATION; APPOINTMENT OF ARBITRATORS; LOCALE

(a) A court having jurisdiction under this chapter may direct that arbitration be held in
accordance with the agreement at any place therein provided for, whether that place is within
or without the United States. The court may also appoint arbitrators in accordance with the
provisions of the agreement.
(b) In the event the agreement does not make provision for the place of arbitration or the
appointment of arbitrators, the court shall direct that the arbitration shall be held and the
arbitrators be appointed in accordance with Article 3 of the Inter-American Convention.

Section 304 RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL DECISIONS AND AWARDS;
RECIPROCITY
Arbitral decisions or awards made in the territory of a foreign State shall, on the basis of
reciprocity, be recognized and enforced under this chapter only if that State has ratified or
acceded to the Inter-American Convention.

Section 305 RELATIONSHIP BETWEEN THE INTER-AMERICAN CONVENTION AND THE CONVENTION
ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS OF JUNE 10, 1958
When the requirements for application of both the Inter-American Convention and the
Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958, are
met, determination as to which Convention applies shall, unless otherwise expressly agreed,
be made as follows:
(1) If a majority of the parties to the arbitration agreement are citizens of a State or States
that have ratified or acceded to the Inter-American Convention and are member States of
the Organization of American States, the Inter-American Convention shall apply.
(2) In all other cases the Convention on the Recognition and Enforcement of Foreign Arbitral
Awards of June 10, 1958, shall apply.

Section 306 APPLICABLE RULES OF INTER-AMERICAN COMMERCIAL ARBITRATION COMMISSION

(a) For the purposes of this chapter the rules of procedure of the Inter-American Commercial
Arbitration Commission referred to in Article 3 of the Inter-American Convention shall, subject
to subsection (b) of this section, be those rules as promulgated by the Commission on July 1,
1988.
(b) In the event the rules of procedure of the Inter-American Commercial Arbitration
Commission are modified or amended in accordance with the procedures for amendment of
the rules of that Commission, the Secretary of State, by regulation in accordance with section
553 of title 5, consistent with the aims and purposes of this Convention, may prescribe that
such modifications or amendments shall be effective for purposes of this chapter.

Section 307 CHAPTER 1; RESIDUAL APPLICATION

 Chapter 1 applies to actions and proceedings brought under this chapter to the extent chapter
P 8 1 is not in conflict with this chapter or the Inter-American Convention as ratified by the United
States.

References
#) For a copy of a previous version of this document, should this be available, please contact
customer support: Contact
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.

Kluwer Arbitration is made available for personal use only. All content is protected by copyright and other intellectual property
laws. No part of this service or the information contained herein may be reproduced or transmitted in any form or by any means, or
used for advertising or promotional purposes, general distribution, creating new collective works, or for resale, without prior
written permission of the publisher.

If you would like to know more about this service, visit www.kluwerarbitration.com or contact our Sales staff at
sales@kluwerlaw.com or call +31 (0)172 64 1562.

KluwerArbitration

Document information
Publication
A contribution by the ITA
Board of Reporters
Jurisdiction
Austria
Organization
United Nations Commission
on International Trade Law
Entry into force
10 August 2010
Bibliographic reference
'UNCITRAL Arbitration Rules
2010', A contribution by the
ITA Board of Reporters,
Kluwer Law International
KluwerArbitration
UNCITRAL Arbitration Rules 2010
Section I. Introductory rules
Article 1 Scope of application (*)
1. Where parties have agreed that disputes between them in respect of a defined legal
relationship, whether contractual or not, shall be referred to arbitration under the UNCITRAL
Arbitration Rules, then such disputes shall be settled in accordance with these Rules subject to
such modification as the parties may agree.
2. The parties to an arbitration agreement concluded after 15 August 2010 shall be presumed
to have referred to the Rules in effect on the date of commencement of the arbitration, unless
the parties have agreed to apply a particular version of the Rules. That presumption does not
apply where the arbitration agreement has been concluded by accepting after 15 August 2010
an offer made before that date.
3. These Rules shall govern the arbitration except that where any of these Rules is in conflict
with a provision of the law applicable to the arbitration from which the parties cannot
derogate, that provision shall prevail.
Article 2 Notice and calculation of periods of time
1. A notice, including a notification, communication or proposal, may be transmitted by any
means of communication that provides or allows for a record of its transmission.
2. If an address has been designated by a party specifically for this purpose or authorized by
the arbitral tribunal, any notice shall be delivered to that party at that address, and if so
delivered shall be deemed to have been received. Delivery by electronic means such as
facsimile or email may only be made to an address so designated or authorized.
3. In the absence of such designation or authorization, a notice is:
(a) received if it is physically delivered to the addressee; or
(b) deemed to have been received if it is delivered at the place of business, habitual
residence or mailing address of the addressee.
4. If, after reasonable efforts, delivery cannot be effected in accordance with paragraphs 2 or
3, a notice is deemed to have been received if it is sent to the addressee's last-known place of
business, habitual residence or mailing address by registered letter or any other means that
provides a record of delivery or of attempted delivery.
5. A notice shall be deemed to have been received on the day it is delivered in accordance
with paragraphs 2, 3 or 4, or attempted to be delivered in accordance with paragraph 4. A
notice transmitted by electronic means is deemed to have been received on the day it is sent,
except that a notice of arbitration so transmitted is only deemed to have been received on the
day when it reaches the addressee's electronic address.
6. For the purpose of calculating a period of time under these Rules, such period shall begin to
run on the day following the day when a notice is received. If the last day of such period is an
official holiday or a non-business day at the residence or place of business of the addressee,
the period is extended until the first business day which follows. Official holidays or non-
business days occurring during the running of the period of time are included in calculating the
period.
Article 3 Notice of arbitration
1. The party or parties initiating recourse to arbitration (hereinafter called the “claimant”)
shall communicate to the other party or parties (hereinafter called the “respondent”) a notice
of arbitration.
2. Arbitral proceedings shall be deemed to commence on the date on which the notice of
arbitration is received by the respondent.
3. The notice of arbitration shall include the following:
(a) A demand that the dispute be referred to arbitration;
(b) The names and contact details of the parties;
(c) Identification of the arbitration agreement that is invoked;
(d) Identification of any contract or other legal instrument out of or in relation to which the
dispute arises or, in the absence of such contract or instrument, a brief description of the
relevant relationship;
(e) A brief description of the claim and an indication of the amount involved, if any;
(f) The relief or remedy sought;
(g) A proposal as to the number of arbitrators, language and place of arbitration, if the
parties have not previously agreed thereon.
4. The notice of arbitration may also include:
(a) A proposal for the designation of an appointing authority referred to in article 6,
paragraph 1;
(b) A proposal for the appointment of a sole arbitrator referred to in article 8, paragraph 1;
(c) Notification of the appointment of an arbitrator referred to in articles 9 or 10.
5. The constitution of the arbitral tribunal shall not be hindered by any controversy with
respect to the sufficiency of the notice of arbitration, which shall be finally resolved by the
arbitral tribunal.

Article 4 Response to the notice of arbitration

1. Within 30 days of the receipt of the notice of arbitration, the respondent shall communicate
to the claimant a response to the notice of arbitration, which shall include:
(a) The name and contact details of each respondent;
(b) A response to the information set forth in the notice of arbitration, pursuant to article 3,
paragraphs 3 (c) to (g).
2. The response to the notice of arbitration may also include:
(a) Any plea that an arbitral tribunal to be constituted under these Rules lacks jurisdiction;
(b) A proposal for the designation of an appointing authority referred to in article 6,
paragraph 1;
(c) A proposal for the appointment of a sole arbitrator referred to in article 8, paragraph 1;
(d) Notification of the appointment of an arbitrator referred to in articles 9 or 10;
(e) A brief description of counterclaims or claims for the purpose of a set-off, if any, including
where relevant, an indication of the amounts involved, and the relief or remedy sought;
(f) A notice of arbitration in accordance with article 3 in case the respondent formulates a
claim against a party to the arbitration agreement other than the claimant.
3. The constitution of the arbitral tribunal shall not be hindered by any controversy with
respect to the respondent's failure to communicate a response to the notice of arbitration, or
an incomplete or late response to the notice of arbitration, which shall be finally resolved by
the arbitral tribunal.

Article 5 Representation and assistance

Each party may be represented or assisted by persons chosen by it. The names and addresses
of such persons must be communicated to all parties and to the arbitral tribunal. Such
communication must specify whether the appointment is being made for purposes of
representation or assistance. Where a person is to act as a representative of a party, the
arbitral tribunal, on its own initiative or at the request of any party, may at any time require
proof of authority granted to the representative in such a form as the arbitral tribunal may
determine.

Article 6 Designating and appointing authorities

1. Unless the parties have already agreed on the choice of an appointing authority, a party
may at any time propose the name or names of one or more institutions or persons, including
the Secretary-General of the Permanent Court of Arbitration at The Hague (hereinafter called
the “PCA”), one of whom would serve as appointing authority.
2. If all parties have not agreed on the choice of an appointing authority within 30 days after a
proposal made in accordance with paragraph 1 has been received by all other parties, any
party may request the Secretary-General of the PCA to designate the appointing authority.
3. Where these Rules provide for a period of time within which a party must refer a matter to
an appointing authority and no appointing authority has been agreed on or designated, the
period is suspended from the date on which a party initiates the procedure for agreeing on or
designating an appointing authority until the date of such agreement or designation.
4. Except as referred to in article 41, paragraph (4), if the appointing authority refuses to act,
or if it fails to appoint an arbitrator within 30 days after it receives a party's request to do so,
fails to act within any other period provided by these Rules, or fails to decide on a challenge to
an arbitrator within a reasonable time after receiving a party's request to do so, any party may
request the Secretary-General of the PCA to designate a substitute appointing authority.
5. In exercising their functions under these Rules, the appointing authority and the Secretary-
General of the PCA may require from any party and the arbitrators the information they deem
necessary and they shall give the parties and, where appropriate, the arbitrators, an
opportunity to present their views in any manner they consider appropriate. All such
communications to and from the appointing authority and the Secretary-General of the PCA
shall also be provided by the sender to all other parties.
6. When the appointing authority is requested to appoint an arbitrator pursuant to articles 8,
9, 10 or 14, the party making the request shall send to the appointing authority copies of the
notice of arbitration and, if it exists, any response to the notice of arbitration.
7. The appointing authority shall have regard to such considerations as are likely to secure the
appointment of an independent and impartial arbitrator and shall take into account the
advisability of appointing an arbitrator of a nationality other than the nationalities of the
parties.

Section II. Composition of the arbitral tribunal

Article 7 Number of arbitrators
1. If the parties have not previously agreed on the number of arbitrators, and if within 30 days
after the receipt by the respondent of the notice of arbitration the parties have not agreed
that there shall be only one arbitrator, three arbitrators shall be appointed.
2. Notwithstanding paragraph 1, if no other parties have responded to a party's proposal to
appoint a sole arbitrator within the time limit provided for in paragraph 1 and the party or
parties concerned have failed to appoint a second arbitrator in accordance with articles 9 or
10, the appointing authority may, at the request of a party, appoint a sole arbitrator pursuant
to the procedure provided for in article 8, paragraph 2 if it determines that, in view of the
circumstances of the case, this is more appropriate.

Article 8 Appointment of arbitrators (articles 8 to 10)

1. If the parties have agreed that a sole arbitrator is to be appointed and if within 30 days
after receipt by all other parties of a proposal for the appointment of a sole arbitrator the
parties have not reached agreement thereon, a sole arbitrator shall, at the request of a party,
be appointed by the appointing authority.
2. The appointing authority shall appoint the sole arbitrator as promptly as possible. In
making the appointment, the appointing authority shall use the following list-procedure,
unless the parties agree that the list-procedure should not be used or unless the appointing
authority determines in its discretion that the use of the list-procedure is not appropriate for
the case:
(a) The appointing authority shall communicate to each of the parties an identical list
containing at least three names;
(b) Within 15 days after the receipt of this list, each party may return the list to the
appointing authority after having deleted the name or names to which it objects and
numbered the remaining names on the list in the order of its preference;
(c) After the expiration of the above period of time the appointing authority shall appoint
the sole arbitrator from among the names approved on the lists returned to it and in
accordance with the order of preference indicated by the parties;
(d) If for any reason the appointment cannot be made according to this procedure, the
appointing authority may exercise its discretion in appointing the sole arbitrator.

Article 9
1. If three arbitrators are to be appointed, each party shall appoint one arbitrator. The two
arbitrators thus appointed shall choose the third arbitrator who will act as the presiding
arbitrator of the arbitral tribunal.
2. If within 30 days after the receipt of a party's notification of the appointment of an
arbitrator the other party has not notified the first party of the arbitrator it has appointed, the
first party may request the appointing authority to appoint the second arbitrator.
3. If within 30 days after the appointment of the second arbitrator the two arbitrators have not
agreed on the choice of the presiding arbitrator, the presiding arbitrator shall be appointed by
the appointing authority in the same way as a sole arbitrator would be appointed under article
8.

Article 10
1. For the purposes of article 9, paragraph 1, where three arbitrators are to be appointed and
there are multiple parties as claimant or as respondent, unless the parties have agreed to
another method of appointment of arbitrators, the multiple parties jointly, whether as
claimant or as respondent, shall appoint an arbitrator.
2. If the parties have agreed that the arbitral tribunal is to be composed of a number of
arbitrators other than one or three, the arbitrators shall be appointed according to the method
agreed upon by the parties.
3. In the event of any failure to constitute the arbitral tribunal under these Rules, the
appointing authority shall, at the request of any party, constitute the arbitral tribunal and, in
doing so, may revoke any appointment already made and appoint or reappoint each of the
arbitrators and designate one of them as the presiding arbitrator.

Article 11 Disclosures by and challenge of arbitrators (**) (articles 11 to 13)

When a person is approached in connection with his or her possible appointment as an
arbitrator, he or she shall disclose any circumstances likely to give rise to justifiable doubts as
to his or her impartiality or independence. An arbitrator, from the time of his or her
appointment and throughout the arbitral proceedings, shall without delay disclose any such
circumstances to the parties and the other arbitrators unless they have already been informed
by him or her of these circumstances.

Article 12
1. Any arbitrator may be challenged if circumstances exist that give rise to justifiable doubts
as to the arbitrator's impartiality or independence.
2. A party may challenge the arbitrator appointed by it only for reasons of which it becomes
aware after the appointment has been made.
3. In the event that an arbitrator fails to act or in the event of the de jure or de facto
impossibility of his or her performing his or her functions, the procedure in respect of the
challenge of an arbitrator as provided in article 13 shall apply.

Article 13
1. A party that intends to challenge an arbitrator shall send notice of its challenge within 15
days after it has been notified of the appointment of the challenged arbitrator, or within 15
days after the circumstances mentioned in articles 11 and 12 became known to that party.
2. The notice of challenge shall be communicated to all other parties, to the arbitrator who is
challenged and to the other arbitrators. The notice of challenge shall state the reasons for the
challenge.
3. When an arbitrator has been challenged by a party, all parties may agree to the challenge.
The arbitrator may also, after the challenge, withdraw from his or her office. In neither case
does this imply acceptance of the validity of the grounds for the challenge.
4. If, within 15 days from the date of the notice of challenge, all parties do not agree to the
challenge or the challenged arbitrator does not withdraw, the party making the challenge may
elect to pursue it. In that case, within 30 days from the date of the notice of challenge, it shall
seek a decision on the challenge by the appointing authority.

Article 14 Replacement of an arbitrator

1. Subject to paragraph (2), in any event where an arbitrator has to be replaced during the
course of the arbitral proceedings, a substitute arbitrator shall be appointed or chosen
pursuant to the procedure provided for in articles 8 to 11 that was applicable to the
appointment or choice of the arbitrator being replaced. This procedure shall apply even if
during the process of appointing the arbitrator to be replaced, a party had failed to exercise
its right to appoint or to participate in the appointment.
2. If, at the request of a party, the appointing authority determines that, in view of the
exceptional circumstances of the case, it would be justified for a party to be deprived of its
right to appoint a substitute arbitrator, the appointing authority may, after giving an
opportunity to the parties and the remaining arbitrators to express their views: (a) appoint the
substitute arbitrator; or (b) after the closure of the hearings, authorize the other arbitrators to
proceed with the arbitration and make any decision or award.

Article 15 Repetition of hearings in the event of the replacement of an arbitrator

If an arbitrator is replaced, the proceedings shall resume at the stage where the arbitrator who
was replaced ceased to perform his or her functions, unless the arbitral tribunal decides
otherwise.

Article 16 Exclusion of liability

Save for intentional wrongdoing, the parties waive, to the fullest extent permitted under the
applicable law, any claim against the arbitrators, the appointing authority and any person
appointed by the arbitral tribunal based on any act or omission in connection with the
arbitration.

Section III. Arbitral proceedings

Article 17 General provisions
1. Subject to these Rules, the arbitral tribunal may conduct the arbitration in such manner as
it considers appropriate, provided that the parties are treated with equality and that at an
appropriate stage of the proceedings each party is given a reasonable opportunity of
presenting its case. The arbitral tribunal, in exercising its discretion, shall conduct the
proceedings so as to avoid unnecessary delay and expense and to provide a fair and efficient
process for resolving the parties' dispute.
2. As soon as practicable after its constitution and after inviting the parties to express their
views, the arbitral tribunal shall establish the provisional timetable of the arbitration. The
arbitral tribunal may, at any time, after inviting the parties to express their views, extend or
abridge any period of time prescribed under these Rules or agreed by the parties.
3. If at an appropriate stage of the proceedings any party so requests, the arbitral tribunal
shall hold hearings for the presentation of evidence by witnesses, including expert witnesses,
or for oral argument. In the absence of such a request, the arbitral tribunal shall decide
whether to hold such hearings or whether the proceedings shall be conducted on the basis of
documents and other materials.
4. All communications to the arbitral tribunal by one party shall be communicated by that
party to all other parties. Such communications shall be made at the same time, except as
otherwise permitted by the arbitral tribunal if it may do so under applicable law.
5. The arbitral tribunal may, at the request of any party, allow one or more third persons to be
joined in the arbitration as a party provided such person is a party to the arbitration
agreement, unless the arbitral tribunal finds, after giving all parties, including the person or
persons to be joined, the opportunity to be heard, that joinder should not be permitted
because of prejudice to any of those parties. The arbitral tribunal may make a single award or
several awards in respect of all parties so involved in the arbitration.

Article 18 Place of arbitration

1. If the parties have not previously agreed on the place of arbitration, the place of arbitration
shall be determined by the arbitral tribunal having regard to the circumstances of the case.
The award shall be deemed to have been made at the place of arbitration.
2. The arbitral tribunal may meet at any location it considers appropriate for deliberations.
Unless otherwise agreed by the parties, the arbitral tribunal may also meet at any location it
considers appropriate for any other purpose, including hearings.

Article 19 Language
1. Subject to an agreement by the parties, the arbitral tribunal shall, promptly after its
appointment, determine the language or languages to be used in the proceedings. This
determination shall apply to the statement of claim, the statement of defence, and any further
written statements and, if oral hearings take place, to the language or languages to be used in
such hearings.
2. The arbitral tribunal may order that any documents annexed to the statement of claim or
statement of defence, and any supplementary documents or exhibits submitted in the course
of the proceedings, delivered in their original language, shall be accompanied by a translation
into the language or languages agreed upon by the parties or determined by the arbitral
tribunal.

Article 20 Statement of claim

1. The claimant shall communicate its statement of claim in writing to the respondent and to
each of the arbitrators within a period of time to be determined by the arbitral tribunal. The
claimant may elect to treat its notice of arbitration referred to in article 3 as a statement of
claim, provided that the notice of arbitration also complies with the requirements of
paragraphs 2 to 4 of this article.
2. The statement of claim shall include the following particulars:
(a) The names and contact details of the parties;
(b) A statement of the facts supporting the claim;
(c) The points at issue;
(d) The relief or remedy sought;
(e) The legal grounds or arguments supporting the claim.
3. A copy of any contract or other legal instrument out of or in relation to which the dispute
arises and of the arbitration agreement shall be annexed to the statement of claim.
4. The statement of claim should, as far as possible, be accompanied by all documents and
other evidence relied upon by the claimant, or contain references to them.

Article 21 Statement of defence

1. The respondent shall communicate its statement of defence in writing to the claimant and
to each of the arbitrators within a period of time to be determined by the arbitral tribunal. The
respondent may elect to treat its response to the notice of arbitration referred to in article 4
as a statement of defence, provided that the response to the notice of arbitration also
complies with the requirements of paragraph 2 of this article.
2. The statement of defence shall reply to the particulars (b) to (e) of the statement of claim
(article 20, paragraph 2). The statement of defence should, as far as possible, be accompanied
by all documents and other evidence relied upon by the respondent, or contain references to
them.
3. In its statement of defence, or at a later stage in the arbitral proceedings if the arbitral
tribunal decides that the delay was justified under the circumstances, the respondent may
make a counterclaim or rely on a claim for the purpose of a set-off provided that the arbitral
tribunal has jurisdiction over it.
4. The provisions of article 20, paragraphs 2 to 4 shall apply to a counterclaim, a claim under
article 4, paragraph (2) (f) and a claim relied on for the purpose of a set-off.

Article 22 Amendments to the claim or defence

During the course of the arbitral proceedings, a party may amend or supplement its claim or
defence, including a counterclaim or a claim for the purpose of a set-off, unless the arbitral
tribunal considers it inappropriate to allow such amendment or supplement having regard to
the delay in making it or prejudice to other parties or any other circumstances. However, a
claim or defence, including a counterclaim or a claim for the purpose of a set-off, may not be
amended or supplemented in such a manner that the amended or supplemented claim or
defence falls outside the jurisdiction of the arbitral tribunal.

Article 23 Pleas as to the jurisdiction of the arbitral tribunal

1. The arbitral tribunal shall have the power to rule on its own jurisdiction, including any
objections with respect to the existence or validity of the arbitration agreement. For that
purpose, an arbitration clause that forms part of a contract shall be treated as an agreement
independent of the other terms of the contract. A decision by the arbitral tribunal that the
contract is null shall not entail automatically the invalidity of the arbitration clause.
2. A plea that the arbitral tribunal does not have jurisdiction shall be raised no later than in
the statement of defence or, with respect to a counterclaim or a claim for the purpose of a set-
off, in the reply to the counterclaim or to the claim for the purpose of a set-off. A party is not
precluded from raising such a plea by the fact that it has appointed, or participated in the
appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its
authority shall be raised as soon as the matter alleged to be beyond the scope of its authority
is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit a
later plea if it considers the delay justified.
3. The arbitral tribunal may rule on a plea referred to in paragraph 2 either as a preliminary
question or in an award on the merits. The arbitral tribunal may continue the arbitral
proceedings and make an award, notwithstanding any pending challenge to its jurisdiction
before a court.

Article 24 Further written statements

The arbitral tribunal shall decide which further written statements, in addition to the
statement of claim and the statement of defence, shall be required from the parties or may be
presented by them and shall fix the periods of time for communicating such statements.

Article 25 Periods of time

The periods of time fixed by the arbitral tribunal for the communication of written statements
(including the statement of claim and statement of defence) should not exceed 45 days.
However, the arbitral tribunal may extend the time limits if it concludes that an extension is
justified.

Article 26 Interim measures

1. The arbitral tribunal may, at the request of a party, grant interim measures.
2. An interim measure is any temporary measure by which, at any time prior to the issuance of
the award by which the dispute is finally decided, the arbitral tribunal orders a party, for
example and without limitation, to:
(a) Maintain or restore the status quo pending determination of the dispute;
(b) Take action that would prevent, or refrain from taking action that is likely to cause, (i)
current or imminent harm or (ii) prejudice to the arbitral process itself;
(c) Provide a means of preserving assets out of which a subsequent award may be satisfied;
or
(d) Preserve evidence that may be relevant and material to the resolution of the dispute.
3. The party requesting an interim measure under paragraphs 2 (a) to (c) shall satisfy the
arbitral tribunal that:
(a) Harm not adequately reparable by an award of damages is likely to result if the measure
is not ordered, and such harm substantially outweighs the harm that is likely to result to
the party against whom the measure is directed if the measure is granted; and
(b) There is a reasonable possibility that the requesting party will succeed on the merits of
the claim. The determination on this possibility shall not affect the discretion of the
arbitral tribunal in making any subsequent determination.
4. With regard to a request for an interim measure under paragraph 2 (d), the requirements in
paragraphs 3 (a) and (b) shall apply only to the extent the arbitral tribunal considers
appropriate.
5. The arbitral tribunal may modify, suspend or terminate an interim measure it has granted,
upon application of any party or, in exceptional circumstances and upon prior notice to the
parties, on the arbitral tribunal's own initiative.
6. The arbitral tribunal may require the party requesting an interim measure to provide
appropriate security in connection with the measure.
7. The arbitral tribunal may require any party promptly to disclose any material change in the
circumstances on the basis of which the interim measure was requested or granted.
8. The party requesting an interim measure may be liable for any costs and damages caused
by the measure to any party if the arbitral tribunal later determines that, in the circumstances
then prevailing, the measure should not have been granted. The arbitral tribunal may award
such costs and damages at any point during the proceedings.
9. A request for interim measures addressed by any party to a judicial authority shall not be
deemed incompatible with the agreement to arbitrate, or as a waiver of that agreement.

Article 27 Evidence
1. Each party shall have the burden of proving the facts relied on to support its claim or
defence.
2. Witnesses, including expert witnesses, who are presented by the parties to testify to the
arbitral tribunal on any issue of fact or expertise may be any individual, notwithstanding that
the individual is a party to the arbitration or in any way related to a party. Unless otherwise
directed by the arbitral tribunal, statements by witnesses, including expert witnesses, may be
presented in writing and signed by them.
3. At any time during the arbitral proceedings the arbitral tribunal may require the parties to
produce documents, exhibits or other evidence within such a period of time as the arbitral
tribunal shall determine.
4. The arbitral tribunal shall determine the admissibility, relevance, materiality and weight of
the evidence offered.

Article 28 Hearings
1. In the event of an oral hearing, the arbitral tribunal shall give the parties adequate advance
notice of the date, time and place thereof.
2. Witnesses, including expert witnesses, may be heard under the conditions and examined in
the manner set by the arbitral tribunal.
3. Hearings shall be held in camera unless the parties agree otherwise. The arbitral tribunal
may require the retirement of any witness or witnesses, including expert witnesses, during the
testimony of such other witnesses, except that a witness, including an expert witness, who is a
party to the arbitration shall not, in principle, be asked to retire.
4. The arbitral tribunal may direct that witnesses, including expert witnesses, be examined
through means of telecommunication that do not require their physical presence at the
hearing (such as videoconference).

Article 29 Experts appointed by the arbitral tribunal

1. After consultation with the parties, the arbitral tribunal may appoint one or more
independent experts to report to it, in writing, on specific issues to be determined by the
arbitral tribunal. A copy of the expert's terms of reference, established by the arbitral tribunal,
shall be communicated to the parties.
2. The expert shall, in principle before accepting appointment, submit to the arbitral tribunal
and to the parties a description of his or her qualifications and a statement of his or her
impartiality and independence. Within the time ordered by the arbitral tribunal, the parties
shall inform the arbitral tribunal whether they have any objections as to the expert's
qualifications, impartiality or independence. The arbitral tribunal shall decide promptly
whether to accept any such objections. After an expert's appointment, a party may object to
the expert's qualifications, impartiality or independence only if the objection is for reasons of
which the party becomes aware after the appointment has been made. The arbitral tribunal
shall decide promptly what, if any, action to take.
3. The parties shall give the expert any relevant information or produce for his or her
inspection any relevant documents or goods that he or she may require of them. Any dispute
between a party and such expert as to the relevance of the required information or production
shall be referred to the arbitral tribunal for decision.
4. Upon receipt of the expert's report, the arbitral tribunal shall communicate a copy of the
report to the parties, which shall be given the opportunity to express, in writing, their opinion
on the report. A party shall be entitled to examine any document on which the expert has
relied in his or her report.
5. At the request of any party, the expert, after delivery of the report, may be heard at a
hearing where the parties shall have the opportunity to be present and to interrogate the
expert. At this hearing, any party may present expert witnesses in order to testify on the points
at issue. The provisions of article 28 shall be applicable to such proceedings.

Article 30 Default
1. If, within the period of time fixed by these Rules or the arbitral tribunal, without showing
sufficient cause:
(a) The claimant has failed to communicate its statement of claim, the arbitral tribunal shall
issue an order for the termination of the arbitral proceedings, unless there are remaining
matters that may need to be decided and the arbitral tribunal considers it appropriate
to do so;
(b) The respondent has failed to communicate its response to the notice of arbitration or its
statement of defence, the arbitral tribunal shall order that the proceedings continue,
without treating such failure in itself as an admission of the claimant's allegations; the
provisions of this subparagraph also apply to a claimant's failure to submit a defence to
a counterclaim or to a claim for the purpose of a set-off.
2. If a party, duly notified under these Rules, fails to appear at a hearing, without showing
sufficient cause for such failure, the arbitral tribunal may proceed with the arbitration.
3. If a party, duly invited by the arbitral tribunal to produce documents, exhibits or other
evidence, fails to do so within the established period of time, without showing sufficient cause
for such failure, the arbitral tribunal may make the award on the evidence before it.

Article 31 Closure of hearings

1. The arbitral tribunal may inquire of the parties if they have any further proof to offer or
witnesses to be heard or submissions to make and, if there are none, it may declare the
hearings closed.
2. The arbitral tribunal may, if it considers it necessary owing to exceptional circumstances,
decide, on its own initiative or upon application of a party, to reopen the hearings at any time
before the award is made.

Article 32 Waiver of right to object

A failure by any party to object promptly to any non-compliance with these Rules or with any
requirement of the arbitration agreement shall be deemed to be a waiver of the right of such
party to make such an objection, unless such party can show that, under the circumstances, its
failure to object was justified.

Section IV. The award

Article 33 Decisions
1. When there is more than one arbitrator, any award or other decision of the arbitral tribunal
shall be made by a majority of the arbitrators.
2. In the case of questions of procedure, when there is no majority or when the arbitral tribunal
so authorizes, the presiding arbitrator may decide alone, subject to revision, if any, by the
arbitral tribunal.

Article 34 Form and effect of the award

1. The arbitral tribunal may make separate awards on different issues at different times.
2. All awards shall be made in writing and shall be final and binding on the parties. The parties
shall carry out all awards without delay.
3. The arbitral tribunal shall state the reasons upon which the award is based, unless the
parties have agreed that no reasons are to be given.
4. An award shall be signed by the arbitrators and it shall contain the date on which the award
was made and indicate the place of arbitration. Where there is more than one arbitrator and
any of them fails to sign, the award shall state the reason for the absence of the signature.
5. An award may be made public with the consent of all parties or where and to the extent
disclosure is required of a party by legal duty, to protect or pursue a legal right or in relation to
legal proceedings before a court or other competent authority.
6. Copies of the award signed by the arbitrators shall be communicated to the parties by the
arbitral tribunal.

Article 35 Applicable law, amiable compositeur

1. The arbitral tribunal shall apply the rules of law designated by the parties as applicable to
the substance of the dispute. Failing such designation by the parties, the arbitral tribunal shall
apply the law which it determines to be appropriate.
2. The arbitral tribunal shall decide as amiable compositeur or ex aequo et bono only if the
parties have expressly authorized the arbitral tribunal to do so.
3. In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract, if
any, and shall take into account any usage of trade applicable to the transaction.

Article 36 Settlement or other grounds for termination

1. If, before the award is made, the parties agree on a settlement of the dispute, the arbitral
tribunal shall either issue an order for the termination of the arbitral proceedings or, if
requested by the parties and accepted by the arbitral tribunal, record the settlement in the
form of an arbitral award on agreed terms. The arbitral tribunal is not obliged to give reasons
for such an award.
2. If, before the award is made, the continuation of the arbitral proceedings becomes
unnecessary or impossible for any reason not mentioned in paragraph 1, the arbitral tribunal
shall inform the parties of its intention to issue an order for the termination of the proceedings.
The arbitral tribunal shall have the power to issue such an order unless there are remaining
matters that may need to be decided and the arbitral tribunal considers it appropriate to do
so.
3. Copies of the order for termination of the arbitral proceedings or of the arbitral award on
agreed terms, signed by the arbitrators, shall be communicated by the arbitral tribunal to the
parties. Where an arbitral award on agreed terms is made, the provisions of article 34,
paragraphs 2, 4 and 5 shall apply.

Article 37 Interpretation of the award

1. Within 30 days after the receipt of the award, a party, with notice to the other parties, may
request that the arbitral tribunal give an interpretation of the award.
2. The interpretation shall be given in writing within 45 days after the receipt of the request.
The interpretation shall form part of the award and the provisions of article 34, paragraphs 2 to
6, shall apply.

Article 38 Correction of the award

1. Within 30 days after the receipt of the award, a party, with notice to the other parties, may
request the arbitral tribunal to correct in the award any error in computation, any clerical or
typographical error, or any error or omission of a similar nature. If the arbitral tribunal
considers that the request is justified, it shall make the correction within 45 days of receipt of
the request.
2. The arbitral tribunal may within 30 days after the communication of the award make such
corrections on its own initiative.
3. Such corrections shall be in writing and shall form part of the award. The provisions of
article 34, paragraphs 2 to 6, shall apply.

Article 39 Additional award

1. Within 30 days after the receipt of the termination order or the award, a party, with notice to
the other parties, may request the arbitral tribunal to make an award or an additional award
as to claims presented in the arbitral proceedings but not decided by the arbitral tribunal.
2. If the arbitral tribunal considers the request for an award or additional award to be
justified, it shall render or complete its award within 60 days after the receipt of the request.
The arbitral tribunal may extend, if necessary, the period of time within which it shall make the
award.
3. When such an award or additional award is made, the provisions of article 34, paragraphs 2
to 6, shall apply.

Article 40 Definition of costs

1. The arbitral tribunal shall fix the costs of arbitration in the final award and, if it deems
appropriate, in another decision.
2. The term “costs” includes only:
(a) The fees of the arbitral tribunal to be stated separately as to each arbitrator and to be
fixed by the tribunal itself in accordance with article 41;
(b) The reasonable travel and other expenses incurred by the arbitrators;
(c) The reasonable costs of expert advice and of other assistance required by the arbitral
tribunal;
(d) The reasonable travel and other expenses of witnesses to the extent such expenses are
approved by the arbitral tribunal;
(e) The legal and other costs incurred by the parties in relation to the arbitration to the
extent that the arbitral tribunal determines that the amount of such costs is reasonable;
(f) Any fees and expenses of the appointing authority as well as the fees and expenses of the
Secretary-General of the PCA.
3. In relation to interpretation, correction or completion of any award under articles 37 to 39,
the arbitral tribunal may charge the costs referred to in paragraphs 2 (b) to (f), but no
additional fees.

Article 41 Fees and expenses of arbitrators

1. The fees and expenses of the arbitrators shall be reasonable in amount, taking into account
the amount in dispute, the complexity of the subject matter, the time spent by the arbitrators
and any other relevant circumstances of the case.
2. If there is an appointing authority and it applies or has stated that it will apply a schedule
or particular method for determining the fees for arbitrators in international cases, the arbitral
tribunal in fixing its fees shall take that schedule or method into account to the extent that it
considers appropriate in the circumstances of the case.
3. Promptly after its constitution, the arbitral tribunal shall inform the parties as to how it
proposes to determine its fees and expenses, including any rates it intends to apply. Within 15
days of receiving that proposal, any party may refer the proposal to the appointing authority
for review. If, within 45 days of receipt of such a referral, the appointing authority finds that the
proposal of the arbitral tribunal is inconsistent with paragraph 1, it shall make any necessary
adjustments thereto, which shall be binding upon the arbitral tribunal.
4.
(a) When informing the parties of the arbitrators' fees and expenses that have been fixed
pursuant to article 40, paragraphs 2 (a) and (b), the arbitral tribunal shall also explain the
manner in which the corresponding amounts have been calculated.
(b) Within 15 days of receiving the arbitral tribunal's determination of fees and expenses, any
party may refer for review such determination to the appointing authority. If no
appointing authority has been agreed upon or designated, or if the appointing authority
fails to act within the time specified in these Rules, then the review shall be made by the
Secretary-General of the PCA.
(c) If the appointing authority or the Secretary-General of the PCA finds that the arbitral
tribunal's determination is inconsistent with the arbitral tribunal's proposal (and any
adjustment thereto) under paragraph 3 or is otherwise manifestly excessive, it shall,
within 45 days of receiving such a referral, make any adjustments to the arbitral tribunal's
determination that are necessary to satisfy the criteria in paragraph 1. Any such
adjustments shall be binding upon the arbitral tribunal.
(d) Any such adjustments shall either be included by the arbitral tribunal in its award or, if
the award has already been issued, be implemented in a correction to the award, to
which the procedure of article 38, paragraph 3 shall apply.
5. Throughout the procedure under paragraphs 3 and 4, the arbitral tribunal shall proceed with
the arbitration, in accordance with article 17, paragraph 1.
6. A referral under paragraph 4 shall not affect any determination in the award other than the
arbitral tribunal's fees and expenses; nor shall it delay the recognition and enforcement of all
parts of the award other than those relating to the determination of the arbitral tribunal's fees
and expenses.

Article 42 Allocation of costs

1. The costs of the arbitration shall in principle be borne by the unsuccessful party or parties.
However, the arbitral tribunal may apportion each of such costs between the parties if it
determines that apportionment is reasonable, taking into account the circumstances of the
case.
2. The arbitral tribunal shall in the final award or, if it deems appropriate, in any other award,
determine any amount that a party may have to pay to another party as a result of the decision
on allocation of costs.

Article 43 Deposit of costs

1. The arbitral tribunal, on its establishment, may request the parties to deposit an equal
amount as an advance for the costs referred to in article 40, paragraphs 2 (a) to (c).
2. During the course of the arbitral proceedings the arbitral tribunal may request
supplementary deposits from the parties.
3. If an appointing authority has been agreed upon or designated, and when a party so
requests and the appointing authority consents to perform the function, the arbitral tribunal
shall fix the amounts of any deposits or supplementary deposits only after consultation with
the appointing authority, which may make any comments to the arbitral tribunal that it deems
appropriate concerning the amount of such deposits and supplementary deposits.
4. If the required deposits are not paid in full within 30 days after the receipt of the request,
the arbitral tribunal shall so inform the parties in order that one or more of them may make
the required payment. If such payment is not made, the arbitral tribunal may order the
suspension or termination of the arbitral proceedings.
5. After a termination order or final award has been made, the arbitral tribunal shall render an
accounting to the parties of the deposits received and return any unexpended balance to the
parties.

Annex
Model arbitration clause for contracts
Any dispute, controversy or claim arising out of or relating to this contract, or the breach,
termination or invalidity thereof, shall be settled by arbitration in accordance with the
UNCITRAL Arbitration Rules.
Note — Parties should consider adding:
(a) The appointing authority shall be … (name of institution or person);
(b) The number of arbitrators shall be … (one or three);
(c) The place of arbitration shall be … (town and country);
(d) The language to be used in the arbitral proceedings shall be … .

Possible waiver statement

Note — If the parties wish to exclude recourse against the arbitral award that may be available
under the applicable law, they may consider adding a provision to that effect as suggested below,
considering, however, that the effectiveness and conditions of such an exclusion depend on the
applicable law.
Waiver: The parties hereby waive their right to any form of recourse against an award to any
court or other competent authority, insofar as such waiver can validly be made under the
applicable law.

Model statements of independence pursuant to article 11 of the Rules

No circumstances to disclose: I am impartial and independent of each of the parties and
intend to remain so. To the best of my knowledge, there are no circumstances, past or present,
likely to give rise to justifiable doubts as to my impartiality or independence. I shall promptly
notify the parties and the other arbitrators of any such circumstances that may subsequently
come to my attention during this arbitration.
Circumstances to disclose: I am impartial and independent of each of the parties and intend to
remain so. Attached is a statement made pursuant to article 11 of the UNCITRAL Arbitration
Rules of (a) my past and present professional, business and other relationships with the parties
and (b) any other relevant circumstances. [Include statement] I confirm that those
circumstances do not affect my independence and impartiality. I shall promptly notify the
parties and the other arbitrators of any such further relationships or circumstances that may
subsequently come to my attention during this arbitration.
Note — Any party may consider requesting from the arbitrator the following addition to the
statement of independence:
I confirm, on the basis of the information presently available to me, that I can devote the
time necessary to conduct this arbitration diligently, efficiently and in accordance with the
time limits in the Rules.

References
*) A model arbitration clause for contracts can be found in the annex to the Rules.
**) Model statements of independence pursuant to article 11 can be found in the annex to the
Rules.
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Document information
Publication
Yearbook Commercial
Arbitration 1997 - Volume
XXII
Jurisdiction
United States of America
Organization
American Arbitration
Association
Entry into force
1 April 1997
Bibliographic reference
'AAA International
Arbitration Rules 1997', in
Albert Jan van den Berg (ed),
Yearbook Commercial
Arbitration 1997 - Volume
XXII, Yearbook Commercial
Arbitration, Volume 22
(© Kluwer Law International;
Kluwer Law International
1997) pp. 305 - 319
KluwerArbitration
AAA International Arbitration Rules 1997
Article 1
1. Where parties have agreed in writing to arbitrate disputes under these International
Arbitration Rules or have provided for arbitration of an international dispute by the American
Arbitration Association without designating particular rules, the arbitration shall take place in
accordance with these rules, as in effect at the date of commencement of the arbitration,
subject to whatever modifications the parties may adopt in writing.
2. These rules govern the arbitration, except that, where any such rule is in conflict with any
provision of the law applicable to the arbitration from which the parties cannot derogate, that
provision shall prevail.
3. These rules specify the duties and responsibilities of the administrator, the American
P 305 Arbitration Association. The administrator may provide services through its own facilities or
P 306 through the facilities of arbitral institutions with which it has agreements of cooperation.
I. Commencing the Arbitration
Notice of Arbitration and Statement of Claim
Article 2
1. The party initiating arbitration (“claimant”) shall give written notice of arbitration to the
administrator and at the same time to the party against whom a claim is being made
(“respondent”).
2. Arbitral proceedings shall be deemed to commence on the date on which the administrator
receives the notice of arbitration.
3. The notice of arbitration shall contain a statement of claim including the following:
a. a demand that the dispute be referred to arbitration;
b. the names and addresses of the parties;
c. a reference to the arbitration clause or agreement that is invoked;
d. a reference to any contract out of or in relation to which the dispute arises;
e. a description of the claim and an indication of the facts supporting it;
f. the relief or remedy sought and the amount claimed; and
g. may include proposals as to the means of designating and the number of arbitrators, the
place of arbitration and the language(s) of the arbitration.
4. Upon receipt of the notice of arbitration, the administrator shall communicate with all
parties with respect to the arbitration and shall acknowledge the commencement of the
arbitration.
Statement of Defense and Counterclaim
Article 3
1. Within 30 days after the commencement of the arbitration, a respondent shall submit a
written statement of defense, responding to the issues raised in the notice of arbitration, to the
claimant and any other parties, and to the administrator.
2. At the time a respondent submits its statement of defense, a respondent may make
counterclaims or assert setoffs as to any claim covered by the agreement to arbitrate, as to
which the claimant shall within 30 days submit a written statement of defense to the
respondent and any other parties and to the administrator.
3. A respondent shall respond to the administrator, the claimant and other parties within 30
P 306 days after the commencement of the arbitration as to any proposals the claimant may have
P 307 made as to the number of arbitrators, the place of the arbitration or the language(s) of the
arbitration, except to the extent that the parties have previously agreed as to these matters.
4. The arbitral tribunal, or the administrator if the arbitral tribunal has not yet been formed,
may extend any of the time limits established in this article if it considers such an extension
justified.
Amendments to Claims
 Article 4
During the arbitral proceedings, any party may amend or supplement its claim, counterclaim
or defense, unless the tribunal considers it inappropriate to allow such amendment or
supplement because of the party's delay in making it, prejudice to the other parties or any
other circumstances. A party may not amend or supplement a claim or counterclaim if the
amendment or supplement would fall outside the scope of the agreement to arbitrate.

II. The Tribunal

Number of Arbitrators

Article 5
If the parties have not agreed on the number of arbitrators, one arbitrator shall be appointed
unless the administrator determines in its discretion that three arbitrators are appropriate
because of the large size, complexity or other circumstances of the case.

Appointment of Arbitrators

Article 6
1. The parties may mutually agree upon any procedure for appointing arbitrators and shall
inform the administrator as to such procedure.
2. The parties may mutually designate arbitrators, with or without the assistance of the
administrator. When such designations are made, the parties shall notify the administrator so
that notice of the appointment can be communicated to the arbitrators, together with a copy
of these rules.
3. If within 45 days after the commencement of the arbitration, all of the parties have not
mutually agreed on a procedure for appointing the arbitrator(s) or have not mutually agreed
P 307 on the designation of the arbitrator(s), the administrator shall, at the written request of any
P 308 party, appoint the arbitrator(s) and designate the presiding arbitrator. If all of the parties
have mutually agreed upon a procedure for appointing the arbitrator(s), but all appointments
have not been made within the time limits provided in that procedure, the administrator shall,
at the written request of any party, perform all functions provided for in that procedure that
remain to be performed.
4. In making such appointments, the administrator, after inviting consultation with the parties,
shall endeavor to select suitable arbitrators. At the request of any party or on its own initiative,
the administrator may appoint nationals of a country other than that of any of the parties.
5. Unless the parties have agreed otherwise no later than 45 days after the commencement of
the arbitration, if the notice of arbitration names two or more claimants or two or more
respondents, the administrator shall appoint all the arbitrators.

Impartiality and Independence of Arbitrators

Article 7
1. Arbitrators acting under these rules shall be impartial and independent. Prior to accepting
appointment, a prospective arbitrator shall disclose to the administrator any circumstance
likely to give rise to justifiable doubts as to the arbitrator's impartiality or independence. If, at
any stage during the arbitration, new circumstances arise that may give rise to such doubts, an
arbitrator shall promptly disclose such circumstances to the parties and to the administrator.
Upon receipt of such information from an arbitrator or a party, the administrator shall
communicate it to the other parties and to the tribunal.
2. No party or anyone acting on its behalf shall have any ex parte communication relating to
the case with any arbitrator, or with any candidate for appointment as party-appointed
arbitrator except to advise the candidate of the general nature of the controversy and of the
anticipated proceedings and to discuss the candidate's qualifications, availability or
independence in relation to the parties, or to discuss the suitability of candidates for selection
as a third arbitrator where the parties or party-designated arbitrators are to participate in
that selection. No party or anyone acting on its behalf shall have any ex parte communication
relating to the case with any candidate for presiding arbitrator.

Challenge of Arbitrators

Article 8
P 308 1. A party may challenge any arbitrator whenever circumstances exist that give rise to
P 309 justifiable doubts as to the arbitrator's impartiality or independence. A party wishing to
challenge an arbitrator shall send notice of the challenge to the administrator within 15 days
after being notified of the appointment of the arbitrator or within 15 days after the
circumstances giving rise to the challenge become known to that party.
 2. The challenge shall state in writing the reasons for the challenge.
3. Upon receipt of such a challenge, the administrator shall notify the other parties of the
challenge. When an arbitrator has been challenged by one party, the other party or parties
may agree to the acceptance of the challenge and, if there is agreement, the arbitrator shall
withdraw. The challenged arbitrator may also withdraw from office in the absence of such
agreement. In neither case does withdrawal imply acceptance of the validity of the grounds for
the challenge.

Article 9
If the other party or parties do not agree to the challenge or the challenged arbitrator does not
withdraw, the administrator in its sole discretion shall make the decision on the challenge.

Replacement of an Arbitrator

Article 10
If an arbitrator withdraws after a challenge, or the administrator sustains the challenge, or the
administrator determines that there are sufficient reasons to accept the resignation of an
arbitrator, or an arbitrator dies, a substitute arbitrator shall be appointed pursuant to the
provisions of Article 6, unless the parties otherwise agree.

Article 11
1. If an arbitrator on a three-person tribunal fails to participate in the arbitration for reasons
other than those identified in Article 10, the two other arbitrators shall have the power in their
sole discretion to continue the arbitration and to make any decision, ruling or award,
notwithstanding the failure of the third arbitrator to participate. In determining whether to
continue the arbitration or to render any decision, ruling or award without the participation of
an arbitrator, the two other arbitrators shall take into account the stage of the arbitration, the
reason, if any, expressed by the third arbitrator for such nonparticipation, and such other
matters as they consider appropriate in the circumstances of the case. In the event that the
P 309 two other arbitrators determine not to continue the arbitration without the participation of the
P 310 third arbitrator, the administrator on proof satisfactory to it shall declare the office vacant,
and a substitute arbitrator shall be appointed pursuant to the provisions of Article 6, unless
the parties otherwise agree.
2. If a substitute arbitrator is appointed under either Article 10 or Article 11, the tribunal shall
determine at its sole discretion whether all or part of any prior hearings shall be repeated.

III. General Conditions

Representation

Article 12
Any party may be represented in the arbitration. The names, addresses and telephone
numbers of representatives shall be communicated in writing to the other parties and to the
administrator. Once the tribunal has been established, the parties or their representatives
may communicate in writing directly with the tribunal.

Place of Arbitration

Article 13
1. If the parties disagree as to the place of arbitration, the administrator may initially
determine the place of arbitration, subject to the power of the tribunal to determine finally
the place of arbitration within 60 days after its constitution. All such determinations shall be
made having regard for the contentions of the parties and the circumstances of the arbitration.
2. The tribunal may hold conferences or hear witnesses or inspect property or documents at
any place it deems appropriate. The parties shall be given sufficient written notice to enable
them to be present at any such proceedings.

Language

Article 14
If the parties have not agreed otherwise, the language(s) of the arbitration shall be that of the
documents containing the arbitration agreement, subject to the power of the tribunal to
determine otherwise based upon the contentions of the parties and the circumstances of the
P 310 arbitration. The tribunal may order that any documents delivered in another language shall be
P 311 accompanied by a translation into the language(s) of the arbitration.

Pleas as to Jurisdiction
 Article 15
1. The tribunal shall have the power to rule on its own jurisdiction, including any objections
with respect to the existence, scope or validity of the arbitration agreement.
2. The tribunal shall have the power to determine the existence or validity of a contract of
which an arbitration clause forms a part. Such an arbitration clause shall be treated as an
agreement independent of the other terms of the contract. A decision by the tribunal that the
contract is null and void shall not for that reason alone render invalid the arbitration clause.
3. A party must object to the jurisdiction of the tribunal or to the arbitrability of a claim or
counterclaim no later than the filing of the statement of defense, as provided in Article 3, to
the claim or counterclaim that gives rise to the objection. The tribunal may rule on such
objections as a preliminary matter or as part of the final award.

Conduct of the Arbitration

Article 16
1. Subject to these rules, the tribunal may conduct the arbitration in whatever manner it
considers appropriate, provided that the parties are treated with equality and that each party
has the right to be heard and is given a fair opportunity to present its case.
2. The tribunal, exercising its discretion, shall conduct the proceedings with a view to
expediting the resolution of the dispute. It may conduct a preparatory conference with the
parties for the purpose of organizing, scheduling and agreeing to procedures to expedite the
subsequent proceedings.
3. The tribunal may in its discretion direct the order of proof, bifurcate proceedings, exclude
cumulative or irrelevant testimony or other evidence, and direct the parties to focus their
presentations on issues the decision of which could dispose of all or part of the case.
4. Documents or information supplied to the tribunal by one party shall at the same time be
communicated by that party to the other party or parties.

Further Written Statements

Article 17
P 311 1. The tribunal may decide whether the parties shall present any written statements in
P 312 addition to statements of claims and counterclaims and statements of defense, and it shall
fix the periods of time for submitting any such statements.
2. The periods of time fixed by the tribunal for the communication of such written statements
should not exceed 45 days. However, the tribunal may extend such time limits if it considers
such an extension justified.

Notices

Article 18
1. Unless otherwise agreed by the parties or ordered by the tribunal, all notices, statements
and written communications may be served on a party by air mail, air courier, facsimile
transmission, telex, telegram, or other written forms of electronic communication addressed to
the party or its representative at its last known address or by personal service.
2. For the purpose of calculating a period of time under these rules, such period shall begin to
run on the day following the day when a notice, statement or written communication is
received. If the last day of such period is an official holiday at the place received, the period is
extended until the first business day which follows. Official holidays occurring during the
running of the period of time are included in calculating the period.

Evidence

Article 19
1. Each party shall have the burden of proving the facts relied on to support its claim or
defense.
2. The tribunal may order a party to deliver to the tribunal and to the other parties a summary
of the documents and other evidence which that party intends to present in support of its
claim, counterclaim or defense.
3. At any time during the proceedings, the tribunal may order parties to produce other
documents, exhibits or other evidence it deems necessary or appropriate.

Hearings

Article 20
 1. The tribunal shall give the parties at least thirty days' advance notice of the date, time and
place of the initial oral hearing. The tribunal shall give reasonable notice of subsequent
hearings.
P 312 2. At least 15 days before the hearings, each party shall give the tribunal and the other parties
P 313 the names and addresses of any witnesses it intends to present, the subject of their
testimony and the languages in which such witnesses will give their testimony.
3. At the request of the tribunal or pursuant to mutual agreement of the parties, the
administrator shall make arrangements for the interpretation of oral testimony or for a record
of the hearing.
4. Hearings are private unless the parties agree otherwise or the law provides to the contrary.
The tribunal may require any witness or witnesses to retire during the testimony of other
witnesses. The tribunal may determine the manner in which witnesses are examined.
5. Evidence of witnesses may also be presented in the form of written statements signed by
them.
6. The tribunal shall determine the admissibility, relevance, materiality and weight of the
evidence offered by any party. The tribunal shall take into account applicable principles of
legal privilege, such as those involving the confidentiality of communications between a lawyer
and client.

Interim Measures of Protection

Article 21
1. At the request of any party, the tribunal may take whatever interim measures it deems
necessary, including injunctive relief and measures for the protection or conservation of
property.
2. Such interim measures may take the form of an interim award, and the tribunal may require
security for the costs of such measures.
3. A request for interim measures addressed by a party to a judicial authority shall not be
deemed incompatible with the agreement to arbitrate or a waiver of the right to arbitrate.
4. The tribunal may in its discretion apportion costs associated with applications for interim
relief in any interim award or in the final award.

Experts

Article 22
1. The tribunal may appoint one or more independent experts to report to it, in writing, on
specific issues designated by the tribunal and communicated to the parties.
2. The parties shall provide such an expert with any relevant information or produce for
inspection any relevant documents or goods that the expert may require. Any dispute between
P 313 a party and the expert as to the relevance of the requested information or goods shall be
P 314 referred to the tribunal for decision.
3. Upon receipt of an expert's report, the tribunal shall send a copy of the report to all parties
and shall give the parties an opportunity to express, in writing, their opinion on the report. A
party may examine any document on which the expert has relied in such a report.
4. At the request of any party, the tribunal shall give the parties an opportunity to question the
expert at a hearing. At this hearing, parties may present expert witnesses to testify on the
points at issue.

Default

Article 23
1. If a party fails to file a statement of defense within the time established by the tribunal
without showing sufficient cause for such failure, as determined by the tribunal, the tribunal
may proceed with the arbitration.
2. If a party, duly notified under these rules, fails to appear at a hearing without showing
sufficient cause for such failure, as determined by the tribunal, the tribunal may proceed with
the arbitration.
3. If a party, duly invited to produce evidence or take any other steps in the proceedings, fails
to do so within the time established by the tribunal without showing sufficient cause for such
failure, as determined by the tribunal, the tribunal may make the award on the evidence
before it.

Closure of Hearing

Article 24
 1. After asking the parties if they have any further testimony or evidentiary submissions and
upon receiving negative replies or if satisfied that the record is complete, the tribunal may
declare the hearings closed.
2. The tribunal in its discretion, on its own motion or upon application of a party, may reopen
the hearings at any time before the award is made.

Waiver of Rules

Article 25
A party who knows that any provision of the rules or requirement under the rules has not been
P 314 complied with, but proceeds with the arbitration without promptly stating an objection in
P 315 writing thereto, shall be deemed to have waived the right to object.

Awards, Decisions and Rulings

Article 26
1. When there is more than one arbitrator, any award, decision or ruling of the arbitral tribunal
shall be made by a majority of the arbitrators. If any arbitrator fails to sign the award, it shall
be accompanied by a statement of the reason for the absence of such signature.
2. When the parties or the tribunal so authorize, the presiding arbitrator may make decisions
or rulings on questions of procedure, subject to revision by the tribunal.

Form and Effect of the Award

Article 27
1. Awards shall be made in writing, promptly by the tribunal, and shall be final and binding on
the parties. The parties undertake to carry out any such award without delay.
2. The tribunal shall state the reasons upon which the award is based, unless the parties have
agreed that no reasons need be given.
3. The award shall contain the date and the place where the award was made, which shall be
the place designated pursuant to Article 13.
4. An award may be made public only with the consent of all parties or as required by law.
5. Copies of the award shall be communicated to the parties by the administrator.
6. If the arbitration law of the country where the award is made requires the award to be filed
or registered, the tribunal shall comply with such requirement.
7. In addition to making a final award, the tribunal may make interim, interlocutory, or partial
orders and awards.

Applicable Laws and Remedies

Article 28
1. The tribunal shall apply the substantive law(s) or rules of law designated by the parties as
applicable to the dispute. Failing such a designation by the parties, the tribunal shall apply
such law(s) or rules of law as it determines to be appropriate.
2. In arbitrations involving the application of contracts, the tribunal shall decide in
P 315 accordance with the terms of the contract and shall take into account usages of the trade
P 316 applicable to the contract.
3. The tribunal shall not decide as amiable compositeur or ex aequo et bono unless the parties
have expressly authorized it to do so.
4. A monetary award shall be in the currency or currencies of the contract unless the tribunal
considers another currency more appropriate, and the tribunal may award such pre-award and
post-award interest, simple or compound, as it considers appropriate, taking into
consideration the contract and applicable law.
5. Unless the parties agree otherwise, the parties expressly waive and forego any right to
punitive, exemplary or similar damages unless a statute requires that compensatory damages
be increased in a specified manner. This provision shall not apply to any award of arbitration
costs to a party to compensate for dilatory or bad faith conduct in the arbitration.

Settlement or Other Reasons for Termination

Article 29
1. If the parties settle the dispute before an award is made, the tribunal shall terminate the
arbitration and, if requested by all parties, may record the settlement in the form of an award
on agreed terms. The tribunal is not obliged to give reasons for such an award.
 2. If the continuation of the proceedings becomes unnecessary or impossible for any other
reason, the tribunal shall inform the parties of its intention to terminate the proceedings. The
tribunal shall thereafter issue an order terminating the arbitration, unless a party raises
justifiable grounds for objection.

Interpretation or Correction of the Award

Article 30
1. Within 30 days after the receipt of an award, any party, with notice to the other parties, may
request the tribunal to interpret the award or correct any clerical, typographical or
computation errors or make an additional award as to claims presented but omitted from the
award.
P 316 2. If the tribunal considers such a request justified, after considering the contentions of the
P 317 parties, it shall comply with such a request within 30 days after the request.

Costs

Article 31
The tribunal shall fix the costs of arbitration in its award. The tribunal may apportion such
costs among the parties if it determines that such apportionment is reasonable, taking into
account the circumstances of the case. Such costs may include:
a. the fees and expenses of the arbitrators;
b. the costs of assistance required by the tribunal, including its experts;
c. the fees and expenses of the administrator;
d. the reasonable costs for legal representation of a successful party; and
e. any such costs incurred in connection with an application for interim or emergency relief
pursuant to Article 21.

Compensation of Arbitrators

Article 32
Arbitrators shall be compensated based upon their amount of service, taking into account their
stated rate of compensation and the size and complexity of the case. The administrator shall
arrange an appropriate daily or hourly rate, based on such considerations, with the parties and
with each of the arbitrators as soon as practicable after the commencement of the arbitration.
If the parties fail to agree on the terms of compensation, the administrator shall establish an
appropriate rate and communicate it in writing to the parties.

Deposit of Costs

Article 33
1. When a party files claims, the administrator may request the filing party to deposit
appropriate amounts as an advance for the costs referred to in Article 31, paragraphs (a), (b)
and (c).
2. During the course of the arbitral proceedings, the tribunal may request supplementary
deposits from the parties.
3. If the deposits requested are not paid in full within 30 days after the receipt of the request,
the administrator shall so inform the parties, in order that one or the other of them may make
P 317 the required payment. If such payments are not made, the tribunal may order the suspension
P 318 or termination of the proceedings.
4. After the award has been made, the administrator shall render an accounting to the parties
of the deposits received and return any unexpended balance to the parties.

Confidentiality

Article 34
Confidential information disclosed during the proceedings by the parties or by witnesses shall
not be divulged by an arbitrator or by the administrator. Unless otherwise agreed by the
parties, or required by applicable law, the members of the tribunal and the administrator shall
keep confidential all matters relating to the arbitration or the award.

Exclusion of Liability

Article 35
 The members of the tribunal and the administrator shall not be liable to any party for any act
or omission in connection with any arbitration conducted under these rules, except that they
may be liable for the consequences of conscious and deliberate wrongdoing.

Interpretation of Rules

Article 36
The tribunal shall interpret and apply these rules insofar as they relate to its powers and
duties. The administrator shall interpret and apply all other rules.

Administrative Fees
The administrative fees of the AAA are based on the amount of the claim or counterclaim.
Arbitrator compensation is not included in this schedule. Unless the parties agree otherwise,
arbitrator compensation and administrative fees are subject to allocation by the arbitrator in
the award.

Filing Fees
P 318 A nonrefundable filing fee is payable in full by a filing party when a claim, counterclaim or
P 319 additional claim is filed, as provided below.
Amount of Claim Filing Fee
Up to $ 10,000 $500
Above $ 10,000 to $ 50,000 $ 750
Above $ 50,000 to $ 100,000 $ 1,250
Above $ 100,000 to $ 250,000 $ 2,000
Above $ 250,000 to $ 500,000 $ 3,500
Above $ 500,000 to $ 1,000,000 $ 5,000
Above $ 1,000,000 to $ 5,000,000 $ 7,000
When no amount can be stated at the time of filing, the minimum filing fee is $ 2,000, subject to
increase when the claim or counterclaim is disclosed.
When a claim or counterclaim is not for a monetary amount, an appropriate filing fee will be
determined by the AAA.
The minimum filing fee for any case having three or more arbitrators is $ 2,000.
The administrative fee for claims in excess of $ 5,000,000 will be negotiated.

Hearing Fees
For each day of hearing held before a single arbitrator, an administrative fee of $ 150 is
payable by each party.
For each day of hearing held before a multiarbitrator panel, an administrative fee of $ 250 is
payable by each party.
There is no AAA hearing fee for the initial Procedural Hearing.

Postponement/Cancellation Fees
A fee of $ 150 is payable by a party causing a postponement of any hearing scheduled before a
single arbitrator.
A fee of $ 250 is payable by a party causing a postponement of any hearing scheduled before a
multiarbitrator panel.

Suspension for Nonpayment

If arbitrator compensation or administrative charges have not been paid in full, the
administrator may so inform the parties in order that one of them may advance the required
payment. If such payments are not made, the tribunal may order the suspension or termination
of the proceedings. If no arbitrator has yet been appointed, the AAA may suspend the
proceedings.

Hearing Room Rental

P 319 The Hearing Fees described above do not cover the rental of hearing rooms, which are
available on a rental basis. Check with the administrator for availability and rates.
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.

Kluwer Arbitration is made available for personal use only. All content is protected by copyright and other intellectual property
laws. No part of this service or the information contained herein may be reproduced or transmitted in any form or by any means, or
used for advertising or promotional purposes, general distribution, creating new collective works, or for resale, without prior
written permission of the publisher.

If you would like to know more about this service, visit www.kluwerarbitration.com or contact our Sales staff at
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KluwerArbitration

Document information
Publication
Yearbook Commercial
Arbitration 1999 - Volume
XXIVa
Jurisdiction
United States of America
Organization
American Arbitration
Association
Entry into force
1 January 1999
Bibliographic reference
'AAA Commercial Mediation
Rules 1999', in Albert Jan van
den Berg (ed), Yearbook
Commercial Arbitration 1999
- Volume XXIVa, Yearbook
Commercial Arbitration,
Volume 24 (© Kluwer Law
International; Kluwer Law
International 1999) pp. 361 -
388
KluwerArbitration
AAA Commercial Mediation Rules 1999
M-1. AGREEMENT OF PARTIES
Whenever, by stipulation or in their contract, the parties have provided for mediation or
conciliation of existing or future disputes under the auspices of the American Arbitration
Association (AAA) or under these rules, they shall be deemed to have made these rules, as
amended and in effect as of the date of the submission of the dispute, a part of their
agreement.
M-2. INITIATION OF MEDIATION
Any party or parties to a dispute may initiate mediation by filing with the AAA a submission to
mediation or a written request for mediation pursuant to these rules, together with the
appropriate Filing Fee. Where there is no submission to mediation or contract providing for
mediation, a party may request the AAA to invite another party to join in a submission to
mediation. Upon receipt of such a request, the AAA will contact the other parties involved in
the dispute and attempt to obtain a submission to mediation.
M-3. REQUESTS FOR MEDIATION
A request for mediation shall contain a brief statement of the nature of the dispute and the
names, addresses, and telephone numbers of all parties to the dispute and those who will
represent them, if any, in the mediation. The initiating party shall simultaneously file two
copies of the request with the AAA and one copy with every other party to the dispute.
M-4. APPOINTMENT OF THE MEDIATOR
Upon receipt of a request for mediation, the AAA will appoint a qualified mediator to serve.
Normally, a single mediator will be appointed unless the parties agree otherwise or the AAA
determines otherwise. If the agreement of the parties names a mediator or specifies a method
of appointing a mediator, that designation or method shall be followed.
M-5. QUALIFICATIONS OF THE MEDIATOR
No person shall serve as a mediator in any dispute in which that person has any financial or
personal interest in the result of the mediation, except by the written consent of all parties.
Prior to accepting an appointment, the prospective mediator shall disclose any circumstance
likely to create a presumption of bias or prevent a prompt meeting with the parties. Upon
receipt of such information, the AAA shall either replace the mediator or immediately
communicate the information to the parties for their comments. In the event that the parties
disagree as to whether the mediator shall serve, the AAA will appoint another mediator. The
AAA is authorized to appoint another mediator if the appointed mediator is unable to serve
promptly.
M-6. VACANCIES
If any mediator shall become unwilling or unable to serve, the AAA will appoint another
mediator, unless the parties agree otherwise.
M-7. REPRESENTATION
Any party may be represented by persons of the party's choice. The names and addresses of
such persons shall be communicated in writing to all parties and to the AAA.
M-8. DATE, TIME, AND PLACE OF MEDIATION
The mediator shall fix the date and the time of each mediation session. The mediation shall be
held at the appropriate regional office of the AAA, or at any other convenient location
agreeable to the mediator and the parties, as the mediator shall determine.
M-9. IDENTIFICATION OF MATTERS IN DISPUTE
At least ten days prior to the first scheduled mediation session, each party shall provide the
mediator with a brief memorandum setting forth its position with regard to the issues that
need to be resolved. At the discretion of the mediator, such memoranda may be mutually
exchanged by the parties.
At the first session, the parties will be expected to produce all information reasonably
required for the mediator to understand the issues presented.
The mediator may require any party to supplement such information.

M-10. AUTHORITY OF THE MEDIATOR

The mediator does not have the authority to impose a settlement on the parties but will
attempt to help them reach a satisfactory resolution of their dispute. The mediator is
authorized to conduct joint and separate meetings with the parties and to make oral and
written recommendations for settlement. Whenever necessary, the mediator may also obtain
expert advice concerning technical aspects of the dispute, provided that the parties agree and
assume the expenses of obtaining such advice. Arrangements for obtaining such advice shall
be made by the mediator or the parties, as the mediator shall determine.
The mediator is authorized to end the mediation whenever, in the judgment of the mediator,
further efforts at mediation would not contribute to a resolution of the dispute between the
parties.

M-11. PRIVACY
Mediation sessions are private. The parties and their representatives may attend mediation
sessions. Other persons may attend only with the permission of the parties and with the
consent of the mediator.

M-12. CONFIDENTIALITY
Confidential information disclosed to a mediator by the parties or by witnesses in the course of
the mediation shall not be divulged by the mediator. All records, reports, or other documents
received by a mediator while serving in that capacity shall be confidential. The mediator shall
not be compelled to divulge such records or to testify in regard to the mediation in any
adversary proceeding or judicial forum.
The parties shall maintain the confidentiality of the mediation and shall not rely on, or
introduce as evidence in any arbitral, judicial, or other proceeding:
a. views expressed or suggestions made by another party with respect to a possible settlement
of the dispute;
b. admissions made by another party in the course of the mediation proceedings;
c. proposals made or views expressed by the mediator; or
d. the fact that another party had or had not indicated willingness to accept a proposal for
settlement made by the mediator.

M-13. NO STENOGRAPHIC RECORD

There shall be no stenographic record of the mediation process.

M-14. TERMINATION OF MEDIATION

The mediation shall be terminated:
a. by the execution of a settlement agreement by the parties;
b. by a written declaration of the mediator to the effect that further efforts at mediation are
no longer worthwhile; or
c. by a written declaration of a party or parties to the effect that the mediation proceedings
are terminated.

M-15. EXCLUSION OF LIABILITY

Neither the AAA nor any mediator is a necessary party in judicial proceedings relating to the
mediation.
Neither the AAA nor any mediator shall be liable to any party for any act or omission in
connection with any mediation conducted under these rules.

M-16. INTERPRETATION AND APPLICATION OF RULES

The mediator shall interpret and apply these rules insofar as they relate to the mediator's
duties and responsibilities. All other rules shall be interpreted and applied by the AAA.

M-17. EXPENSES
The expenses of witnesses for either side shall be paid by the party producing such witnesses.
All other expenses of the mediation, including required traveling and other expenses of the
mediator and representatives of the AAA, and the expenses of any witness and the cost of any
proofs or expert advice produced at the direct request of the mediator, shall be borne equally
by the parties unless they agree otherwise.
Administrative Fees
The Filing Fee
The case filing or set-up fee is $150 per party.
Additionally, the parties are charged a fee based on the number of hours of mediator time. The
hourly fee is for the compensation of both the mediator and the AAA and varies according to
region. Check with your local office for specific availability and rates.
There is no charge to the filing party where the AAA is requested to invite other parties to join
in a submission to mediation. However, if a case settles after AAA involvement but prior to
dispute resolution, the filing party will be charged a $150 filing fee.
The expenses of the AAA and the mediator, if any, are generally borne equally by the parties.
The parties may vary this arrangement by agreement.
Where the parties have attempted mediation under these rules but have failed to reach a
settlement, the AAA will apply the administrative fee for the mediation toward subsequent AAA
arbitration filed with the AAA within ninety days of the termination of the mediation.

Deposits
Before the commencement of mediation, the parties shall each deposit such portion of the fee
covering the cost of mediation as the AAA shall direct and all appropriate additional sums that
the AAA deems necessary to defray the expenses of the proceeding. When the mediation has
terminated, the AAA shall render an accounting and return any unexpended balance to the
parties.

Refunds
Once the parties agree to mediate, no refund of the administrative fee will be made.
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.

Kluwer Arbitration is made available for personal use only. All content is protected by copyright and other intellectual property
laws. No part of this service or the information contained herein may be reproduced or transmitted in any form or by any means, or
used for advertising or promotional purposes, general distribution, creating new collective works, or for resale, without prior
written permission of the publisher.

If you would like to know more about this service, visit www.kluwerarbitration.com or contact our Sales staff at
sales@kluwerlaw.com or call +31 (0)172 64 1562.

KluwerArbitration

Document information
Publication
Yearbook Commercial
Arbitration 1997 - Volume
XXII
Jurisdiction
France
Organization
International Court of
Arbitration of the
International Chamber of
Commerce
Entry into force
1 January 1998
Promulgation
1 January 1998
Topics
Investment Arbitration
Bibliographic reference
'ICC Rules of Arbitration
1998', in Albert Jan van den
Berg (ed), Yearbook
Commercial Arbitration 1997
- Volume XXII, Yearbook
Commercial Arbitration,
Volume 22 (© Kluwer Law
International; Kluwer Law
International 1997) pp. 347 -
370
KluwerArbitration
ICC Rules of Arbitration 1998
(1)
Introductory Provisions
Article 1 INTERNATIONAL COURT OF ARBITRATION
1. The International Court of Arbitration (the “Court”) of the International Chamber of
Commerce (the “ICC”) is the arbitration body attached to the ICC. The statutes of the Court are
set forth in Appendix I. Members of the Court are appointed by the Council of the ICC. The
function of the Court is to provide for the settlement by arbitration of business disputes of an
international character in accordance with the Rules of Arbitration of the International
Chamber of Commerce (the “Rules”). If so empowered by an arbitration agreement, the Court
shall also provide for the settlement by arbitration in accordance with these Rules of business
disputes not of an international character.
2. The Court does not itself settle disputes. It has the function of ensuring the application of
these Rules. It draws up its own Internal Rules (Appendix II).
3. The Chairman of the Court, or, in the Chairman's absence or otherwise at his request, one of
its Vice-Chairmen shall have the power to take urgent decisions on behalf of the Court,
provided that any such decision is reported to the Court at its next session.
4. As provided for in its Internal Rules, the Court may delegate to one or more committees
composed of its members the power to take certain decisions, provided that any such decision
is be reported to the Court at its next session.
P 347 5. The Secretariat of the Court (the “Secretariat ”) under the direction of its Secretary General
P 348 (the “Secretary General”) shall have its seat at the headquarters of the ICC.
Article 2 DEFINITIONS
In these Rules:
(i) “Arbitral Tribunal” includes one or more arbitrators.
(ii) “Claimant” includes one or more claimants and “Respondent” includes one or more
respondents.
(iii) “Award” includes, inter alia, an interim, partial or final Award.
Article 3 WRITTEN NOTIFICATIONS OR COMMUNICATIONS; TIME LIMITS
1. All pleadings and other written communications submitted by any party, as well as all
documents annexed thereto, shall be supplied in a number of copies sufficient to provide one
copy for each party, plus one for each arbitrator, and one for the Secretariat. A copy of any
communication from the Arbitral Tribunal to the parties shall be sent to the Secretariat.
2. All notifications or communications from the Secretariat and the Arbitral Tribunal shall be
made to the last address of the party or its representative for whom the same are intended, as
notified either by the party in question or by the other party. Such notification or
communication may be made by delivery against receipt, registered post, courier, facsimile
transmission, telex, telegram or any other means of telecommunication that provides a record
of the sending thereof.
3. A notification or communication shall be deemed to have been made on the day it was
received by the party itself or by its representative, or would have been received if made in
accordance with the preceding paragraph.
4. Periods of time specified in, or fixed under the present Rules, shall start to run on the day
following the date a notification or communication is deemed to have been made in
accordance with the preceding paragraph. When the day next following such date is an official
holiday, or a non-business day in the country where the notification or communication is
deemed to have been made, the period of time shall commence on the first following business
day. Official holidays and non-business days are included in the calculation of the period of
time. If the last day of the relevant period of time granted is an official holiday or a non-
P 348 business day in the country where the notification or communication is deemed to have been
P 349 made, the period of time shall expire at the end of the first following business day.
Commencing the Arbitration
Article 4 REQUEST FOR ARBITRATION
 1. A party wishing to have recourse to arbitration under these Rules shall submit its Request for
Arbitration (the “Request”) to the Secretariat, which shall notify the Claimant and Respondent
of the receipt of the Request and the date of such receipt.
2. The date on which the Request is received by the Secretariat shall, for all purposes, be
deemed to be the date of the commencement of the arbitral proceedings.
3. The Request shall, inter alia, contain the following information:
(a) the name in full, description and address of each of the parties;
(b) a description of the nature and circumstances of the dispute giving rise to the claims;
(c) a statement of the relief sought, including, to the extent possible, an indication of any
amount(s) claimed;
(d) the relevant agreements and, in particular, the arbitration agreement;
(e) all relevant particulars concerning the number of arbitrators and their choice in
accordance with the provisions of Articles 8, 9 and 10, and any nomination of an arbitrator
required thereby; and
(f) any comments as to the place of arbitration, the applicable rules of law and the language
of the arbitration.
4. Together with the Request, the Claimant shall submit the number of copies thereof required
by Article 3(1) and shall make the advance payment on administrative expenses required by
Appendix III (“Arbitration Costs and Fees”) in force on the date the Request is submitted. In the
event that the Claimant fails to comply with either of these requirements, the Secretariat may
fix a time limit within which the Claimant must comply, failing which the file shall be closed
without prejudice to the right of the Claimant to submit the same claims at a later date in
another Request.
5. The Secretariat shall send a copy of the Request and the documents annexed thereto to the
Respondent for its Answer to the Request once the Secretariat has sufficient copies of the
Request and the required advance payment.
6. When a party submits a Request in connection with a legal relationship in respect of which
arbitration proceedings between the same parties are already pending under these Rules, the
P 349 Court may, at the request of a party, decide to include the claims contained in the Request in
P 350 the pending proceedings provided that the Terms of Reference have not been signed or
approved by the Court. Once the Terms of Reference have been signed or approved by the
Court, claims may only be included in the pending proceedings subject to the provisions of
Article 19.

Article 5 ANSWER TO THE REQUEST; COUNTERCLAIMS

1. Within 30 days from the receipt of the Request from the Secretariat, the Respondent shall
file an Answer (the “Answer”) which shall, inter alia, contain the following information:
(a) its name in full, description and address;
(b) its comments as to the nature and circumstances of the dispute giving rise to the claim(s);
(c) its response to the relief sought;
(d) any comments concerning the number of arbitrators and their choice in light of the
Claimant's proposals and in accordance with the provisions of Articles 8, 9 and 10, and
any nomination of an arbitrator required thereby; and
(e) any comments as to the place of arbitration, the applicable rules of law and the language
of the arbitration.
2. The Secretariat may grant the Respondent an extension of the time for filing the Answer,
provided the application for such an extension contains the Respondent's comments
concerning the number of arbitrators and their choice, and where required by Articles 8, 9 and
10, the nomination of an arbitrator. If the Respondent fails to do so, the Court shall proceed in
accordance with these Rules.
3. The Answer shall be supplied to the Secretariat in the number of copies specified by Article
3(1).
4. A copy of the Answer and the documents annexed thereto shall be communicated by the
Secretariat to the Claimant.
5. Any counterclaims made by the Respondent shall be filed with its Answer and shall provide:
(a) a description of the nature and circumstances of the dispute giving rise to the
counterclaim(s); and
(b) a statement of the relief sought, including, to the extent possible, an indication of any
amount(s) counterclaimed.
6. The Claimant shall file a Reply to any counterclaim within 30 days from the date of receipt
P 350 of the counterclaim(s) communicated by the Secretariat. The Secretariat may grant the
P 351 Claimant an extension of time for filing the Reply.
 Article 6 EFFECT OF THE ARBITRATION AGREEMENT
1. Where the parties have agreed to submit to arbitration under the Rules, they shall be
deemed thereby to have submitted ipso facto to the Rules in effect on the date of
commencement of the arbitration proceedings unless they have agreed to submit to the Rules
in effect on the date of their arbitration agreement.
2. If the Respondent does not file an Answer, as provided by Article 5, or if any party raises one
or more pleas concerning the existence, validity or scope of the arbitration agreement, the
Court may decide, without prejudice to the admissibility or merits of the plea or pleas, that the
arbitration shall proceed if it is prima facie satisfied that an arbitration agreement under the
Rules may exist. In such a case, any decision as to the jurisdiction of the Arbitral Tribunal shall
be taken by the Arbitral Tribunal itself. If the Court is not so satisfied, the parties shall be
notified that the arbitration cannot proceed. In such a case, any party retains the right to ask
any court having jurisdiction whether or not there is a binding arbitration agreement.
3. If any of the parties refuses or fails to take part in the arbitration or any stage thereof, the
arbitration shall proceed notwithstanding such refusal or failure.
4. Unless otherwise agreed, the Arbitral Tribunal shall not cease to have jurisdiction by reason
of any claim that the contract is null and void or allegation that it is non-existent provided that
the Arbitral Tribunal upholds the validity of the arbitration agreement. The Arbitral Tribunal
shall continue to have jurisdiction to determine the respective rights of the parties and to
adjudicate upon their claims and pleas even though the contract itself may be non-existent or
null and void.

The Arbitral Tribunal

Article 7 GENERAL PROVISIONS
1. Every arbitrator must be and remain independent of the parties involved in the arbitration.
2. Before appointment or confirmation, a prospective arbitrator shall sign a statement of
independence and disclose in writing to the Secretariat any facts or circumstances which
might be of such a nature as to call into question the arbitrator's independence in the eyes of
P 351 the parties. The Secretariat shall provide such information to the parties in writing and fix a
P 352 time limit for any comments from them.
3. An arbitrator shall immediately disclose in writing to the Secretariat and to the parties any
facts or circumstances of a similar nature which may arise during the arbitration.
4. The decisions of the Court as to the appointment, confirmation, challenge or replacement of
an arbitrator shall be final and the reasons for such decisions shall not be communicated.
5. By accepting to serve, every arbitrator undertakes to carry out his responsibilities in
accordance with these Rules.
6. Insofar as the parties have not provided otherwise, the Arbitral Tribunal shall be constituted
in accordance with the provisions of Articles 8, 9 and 10.

Article 8 NUMBER OF ARBITRATORS

1. The disputes shall be decided by a sole arbitrator or by three arbitrators.
2. Where the parties have not agreed upon the number of arbitrators, the Court shall appoint a
sole arbitrator, save where it appears to the Court that the dispute is such as to warrant the
appointment of three arbitrators. In such case, the Claimant shall nominate an arbitrator
within a period of 15 days from the receipt of the notification of the decision of the Court, and
the Respondent shall nominate an arbitrator within a period of 15 days from the receipt of the
notification of the nomination made by the Claimant.
3. Where the parties have agreed that the dispute shall be settled by a sole arbitrator, they
may, by agreement, nominate the sole arbitrator for confirmation. If the parties fail to
nominate a sole arbitrator within 30 days from the date when the Claimant's Request for
Arbitration has been received by the other party, or within such additional time as may be
allowed by the Secretariat, the sole arbitrator shall be appointed by the Court.
4. Where the dispute is to be referred to three arbitrators, each party shall nominate in the
Request and the Answer, respectively, one arbitrator for confirmation by the Court. If a party
fails to nominate an arbitrator, the appointment shall be made by the Court. The third
arbitrator, who will act as chairman of the Arbitral Tribunal, shall be appointed by the Court,
unless the parties have agreed upon another procedure for such appointment, in which case
the nomination will be subject to confirmation pursuant to Article 9. Should such procedure not
result in a nomination within the time limit fixed by the parties or the Court, the third
arbitrator shall be appointed by the Court.

Article 9 APPOINTMENT AND CONFIRMATION OF THE ARBITRATORS

1. In confirming or appointing arbitrators, the Court shall consider the prospective arbitrator's
P 352 nationality, residence and other relationships with the countries of which the parties or the
P 353 other arbitrators are nationals and the prospective arbitrator's availability and ability to
conduct the arbitration in accordance with these Rules. The same shall apply where the
 Secretary General confirms arbitrators pursuant to Article 9(2).
2. The Secretary General may confirm as co-arbitrators, sole arbitrators and chairmen of
Arbitral Tribunals persons nominated by the parties or pursuant to their particular
agreements, provided they have filed a statement of independence without qualification or a
qualified statement of independence has not given rise to objections. Such confirmation shall
be reported to the Court at its next session. If the Secretary General considers that a co-
arbitrator, sole arbitrator or chairman of an Arbitral Tribunal should not be confirmed, the
matter shall be submitted to the Court.
3. Where the Court is to appoint a sole arbitrator or the chairman of an Arbitral Tribunal, it
shall make the appointment upon a proposal of a National Committee of the ICC that it
considers to be appropriate. If the Court does not accept the proposal made, or if the National
Committee fails to make the proposal requested within the time limit fixed by the Court, the
Court may repeat its request or may request a proposal from another National Committee that
it considers to be appropriate.
4. Where the Court considers that the circumstances so demand, it may choose the sole
arbitrator or the chairman of the Arbitral Tribunal from a country where there is no National
Committee, provided that neither of the parties objects within the time limit fixed by the
Court.
5. The sole arbitrator or the chairman of the Arbitral Tribunal shall be of a nationality other
than those of the parties. However, in suitable circumstances and provided that neither of the
parties objects within the time limit fixed by the Court, the sole arbitrator or the chairman of
the Arbitral Tribunal may be chosen from a country of which any of the parties is a national.
6. Where the Court is to appoint an arbitrator on behalf of a party which has failed to nominate
one, it shall make the appointment upon a proposal of the National Committee of the country
of which that party is a national. If the Court does not accept the proposal made, or if the
National Committee fails to make the proposal requested within the time limit fixed by the
Court, or if the country of which the said party is a national has no National Committee, the
Court shall be at liberty to choose any person whom it regards as suitable. The Secretariat shall
P 353 inform the National Committee, if one exists, of the country of which such person is a national.
P 354

Article 10 MULTIPLE PARTIES

1. Where there are multiple parties, whether as Claimant or as Respondent, and where the
dispute is to be referred to three arbitrators, the multiple Claimants, jointly, and the multiple
Respondents, jointly, shall nominate an arbitrator for confirmation pursuant to Article 9.
2. In the absence of such a joint nomination and where all parties are unable to agree to a
method for the constitution of the Arbitral Tribunal, the Court may appoint each member of the
Arbitral Tribunal and shall designate one of them to act as chairman. In such case, the Court
shall be at liberty to choose any person whom it regards as suitable to act as arbitrator,
applying Article 9 when it considers this appropriate.

Article 11 CHALLENGE OF ARBITRATORS

1. A challenge of an arbitrator, whether for an alleged lack of independence or otherwise, shall
be made by the submission to the Secretariat of a written statement specifying the facts and
circumstances on which the challenge is based.
2. For a challenge to be admissible, it must be sent by a party either within 30 days from
receipt by that party of the notification of the appointment or confirmation of the arbitrator, or
within 30 days from the date when the party making the challenge was informed of the facts
and circumstances on which the challenge is based if such date is subsequent to the receipt of
such notification.
3. The Court shall decide on the admissibility, and, at the same time, if necessary, on the
merits of a challenge after the Secretariat has afforded an opportunity for the arbitrator
concerned, the other party or parties and any other members of the Arbitral Tribunal, to
comment in writing within a suitable period of time. Such comments shall be communicated to
the parties and to the arbitrators.

Article 12 REPLACEMENT OF ARBITRATORS

1. An arbitrator shall be replaced upon his death, upon the acceptance by the Court of the
arbitrator's resignation, upon acceptance by the Court of a challenge or upon the request of all
the parties.
2. An arbitrator shall also be replaced on the Court's own initiative when it decides that he is
prevented de jure or de facto from fulfilling his functions, or that he is not fulfilling his functions
in accordance with the Rules or within the prescribed time limits.
3. When, on the basis of information that has come to its attention, the Court considers
P 354 applying Article 12(2), it shall decide on the matter after the arbitrator concerned, the parties
P 355 and any other members of the Arbitral Tribunal have had an opportunity to comment in
writing within a suitable period of time. Such comments shall be communicated to the parties
and to the arbitrators.
 4. When an arbitrator is to be replaced, the Court has discretion to decide whether or not to
follow the original nominating process. Once reconstituted, and after having invited the parties
to comment, the Arbitral Tribunal shall determine if and to what extent prior proceedings shall
be repeated before the reconstituted Arbitral Tribunal.
5. Subsequent to the closing of the proceedings, instead of replacing an arbitrator who has
died or been removed by the Court pursuant to Articles 12(1) and 12(2), the Court may decide,
when it considers it appropriate, that the remaining arbitrators shall continue the arbitration.
In making such determination, the Court shall take into account the views of the remaining
arbitrators and of the parties and such other matters that it considers appropriate in the
circumstances.

The Arbitral Proceedings

Article 13 TRANSMISSION OF THE FILE TO THE ARBITRAL TRIBUNAL
The Secretariat shall transmit the file to the Arbitral Tribunal as soon as it has been
constituted, provided the advance on costs requested by the Secretariat at this stage has been
paid.

Article 14 PLACE OF THE ARBITRATION

1. The place of the arbitration shall be fixed by the Court, unless agreed upon by the parties.
2. The Arbitral Tribunal may, after consultation with the parties, conduct hearings and
meetings at any location it considers appropriate unless otherwise agreed by the parties.
3. The Arbitral Tribunal may deliberate at any location it considers appropriate.

Article 15 RULES GOVERNING THE PROCEEDINGS

1. The proceedings before the Arbitral Tribunal shall be governed by these Rules, and, where
these Rules are silent, any rules which the parties or, failing them, the Arbitral Tribunal may
settle on, whether or not reference is thereby made to the rules of procedure of a national law
to be applied to the arbitration.
P 355 2. In all cases, the Arbitral Tribunal shall act fairly and impartially and ensure that each party
P 356 has a reasonable opportunity to present its case.

Article 16 LANGUAGE OF THE ARBITRATION

In the absence of an agreement by the parties, the Arbitral Tribunal shall determine the
language or languages of the arbitration, due regard being given to all relevant circumstances,
including the language of the contract.

Article 17 APPLICABLE RULES OF LAW

1. The parties shall be free to agree upon the rules of law to be applied by the Arbitral Tribunal
to the merits of the dispute. In the absence of any such agreement, the Arbitral Tribunal shall
apply the rules of law which it determines to be appropriate.
2. In all cases, the Arbitral Tribunal shall take account of the provisions of the contract and the
relevant trade usages.
3. The Arbitral Tribunal shall assume the powers of an amiable compositeur or decide ex aequo
et bono only if the parties have agreed to give it such powers.

Article 18 TERMS OF REFERENCE; PROCEDURAL TIMETABLE

1. As soon as it has received the file from the Secretariat, the Arbitral Tribunal shall draw up,
on the basis of documents or in the presence of the parties and in the light of their most recent
submissions, a document defining its Terms of Reference. This document shall include the
following particulars:
(a) the full names and descriptions of the parties;
(b) the addresses of the parties to which notifications and communications arising in the
course of the arbitration may be made;
(c) a summary of the parties' respective claims and of the relief sought by each party with an
indication to the extent possible of the amounts claimed or counterclaimed;
d) unless the Arbitral Tribunal considers it inappropriate, a list of issues to be determined;
(e) the full names, descriptions and addresses of the arbitrators;
(f) the place of the arbitration; and
(g) particulars of the applicable procedural rules and, if such is the case, reference to the
power conferred upon the Arbitral Tribunal to act as amiable compositeur or to decide ex
aequo et bono.
 2. The Terms of Reference shall be signed by the parties and the Arbitral Tribunal. Within two
months of the date on which the file has been transmitted to it, the Arbitral Tribunal shall
P 356 transmit to the Court the Terms of Reference signed by it and by the parties. The Court may
P 357 extend this time limit pursuant to a reasoned request from the Arbitral Tribunal or on its
own initiative if it decides it is necessary to do so.
3. If any of the parties refuses to take part in the drawing up of the Terms of Reference or to
sign the same, they shall be submitted to the Court for approval. When the Terms of Reference
are signed in accordance with Article 18(2) or approved by the Court, the arbitration shall
proceed.
4. When drawing up the Terms of Reference, or as soon as possible thereafter, the Arbitral
Tribunal, after having consulted the parties, shall establish in a separate document a
provisional timetable that it intends to follow for the conduct of the arbitration and shall
communicate it to the Court and the parties. Any subsequent modifications of the provisional
timetable shall be communicated to the Court and the parties.

Article 19 NEW CLAIMS

After the Terms of Reference have been signed or approved by the Court, no party shall make
new claims or counterclaims which fall outside the limits of the Terms of Reference unless it
has been authorized to do so by the Arbitral Tribunal, which shall consider the nature of such
new claims or counterclaims, the stage of the arbitration and other relevant circumstances.

Article 20 ESTABLISHING THE FACTS OF THE CASE

1. The Arbitral Tribunal shall proceed within as short a time as possible to establish the facts
of the case by all appropriate means.
2. After studying the written submissions of the parties and all documents relied upon, the
Arbitral Tribunal shall hear the parties together in person if any of them so requests or, failing
such a request, it may of its own motion decide to hear them.
3. The Arbitral Tribunal may decide to hear witnesses, experts appointed by the parties or any
other person, in the presence of the parties, or in their absence provided they have been duly
summoned.
4. The Arbitral Tribunal, after having consulted the parties, may appoint one or more experts,
define their terms of reference and receive their reports. At the request of a party, the parties
shall be given the opportunity to question at a hearing any such expert appointed by the
Tribunal.
5. At any time during the proceedings, the Arbitral Tribunal may summon any party to provide
additional evidence.
6. The Arbitral Tribunal may decide the case solely on the documents submitted by the parties
unless any of the parties requests a hearing.
P 357 7. The Arbitral Tribunal may take measures for protecting trade secrets and confidential
P 358 information.

Article 21 HEARINGS
1. When a hearing is to be held, the Arbitral Tribunal, giving reasonable notice, shall summon
the parties to appear before it on the day and at the place fixed by it.
2. If any of the parties, although duly summoned, fails to appear without valid excuse, the
Arbitral Tribunal shall have the power to proceed with the hearing.
3. The Arbitral Tribunal shall be in full charge of the hearings, at which all the parties shall be
entitled to be present. Save with the approval of the Arbitral Tribunal and the parties, persons
not involved in the proceedings shall not be admitted.
4. The parties may appear in person or through duly authorized representatives. In addition,
they may be assisted by advisers.

Article 22 CLOSING OF THE PROCEEDINGS

1. When it is satisfied that the parties have had a reasonable opportunity to present their
cases, the Arbitral Tribunal shall declare the proceedings closed. Thereafter, no further
submission or argument may be made, or evidence produced, unless requested or authorized
by the Arbitral Tribunal.
2. When the Arbitral Tribunal has declared the proceedings closed, it shall indicate to the
Secretariat an approximate date by which the draft Award will be submitted to the Court for
approval pursuant to Article 27. Any postponement of that date shall be communicated to the
Secretariat by the Arbitral Tribunal.

Article 23 CONSERVATORY AND INTERIM MEASURES

1. Unless the parties have otherwise agreed, as soon as the file has been transmitted to it, the
Arbitral Tribunal may, at the request of a party, order any interim or conservatory measure it
deems appropriate. The Arbitral Tribunal may make the granting of any such measure subject
 to appropriate security being furnished by the requesting party. Any such measure shall take
the form of an order, giving reasons, or of an Award, as the Arbitral Tribunal considers
appropriate.
2. Before the file is transmitted to the Arbitral Tribunal, and in appropriate circumstances
even thereafter, the parties may apply to any competent judicial authority for interim or
conservatory measures. The application of a party to a judicial authority for such measures or
for the implementation of any such measures ordered by an Arbitral Tribunal shall not be
P 358 deemed to be an infringement or a waiver of the arbitration agreement and shall not affect the
P 359 relevant powers reserved to the Arbitral Tribunal. Any such application and any measures
taken by the judicial authority must be notified without delay to the Secretariat. The
Secretariat shall inform the Arbitral Tribunal thereof.

Awards
Article 24 TIME LIMIT FOR THE AWARD
1. The time limit within which the Arbitral Tribunal must render its final Award is six months.
Such time limit shall start to run from the date of the last signature by the Arbitral Tribunal or
of the parties of the Terms of Reference, or, in the case of application of Article 18(3), the date
of the notification to the Arbitral Tribunal by the Secretariat of the approval of the Terms of
Reference by the Court.
2. The Court may extend this time limit pursuant to a reasoned request from the Arbitral
Tribunal or on its own initiative if it decides it is necessary to do so.

Article 25 MAKING OF THE AWARD

1. When the Arbitral Tribunal is composed of more than one arbitrator, an Award is given by a
majority decision. If there be no majority, the Award shall be made by the chairman of the
Arbitral Tribunal alone.
2. The Award shall state the reasons upon which it is based.
3. The Award shall be deemed to be made at the place of the arbitration and on the date
stated therein.

Article 26 AWARD BY CONSENT

If the parties reach a settlement after the file has been transmitted to the Arbitral Tribunal in
accordance with Article 13, the settlement shall be recorded in the form of an Award made by
consent of the parties if so requested by the parties and the Arbitral Tribunal agrees to do so.

Article 27 SCRUTINY OF THE AWARD BY THE COURT

Before signing any Award, the Arbitral Tribunal shall submit it in draft form to the Court. The
Court may lay down modifications as to the form of the Award and, without affecting the
Arbitral Tribunal's liberty of decision, may also draw its attention to points of substance. No
P 359 Award shall be rendered by the Arbitral Tribunal until it has been approved by the Court as to
P 360 its form.

Article 28 NOTIFICATION, DEPOSIT AND ENFORCEABILITY OF THE AWARD

1. Once an Award has been made, the Secretariat shall notify to the parties the text signed by
the Arbitral Tribunal, provided always that the costs of the arbitration have been fully paid to
the ICC by the parties or by one of them.
2. Additional copies certified true by the Secretary General shall be made available on
request and at any time to the parties, but to no one else.
3. By virtue of the notification made in accordance with Paragraph 1 of this Article, the parties
waive any other form of notification or deposit on the part of the Arbitral Tribunal.
4. An original of each Award made in accordance with the present Rules shall be deposited
with the Secretariat.
5. The Arbitral Tribunal and the Secretariat shall assist the parties in complying with whatever
further formalities may be necessary.
6. Every Award shall be binding on the parties. By submitting the dispute to arbitration under
these Rules, the parties undertake to carry out any Award without delay and shall be deemed
to have waived their right to any form of recourse insofar as such waiver can validly be made.

Article 29 CORRECTION AND INTERPRETATION OF THE AWARD

1. On its own initiative, the Arbitral Tribunal may correct a clerical, computational or
typographical error, or any errors of similar nature contained in an Award, provided such
correction is submitted for approval to the Court within 30 days of the date of such Award.
2. Any application of a party for the correction of an error of the kind referred to in Article
29(1), or for the interpretation of an Award, must be made to the Secretariat within 30 days of
 the receipt of the Award by such party, in a number of copies as stated in Article 3(1). After
transmittal of the application to the Arbitral Tribunal, it shall grant the other party a short time
limit, normally not exceeding 30 days, from the receipt of the application by that party to
submit any comments thereon. If the Arbitral Tribunal decides to correct or interpret the
Award, it shall submit its decision in draft form to the Court not later than 30 days following the
expiration of the time limit for the receipt of any comments from the other party or within such
other period as the Court may decide.
3. The decision to correct or to interpret the Award shall take the form of an addendum and
P 360 shall constitute part of the Award. The provisions of Articles 25, 27 and 28 shall apply mutatis
P 361 mutandis.

Costs
Article 30 ADVANCE TO COVER THE COSTS OF THE ARBITRATION
1. After receipt of the Request, the Secretary General may request the Claimant to pay a
provisional advance in an amount intended to cover the costs of arbitration until the Terms of
Reference have been drawn up.
2. As soon as practicable, the Court shall fix the advance on costs in an amount likely to cover
the fees and expenses of the arbitrators and the ICC administrative costs for the claims and
counterclaims which have been referred to it by the parties. This amount may be subject to
readjustment at any time during the arbitration. Where, apart from the claims, counterclaims
are submitted, the Court may fix separate advances on costs for the claims and the
counterclaims.
3. The advance on costs fixed by the Court shall be payable in equal shares by the Claimant
and the Respondent. Any provisional advance paid on the basis of Article 30(1) will be
considered as a partial payment thereof. However, any party shall be free to pay the whole of
the advance on costs in respect of the principal claim or the counterclaim should the other
party fail to pay its share. When the Court has set separate advances on costs in accordance
with Article 30(2), each of the parties shall pay the advance on costs corresponding to its
claims.
4. When a request for an advance on costs has not been complied with, and after consultation
with the Arbitral Tribunal, the Secretary General may direct the Arbitral Tribunal to suspend its
work and set a time limit, which must be not less than 15 days, on the expiry of which the
relevant claims, or counterclaims, shall be considered as withdrawn. Should the party in
question wish to object to this measure it must make a request within the aforementioned
period for the matter to be decided by the Court. Such party shall not be prevented on the
ground of such withdrawal from reintroducing the same claims or counterclaims at a later date
in another proceeding.
5. If one of the parties claims a right to a set-off with regard to either claims or counterclaims,
such set-off shall be taken into account in determining the advance to cover the costs of
arbitration in the same way as a separate claim insofar as it may require the Arbitral Tribunal
to consider additional matters.

Article 31 DECISION AS TO THE COSTS OF THE ARBITRATION

1. The costs of the arbitration shall include the fees and expenses of the arbitrators and the
ICC administrative costs fixed by the Court, in accordance with the scale in force at the time of
P 361 the commencement of the arbitral proceedings, as well as the fees and expenses of any
P 362 experts appointed by the Arbitral Tribunal and the reasonable legal and other costs
incurred by the parties for the arbitration.
2. The Court may fix the fees of the arbitrators at a figure higher or lower than that which would
result from the application of the relevant scale should this be deemed necessary due to the
exceptional circumstances of the case. Decisions on costs other than those fixed by the Court
may be taken by the Arbitral Tribunal at any time during the proceedings.
3. The final Award shall fix the costs of the arbitration and decide which of the parties shall
bear them or in what proportion they shall be borne by the parties

Miscellaneous
Article 32 MODIFIED TIME LIMITS
1. The parties may agree to shorten the various time limits set out in these Rules. Any such
agreement entered into subsequent to the constitution of an Arbitral Tribunal shall become
effective only upon the approval of the Arbitral Tribunal.
2. The Court, on its own initiative, may extend any time limit which has been modified
pursuant to Article 32(1) if it decides that it is necessary to do so in order that the Arbitral
Tribunal or the Court may fulfil their responsibilities in accordance with these Rules.

Article 33 WAIVER
 A party which proceeds with the arbitration without raising its objection to a failure to comply
with any provisions of these Rules, or any other rules applicable to the proceedings, any
direction given by the Arbitral Tribunal, or any requirement under the arbitration agreement
relating to the constitution of the Arbitral Tribunal, or to the conduct of the proceedings, shall
be deemed to have waived its right to object.

Article 34 EXCLUSION OF LIABILITY

Neither the arbitrators, nor the Court and its members, nor the ICC and its employees, nor the
ICC National Committees shall be liable to any person for any act or omission in connection
with the arbitration.

Article 35 GENERAL RULE

In all matters not expressly provided for in these Rules, the Court and the Arbitral Tribunal
P 362 shall act in the spirit of these Rules and shall make every effort to make sure that the Award is
P 363 enforceable at law.
Appendix I - Statutes of the International Court of Arbitration of the ICC

Article 1 FUNCTION
1. The function of the International Court of Arbitration of the International Chamber of
Commerce (the Court) is to ensure the application of the Rules of Arbitration and the Rules of
Conciliation of the International Chamber of Commerce and it has all the necessary powers for
that purpose.
2. As an autonomous body, it carries out these functions in complete independence from the
ICC and its organs.
3. Its members are independent from the ICC National Committees.

Article 2 COMPOSITION OF THE COURT

The Court shall consist of a Chairman, Vice-Chairmen, and members and alternate members
(collectively designated as members). In its work it is assisted by its Secretariat (Secretariat of
the Court).

Article 3 APPOINTMENT
1. The Chairman is elected by the ICC Council upon recommendation of the Executive Board of
the ICC.
2. The ICC Council appoints the Vice-Chairmen of the Court from among the members of the
Court or otherwise.
3. Its members are appointed by the ICC Council on the proposal of National Committees, one
member for each Committee.
4. On the proposal of the Chairman of the Court, the Council may appoint alternate members.
5. The term of office of all members is three years. If a member is no longer in a position to
exercise his functions, his successor is appointed by the Council for the remainder of the term.

Article 4 PLENARY SESSION OF THE COURT

The Plenary Sessions of the Court are presided by the Chairman, or, in his absence, by one of
the Vice-Chairmen designated by him. The deliberations shall be valid when at least six
members are present. Decisions are taken by a majority vote, the Chairman having a casting
vote in the event of a tie.

Article 5 COMMITTEES
P 363 The Court may set up one or more Committees and establish the functions and organization of
P 364 such Committees.

Article 6 CONFIDENTIALITY
The work of the Court is of a confidential character and must be respected by everyone who
participates in that work in whatever capacity. The Court lays down the rules regarding the
persons who can attend the meetings of the Court and its Committees and who are entitled to
have access to the materials submitted to the Court and its Secretariat.

Article 7 MODIFICATION OF THE RULES OF ARBITRATION

Any proposal of the Court for a modification of the Rules is laid before the Commission on
International Arbitration before submission to the Executive Board and the Council of the ICC
for approval.
Appendix II - Internal Rules of the International Court of Arbitration of the ICC
 Article 1 CONFIDENTIAL CHARACTER OF THE WORK OF THE INTERNATIONAL COURT OFArbitration
1. The sessions of Court, whether plenary or those of a Committee of the Court, are open only to
its members and to the Secretariat.
2. However, in exceptional circumstances, the Chairman of the Court may invite other persons
to attend. Such persons must respect the confidential nature of the work of the Court.
3. The documents submitted to the Court, or drawn up by it in the course of its proceedings,
are communicated only to the members of the Court and to the Secretariat and to persons
authorized by the Chairman to attend Court sessions.
4. The Chairman or the Secretary General of the Court may authorize researchers undertaking
work of a scientific nature on international trade law to acquaint themselves with awards and
other documents of general interest, with the exception of memoranda, notes, statements and
documents remitted by the parties within the framework of arbitration proceedings.
5. Such authorization shall not be given unless the beneficiary has undertaken to respect the
confidential character of the documents made available and to refrain from any publication in
their respect without having previously submitted the text for approval to the Secretary
General of the Court.
6. The Secretariat will in each case submitted to arbitration under the Rules retain in the
P 364 archives of the Court all awards, terms of reference, decisions of the Court as well as copies of
P 365 the pertinent correspondence of the Secretariat.
7. Any documents, communications or correspondence submitted by the parties or the
arbitrators may be destroyed unless a party or an arbitrator requests in writing within a period
fixed by the Secretariat the return of such documents. All related costs and expenses for the
return of those documents shall be paid by such party or arbitrator.

Article 2 PARTICIPATION OF MEMBERS OF THE INTERNATIONAL COURT OF ARBITRATION IN ICC

ARBITRATION
1. The Chairman and the members of the Secretariat of the Court may not act as arbitrators or
as counsel in cases submitted to ICC arbitration.
2. The Court shall not appoint Vice-Chairmen or members of the Court as arbitrators. They may,
however, be proposed for such duties by one or more of the parties, or pursuant to any other
procedure agreed upon by the parties, subject to confirmation by the Court.
3. When the Chairman, a Vice-Chairman or a member of the Court or of the Secretariat is
involved in any capacity whatsoever in proceedings pending before the Court, such person
must inform the Secretary General of the Court upon becoming aware of such involvement.
4. Such person must refrain from participating in the discussions or in the decisions of the
Court concerning the proceedings and must be absent from the courtroom whenever the
matter is considered.
5. Such person will not receive any material documentation or information pertaining to such
proceedings.

Article 3 RELATIONS BETWEEN THE MEMBERS OF THE COURT AND THE ICC NATIONAL
COMMITTEES
1. By virtue of their capacity, the members of the Court are independent of the ICC National
Committees which proposed them for appointment by the ICC Council.
2. Furthermore, they must regard as confidential, vis-à-vis the said National Committees, any
information concerning individual cases with which they have become acquainted in their
capacity as members of the Court except when they have been requested by the Chairman of
the Court or by its Secretary General to communicate specific information to their respective
National Committee.

Article 4 COMMITTEE OF THE COURT

P 365 1. In accordance with the provisions of Article 1(4) of the Rules and Article 5 of its Statutes
P 366 (Appendix I), the Court hereby establishes a Committee of the Court.
2. The members of the Committee consist of a Chairman and at least two other members. The
Chairman of the Court acts as the Chairman of the Committee. If absent, the Chairman may
designate a Vice-Chairman of the Court or, in exceptional circumstances, another member of
the Court as Chairman of the Committee.
3. The other two members of the Committee are appointed by the Court from among the Vice-
Chairmen or the other members of the Court. At each Plenary Session the Court appoints the
members who are to attend the meetings of the Committee to be held before the next Plenary
Session.
4. The Committee meets when convened by its Chairman. Two members constitute a quorum.
5.
(a) The Court shall determine the decisions that may be taken by the Committee.
 (b) The decisions of the Committee are taken unanimously.
(c) When the Committee cannot reach a decision or deems it preferable to abstain, it
transfers the case to the next Plenary Session, making any suggestions it deems
appropriate.
(d) The Committee's decisions are brought to the notice of the Court at its next Plenary
Session.

Article 5 COURT SECRETARIAT

1. In case of absence, the Secretary General may delegate to the General Counsel and Deputy
Secretary General the authority to confirm arbitrators, to certify true copies of awards and to
request the payment of a provisional advance respectively provided for in Articles 9(2), 28(2)
and 30(1) of the Rules.
2. The Secretariat may, with the approval of the Court, issue notes and other documents for the
information of the parties and the arbitrators, or as necessary for the proper conduct of the
arbitral proceedings.

Article 6 SCRUTINY OF ARBITRAL AWARDS

When the Court scrutinizes draft awards in accordance with Article 27 of the Rules, it considers,
to the extent practicable, the requirements of mandatory law at the place of arbitration.
Appendix III - Arbitration Costs and Fees

Article 1 ADVANCE ON COSTS

P 366 1. Each request to commence an arbitration pursuant to the Rules must be accompanied by an
P 367 advance payment of US$ 2 500 on the administrative expenses. Such payment is
nonrefundable, and shall be credited to the Claimant's portion of the advance on costs.
2. The provisional advance on costs fixed by the Secretary General according to Article 30(1) of
the Rules shall normally not exceed the amount obtained by adding together the
administrative expenses, the minimum of the fees (as set out in the scale hereinafter) based
upon the amount of the claim and the expected reimbursable expenses of the Arbitral Tribunal
incurred with respect to the drafting of the Terms of Reference. If such amount is not
quantified, the provisional advance shall be fixed at the discretion of the Secretary General.
Payment by the Claimant shall be credited to its share of the advance on costs fixed by the
Court.
3. In general, after the Terms of Reference have been signed or approved by the Court and the
provisional timetable has been established, the Arbitral Tribunal shall in accordance with
Article 30(4) of the Rules proceed only with respect to those claims or counterclaims in regard
to which the whole of the advance on costs has been paid.
4. The advance on costs fixed by the Court according to Article 30(2) of the Rules comprises the
fees of the arbitrator or arbitrators (hereinafter referred to as “arbitrator”), any arbitration-
related expenses of the arbitrator and the administrative expenses.
5. Each party shall pay in cash its share of the total advance on costs. However, if its share
exceeds an amount fixed from time to time by the Court, a party may post a bank guarantee for
this additional amount.
6. A party that has already paid in full its share of the advance on costs fixed by the Court may,
in accordance with Article 30(3) of the Rules, pay the unpaid portion of the advance owed by
the defaulting party by posting a bank guarantee.
7. When the Court has fixed separate advances on costs pursuant to Article 30(2) of the Rules,
the Secretariat shall invite each party to pay the amount of the advance corresponding to its
respective claims.
8. When, as a result of the fixing of separate advances on costs, the separate advance fixed for
the claim of either party exceeds one-half of such global advance as was previously fixed (in
respect of the same claims and counterclaims that are the object of separate advances), a
bank guarantee may be posted to cover any such excess amount. In the event that the amount
of the separate advance is subsequently increased, at least one-half of the increase shall be
paid in cash.
9. The Secretariat shall establish the terms governing all bank guarantees which the parties
may post pursuant to the above provisions.
P 367 10. As provided in Article 30(2) of the ICC Rules, the advance on costs may be subject to
P 368 readjustment at any time during the arbitration, in particular to take into account
fluctuations in the amount in dispute, changes in the amount of the estimated expenses of the
arbitrator, or the evolving difficulty or complexity of arbitration proceedings.
11. Before any expertise ordered by the Arbitral Tribunal can be commenced, the parties, or
one of them, shall pay an advance on costs fixed by the Arbitral Tribunal sufficient to cover the
expected fees and expenses of the expert as determined by the Arbitral Tribunal. The Arbitral
Tribunal shall be responsible for ensuring the payment by the parties of such fees and
expenses.
 Article 2 COSTS AND FEES
1. Subject to Article 31(2) of the Rules, the Court shall fix the fees of the arbitrators in
accordance with the scale hereinafter set out, or, where the sum in dispute is not stated, at its
discretion.
2. In setting the arbitrator's fees, the Court shall take into consideration the diligence of the
arbitrator, the time spent, the rapidity of the proceedings, and the complexity of the dispute
so as to arrive at a figure within the limits specified, or, in exceptional circumstances [Article
31(2) of the ICC Rules], at a figure higher or lower than those limits.
3. When a case is submitted to more than one arbitrator, the Court, at its discretion, shall have
the right to increase the total fees up to a maximum which shall normally not exceed three
times the fee of one arbitrator.
4. The arbitrator's fees and expenses shall be fixed exclusively by the Court as required by the
ICC Rules. Separate fee arrangements between the parties and the arbitrators are contrary to
the Rules.
5. The Court shall fix the administrative expenses of each arbitration in accordance with the
scale hereinafter set out, or, where the sum in dispute is not stated, at its discretion. In
exceptional circumstances, the Court may fix the administrative expenses at a lower or higher
figure than that which would result from the application of such scale, provided that such
expenses shall normally not exceed the maximum amount of the scale. Further, the Court may
require the payment of administrative expenses in addition to those provided in the scale of
administrative expenses as a condition to holding an arbitration in abeyance at the request of
the parties or one of them with the acquiescence of the other.
6. If an arbitration terminates before the rendering of a final award, the Court shall fix the
costs of the arbitration at its discretion, taking into account the stage attained by the arbitral
proceedings and any other relevant circumstances.
P 368 7. In the case of an application under Article 29(2) of the Rules, the Court may fix an advance to
P 369 cover additional fees and expenses of the Arbitral Tribunal and may subordinate the
transmission of such application to the Arbitral Tribunal to the prior cash payment in full to the
ICC of such advance. The Court shall fix at its discretion any possible fees of the arbitrator when
approving the decision of the Arbitral Tribunal.
8. When an arbitration is preceded by attempted conciliation, one-half of the administrative
expenses paid for such conciliation shall be credited to the administrative expenses of the
arbitration.
9. Amounts paid to the arbitrator do not include any possible value added taxes (VAT) or other
taxes or charges and imposts applicable to arbitrator's fees. Parties are expected to pay any
such taxes or charges; however, the recovery of any such charges or taxes is a matter solely
between the arbitrator and the parties.

Article 3 APPOINTMENT OF ARBITRATORS

A registration fee normally not exceeding US$ 2 500 is payable by the requesting party in
respect of each request made to the ICC to appoint an arbitrator for any arbitration not
conducted under the Rules. No request for appointment of an arbitrator will be considered
unless accompanied by the said fee, which is not recoverable and becomes the property of the
ICC.
2. The said fee shall cover any additional services rendered by the ICC regarding the
appointment, such as decisions on a challenge of an arbitrator and the appointment of a
substitute arbitrator.

Article 4 SCALES OF ADMINISTRATIVE EXPENSES AND OF ARBITRATOR'S FEES

1. The Scales of Administrative Expenses and Arbitrator's Fees set forth below shall be
effective as of January 1, 1998 in respect of all arbitrations commenced on or after such date,
irrespective of the version of the Rules applying to such arbitrations.
2. To calculate the administrative expenses and the arbitrator's fees, the amounts calculated
for each successive slice of the sum in dispute must be added together, except that where the
P 369 sum in dispute is over US$ 80 million, a flat amount of US$ 75 800 shall constitute the entirety
P 370 of the administrative expenses.

A. Administrative Expenses
A. Administrative Expenses
Sum in dispute (in US Dollars) Administrative expenses
up to 50 000 $ 2 500
from 50 001 to 100 000 3.50%
from 100 001 to 500 000 1.70%
from 500 001 to 1 000 000 1.15%
from 1 000 001 to 2 000 000 0.60%
 from 2 000 001 to 5 000 000 0.20%
from 5 000 001 to 10 000 000 0.10%
from 10 000 001 to 50 000 000 0.06%
from 50 000 001 to 80 000 000 0.06%
over 80 000 000 $ 75 800

B. Arbitrator's Fees
B. Arbitrator's Fees
Sum in dispute (in US Dollars) Fees - minimum Fees - maximum
up to 50 000 $ 2 500 17.00%
from 50 001 to 100 000 2.00% 11.00%
from 100 001 to 500 000 1.00% 5.50%
from 500 001 to 1 000 000 0.74% 3.50%
from 1 000 001 to 2 000 000 0.50% 2.50%
from 2 000 001 to 5 000 000 0.25% 1.00%
from 5 000 001 to 10 000 000 0.10% 0.55%
from 10 000 001 to 50 000 000 0.05% 0.17%
from 50 000 001 to 80 000 000 0.03% 0.12%
from 80 000 001 to 100 000 000 0.02% 0.10%
over 100 000 000 0.01% 0.05%
P 370

References
1) *
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Document information
LCIA Arbitration Rules 1998
Publication LCIA Arbitration Rules 1998 Spanish
Public Source Materials LCIA Arbitration Rules 1998 Portuguese
LCIA Arbitration Rules 1998 Italian
Jurisdiction LCIA Arbitration Rules 1998 German
United Kingdom LCIA Arbitration Rules 1998 French

Organization
LCIA Arbitration Rules
Effective 1 January 1998
London Court of
International Arbitration Where any agreement, submission or reference provides in writing and in whatsoever manner
for arbitration under the rules of the LCIA or by the Court of the LCIA (“the LCIA Court”), the
parties shall be taken to have agreed in writing that the arbitration shall be conducted in
Entry into force accordance with the following rules (“the Rules”) or such amended rules as the LCIA may have
adopted hereafter to take effect before the commencement of the arbitration. The Rules
1 January 1998 include the Schedule of Costs in effect at the commencement of the arbitration, as separately
amended from time to time by the LCIA Court.

Bibliographic reference Article 1 The Request for Arbitration

'LCIA Arbitration Rules 1998',
Public Source Materials,
1.1 Any party wishing to commence an arbitration under these Rules (“the Claimant”) shall send
to the Registrar of the LCIA Court (“the Registrar”) a written request for arbitration (“the
Request”), containing or accompanied by:
(a) the names, addresses, telephone, facsimile, telex and e-mail numbers (if known) of the
parties to the arbitration and of their legal representatives;
(b) a copy of the written arbitration clause or separate written arbitration agreement
invoked by the Claimant (“the Arbitration Agreement”), together with a copy of the
contractual documentation in which the arbitration clause is contained or in respect of
which the arbitration arises;
(c) a brief statement describing the nature and circumstances of the dispute, and specifying
the claims advanced by the Claimant against another party to the arbitration (“the
Respondent”);
(d) a statement of any matters (such as the seat or language(s) of the arbitration, or the
number of arbitrators, or their qualifications or identities) on which the parties have
already agreed in writing for the arbitration or in respect of which the Claimant wishes to
make a proposal;
(e) if the Arbitration Agreement calls for party nomination of arbitrators, the name, address,
telephone, facsimile, telex and e-mail numbers (if known) of the Claimant's nominee;
(f) the fee prescribed in the Schedule of Costs (without which the Request shall be treated as
not having been received by the Registrar and the arbitration as not having been
commenced);
(g) confirmation to the Registrar that copies of the Request (including all accompanying
documents) have been or are being served simultaneously on all other parties to the
arbitration by one or more means of service to be identified in such confirmation.
1.2 The date of receipt by the Registrar of the Request shall be treated as the date on which
the arbitration has commenced for all purposes. The Request (including all accompanying
documents) should be submitted to the Registrar in two copies where a sole arbitrator should
be appointed, or, if the parties have agreed or the Claimant considers that three arbitrators
should be appointed, in four copies.

Article 2 The Response

2.1 Within 30 days of service of the Request on the Respondent, (or such lesser period fixed by
the LCIA Court), the Respondent shall send to the Registrar a written response to the Request
(“the Response”), containing or accompanied by:
(a) confirmation or denial of all or part of the claims advanced by the Claimant in the
Request;
(b) a brief statement describing the nature and circumstances of any counterclaims
advanced by the Respondent against the Claimant;
(c) comment in response to any statements contained in the Request, as called for under
Article 1.1(d), on matters relating to the conduct of the arbitration;
(d) if the Arbitration Agreement calls for party nomination of arbitrators, the name, address,
telephone, facsimile, telex and e-mail numbers (if known) of the Respondent's nominee;
and
(e) confirmation to the Registrar that copies of the Response (including all accompanying
documents) have been or are being served simultaneously on all other parties to the
arbitration by one or more means of service to be identified in such confirmation.
2.2 The Response (including all accompanying documents) should be submitted to the
Registrar in two copies, or if the parties have agreed or the Respondent considers that three
arbitrators should be appointed, in four copies.
2.3 Failure to send a Response shall not preclude the Respondent from denying any claim or
from advancing a counterclaim in the arbitration. However, if the Arbitration Agreement calls
for party nomination of arbitrators, failure to send a Response or to nominate an arbitrator
within time or at all shall constitute an irrevocable waiver of that party's opportunity to
nominate an arbitrator.

Article 3 The LCIA Court and Registrar

3.1 The functions of the LCIA Court under these Rules shall be performed in its name by the
President or a Vice-President of the LCIA Court or by a division of three or five members of the
LCIA Court appointed by the President or a Vice-President of the LCIA Court, as determined by
the President.
3.2 The functions of the Registrar under these Rules shall be performed by the Registrar or any
deputy Registrar of the LCIA Court under the supervision of the LCIA Court.
3.3 All communications from any party or arbitrator to the LCIA Court shall be addressed to the
Registrar.

Article 4 Notices and Periods of Time

4.1 Any notice or other communication that may be or is required to be given by a party under
these Rules shall be in writing and shall be delivered by registered postal or courier service or
transmitted by facsimile, telex, e-mail or any other means of telecommunication that provide
a record of its transmission.
4.2 A party's last-known residence or place of business during the arbitration shall be a valid
address for the purpose of any notice or other communication in the absence of any
notification of a change to such address by that party to the other parties, the Arbitral Tribunal
and the Registrar.
4.3 For the purpose of determining the date of commencement of a time limit, a notice or
other communication shall be treated as having been received on the day it is delivered or, in
the case of telecommunications, transmitted in accordance with Articles 4.1 and 4.2.
4.4 For the purpose of determining compliance with a time limit, a notice or other
communication shall be treated as having been sent, made or transmitted if it is dispatched in
accordance with Articles 4.1 and 4.2 prior to or on the date of the expiration of the time-limit.
4.5 Notwithstanding the above, any notice or communication by one party may be addressed
to another party in the manner agreed in writing between them or, failing such agreement,
according to the practice followed in the course of their previous dealings or in whatever
manner ordered by the Arbitral Tribunal.
4.6 For the purpose of calculating a period of time under these Rules, such period shall begin
to run on the day following the day when a notice or other communication is received. If the
last day of such period is an official holiday or a non-business day at the residence or place of
business of the addressee, the period is extended until the first business day which follows.
Official holidays or non-business days occurring during the running of the period of time are
included in calculating that period.
4.7 The Arbitral Tribunal may at any time extend (even where the period of time has expired)
or abridge any period of time prescribed under these Rules or under the Arbitration Agreement
for the conduct of the arbitration, including any notice or communication to be served by one
party on any other party.

Article 5 Formation of the Arbitral Tribunal

5.1 The expression “the Arbitral Tribunal” in these Rules includes a sole arbitrator or all the
arbitrators where more than one. All references to an arbitrator shall include the masculine
and feminine. (References to the President, Vice-President and members of the LCIA Court, the
Registrar or deputy Registrar, expert, witness, party and legal representative shall be similarly
understood).
5.2 All arbitrators conducting an arbitration under these Rules shall be and remain at all times
impartial and independent of the parties; and none shall act in the arbitration as advocates
for any party. No arbitrator, whether before or after appointment, shall advise any party on the
merits or outcome of the dispute.
5.3 Before appointment by the LCIA Court, each arbitrator shall furnish to the Registrar a
written resume of his past and present professional positions; he shall agree in writing upon
fee rates conforming to the Schedule of Costs; and he shall sign a declaration to the effect that
there are no circumstances known to him likely to give rise to any justified doubts as to his
impartiality or independence, other than any circumstances disclosed by him in the
declaration. Each arbitrator shall thereby also assume a continuing duty forthwith to disclose
any such circumstances to the LCIA Court, to any other members of the Arbitral Tribunal and to
all the parties if such circumstances should arise after the date of such declaration and before
the arbitration is concluded.
5.4 The LCIA Court shall appoint the Arbitral Tribunal as soon as practicable after receipt by
the Registrar of the Response or after the expiry of 30 days following service of the Request
upon the Respondent if no Response is received by the Registrar (or such lesser period fixed by
the LCIA Court). The LCIA Court may proceed with the formation of the Arbitral Tribunal
notwithstanding that the Request is incomplete or the Response is missing, late or incomplete.
A sole arbitrator shall be appointed unless the parties have agreed in writing otherwise, or
unless the LCIA Court determines that in view of all the circumstances of the case a three-
member tribunal is appropriate.
5.5 The LCIA Court alone is empowered to appoint arbitrators. The LCIA Court will appoint
arbitrators with due regard for any particular method or criteria of selection agreed in writing
by the parties. In selecting arbitrators consideration will be given to the nature of the
transaction, the nature and circumstances of the dispute, the nationality, location and
languages of the parties and (if more than two) the number of parties.
5.6 In the case of a three-member Arbitral Tribunal, the chairman (who will not be a party-
nominated arbitrator) shall be appointed by the LCIA Court.

Article 6 Nationality of Arbitrators

6.1 Where the parties are of different nationalities, a sole arbitrator or chairman of the Arbitral
Tribunal shall not have the same nationality as any party unless the parties who are not of the
same nationality as the proposed appointee all agree in writing otherwise.
6.2 The nationality of parties shall be understood to include that of controlling shareholders or
interests.
6.3 For the purpose of this Article, a person who is a citizen of two or more states shall be
treated as a national of each state; and citizens of the European Union shall be treated as
nationals of its different Member States and shall not be treated as having the same
nationality.

Article 7 Party and Other Nominations

7.1 If the parties have agreed that any arbitrator is to be appointed by one or more of them or
by any third person, that agreement shall be treated as an agreement to nominate an
arbitrator for all purposes. Such nominee may only be appointed by the LCIA Court as
arbitrator subject to his prior compliance with Article 5.3. The LCIA Court may refuse to appoint
any such nominee if it determines that he is not suitable or independent or impartial.
7.2 Where the parties have howsoever agreed that the Respondent or any third person is to
nominate an arbitrator and such nomination is not made within time or at all, the LCIA Court
may appoint an arbitrator notwithstanding the absence of the nomination and without regard
to any late nomination. Likewise, if the Request for Arbitration does not contain a nomination
by the Claimant where the parties have howsoever agreed that the Claimant or a third person
is to nominate an arbitrator, the LCIA Court may appoint an arbitrator notwithstanding the
absence of the nomination and without regard to any late nomination.

Article 8 Three or More Parties

8.1 Where the Arbitration Agreement entitles each party howsoever to nominate an arbitrator,
the parties to the dispute number more than two and such parties have not all agreed in
writing that the disputant parties represent two separate sides for the formation of the Arbitral
Tribunal as Claimant and Respondent respectively, the LCIA Court shall appoint the Arbitral
Tribunal without regard to any party's nomination.
8.2 In such circumstances, the Arbitration Agreement shall be treated for all purposes as a
written agreement by the parties for the appointment of the Arbitral Tribunal by the LCIA
Court.

Article 9 Expedited Formation

9.1 In exceptional urgency, on or after the commencement of the arbitration, any party may
apply to the LCIA Court for the expedited formation of the Arbitral Tribunal, including the
appointment of any replacement arbitrator under Articles 10 and 11 of these Rules.
9.2 Such an application shall be made in writing to the LCIA Court, copied to all other parties
to the arbitration; and it shall set out the specific grounds for exceptional urgency in the
formation of the Arbitral Tribunal.
9.3 The LCIA Court may, in its complete discretion, abridge or curtail any time-limit under
these Rules for the formation of the Arbitral Tribunal, including service of the Response and of
any matters or documents adjudged to be missing from the Request. The LCIA Court shall not
be entitled to abridge or curtail any other time-limit.

Article 10 Revocation of Arbitrator's Appointment

10.1 If either (a) any arbitrator gives written notice of his desire to resign as arbitrator to the
LCIA Court, to be copied to the parties and the other arbitrators (if any) or (b) any arbitrator
dies, falls seriously ill, refuses, or becomes unable or unfit to act, either upon challenge by a
party or at the request of the remaining arbitrators, the LCIA Court may revoke that arbitrator's
appointment and appoint another arbitrator. The LCIA Court shall decide upon the amount of
fees and expenses to be paid for the former arbitrator's services (if any) as it may consider
appropriate in all the circumstances.
10.2 If any arbitrator acts in deliberate violation of the Arbitration Agreement (including these
Rules) or does not act fairly and impartially as between the parties or does not conduct or
participate in the arbitration proceedings with reasonable diligence, avoiding unnecessary
delay or expense, that arbitrator may be considered unfit in the opinion of the LCIA Court.
10.3 An arbitrator may also be challenged by any party if circumstances exist that give rise to
justifiable doubts as to his impartiality or independence. A party may challenge an arbitrator
it has nominated, or in whose appointment it has participated, only for reasons of which it
becomes aware after the appointment has been made.
10.4 A party who intends to challenge an arbitrator shall, within 15 days of the formation of the
Arbitral Tribunal or (if later) after becoming aware of any circumstances referred to in Article
10.1, 10.2 or 10.3, send a written statement of the reasons for its challenge to the LCIA Court, the
Arbitral Tribunal and all other parties. Unless the challenged arbitrator withdraws or all other
parties agree to the challenge within 15 days of receipt of the written statement, the LCIA Court
shall decide on the challenge.

Article 11 Nomination and Replacement of Arbitrators

11.1 In the event that the LCIA Court determines that any nominee is not suitable or
independent or impartial or if an appointed arbitrator is to be replaced for any reason, the
LCIA Court shall have a complete discretion to decide whether or not to follow the original
nominating process.
11.2 If the LCIA Court should so decide, any opportunity given to a party to make a
renomination shall be waived if not exercised within 15 days (or such lesser time as the LCIA
Court may fix), after which the LCIA Court shall appoint the replacement arbitrator.

Article 12 Majority Power to Continue Proceedings

12.1 If any arbitrator on a three-member Arbitral Tribunal refuses or persistently fails to
participate in its deliberations, the two other arbitrators shall have the power, upon their
written notice of such refusal or failure to the LCIA Court, the parties and the third arbitrator, to
continue the arbitration (including the making of any decision, ruling or award),
notwithstanding the absence of the third arbitrator.
12.2 In determining whether to continue the arbitration, the two other arbitrators shall take
into account the stage of the arbitration, any explanation made by the third arbitrator for his
non-participation and such other matters as they consider appropriate in the circumstances of
the case. The reasons for such determination shall be stated in any award, order or other
decision made by the two arbitrators without the participation of the third arbitrator.
12.3 In the event that the two other arbitrators determine at any time not to continue the
arbitration without the participation of the third arbitrator missing from their deliberations,
the two arbitrators shall notify in writing the parties and the LCIA Court of such determination;
and in that event, the two arbitrators or any party may refer the matter to the LCIA Court for the
revocation of that third arbitrator's appointment and his replacement under Article 10.

Article 13 Communications between Parties and the Arbitral Tribunal

13.1 Until the Arbitral Tribunal is formed, all communications between parties and arbitrators
shall be made through the Registrar.
13.2 Thereafter, unless and until the Arbitral Tribunal directs that communications shall take
place directly between the Arbitral Tribunal and the parties (with simultaneous copies to the
Registrar), all written communications between the parties and the Arbitral Tribunal shall
continue to be made through the Registrar.
13.3 Where the Registrar sends any written communication to one party on behalf of the
Arbitral Tribunal, he shall send a copy to each of the other parties. Where any party sends to
the Registrar any communication (including Written Statements and Documents under Article
15), it shall include a copy for each arbitrator; and it shall also send copies direct to all other
parties and confirm to the Registrar in writing that it has done or is doing so.

Article 14 Conduct of the Proceedings

14.1 The parties may agree on the conduct of their arbitral proceedings and they are
encouraged to do so, consistent with the Arbitral Tribunal's general duties at all times:
(i) to act fairly and impartially as between all parties, giving each a reasonable opportunity
of putting its case and dealing with that of its opponent; and
(ii) to adopt procedures suitable to the circumstances of the arbitration, avoiding
unnecessary delay or expense, so as to provide a fair and efficient means for the final
resolution of the parties' dispute.
Such agreements shall be made by the parties in writing or recorded in writing by the Arbitral
Tribunal at the request of and with the authority of the parties.
14.2 Unless otherwise agreed by the parties under Article 14.1, the Arbitral Tribunal shall have
the widest discretion to discharge its duties allowed under such law(s) or rules of law as the
Arbitral Tribunal may determine to be applicable; and at all times the parties shall do
everything necessary for the fair, efficient and expeditious conduct of the arbitration.
14.3 In the case of a three-member Arbitral Tribunal the chairman may, with the prior consent
of the other two arbitrators, make procedural rulings alone.

Article 15 Submission of Written Statements and Documents

15.1 Unless the parties have agreed otherwise under Article 14.1 or the Arbitral Tribunal should
determine differently, the written stage of the proceedings shall be as set out below.
15.2 Within 30 days of receipt of written notification from the Registrar of the formation of the
Arbitral Tribunal, the Claimant shall send to the Registrar a Statement of Case setting out in
sufficient detail the facts and any contentions of law on which it relies, together with the relief
claimed against all other parties, save and insofar as such matters have not been set out in its
Request.
15.3 Within 30 days of receipt of the Statement of Case or written notice from the Claimant that
it elects to treat the Request as its Statement of Case, the Respondent shall send to the
Registrar a Statement of Defence setting out in sufficient detail which of the facts and
contentions of law in the Statement of Case or Request (as the case may be) it admits or
denies, on what grounds and on what other facts and contentions of law it relies. Any
counterclaims shall be submitted with the Statement of Defence in the same manner as claims
are to be set out in the Statement of Case.
15.4 Within 30 days of receipt of the Statement of Defence, the Claimant shall send to the
Registrar a Statement of Reply which, where there are any counterclaims, shall include a
Defence to Counterclaim in the same manner as a defence is to be set out in the Statement of
Defence.
15.5 If the Statement of Reply contains a Defence to Counterclaim, within 30 days of its receipt
the Respondent shall send to the Registrar a Statement of Reply to Counterclaim.
15.6 All Statements referred to in this Article shall be accompanied by copies (or, if they are
especially voluminous, lists) of all essential documents on which the party concerned relies
and which have not previously been submitted by any party, and (where appropriate) by any
relevant samples and exhibits.
15.7 As soon as practicable following receipt of the Statements specified in this Article, the
Arbitral Tribunal shall proceed in such manner as has been agreed in writing by the parties or
pursuant to its authority under these Rules.
15.8 If the Respondent fails to submit a Statement of Defence or the Claimant a Statement of
Defence to Counterclaim, or if at any point any party fails to avail itself of the opportunity to
present its case in the manner determined by Article 15.2 to 15.6 or directed by the Arbitral
Tribunal, the Arbitral Tribunal may nevertheless proceed with the arbitration and make an
award.

Article 16 Seat of Arbitration and Place of Hearings

16.1 The parties may agree in writing the seat (or legal place) of their arbitration. Failing such a
choice, the seat of arbitration shall be London, unless and until the LCIA Court determines in
view of all the circumstances, and after having given the parties an opportunity to make
written comment, that another seat is more appropriate.
16.2 The Arbitral Tribunal may hold hearings, meetings and deliberations at any convenient
geographical place in its discretion; and if elsewhere than the seat of the arbitration, the
arbitration shall be treated as an arbitration conducted at the seat of the arbitration and any
award as an award made at the seat of the arbitration for all purposes.
16.3 The law applicable to the arbitration (if any) shall be the arbitration law of the seat of
arbitration, unless and to the extent that the parties have expressly agreed in writing on the
application of another arbitration law and such agreement is not prohibited by the law of the
arbitral seat.

Article 17 Language of Arbitration

17.1 The initial language of the arbitration shall be the language of the Arbitration Agreement,
unless the parties have agreed in writing otherwise and providing always that a non-
participating or defaulting party shall have no cause for complaint if communications to and
from the Registrar and the arbitration proceedings are conducted in English.
17.2 In the event that the Arbitration Agreement is written in more than one language, the LCIA
Court may, unless the Arbitration Agreement provides that the arbitration proceedings shall be
conducted in more than one language, decide which of those languages shall be the initial
language of the arbitration.
17.3 Upon the formation of the Arbitral Tribunal and unless the parties have agreed upon the
language or languages of the arbitration, the Arbitration Tribunal shall decide upon the
language(s) of the arbitration, after giving the parties an opportunity to make written comment
and taking into account the initial language of the arbitration and any other matter it may
consider appropriate in all the circumstances of the case.
17.4 If any document is expressed in a language other than the language(s) of the arbitration
and no translation of such document is submitted by the party relying upon the document, the
Arbitral Tribunal or (if the Arbitral Tribunal has not been formed) the LCIA Court may order that
party to submit a translation in a form to be determined by the Arbitral Tribunal or the LCIA
Court, as the case may be.

Article 18 Party Representation

18.1 Any party may be represented by legal practitioners or any other representatives.
18.2 At any time the Arbitral Tribunal may require from any party proof of authority granted to
its representative(s) in such form as the Arbitral Tribunal may determine.

Article 19 Hearings
19.1 Any party which expresses a desire to that effect has the right to be heard orally before
the Arbitral Tribunal on the merits of the dispute, unless the parties have agreed in writing on
documents-only arbitration.
19.2 The Arbitral Tribunal shall fix the date, time and physical place of any meetings and
hearings in the arbitration, and shall give the parties reasonable notice thereof.
19.3 The Arbitral Tribunal may in advance of any hearing submit to the parties a list of
questions which it wishes them to answer with special attention.
19.4 All meetings and hearings shall be in private unless the parties agree otherwise in writing
or the Arbitral Tribunal directs otherwise.
19.5 The Arbitral Tribunal shall have the fullest authority to establish time-limits for meetings
and hearings, or for any parts thereof.

Article 20 Witnesses
20.1 Before any hearing, the Arbitral Tribunal may require any party to give notice of the
identity of each witness that party wishes to call (including rebuttal witnesses), as well as the
subject matter of that witness's testimony, its content and its relevance to the issues in the
arbitration.
20.2 The Arbitral Tribunal may also determine the time, manner and form in which such
materials should be exchanged between the parties and presented to the Arbitral Tribunal;
and it has a discretion to allow, refuse, or limit the appearance of witnesses (whether witness
of fact or expert witness).
20.3 Subject to any order otherwise by the Arbitral Tribunal, the testimony of a witness may be
presented by a party in written form, either as a signed statement or as a sworn affidavit.
20.4 Subject to Article 14.1 and 14.2, any party may request that a witness, on whose testimony
another party seeks to rely, should attend for oral questioning at a hearing before the Arbitral
Tribunal. If the Arbitral Tribunal orders that other party to produce the witness and the witness
fails to attend the oral hearing without good cause, the Arbitral Tribunal may place such weight
on the written testimony (or exclude the same altogether) as it considers appropriate in the
circumstances of the case.
20.5 Any witness who gives oral evidence at a hearing before the Arbitral Tribunal may be
questioned by each of the parties under the control of the Arbitral Tribunal. The Arbitral
Tribunal may put questions at any stage of his evidence.
20.6 Subject to the mandatory provisions of any applicable law, it shall not be improper for
any party or its legal representatives to interview any witness or potential witness for the
purpose of presenting his testimony in written form or producing him as an oral witness.
20.7 Any individual intending to testify to the Arbitral Tribunal on any issue of fact or expertise
shall be treated as a witness under these Rules notwithstanding that the individual is a party
to the arbitration or was or is an officer, employee or shareholder of any party.

Article 21 Experts to the Arbitral Tribunal

21.1 Unless otherwise agreed by the parties in writing, the Arbitral Tribunal:
(a) may appoint one or more experts to report to the Arbitral Tribunal on specific issues, who
shall be and remain impartial and independent of the parties throughout the arbitration
proceedings; and
(b) may require a party to give any such expert any relevant information or to provide access
to any relevant documents, goods, samples, property or site for inspection by the expert.
21.2 Unless otherwise agreed by the parties in writing, if a party so requests or if the Arbitral
Tribunal considers it necessary, the expert shall, after delivery of his written or oral report to
the Arbitral Tribunal and the parties, participate in one or more hearings at which the parties
shall have the opportunity to question the expert on his report and to present expert witnesses
in order to testify on the points at issue.
21.3 The fees and expenses of any expert appointed by the Arbitral Tribunal under this Article
shall be paid out of the deposits payable by the parties under Article 24 and shall form part of
the costs of the arbitration.

Article 22 Additional Powers of the Arbitral Tribunal

22.1 Unless the parties at any time agree otherwise in writing, the Arbitral Tribunal shall have
the power, on the application of any party or of its own motion, but in either case only after
giving the parties a reasonable opportunity to state their views:
(a) to allow any party, upon such terms (as to costs and otherwise) as it shall determine, to
amend any claim, counterclaim, defence and reply;
(b) to extend or abbreviate any time-limit provided by the Arbitration Agreement or these
Rules for the conduct of the arbitration or by the Arbitral Tribunal's own orders;
(c) to conduct such enquiries as may appear to the Arbitral Tribunal to be necessary or
expedient, including whether and to what extent the Arbitral Tribunal should itself take
the initiative in identifying the issues and ascertaining the relevant facts and the law(s) or
rules of law applicable to the arbitration, the merits of the parties' dispute and the
Arbitration Agreement;
(d) to order any party to make any property, site or thing under its control and relating to the
subject matter of the arbitration available for inspection by the Arbitral Tribunal, any
other party, its expert or any expert to the Arbitral Tribunal;
(e) to order any party to produce to the Arbitral Tribunal, and to the other parties for
inspection, and to supply copies of, any documents or classes of documents in their
possession, custody or power which the Arbitral Tribunal determines to be relevant;
(f) to decide whether or not to apply any strict rules of evidence (or any other rules) as to the
admissibility, relevance or weight of any material tendered by a party on any matter of
fact or expert opinion; and to determine the time, manner and form in which such
material should be exchanged between the parties and presented to the Arbitral
Tribunal;
(g) to order the correction of any contract between the parties or the Arbitration Agreement,
but only to the extent required to rectify any mistake which the Arbitral Tribunal
determines to be common to the parties and then only if and to the extent to which the
law(s) or rules of law applicable to the contract or Arbitration Agreement permit such
correction; and
(h) to allow, only upon the application of a party, one or more third persons to be joined in
the arbitration as a party provided any such third person and the applicant party have
consented thereto in writing, and thereafter to make a single final award, or separate
awards, in respect of all parties so implicated in the arbitration;
22.2 By agreeing to arbitration under these Rules, the parties shall be treated as having agreed
not to apply to any state court or other judicial authority for any order available from the
Arbitral Tribunal under Article 22.1, except with the agreement in writing of all parties.
22.3 The Arbitral Tribunal shall decide the parties' dispute in accordance with the law(s) or
rules of law chosen by the parties as applicable to the merits of their dispute. If and to the
extent that the Arbitral Tribunal determines that the parties have made no such choice, the
Arbitral Tribunal shall apply the law(s) or rules of law which it considers appropriate.
22.4 The Arbitral Tribunal shall only apply to the merits of the dispute principles deriving from
“ex aequo et bono”, “amiable composition” or “honourable engagement” where the parties
have so agreed expressly in writing.

Article 23 Jurisdiction of the Arbitral Tribunal

23.1 The Arbitral Tribunal shall have the power to rule on its own jurisdiction, including any
objection to the initial or continuing existence, validity or effectiveness of the Arbitration
Agreement. For that purpose, an arbitration clause which forms or was intended to form part of
another agreement shall be treated as an arbitration agreement independent of that other
agreement. A decision by the Arbitral Tribunal that such other agreement is non-existent,
invalid or ineffective shall not entail ipso jure the non-existence, invalidity or ineffectiveness
of the arbitration clause.
23.2 A plea by a Respondent that the Arbitral Tribunal does not have jurisdiction shall be
treated as having been irrevocably waived unless it is raised not later than the Statement of
Defence; and a like plea by a Respondent to Counterclaim shall be similarly treated unless it is
raised no later than the Statement of Defence to Counterclaim. A plea that the Arbitral
Tribunal is exceeding the scope of its authority shall be raised promptly after the Arbitral
Tribunal has indicated its intention to decide on the matter alleged by any party to be beyond
the scope of its authority, failing which such plea shall also be treated as having been waived
irrevocably. In any case, the Arbitral Tribunal may nevertheless admit an untimely plea if it
considers the delay justified in the particular circumstances.
23.3 The Arbitral Tribunal may determine the plea to its jurisdiction or authority in an award as
to jurisdiction or later in an award on the merits, as it considers appropriate in the
circumstances.
23.4 By agreeing to arbitration under these Rules, the parties shall be treated as having
agreed not to apply to any state court or other judicial authority for any relief regarding the
Arbitral Tribunal's jurisdiction or authority, except with the agreement in writing of all parties
to the arbitration or the prior authorisation of the Arbitral Tribunal or following the latter's
award ruling on the objection to its jurisdiction or authority.

Article 24 Deposits
24.1 The LCIA Court may direct the parties, in such proportions as it thinks appropriate, to
make one or several interim or final payments on account of the costs of the arbitration. Such
deposits shall be made to and held by the LCIA and from time to time may be released by the
LCIA Court to the arbitrator(s), any expert appointed by the Arbitral Tribunal and the LCIA itself
as the arbitration progresses.
24.2 The Arbitral Tribunal shall not proceed with the arbitration without ascertaining at all
times from the Registrar or any deputy Registrar that the LCIA is in requisite funds.
24.3 In the event that a party fails or refuses to provide any deposit as directed by the LCIA
Court, the LCIA Court may direct the other party or parties to effect a substitute payment to
allow the arbitration to proceed (subject to any award on costs). In such circumstances, the
party paying the substitute payment shall be entitled to recover that amount as a debt
immediately due from the defaulting party.
24.4 Failure by a claimant or counterclaiming party to provide promptly and in full the
required deposit may be treated by the LCIA Court and the Arbitral Tribunal as a withdrawal of
the claim or counterclaim respectively.

Article 25 Interim and Conservatory Measures

25.1 The Arbitral Tribunal shall have the power, unless otherwise agreed by the parties in
writing, on the application of any party:
(a) to order any respondent party to a claim or counterclaim to provide security for all or
part of the amount in dispute, by way of deposit or bank guarantee or in any other
manner and upon such terms as the Arbitral Tribunal considers appropriate. Such terms
may include the provision by the claiming or counterclaiming party of a cross-indemnity,
itself secured in such manner as the Arbitral Tribunal considers appropriate, for any costs
or losses incurred by such respondent in providing security. The amount of any costs and
losses payable under such cross-indemnity may be determined by the Arbitral Tribunal
in one or more awards;
(b) to order the preservation, storage, sale or other disposal of any property or thing under
the control of any party and relating to the subject matter of the arbitration; and
(c) to order on a provisional basis, subject to final determination in an award, any relief
which the Arbitral Tribunal would have power to grant in an award, including a
provisional order for the payment of money or the disposition of property as between any
parties.
25.2 The Arbitral Tribunal shall have the power, upon the application of a party, to order any
claiming or counterclaiming party to provide security for the legal or other costs of any other
party by way of deposit or bank guarantee or in any other manner and upon such terms as the
Arbitral Tribunal considers appropriate. Such terms may include the provision by that other
party of a cross-indemnity, itself secured in such manner as the Arbitral Tribunal considers
appropriate, for any costs and losses incurred by such claimant or counterclaimant in
providing security. The amount of any costs and losses payable under such cross-indemnity
may be determined by the Arbitral Tribunal in one or more awards. In the event that a claiming
or counterclaiming party does not comply with any order to provide security, the Arbitral
Tribunal may stay that party's claims or counterclaims or dismiss them in an award.
25.3 The power of the Arbitral Tribunal under Article 25.1 shall not prejudice howsoever any
party's right to apply to any state court or other judicial authority for interim or conservatory
measures before the formation of the Arbitral Tribunal and, in exceptional cases, thereafter.
Any application and any order for such measures after the formation of the Arbitral Tribunal
shall be promptly communicated by the applicant to the Arbitral Tribunal and all other
parties. However, by agreeing to arbitration under these Rules, the parties shall be taken to
have agreed not to apply to any state court or other judicial authority for any order for security
for its legal or other costs available from the Arbitral Tribunal under Article 25.2.
Article 26 The Award
26.1 The Arbitral Tribunal shall make its award in writing and, unless all parties agree in writing
otherwise, shall state the reasons upon which its award is based. The award shall also state the
date when the award is made and the seat of the arbitration; and it shall be signed by the
Arbitral Tribunal or those of its members assenting to it.
26.2 If any arbitrator fails to comply with the mandatory provisions of any applicable law
relating to the making of the award, having been given a reasonable opportunity to do so, the
remaining arbitrators may proceed in his absence and state in their award the circumstances
of the other arbitrator's failure to participate in the making of the award.
26.3 Where there are three arbitrators and the Arbitral Tribunal fails to agree on any issue, the
arbitrators shall decide that issue by a majority. Failing a majority decision on any issue, the
chairman of the Arbitral Tribunal shall decide that issue.
26.4 If any arbitrator refuses or fails to sign the award, the signatures of the majority or (failing
a majority) of the chairman shall be sufficient, provided that the reason for the omitted
signature is stated in the award by the majority or chairman.
26.5 The sole arbitrator or chairman shall be responsible for delivering the award to the LCIA
Court, which shall transmit certified copies to the parties provided that the costs of arbitration
have been paid to the LCIA in accordance with Article 28.
26.6 An award may be expressed in any currency. The Arbitral Tribunal may order that simple
or compound interest shall be paid by any party on any sum awarded at such rates as the
Arbitral Tribunal determines to be appropriate, without being bound by legal rates of interest
imposed by any state court, in respect of any period which the Arbitral Tribunal determines to
be appropriate ending not later than the date upon which the award is complied with.
26.7 The Arbitral Tribunal may make separate awards on different issues at different times.
Such awards shall have the same status and effect as any other award made by the Arbitral
Tribunal.
26.8 In the event of a settlement of the parties' dispute, the Arbitral Tribunal may render an
award recording the settlement if the parties so request in writing (a “Consent Award”),
provided always that such award contains an express statement that it is an award made by
the parties' consent. A Consent Award need not contain reasons. If the parties do not require a
consent award, then on written confirmation by the parties to the LCIA Court that a settlement
has been reached, the Arbitral Tribunal shall be discharged and the arbitration proceedings
concluded, subject to payment by the parties of any outstanding costs of the arbitration under
Article 28.
26.9 All awards shall be final and binding on the parties. By agreeing to arbitration under
these Rules, the parties undertake to carry out any award immediately and without any delay
(subject only to Article 27); and the parties also waive irrevocably their right to any form of
appeal, review or recourse to any state court or other judicial authority, insofar as such waiver
may be validly made.

Article 27 Correction of Awards and Additional Awards

27.1 Within 30 days of receipt of any award, or such lesser period as may be agreed in writing
by the parties, a party may by written notice to the Registrar (copied to all other parties)
request the Arbitral Tribunal to correct in the award any errors in computation, clerical or
typographical errors or any errors of a similar nature. If the Arbitral Tribunal considers the
request to be justified, it shall make the corrections within 30 days of receipt of the request.
Any correction shall take the form of separate memorandum dated and signed by the Arbitral
Tribunal or (if three arbitrators) those of its members assenting to it; and such memorandum
shall become part of the award for all purposes.
27.2 The Arbitral Tribunal may likewise correct any error of the nature described in Article 27.1
on its own initiative within 30 days of the date of the award, to the same effect.
27.3 Within 30 days of receipt of the final award, a party may by written notice to the Registrar
(copied to all other parties), request the Arbitral Tribunal to make an additional award as to
claims or counterclaims presented in the arbitration but not determined in any award. If the
Arbitral Tribunal considers the request to be justified, it shall make the additional award
within 60 days of receipt of the request. The provisions of Article 26 shall apply to any
additional award.

Article 28 Arbitration and Legal Costs

28.1 The costs of the arbitration (other than the legal or other costs incurred by the parties
themselves) shall be determined by the LCIA Court in accordance with the Schedule of Costs.
The parties shall be jointly and severally liable to the Arbitral Tribunal and the LCIA for such
arbitration costs.
28.2 The Arbitral Tribunal shall specify in the award the total amount of the costs of the
arbitration as determined by the LCIA Court. Unless the parties agree otherwise in writing, the
Arbitral Tribunal shall determine the proportions in which the parties shall bear all or part of
such arbitration costs. If the Arbitral Tribunal has determined that all or any part of the
arbitration costs shall be borne by a party other than a party which has already paid them to
the LCIA, the latter party shall have the right to recover the appropriate amount from the
former party.
28.3 The Arbitral Tribunal shall also have the power to order in its award that all or part of the
legal or other costs incurred by a party be paid by another party, unless the parties agree
otherwise in writing. The Arbitral Tribunal shall determine and fix the amount of each item
comprising such costs on such reasonable basis as it thinks fit.
28.4 Unless the parties otherwise agree in writing, the Arbitral Tribunal shall make its orders
on both arbitration and legal costs on the general principle that costs should reflect the
parties' relative success and failure in the award or arbitration, except where it appears to the
Arbitral Tribunal that in the particular circumstances this general approach is inappropriate.
Any order for costs shall be made with reasons in the award containing such order.
28.5 If the arbitration is abandoned, suspended or concluded, by agreement or otherwise,
before the final award is made, the parties shall remain jointly and severally liable to pay to
the LCIA and the Arbitral Tribunal the costs of the arbitration as determined by the LCIA Court
in accordance with the Schedule of Costs. In the event that such arbitration costs are less than
the deposits made by the parties, there shall be a refund by the LCIA in such proportion as the
parties may agree in writing, or failing such agreement, in the same proportions as the deposits
were made by the parties to the LCIA.

Article 29 Decisions by the LCIA Court

29.1 The decisions of the LCIA Court with respect to all matters relating to the arbitration shall
be conclusive and binding upon the parties and the Arbitral Tribunal. Such decisions are to be
treated as administrative in nature and the LCIA Court shall not be required to give any
reasons.
29.2 To the extent permitted by the law of the seat of the arbitration, the parties shall be
taken to have waived any right of appeal or review in respect of any such decisions of the LCIA
Court to any state court or other judicial authority. If such appeals or review remain possible
due to mandatory provisions of any applicable law, the LCIA Court shall, subject to the
provisions of that applicable law, decide whether the arbitral proceedings are to continue,
notwithstanding an appeal or review.

Article 30 Confidentiality
30.1 Unless the parties expressly agree in writing to the contrary, the parties undertake as a
general principle to keep confidential all awards in their arbitration, together with all
materials in the proceedings created for the purpose of the arbitration and all other
documents produced by another party in the proceedings not otherwise in the public domain -
save and to the extent that disclosure may be required of a party by legal duty, to protect or
pursue a legal right or to enforce or challenge an award in bona fide legal proceedings before a
state court or other judicial authority.
30.2 The deliberations of the Arbitral Tribunal are likewise confidential to its members, save
and to the extent that disclosure of an arbitrator's refusal to participate in the arbitration is
required of the other members of the Arbitral Tribunal under Articles 10, 12 and 26.
30.3 The LCIA Court does not publish any award or any part of an award without the prior
written consent of all parties and the Arbitral Tribunal.

Article 31 Exclusion of Liability

31.1 None of the LCIA, the LCIA Court (including its President, Vice-Presidents and individual
members), the Registrar, any deputy Registrar, any arbitrator and any expert to the Arbitral
Tribunal shall be liable to any party howsoever for any act or omission in connection with any
arbitration conducted by reference to these Rules, save where the act or omission is shown by
that party to constitute conscious and deliberate wrongdoing committed by the body or
person alleged to be liable to that party.
31.2 After the award has been made and the possibilities of correction and additional awards
referred to in Article 27 have lapsed or been exhausted, neither the LCIA, the LCIA Court
(including its President, Vice-Presidents and individual members), the Registrar, any deputy
Registrar, any arbitrator or expert to the Arbitral Tribunal shall be under any legal obligation
to make any statement to any person about any matter concerning the arbitration, nor shall
any party seek to make any of these persons a witness in any legal or other proceedings arising
out of the arbitration.

Article 32 General Rules

32.1 A party who knows that any provision of the Arbitration Agreement (including these Rules)
has not been complied with and yet proceeds with the arbitration without promptly stating its
objection to such non-compliance, shall be treated as having irrevocably waived its right to
object.
32.2 In all matters not expressly provided for in these Rules, the LCIA Court, the Arbitral
Tribunal and the parties shall act in the spirit of these Rules and shall make every reasonable
effort to ensure that an award is legally enforceable.
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Document information
Publication
Public Source Materials
Jurisdiction
Argentina
Organization
Inter-American Commercial
Arbitration Commission
Entry into force
1 April 1982
Promulgation
1 April 1982
Bibliographic reference
'IACA Rules of Procedure
1982', Public Source
Materials, (© Kluwer Law
International; ) pp. 1 - 16
P 1 Originally established in 1934 as the result of Resolution XLI of the Seventh International
P 2 Conference of American States at its meeting in Montevideo, Uruguay in December, 1933, the
KluwerArbitration
IACA Rules of Procedure 1982
Previous version (#)
Model Clauses
Arbitration clause recommended by the Inter-American Commercial Arbitration Commission:
Clause for the Arbitration of Future Disputes
Any dispute, controversy or claim arising out of or relating to this contract, or the breach,
termination or invalidity thereof, shall be settled by arbitration in accordance with the Rules
of Procedure of the Inter-American Commercial Arbitration Commission in effect on the date of
this agreement. The arbitral tribunal shall decide as amiable compositeur or ex aequo et bono.
Note-Parties may wish to consider adding:
(a) the number of arbitrators shall be. .. (one or three);
(b) the place of arbitration shall be. .. (town or country);
(c) the language(s) to be used in the arbitral proceedings shall be. . .
Submission to Arbitration of Existing Disputes
Where the contract does not contain an arbitration clause and the parties desire to submit to
arbitration, under the Rules of Procedure of the IACAC, an existing dispute arising from the
contract, it is recommended that they consult with the Commission in preparing an
appropriate text for a submission to arbitration.
The Inter-American Commercial Arbitration Commission
The Inter-American Commercial Arbitration Commission has established, maintains and
administers a system throughout the Western Hemisphere for the settlement, by arbitration or
conciliation, of international commercial disputes. The system includes National Sections or
Representatives in almost all countries in the Western Hemisphere. Where no such National
Section or Representative exists, the Commission performs all activities that would otherwise
be performed by a National Section.
Working in cooperation with the National Sections, the Commission provides service to parties
who request conciliation or arbitration in accordance with the Rules of the Commission.
Arbitrations are conducted by arbitrators who are specially selected by the parties or by the
Commission in accordance with the IACAC Rules of Procedure, utilizing existing panels of highly
qualified individuals who render awards on the merits of the disputes.
Organization
Inter-American Commercial Arbitration Commission is composed of a Delegate and an
Alternate Delegate from each of the National Sections. The Commission coordinates the
activities of the National Sections, provides administrative services and serves as an
appointing authority for arbitrators.
The Commission meets at least once every two years, is governed during the interval by an
Executive Committee and is supported financially by case fees as well as contributions from
National Sections, interested organizations and institutions.
The duties of the Commission may be carried out through such officers, staff or committees as
the Commission may designate. In order to facilitate conduct of a case, the Commission will,
when all parties agree, delegate functions under the Rules of Procedure to the National Section
designated by the parties.
The National Sections are representative of the members of the business and legal
communities in each of the countries of the Western Hemisphere. Each National Section
maintains a panel of arbitrators specially chosen for their expertise. The Commission also
engages in educational activities designed to foster knowledge and use of international
commercial arbitration.
Additionally, the Commission lends its good offices to the conciliation or other adjustment of
misunderstandings or trade disputes.
As of 1 January 1978, the Rules of Procedures [as reproduced here] are the official Rules of
IACAC. They have the substantive provisions of the UNCITRAL Arbitration Rules (developed by
the United Nations Commission on International Trade Law and recommended by the General
 Assembly on 15 December 1976) and have been adapted to the institutional requirements of
the Inter-American Commercial Arbitration Commission. (*) Disputes submitted to IACAC
involving contracts signed prior to 1 January 1978, will be administered under these Rules
unless both parties prefer that the arbitration be administered under the Rules previously in
effect as amended 1 April 1969, and so indicate to IACAC in writing. All other cases initiated
after 1 January 1978 will be administered under the Rules [as reproduced here].

International Conventions
The Inter-American Convention on International Commercial Arbitration came into effect on 16
June 1976. As of 1 September 1977, the Convention had been ratified by Chile, Panama, Paraguay
and Uruguay. The text of the Convention is [reproduced in Annex I].
Article 3 of the Convention provides as follows: “In the absence of an express agreement
between the parties, the arbitration shall be conducted in accordance with the rules of
procedure of the Inter-American Commercial Arbitration Commission.”Thus, the Convention has
given the IACAC a special responsiblity.
The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards
(1958) had, as of 1 September 1977, been ratified by 55 nations, including the following in the
P 2 Western Hemisphere: Chile, Cuba, Ecuador, Mexico, Trinidad and Tobago and the United
P 3 States.

Instructions for Proceeding Under the Rules

The parties shall be deemed to have made these Rules a part of their arbitration agreement
whenever they have provided for arbitration by the Inter-American Commercial Arbitration
Commission or under its Rules.
When parties agree to arbitrate under these Rules, or when they provide for arbitration by the
Inter-American Commercial Arbitration Commission and an arbitration is initiated thereunder,
they thereby constitute the IACAC the administrator of the arbitration. The authority and
obligations of the administrator are prescribed in the agreement of the parties and in these
Rules.
A model clause for the arbitration of future disputes is printed [above].
Where the contract of the parties does not contain a clause for the arbitration of future
disputes, an agreement to arbitrate may be made when a dispute arises. Aid in the
preparation of such a submission will be given by the Commission upon request of the parties.
A party who desires to initiate an arbitration should give a Notice of Arbitration, as described
in Article 3 of the Rules of Procedure. The initiating party shall file with the Commission at any
of its offices two copies of said notice, together with two copies of the contract or such parts
thereof as relate to the dispute, including the arbitration provision. The Commission shall give
notice of such filing to the other party.
When a party initiates an arbitration under the Rules, the Commission shall provide
administrative services to facilitate the conduct of the case. Such services include scheduling
and making physical arrangements for hearings, issuing notices and orders when required,
acting as a conduit for exchanges of papers between the parties and arbitrators, arranging fees
of arbitrators and performing other services. These administrative services help to assure
efficient handling of the necessary details of the arbitration and provide a desirable buffer
between disputing parties.
A party may request the Commission to appoint arbitrators in accordance with Articles 6 and 7
of the Rules of Procedure and to perform various other functions set forth in those Rules.
Whenever a party requests the Commission to perform any of these administrative or
appointing services an Administrative Fee is payable. Schedules of Administrative Fees and
Other Service Charges are printed [below] immediately following the text of the Rules of
Procedure. (These schedules are subject to change by the Commission.)
A party who desires to communicate with the Commission may do so either through the
Commission's National Offices in his country or through the President. Director General or
General Counsel. [. . .]

Conciliation
On some occasions the parties may prefer to use procedures for conciliation rather than
arbitration. This can frequently be effected through the good offices of the Commission or its
National Sections.

Rules of Procedure
Section I. Introductory Rules

Article 1 -SCOPE OF APPLICATION

P 3 1. Where the parties to a contract have agreed in writing that disputes in relation to that
P 4 contract shall be referred to arbitration under the IACAC Arbitration Rules, then such
P4
disputes shall be settled in accordance with these Rules subject to such modification as the
parties may agree in writing.
2. These Rules shall govern the arbitration except that where any of these Rules is in conflict
with a provision of the law applicable to the arbitration from which the parties cannot
derogate, that provision shall prevail.

Article 2 -NOTICE, CALCULATION OF PERIODS OF TIME

1. For the purposes of these Rules, any notice, including a notification, communication or
proposal, is deemed to have been received if it is physically delivered to the addressee or if it
is delivered at his habitual residence, place of business or mailing address, or, if none of these
can be found after making reasonable inquiry, then at the addressee's last known residence or
place of business. Notice shall be deemed to have been received on the day it is so delivered.
2. For the purposes of calculating a period of time under these Rules, such period shall begin
to run on the day following the day when a notice, notification, communication or proposal is
received. If the last day of such period is an official holiday or a non-business day at the
residence or place of business of the addressee, the period is extended until the first business
day which follows. Official holidays or non-business days occurring during the running of the
period of time are included in calculating the period.

Article 3 -NOTICE OF ARBITRATION

1. The party initiating recourse to arbitration (hereinafter called the “claimant”) shall give to
the other party (hereinafter called the “respondent”) a notice of arbitation.
2. Arbitral proceedings shall be deemed to commence on the date on which the notice of
arbitration is received by the respondent.
3. The notice of arbitration shall include the following:
(a) A demand that the dispute be referred to arbitration;
(b) The names and addresses of the parties;
(c) A reference to the arbitration clause or the separate arbitration agreement that is
invoked;
(d) A reference to the contract out of or in relation to which the dispute arises;
(e) The general nature of the claim and an indication of the amount involved, if any;
(f) The relief or remedy sought;
(g) A proposal as to the number of arbitrators (i.e., one or three), if parties have not
previously agreed thereon.
4. The notice of arbitration may also include:
(a) The proposals for the appointment of a sole arbitrator referred to in Article 6, paragraph
1;
(b) The notification of the appointment of an arbitrator referred to in Article 7;
(c) The statement of claim referred to in Article 18.
P4
P5

Article 4 -REPRESENTATION AND ASSISTANCE

The parties may be represented or assisted by persons of their choice. The names and
addresses of such persons must be communicated in writing to the other party; such
communication must specify whether the appointment is being made for purposes of
representation or assistance.

Section II. Composition of the Arbitral Tribunal

Number of Arbitrators

Article 5
If the parties have not previously agreed on the number of arbitrators (i.e., one or three), and if
within fifteen days after the receipt by the respondent of the notice of arbitration the parties
have not agreed that there shall be only one arbitrator, three arbitrators shall be appointed.

Appointment of Arbitrators (Articles 6 to 8)

Article 6
1. If a sole arbitrator is to be appointed, either party may propose to the other the names of
one or more persons, one of whom would serve as the sole arbitrator.
2. If within thirty days after receipt by a party of a proposal made in accordance with
 paragraph 1 the parties have not reached agreement on the choice of a sole arbitrator, the sole
arbitrator shall be appointed by the IACAC.
3. The IACAC shall, at the request of one of the parties, appoint the sole arbitrator as promptly
as possible. In making the appointment the IACAC shall use the following list-procedure, unless
both parties agree that the list-procedure should not be used or unless the IACAC determines
in its discretion that the use of the list-procedure is not appropriate for the case:
(a) At the request of one of the parties the IACAC shall communicate to both parties an
identical list containing at least three names;
(b) Within fifteen days after the receipt of this list, each party may return the list to the IACAC
after having deleted the name or names to which he objects and numbered the remaining
names on the list in the order of his preference;
(c) After the expiration of the above period of time the IACAC shall appoint the sole
arbitrator from among the names approved on the lists returned to it and in accordance
with the order of preference indicated by the parties;
(d) If for any reason the appointment cannot be made according to this procedure, the IACAC
may exercise its discretion in appointing the sole arbitrator.
4. In making the appointment, the IACAC shall have regard to such considerations as are likely
to secure the appointment of an independent and impartial arbitrator and shall take into
account as well the advisability of appointing an arbitrator of a nationality other than the
nationalities of the parties.

Article 7
1. If three arbitrators are to be appointed, each party shall appoint one arbitrator. The two
P 5 arbitrators thus appointed shall choose the third arbitrator, who will act as the presiding
P 6 arbitrator of the tribunal.
2. If within thirty days after the receipt of a party's notification of the appointment of an
arbitrator, the other party has not notified the first party of the arbitrator he has appointed the
first party may request the IACAC to appoint the second arbitrator.
3. If within thirty days after the appointment of the second arbitrator the two arbitrators have
not agreed on the choice of the presiding arbitrator, the presiding arbitrator shall be
appointed by the IACAC in the same way as a sole arbitrator would be appointed under Article
6.

Article 8
1. When the IACAC is requested to appoint an arbitrator pursuant to Article 6 or Article 7, the
party which makes the request shall send to the IACAC a copy of the notice of arbitration, a
copy of the contract out of or in relation to which the dispute has arisen and a copy of the
arbitration agreement if it is not contained in the contract. The IACAC may require from either
party such information as it deems necessary to fulfill its function.
2. Where the names of one or more persons are proposed for appointment as arbitrators, their
full names, addresses and nationalities shall be indicated, together with a description of their
qualifications.

Challenge of Arbitrators (Articles 9 to 12)

Article 9
A prospective arbitrator shall disclose to those who approach him in connection with his
possible appointment any circumstances likely to give rise to justifiable doubts as to his
impartiality or independence. An arbitrator, once appointed or chosen, shall disclose such
circumstances to the parties unless they have already been informed by him of these
circumstances.

Article 10
1. Any arbitrator may be challenged if circumstances exist that give rise to justifiable doubts
as to the arbitrator's impartiality or independence.
2. A party may challenge the arbitrator appointed by him only for reasons of which he
becomes aware after the appointment has been made.

Article 11
1. A party who intends to challenge an arbitrator shall send notice of his challenge within
fifteen days after the appointment of the challenged arbitrator has been notified to the
challenging party or within fifteen days after the circumstances mentioned in Articles 9 and 10
became known to that party.
2. The challenge shall be notified to the other party, to the arbitrator who is challenged and to
the other members of the arbitral tribunal. The notification shall be in writing and shall state
 the reasons for the challenge.
3. When an arbitrator has been challenged by one party, the other party may agree to the
challenge. The arbitrator may also, after the challenge, withdraw from his office. In neither case
does this imply acceptance of the validity of the grounds for the challenge. In both cases the
procedure provided in Article 6 or 7 shall be used in full for the appointment of the substitute
arbitrator, even if during the process of appointing the challenged arbitrator a party had failed
to exercise his right to appoint or to participate in the appointment.

Article 12
P 6 1. If the other party does not agree to the challenge and the challenged arbitrator does not
P 7 withdraw, the decision on the challenge will be made by the IACAC.
2. If the IACAC sustains the challenge, a substitute arbitrator shall be appointed or chosen
pursuant to the procedure applicable to the appointment or choice of an arbitrator as
provided in Articles 6 to 9.

Replacement of an Arbitrator

Article 13
1. In the event of the death or resignation of an arbitrator during the course of the arbitral
proceedings, a substitute arbitrator shall be appointed or chosen pursuant to the procedure
provided for in Articles 6 to 9 that was applicable to the appointment or choice of the
arbitrator being replaced.
2. In the event that an arbitrator fails to act or in the event of the de jure or de facto
impossibility of his performing his functions, the procedure in respect of the challenge and
replacement of an arbitrator as provided in the preceding Article shall apply.

Repetition of Hearings in the Event of the Replacement of an Arbitrator

Article 14
If under articles 11 to 13 the sole or presiding arbitrator is replaced, any hearings held
previously shall be repeated; if any other arbitrator is replaced, such prior hearings may be
repeated at the discretion of the arbitral tribunal.

Section III. Arbitral Proceedings

General Provisions

Article 15
1. Subject to these rules, the arbitral tribunal may conduct the arbitration in such manner as it
considers appropriate, provided that the parties are treated with equality and that at any
stage of the proceedings each party is given a full opportunity of presenting his case.
2. If either party so requests at any stage of the proceedings, the arbitral tribunal shall hold
hearings for the presentation of evidence by witnesses, including expert witnesses, or for oral
argument. In the absence of such a request, the arbitral tribunal shall decide whether to hold
such hearings or whether the proceedings shall be conducted on the basis of documents and
other materials.
3. All documents or information supplied to the arbitral tribunal by one party shall at the
same time be communicated by that party to the other party.

Place of Arbitration

Article 16
1. Unless the parties have agreed upon the place where the arbitration is to be held, such
place shall be determined by the arbitral tribunal, having regard to the circumstances of the
arbitration.
2. The arbitral tribunal may determine the locale of the arbitration within the country agreed
upon by the parties. It may hear witnesses and hold meetings for consultation among its
P 7 members at any place it deems appropriate, having regard to the circumstances of the
P 8 arbitration.
3. The arbitral tribunal may meet at any place it deems appropriate for the inspection of
goods, other property or documents. The parties shall be given sufficient notice to enable them
to be present at such inspection.
4. The award shall be made at the place of arbitration.

Language
 Article 17
1. Subject to an agreement by the parties, the arbitral tribunal shall, promptly after its
appointment, determine the language or languages to be used in the proceedings. This
determination shall apply to the statement of claim, the statement of defense, and any further
written statements and, if oral hearings take place, to the language or languages to be used in
such hearings.
2. The arbitral tribunal may order that any documents annexed to the statement of claim or
statement of defense, and any supplementary documents or exhibits submitted in the course
of the proceedings, delivered in their original language, shall be accompanied by a translation
into the language or languages agreed upon by the parties or determined by the arbitral
tribunal.

Statement of Claim

Article 18
1. Unless the statement of claim was contained in the notice of arbitration, within a period of
time to be determined by the arbitral tribunal, the claimant shall communicate his statement
of claim in writing to the respondent and to each of the arbitrators. A copy of the contract, and
of the arbitration agreement if not contained in the contract, shall be annexed thereto.
2. The statement of claim shall include the following particulars:
(a) The names and addresses of the parties;
(b) A statement of the facts supporting the claim;
(c) The points at issue;
(d) The relief or remedy sought.
The claimant may annex to his statement of claim all documents he deems relevant or may
add a reference to the documents or other evidence he will submit.

Statement of Defense

Article 19
1. Within a period of time to be determined by the arbitral tribunal, the respondent shall
communicate his statement of defense in writing to the claimant and to each of the arbitrators.
2. The statement of defense shall reply to the particulars (b), (c) and (d) of the statement of
claim (Article 18, para. 2). The respondent may annex to his statement the documents on which
he relies for his defense or may add a reference to the documents or other evidence he will
submit.
3. In his statement of defense, or at a later stage in the arbitral proceedings if the arbitral
tribunal decides that the delay was justified under the circumstances, the respondent may
make a counter-claim arising out of the same contract or rely on a claim arising out of the
same contract for the purpose of a set-off.
P 8 4. The provisions of Article 18, paragraph 2, shall apply to a counter-claim and a claim relied
P 9 on for the purpose of a set-off.
Amendments to the Claim or Defense

Article 20
During the course of arbitral proceedings either party may amend or supplement his claim or
defense unless the arbitral tribunal considers it inappropriate to allow such amendment
having regard to the delay in making it or prejudice to the other party or any other
circumstances. However, a claim may not be amended in such a manner that the amended
claim falls outside the scope of the arbitration clause or separate arbitration agreement.

Pleas as to the Jurisdiction of the Arbitral Tribunal

Article 21
1. The arbitral tribunal shall have the power to rule on objections that it has no jurisdiction,
including any objections with respect to the existence or validity of the arbitration clause or of
the separate arbitration agreement.
2. The arbitral tribunal shall have the power to determine the existence or the validity of the
contract of which an arbitration clause forms a part. For the purposes of Article 21, an
arbitration clause which forms part of a contract and which provides for arbitration under
these Rules shall be treated as an agreement independent of the other terms of the contract. A
decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause.
3. A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than in
the statement of defense or, with respect to a counter-claim, in the reply to the counter-claim.
 4. In general, the arbitral tribunal should rule on a plea concerning its jurisdiction as a
preliminary question. However, the arbitral tribunal may proceed with the arbitration and rule
on such a plea in their final award.

Further Written Statements

Article 22
The arbitral tribunal shall decide which further written statements, in addition to the
statement of claim and the statement of defense, shall be required from the parties or may be
presented by them and shall fix the periods of time for communicating such statements.

Periods of Time

Article 23
The periods of time fixed by the arbitral tribunal for the communication of written statements
(including the statement of claim and statement of defense) should not exceed forty-five days.
However, the arbitral tribunal may extend the time limits if it concludes that an extension is
justified.

Evidence and Hearings (Articles 24 and 25)

Article 24
P 9 1. Each party shall have the burden of proving the facts relied on to support his claim or
P 10 defense.
2. The arbitral tribunal may, if it considers it appropriate, require a party to deliver to the
tribunal and to the other party, within such a period of time as the arbitral tribunal shall
decide, a summary of the documents and other evidence which that party intends to present in
support of the facts in issue set out in his statement of claim or statement of defense.
3. At any time during the arbitral proceedings the arbitral tribunal may require the parties to
produce documents, exhibits or other evidence within such a period of time as the tribunal
shall determine.

Article 25
1. In the event of an oral hearing, the arbitral tribunal shall give the parties adequate advance
notice of the date, time and place thereof.
2. If witnesses are to be heard, at least fifteen days before the hearing each party shall
communicate to the arbitral tribunal and to the other party the names and addresses of the
witnesses he intends to present, and the subject upon and the languages in which such
witnesses will give their testimony.
3. The arbitral tribunal shall make arrangements for the translation of oral statements made at
a hearing and for a record of the hearing if either is deemed necessary by the tribunal under
the circumstances of the case, or if the parties have agreed thereto and have communicated
such agreement to the tribunal at least fifteen days before the hearing.
4. Hearings shall be held in camera unless the parties agree otherwise. The arbitral tribunal
may require the retirement of any witness or witnesses during the testimony of other witnesses.
The arbitral tribunal is free to determine the manner in which witnesses are examined.
5. Evidence of witnesses may also be presented in the form of written statements signed by
them.
6. The arbitral tribunal shall determine the admissibility, relevance, materiality and weight of
the evidence offered.

Interim Measures of Protection

Article 26
1. At the request of either party, the arbitral tribunal may take any interim measures it deems
necessary in respect of the subject matter of the dispute, including measures for the
conservation of the goods forming the subject matter in dispute, such as ordering their deposit
with a third person or the sale of perishable goods.
2. Such interim measures may be established in the form of an interim award. The arbitral
tribunal shall be entitled to require security for the costs of such measures.
3. A request for interim measures addressed by any party to a judicial authority shall not be
deemed incompatible with the agreement to arbitrate, or as a waiver of that agreement.

Experts

Article 27
 1. The arbitral tribunal may appoint one or more experts to report to it, in writing, on specific
P 10 issues to be determined by the tribunal. A copy of the expert's terms of reference, established
P 11 by the arbitral tribunal, shall be communicated to the parties.
2. The parties shall give the expert any relevant information or produce for his inspection any
relevant documents or goods that he may require of them. Any dispute between a party and
such expert as to the relevance of the required information or production shall be referred to
the arbitral tribunal for decision.
3. Upon receipt of the expert's report, the arbitral tribunal shall communicate a copy of the
report to the parties who shall be given the opportunity to express, in writing, their opinion on
the report. A party shall be entitled to examine any document on which the expert has relied
in his report.
4. At the request of either party the expert, after delivery of the report, may be heard at a
hearing where the parties shall have the opportunity to be present and to interrogate the
expert. At this hearing either party may present expert witnesses in order to testify on the
points at issue. The provisions of Article 25 shall be applicable to such proceedings.

Default

Article 28
1. If, within the period of time fixed by the arbitral tribunal, the claimant has failed to
communicate his claim without showing sufficient cause for such failure, the arbitral tribunal
shall issue an order for the termination of the arbitral proceedings. If, within the period of time
fixed by the arbitral tribunal, the respondent has failed to communicate his statement of
defense without showing sufficient cause for such failure, the arbitral tribunal shall order that
the proceedings continue.
2. If one of the parties, duly notified under these Rules, fails to appear at a hearing, without
showing sufficient cause for such failure, the arbitral tribunal may proceed with the arbitration.
3. If one of the parties, duly invited to produce documentary evidence, fails to do so within the
established period of time, without showing sufficient cause for such failure, the arbitral
tribunal may make the award on the evidence before it.

Closure of Hearings

Article 29
1. The arbitral tribunal may inquire of the parties if they have any further proofs to offer or
witnesses to be heard or submissions to make and, if there are none, it may declare the
hearings closed.
2. The arbitral tribunal may, if it considers it necessary owing to exceptional circumstances,
decide, on its own motion or upon application of a party, to reopen the hearings at any time
before the award is made.

Waiver of Rules

Article 30
A party who knows that any provision of, or requirement under, these Rules has not been
complied with and yet proceeds with the arbitration without promptly stating his objection to
such non-compliance, shall be deemed to have waived his right to object.

Section IV. The Award

Article 31 -DECISIONS
P 11 1. When there are three arbitrators, any award or other decision of the arbitral tribunal shall
P 12 be made by a majority of the arbitrators.
2. In the case of questions of procedure, when there is no majority or when the arbitral tribunal
so authorizes, the presiding arbitrator may decide on his own, subject to revision, if any, by the
arbitral tribunal.

Article 32 -FORM AND EFFECT OF THE AWARD

1. In addition to making a final award, the arbitral tribunal shall be entitled to make interim,
interlocutory, or partial awards.
2. The award shall be made in writing and shall be final and binding on the parties. The parties
undertake to carry out the award without delay.
3. The arbitral tribunal shall state the reasons upon which the award is based, unless the
parties have agreed that no reasons are to be given.
4. An award shall be signed by the arbitrators and it shall contain the date on which and the
place where the award was made. Where there are three arbitrators and one of them fails to
 sign, the award shall state the reason for the absence of the signature.
5. The award may be made public only with the consent of both parties.
6. Copies of the award signed by the arbitrators shall be communicated to the parties by the
arbitral tribunal.
7. If the arbitration law of the country where the award is made requires that the award be
filed or registered by the arbitral tribunal, the tribunal shall comply with this requirement
within the period of time required by law.

Article 33 -APPLICABLE LAW, AMIABLE COMPOSITEUR

1. The arbitral tribunal shall apply the law designated by the parties as applicable to the
substance of the dispute. Failing such designation by the parties, the arbitral tribunal shall
apply the law determined by the conflict of laws rules which it considers applicable.
2. The arbitral tribunal shall decide as amiable compositeur or ex aequo et bono only if the
parties have expressly authorized the arbitral tribunal to do so and if the law applicable to the
arbitral procedure permits such arbitration.
3. In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract
and shall take into account the usages of the trade applicable to the transaction.

Article 34 - SETTLEMENT OR OTHER GROUNDS FOR TERMINATION

1. If, before the award is made, the parties agree on a settlement of the dispute, the arbitral
tribunal shall either issue an order for the termination of the arbitral proceedings or, if
requested by both parties and accepted by the tribunal, record the settlement in the form of
an arbitral award on agreed terms. The arbitral tribunal is not obliged to give reasons for such
an award.
2. If, before the award is made, the continuation of the arbitral proceedings becomes
unnecessary or impossible for any reason not mentioned in paragraph 1, the arbitral tribunal
shall inform the parties of its intention to issue an order for the termination of the proceedings.
The arbitral tribunal shall have the power to issue such an order unless a party raises
justifiable grounds for objection.
P 12 3. Copies of the order for termination of the arbitral proceedings or of the arbitral award on
P 13 agreed terms, signed by the arbitrators, shall be communicated by the arbitral tribunal to
the parties. Where an arbitral award on agreed terms is made, the provisions of Article 32,
paragraphs 2 and 4 to 7, shall apply.

Article 35 -INTERPRETATION OF THE AWARD

1. Within thirty days after the receipt of the award, either party, with notice to the other party,
may request that the arbitral tribunal give an interpretation of the award.
2. The interpretation shall be given in writing within forty-five days after the receipt of the
request. The interpretation shall form part of the award and the provisions of Article 32,
paragraphs 2 to 7, shall apply.

Article 36 -CORRECTION OF THE AWARD

1. Within thirty days after the receipt of the award, either party, with notice to the other party,
may request the arbitral tribunal to correct in the award any errors in computation, any
clerical or typographical errors, or any errors of similar nature. The arbitral tribunal may within
thirty days after the communication of the award make such corrections on its own initiative.
2. Such corrections shall be in writing, and the provisions of Article 32, paragraphs 2 to 7, shall
apply.

Article 37 -ADDITIONAL AWARD

1. Within thirty days after the receipt of the award, either party, with notice to the other party,
may request the arbitral tribunal to make an additional award as to claims presented in the
arbital proceedings but omitted from the award.
2. If the arbitral tribunal considers the request for an additional award to be justified and
considers that the omission can be rectified without any further hearings or evidence, it shall
complete its award within sixty days after the receipt of the request.
3. When an additional award is made, the provisions of Article 32, paragraphs 2 to 7, shall
apply.

Costs (Articles 38 to 40)

Article 38
The arbitral tribunal shall fix the costs of arbitration in its award. The term “costs” includes
only:
 (a) The fees of the arbitral tribunal to be stated separately as to each arbitrator and to be
fixed by the tribunal itself in accordance with Article 39;
(b) The travel and other expenses incurred by the arbitrators;
(c) The costs of expert advice and of other assistance required by the arbitral tribunal;
(d) The travel and other expenses of witnesses to the extent such expenses are approved by
the arbitral tribunal;
P 13 (e) The costs for legal representation and assistance of the successful party if such costs were
P 14 claimed during the arbitral proceedings, and only to the extent that the arbitral
tribunal determines that the amount of such costs is reasonable;
(f) The Administrative Fee and other Service Charges of the IACAC.

Article 39
1. The fees of the arbitral tribunal shall be reasonable in amount, taking into account the
amount in dispute, the complexity of the subject matter, the time spent by the arbitrators and
any other relevant circumstances of the case.
2. Any party may at any time request the IACAC to furnish a statement setting forth the basis for
establishing fees for arbitrators which is customarily followed in international cases in which
the IACAC appoints arbitrators. The arbitral tribunal in fixing its fees shall take any such
information provided by the IACAC into account to the extent that it considers appropriate in
the circumstances of the case.
3. The IACAC shall prescribe schedules setting forth the Administrative Fee, other Service
Charges, and Refunds. The schedules in effect at the time of initiating the arbitration shall be
applicable.
4. The Administrative Fee shall be advanced by the claimant or claimants.

Article 40
1. Except as provided in paragraph 2, the costs of arbitration shall in principle be borne by the
unsuccessful party. However, the arbitral tribunal may apportion each of such costs between
the parties if it determines that apportionment is reasonable, taking into account the
circumstances of the case.
2. With respect to the costs of legal representation and assistance referred to in Article 38,
paragraph (e), the arbitral tribunal, taking into account the circumstances of the case, shall be
free to determine which party shall bear such costs or may apportion such costs between the
parties if it determines that apportionment is reasonable.
3. When the arbitral tribunal issues an order for the termination of the arbitral proceedings or
makes an award on agreed terms, it shall fix the costs of arbitration referred to in Article 38
and Article 39, paragraph 1 in the text of that order or award.
4. No additional fees may be charged by an arbitral tribunal for interpretation or correction or
completion of its award under Article 35 to 37.

Deposit of Costs
Article 41
1. The arbitral tribunal, on its establishment, may request each party to deposit an equal
amount as an advance for the costs referred to in Article 38, paragraphs (a), (b) and (c).
2. During the course of the arbitral proceedings the arbitral tribunal may request
supplementary deposits from the parties.
3. When a party so requests, the arbitral tribunal shall fix the amounts of any deposits or
supplementary deposits only after consultation with the IACAC, which may make any comments
to the arbitral tribunal which it deems appropriate concerning the amounts of such deposits
and supplementary deposits.
4. If the required deposits are not paid in full within thirty days after the receipt of the
request, the arbitral tribunal shall so inform the parties in order that one or another of them
may make the required payment. If such payment is not made, the arbitral tribunal may order
the suspension or termination of the arbitral proceedings.
P 14 5. After the award has been made, the arbitral tribunal shall render an accounting to the
P 15 parties of the deposits received and return any unexpended balance to the parties.

Administrative Fee Schedule

The administrative fee of the IACAC is based upon the amount of each claim as disclosed when
the claim is filed, and is due and payable at the time of filing.
 Amount of Claim or Counterclaim Fee for Claim or Counterclaim
$1 to $25,000 3% ($300 minimum)
$25,000 to $50,000 $750, plus 2% of excess over $25,000
$50,000 to $100,000 $1,250, plus 1% of excess over $50,000
$100,000 to $200,000 $1,750, plus 1/2% of excess over $100,000
$200,000 to $5,000,000 $2,250, plus 1/4% of excess over $200,000
$5,000,000 to $50,000,000 $14,250, plus 1/10% of excess over $5,000,000
The fee for claims in excess of $50 million should be discussed with the IACAC in advance of
filing.
When no amount can be stated at the time of filing, the administrative fee is $750, subject to
adjustment in accordance with the above schedule as soon as an amount can be disclosed.
If there are more than two parties represented in the arbitration, an additional 10% of the
initiating fee will be due for each additional represented party.

Refund Schedule
If the IACAC is notified that a case has been settled or withdrawn before a list of arbitrators has
been sent out, all the fee in excess of $300 will be refunded.
If the IACAC is notified that a case has been settled or withdrawn thereafter but before the
original due date for the return of the first list, two thirds of the fee in excess of $300 will be
refunded.
If the IACAC is notified that a case is settled or withdrawn thereafter but at least 48 hours
P 15 before the date and time set for the first hearing, one third of the fee in excess of $300 will be
refunded.

References
#) For a copy of a previous version of this document, should this be available, please contact
customer support: Contact
*) There are several articles of the UNCITRAL Arbitration Rules which have been adapted to the
institutional requirements of IACAC. For example, the term “IACAC” is substituted for
“UNCITRAL” and “appointing authority” throughout the text. In addition, there are changes in
the following articles to permit accommodation of the UNCITRAL Arbitration Rules by IACAC:
3,4(a); 6,1; 6,1(a) & (b); 6,2; 7,2; 7,2(a) & (b); 12,1(a), (b) & (c); 12,2; 38(f); 39,2,3 & 4; 41,3.
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Document information
Publication
Yearbook Commercial
Arbitration 1999 - Volume
XXIVa
Jurisdiction
United Kingdom
Organization
International Bar Association
Entry into force
1 June 1999
Bibliographic reference
'IBA Rules on the Taking of
Evidence in International
Commercial Arbitration 1999
English', in Albert Jan van
den Berg (ed), Yearbook
Commercial Arbitration 1999
- Volume XXIVa, Yearbook
Commercial Arbitration,
Volume 24 (© Kluwer Law
International; Kluwer Law
International 1999) pp. 410 -
419
P 410 “Evidentiary Hearing”means any hearing, whether or not held on consecutive days, at which the
P 411 Arbitral Tribunal receives oral evidence;
KluwerArbitration
IBA Rules on the Taking of Evidence in International
Commercial Arbitration 1999 English
Preamble
1. These IBA Rules on the Taking of Evidence in International Commercial Arbitration (the “IBA
Rules of Evidence”) are intended to govern in an efficient and economical manner the taking of
evidence in international commercial arbitrations, particularly those between Parties from
different legal traditions. They are designed to supplement the legal provisions and the
institutional or ad hoc rules according to which the Parties are conducting their arbitration.
2. Parties and Arbitral Tribunals may adopt the IBA Rules of Evidence, in whole or in part, to
govern arbitration proceedings, or they may vary them or use them as guidelines in developing
their own procedures. The Rules are not intended to limit the flexibility that is inherent in, and
an advantage of, international arbitration, and Parties and Arbitral Tribunals are free to adapt
them to the particular circumstances of each arbitration.
3. Each Arbitral Tribunal is encouraged to identify to the Parties, as soon as it considers it to be
appropriate, the issues that it may regard as relevant and material to the outcome of the case,
including issues where a preliminary determination may be appropriate.
4. The taking of evidence shall be conducted on the principle that each Party shall be entitled
to know, reasonably in advance of any Evidentiary Hearing, the evidence on which the other
Parties rely.
Article 1DEFINITIONS
In the IBA Rules of Evidence:
“Arbitral Tribunal”means a sole arbitrator or a panel of arbitrators validly deciding by majority
or otherwise;
“Claimant”means the Party or Parties who commenced the arbitration and any Party who,
through joinder or otherwise, becomes aligned with such Party or Parties;
“Document”means a writing of any kind, whether recorded on paper, electronic means, audio or
visual recordings or any other mechanical or electronic means of storing or recording
information;
“Expert Report”means a written statement by a Tribunal-Appointed Expert or a Party-
Appointed Expert submitted pursuant to the IBA Rules of Evidence;
“General Rules”mean the institutional or ad hoc rules according to which the Parties are
conducting their arbitration;
“Party”means a party to the arbitration;
“Party-Appointed Expert”means an expert witness presented by a Party;
“Request to Produce”means a request by a Party for a procedural order by which the Arbitral
Tribunal would direct another Party to produce documents;
“Respondent”means the Party or Parties against whom the Claimant made its claim, and any
Party who, through joinder or otherwise, becomes aligned with such Party or Parties, and
includes a Respondent making a counter-claim;
“Tribunal-Appointed Expert”means a person or organization appointed by the Arbitral Tribunal
in order to report to it on specific issues determined by the Arbitral Tribunal.
Article 2SCOPE OF APPLICATION
1. Whenever the Parties have agreed or the Arbitral Tribunal has determined to apply the IBA
Rules of Evidence, the Rules shall govern the taking of evidence, except to the extent that any
specific provision of them may be found to be in conflict with any mandatory provision of law
determined to be applicable to the case by the Parties or by the Arbitral Tribunal.
2. In case of conflict between any provisions of the IBA Rules of Evidence and the General
Rules, the Arbitral Tribunal shall apply the IBA Rules of Evidence in the manner that it
determines best in order to accomplish the purposes of both the General Rules and the IBA
Rules of Evidence, unless the Parties agree to the contrary.
3. In the event of any dispute regarding the meaning of the IBA Rules of Evidence, the Arbitral
Tribunal shall interpret them according to their purpose and in the manner most appropriate
for the particular arbitration.
 4. Insofar as the IBA Rules of Evidence and the General Rules are silent on any matter
concerning the taking of evidence and the Parties have not agreed otherwise, the Arbitral
Tribunal may conduct the taking of evidence as it deems appropriate, in accordance with the
general principles of the IBA Rules of Evidence.

Article 3DOCUMENTS
1. Within the time ordered by the Arbitral Tribunal, each Party shall submit to the Arbitral
Tribunal and to the other Parties all documents available to it on which it relies, including
P 411 public documents and those in the public domain, except for any documents that have already
P 412 been submitted by another Party.
2. Within the time ordered by the Arbitral Tribunal, any Party may submit to the Arbitral
Tribunal a Request to Produce.
3. A Request to Produce shall contain:
(a) (i) a description of a requested document sufficient to identify it, or (ii) a description in
sufficient detail (including subject matter) of a narrow and specific requested category of
documents that are reasonably believed to exist;
(b) a description of how the documents requested are relevant and material to the outcome of
the case; and
(c) a statement that the documents requested are not in the possession, custody or control of
the requesting Party, and of the reason why that Party assumes the documents requested to be
in the possession, custody or control of the other Party.
4. Within the time ordered by the Arbitral Tribunal, the Party to whom the Request to Produce
is addressed shall produce to the Arbitral Tribunal and to the other Parties all the documents
requested in its possession, custody or control as to which no objection is made.
5. If the Party to whom the Request to Produce is addressed has objections to some or all of
the documents requested, it shall state them in writing to the Arbitral Tribunal within the time
ordered by the Arbitral Tribunal. The reasons for such objections shall be any of those set forth
in Article 9.2.
6. The Arbitral Tribunal shall, in consultation with the Parties and in timely fashion, consider
the Request to Produce and the objections. The Arbitral Tribunal may order the Party to whom
such Request is addressed to produce to the Arbitral Tribunal and to the other Parties those
requested documents in its possession, custody or control as to which the Arbitral Tribunal
determines that (i) the issues that the requesting Party wishes to prove are relevant and
material to the outcome of the case, and (ii) none of the reasons for objection set forth in
Article 9.2 apply.
7. In exceptional circumstances, if the propriety of an objection can only be determined by
review of the document, the Arbitral Tribunal may determine that it should not review the
document. In that event, the Arbitral Tribunal may, after consultation with the Parties, appoint
an independent and impartial expert, bound to confidentiality, to review any such document
and to report on the objection. To the extent that the objection is upheld by the Arbitral
Tribunal, the expert shall not disclose to the Arbitral Tribunal and to the other Parties the
contents of the document reviewed.
8. If a Party wishes to obtain the production of documents from a person or organization who is
P 412 not a Party to the arbitration and from whom the Party cannot obtain the documents on its
P 413 own, the Party may, within the time ordered by the Arbitral Tribunal, ask it to take whatever
steps are legally available to obtain the requested documents. The Party shall identify the
documents in sufficient detail and state why such documents are relevant and material to the
outcome of the case. The Arbitral Tribunal shall decide on this request and shall take the
necessary steps if in its discretion it determines that the documents would be relevant and
material.
9. The Arbitral Tribunal, at any time before the arbitration is concluded, may request a Party to
produce to the Arbitral Tribunal and to the other Parties any documents that it believes to be
relevant and material to the outcome of the case. A Party may object to such a request based
on any of the reasons set forth in Article 9.2. If a Party raises such an objection, the Arbitral
Tribunal shall decide whether to order the production of such documents based upon the
considerations set forth in Article 3.6 and, if the Arbitral Tribunal considers it appropriate,
through the use of the procedures set forth in Article 3.7.
10. Within the time ordered by the Arbitral Tribunal, the Parties may submit to the Arbitral
Tribunal and to the other Parties any additional documents which they believe have become
relevant and material as a consequence of the issues raised in documents, Witness Statements
or Expert Reports submitted or produced by another Party or in other submissions of the
Parties.
11. If copies are submitted or produced, they must conform fully to the originals. At the request
of the Arbitral Tribunal, any original must be presented for inspection.
12. All documents produced by a Party pursuant to the IBA Rules of Evidence (or by a non-Party
pursuant to Article 3.8) shall be kept confidential by the Arbitral Tribunal and by the other
Parties, and they shall be used only in connection with the arbitration. The Arbitral Tribunal
may issue orders to set forth the terms of this confidentiality. This requirement is without
prejudice to all other obligations of confidentiality in arbitration.
 Article 4WITNESSES OF FACT
1. Within the time ordered by the Arbitral Tribunal, each Party shall identify the witnesses on
whose testimony it relies and the subject matter of that testimony.
2. Any person may present evidence as a witness, including a Party or a Party's officer,
employee or other representative.
3. It shall not be improper for a Party, its officers, employees, legal advisors or other
representatives to interview its witnesses or potential witnesses.
P 413 4. The Arbitral Tribunal may order each Party to submit within a specified time to the Arbitral
P 414 Tribunal and to the other Parties a written statement by each witness on whose testimony it
relies, except for those witnesses whose testimony is sought pursuant to Article 4.10 (the
“Witness Statement”). If Evidentiary Hearings are organized on separate issues (such as liability
and damages), the Arbitral Tribunal or the Parties by agreement may schedule the submission
of Witness Statements separately for each Evidentiary Hearing.
5. Each Witness Statement shall contain:
(a) the full name and address of the witness, his or her present and past relationship (if any)
with any of the Parties, and a description of his or her background, qualifications, training and
experience, if such a description may be relevant and material to the dispute or to the
contents of the statement;
(b) a full and detailed description of the facts, and the source of the witness's information as
to those facts, sufficient to serve as that witness's evidence in the matter in dispute;
(c) an affirmation of the truth of the statement; and
(d) the signature of the witness and its date and place.
6. If Witness Statements are submitted, any Party may, within the time ordered by the Arbitral
Tribunal, submit to the Arbitral Tribunal and to the other Parties revised or additional Witness
Statements, including statements from persons not previously named as witnesses, so long as
any such revisions or additions only respond to matters contained in another Party's Witness
Statement or Expert Report and such matters have not been previously presented in the
arbitration.
7. Each witness who has submitted a Witness Statement shall appear for testimony at an
Evidentiary Hearing, unless the Parties agree otherwise.
8. If a witness who has submitted a Witness Statement does not appear without a valid reason
for testimony at an Evidentiary Hearing, except by agreement of the Parties, the Arbitral
Tribunal shall disregard that Witness Statement unless, in exceptional circumstances, the
Arbitral Tribunal determines otherwise.
9. If the Parties agree that a witness who has submitted a Witness Statement does not need to
appear for testimony at an Evidentiary Hearing, such an agreement shall not be considered to
reflect an agreement as to the correctness of the content of the Witness Statement.
10. If a Party wishes to present evidence from a person who will not appear voluntarily at its
request, the Party may, within the time ordered by the Arbitral Tribunal, ask it to take whatever
steps are legally available to obtain the testimony of that person. The Party shall identify the
P 414 intended witness, shall describe the subjects on which the witness's testimony is sought and
P 415 shall state why such subjects are relevant and material to the outcome of the case. The
Arbitral Tribunal shall decide on this request and shall take the necessary steps if in its
discretion it determines that the testimony of that witness would be relevant and material.
11. The Arbitral Tribunal may, at any time before the arbitration is concluded, order any Party
to provide, or to use its best efforts to provide, the appearance for testimony at an Evidentiary
Hearing of any person, including one whose testimony has not yet been offered.

Article 5 PARTY-APPOINTED EXPERTS

1. A Party may rely on a Party-Appointed Expert as a means of evidence on specific issues.
Within the time ordered by the Arbitral Tribunal, a Party-Appointed Expert shall submit an
Expert Report.
2. The Expert Report shall contain:
(a) the full name and address of the Party-Appointed Expert, his or her present and past
relationship (if any) with any of the Parties, and a description of his or her background,
qualifications, training and experience;
(b) a statement of the facts on which he or she is basing his or her expert opinions and
conclusions;
(c) his or her expert opinions and conclusions, including a description of the method, evidence
and information used in arriving at the conclusions;
(d) an affirmation of the truth of the Expert Report; and
(e) the signature of the Party-Appointed Expert and its date and place.
3. The Arbitral Tribunal in its discretion may order that any Party-Appointed Experts who have
submitted Expert Reports on the same or related issues meet and confer on such issues. At
such meeting, the Party-Appointed Experts shall attempt to reach agreement on those issues
 as to which they had differences of opinion in their Expert Reports, and they shall record in
writing any such issues on which they reach agreement.
4. Each Party-Appointed Expert shall appear for testimony at an Evidentiary Hearing, unless
the Parties agree otherwise and the Arbitral Tribunal accepts this agreement.
5. If a Party-Appointed Expert does not appear without a valid reason for testimony at an
Evidentiary Hearing, except by agreement of the Parties accepted by the Arbitral Tribunal, the
Arbitral Tribunal shall disregard his or her Expert Report unless, in exceptional circumstances,
the Arbitral Tribunal determines otherwise.
P 415 6. If the Parties agree that a Party-Appointed Expert does not need to appear for testimony at
P 416 an Evidentiary Hearing, such an agreement shall not be considered to reflect an agreement
as to the correctness of the content of the Expert Report.

Article 6 TRIBUNAL-APPOINTED EXPERTS

1. The Arbitral Tribunal, after having consulted with the Parties, may appoint one or more
independent Tribunal-Appointed Experts to report to it on specific issues designated by the
Arbitral Tribunal. The Arbitral Tribunal shall establish the terms of reference for any Tribunal-
Appointed Expert report after having consulted with the Parties. A copy of the final terms of
reference shall be sent by the Arbitral Tribunal to the Parties.
2. The Tribunal-Appointed Expert shall, before accepting appointment, submit to the Arbitral
Tribunal and to the Parties a statement of his or her independence from the Parties and the
Arbitral Tribunal. Within the time ordered by the Arbitral Tribunal, the Parties shall inform the
Arbitral Tribunal whether they have any objections to the Tribunal-Appointed Expert's
independence. The Arbitral Tribunal shall decide promptly whether to accept any such
objection.
3. Subject to the provisions of Article 9.2, the Tribunal-Appointed Expert may request a Party to
provide any relevant and material information or to provide access to any relevant documents,
goods, samples, property or site for inspection. The authority of a Tribunal-Appointed Expert to
request such information or access shall be the same as the authority of the Arbitral Tribunal.
The Parties and their representatives shall have the right to receive any such information and
to attend any such inspection. Any disagreement between a Tribunal-Appointed Expert and a
Party as to the relevance, materiality or appropriateness of such a request shall be decided by
the Arbitral Tribunal, in the manner provided in Articles 3.5 through 3.7. The Tribunal-
Appointed Expert shall record in the report any non-compliance by a Party with an
appropriate request or decision by the Arbitral Tribunal and shall describe its effects on the
determination of the specific issue.
4. The Tribunal-Appointed Expert shall report in writing to the Arbitral Tribunal. The Tribunal-
Appointed Expert shall describe in the report the method, evidence and information used in
arriving at the conclusions.
5. The Arbitral Tribunal shall send a copy of such Expert Report to the Parties. The Parties may
examine any document that the Tribunal-Appointed Expert has examined and any
correspondence between the Arbitral Tribunal and the Tribunal-Appointed Expert. Within the
time ordered by the Arbitral Tribunal, any Party shall have the opportunity to respond to the
report in a submission by the Party or through an Expert Report by a Party-Appointed Expert.
P 416 The Arbitral Tribunal shall send the submission or Expert Report to the Tribunal-Appointed
P 417 Expert and to the other Parties.
6. At the request of a Party or of the Arbitral Tribunal, the Tribunal-Appointed Expert shall be
present at an Evidentiary Hearing. The Arbitral Tribunal may question the Tribunal-Appointed
Expert, and he or she may be questioned by the Parties or by any Party-Appointed Expert on
issues raised in the Parties' submissions or in the Expert Reports made by the Party-Appointed
Experts pursuant to Article 6.5.
7. Any Expert Report made by a Tribunal-Appointed Expert and its conclusions shall be
assessed by the Arbitral Tribunal with due regard to all circumstances of the case.
8. The fees and expenses of a Tribunal-Appointed Expert, to be funded in a manner
determined by the Arbitral Tribunal, shall form part of the costs of the arbitration.

Article 7ON SITE INSPECTION

Subject to the provisions of Article 9.2, the Arbitral Tribunal may, at the request of a Party or on
its own motion, inspect or require the inspection by a Tribunal-Appointed Expert of any site,
property, machinery or any other goods or process, or documents, as it deems appropriate. The
Arbitral Tribunal shall, in consultation with the Parties, determine the timing and arrangement
for the inspection. The Parties and their representatives shall have the right to attend any such
inspection.

Article 8EVIDENTIARY HEARING

1. The Arbitral Tribunal shall at all times have complete control over the Evidentiary Hearing.
The Arbitral Tribunal may limit or exclude any question to, answer by or appearance of a
witness (which term includes, for the purposes of this Article, witnesses of fact and any
Experts), if it considers such question, answer or appearance to be irrelevant, immaterial,
burdensome, duplicative or covered by a reason for objection set forth in Article 9.2. Questions
 to a witness during direct and re-direct testimony may not be unreasonably leading.
2. The Claimant shall ordinarily first present the testimony of its witnesses, followed by the
Respondent presenting testimony of its witnesses, and then by the presentation by Claimant of
rebuttal witnesses, if any. Following direct testimony, any other Party may question such
witness, in an order to be determined by the Arbitral Tribunal. The Party who initially
presented the witness shall subsequently have the opportunity to ask additional questions on
the matters raised in the other Parties' questioning. The Arbitral Tribunal, upon request of a
Party or on its own motion, may vary this order of proceeding, including the arrangement of
P 417 testimony by particular issues or in such a manner that witnesses presented by different
P 418 Parties be questioned at the same time and in confrontation with each other. The Arbitral
Tribunal may ask questions to a witness at any time.
3. Any witness providing testimony shall first affirm, in a manner determined appropriate by
the Arbitral Tribunal, that he or she is telling the truth. If the witness has submitted a Witness
Statement or an Expert Report, the witness shall confirm it. The Parties may agree or the
Arbitral Tribunal may order that the Witness Statement or Expert Report shall serve as that
witness's direct testimony.
4. Subject to the provisions of Article 9.2, the Arbitral Tribunal may request any person to give
oral or written evidence on any issue that the Arbitral Tribunal considers to be relevant and
material. Any witness called and questioned by the Arbitral Tribunal may also be questioned
by the Parties.

Article 9ADMISSIBILITY AND ASSESSMENT OF EVIDENCE

1. The Arbitral Tribunal shall determine the admissibility, relevance, materiality and weight of
evidence.
2. The Arbitral Tribunal shall, at the request of a Party or on its own motion, exclude from
evidence or production any document, statement, oral testimony or inspection for any of the
following reasons:
(a) lack of sufficient relevance or materiality;
(b). legal impediment or privilege under the legal or ethical rules determined by the Arbitral
Tribunal to be applicable;
(c) unreasonable burden to produce the requested evidence;
(d) loss or destruction of the document that has been reasonably shown to have occurred;
(e) grounds of commercial or technical confidentiality that the Arbitral Tribunal determines to
be compelling;
(f) grounds of special political or institutional sensitivity (including evidence that has been
classified as secret by a government or a public international institution) that the Arbitral
Tribunal determines to be compelling; or
(g) considerations of fairness or equality of the Parties that the Arbitral Tribunal determines to
be compelling.
3. The Arbitral Tribunal may, where appropriate, make necessary arrangements to permit
evidence to be considered subject to suitable confidentiality protection.
4. If a Party fails without satisfactory explanation to produce any document requested in a
P 418 Request to Produce to which it has not objected in due time or fails to produce any document
P 419 ordered to be produced by the Arbitral Tribunal, the Arbitral Tribunal may infer that such
document would be adverse to the interests of that Party.
5. If a Party fails without satisfactory explanation to make available any other relevant
evidence, including testimony, sought by one Party to which the Party to whom the request was
addressed has not objected in due time or fails to make available any evidence, including
P 419 testimony, ordered by the Arbitral Tribunal to be produced, the Arbitral Tribunal may infer
that such evidence would be adverse to the interests of that Party.
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Document information
Publication
Yearbook Commercial
Arbitration 1987 - Volume XII
Jurisdiction
United Kingdom
Organization
International Bar Association
Entry into force
24 July 1964
Bibliographic reference
'IBA Rules of Ethics for
International Arbitrators
1964 English', in Albert Jan
van den Berg (ed), Yearbook
Commercial Arbitration 1987
- Volume XII, Yearbook
Commercial Arbitration,
Volume 12 (© Kluwer Law
International; Kluwer Law
International 1987) pp. 199 -
202
P 199 Arbitrators shall proceed diligently and efficiently to provide the parties with a just and
P 200 effective resolution of their disputes, and shall be and shall remain free from bias.
KluwerArbitration
IBA Rules of Ethics for International Arbitrators 1964
English
Introductory Note
International arbitrators should be impartial, independent, competent, diligent and discreet.
These rules seek to establish the manner in which these abstract qualities may be assessed in
practice. Rather than rigid rules, they reflect internationally acceptable guidelines developed
by practising lawyers from all continents. They will attain their objectives only if they are
applied in good faith.
The rules cannot be directly binding either on arbitrators, or on the parties themselves, unless
they are adopted by agreement. Whilst the International Bar Association hopes that they will
be taken into account in the context of challenges to arbitrators, it is emphasised that these
guidelines are not intended to create grounds for the setting aside of awards by national
courts.
If parties wish to adopt the rules they may add the following to their arbitration clause or
arbitration agreement: “The parties agree that the rules of Ethics for International Arbitrators
established by the International Bar Association, in force at the date of the commencement of
any arbitration under this clause, shall be applicable to the arbitrators appointed in respect of
such arbitration.” The International Bar Association takes the position that (whatever may be
the case in domestic arbitration) international arbitrators should in principle be granted
immunity from suit under national laws, except in extreme cases of wilful or reckless disregard
of their legal obligations. Accordingly, the International Bar Association wishes to make it clear
that it is not the intention of these rules to create opportunities for aggrieved parties to sue
international arbitrators in national courts. The normal sanction for breach of an ethical duty is
removal from office, with consequent loss of entitlement to remuneration. The International
Bar Association also emphasises that these rules do not affect, and are intended to be
consistent with, the International Code of Ethics for lawyers, adopted at Oslo on 25th July 1956,
and amended by the General Meeting of the International Bar Association at Mexico City on
24th July 1964.
Rules of Ethics for International Arbitrators
Article 1 FUNDAMENTAL RULE
Article 2 ACCEPTANCE OF APPOINTMENT
2.1 A prospective arbitrator shall accept an appointment only if he is fully satisfied that he is
able to discharge his duties without bias.
2.2 A prospective arbitrator shall accept an appointment only if he is fully satisfied that he is
competent to determine the issues in dispute, and has an adequate knowledge of the language
of the arbitration.
2.3 A prospective arbitrator should accept an appointment only if he is able to give to the
arbitration the time and attention which the parties are reasonably entitled to expect.
2.4 It is inappropriate to contact parties in order to solicit appointment as arbitrator.
Article 3 ELEMENTS OF BIAS
3.1 The criteria for assessing questions relating to bias are impartiality and independence.
Partiality arises where an arbitrator favours one of the parties, or where he is prejudiced in
relation to the subject-matter of the dispute. Dependence arises from relationships between
an arbitrator and one of the parties, or with someone closely connected with one of the parties.
3.2 Facts which might lead a reasonable person, not knowing the arbitrator's true state of
mind, to consider that he is dependent on a party create an appearance of bias. The same is
true if an arbitrator has a material interest in the outcome of the dispute, or if he has already
taken a position in relation to it. The appearance of bias is best overcome by full disclosure as
described in Article 4 below.
3.3 Any current direct or indirect business relationship between an arbitrator and a party, or
with a person who is known to be a potentially important witness, will normally give rise to
justifiable doubts as to a prospective arbitrator's impartiality or independence. He should
decline to accept an appointment in such circumstances unless the parties agree in writing
that he may proceed. Examples of indirect relationships are where a member of the
prospective arbitrator's family, his firm, or any business partner has a business relationship
 with one of the parties.
3.4 Past business relationships will not operate as an absolute bar to acceptance of
appointment, unless they are of such magnitude or nature as to be likely to affect a
prospective arbitrator's judgment.
3.5 Continuous and substantial social or professional relationships between a prospective
arbitrator and a party, or with a person who is known to be a potentially important witness in
the arbitration, will normally give rise to justifiable doubts as to the impartiality or
independence of a prospective arbitrator.

Article 4 DUTY OF DISCLOSURE

4.1 A prospective arbitrator should disclose all facts or circumstances that may give rise to
justifiable doubts as to his impartiality or independence. Failure to make such disclosure
creates an appearance of bias, and may of itself be a ground for disqualification even though
the non-disclosed facts or circumstances would not of themselves justify disqualification.
4.2 A prospective arbitrator should disclose:

P 200 (a) any past or present business relationship, whether direct or indirect as illustrated in
P 201 Article 3.3, including prior appointment as arbitrator, with any party to the dispute, or
any representative of a party, or any person known to be a potentially important witness
in the arbitration. With regard to present relationships, the duty of disclosure applies
irrespective of their magnitude, but with regard to past relationships only if they were of
more than a trivial nature in relation to the arbitrator's professional or business affairs.
Non-disclosure of an indirect relationship unknown to a prospective arbitrator will not be
a ground for disqualification unless it could have been ascertained by making reasonable
enquiries;
(b) the nature and duration of any substantial social relationships with any party or any
person known to be likely to be an important witness in the arbitration;
(c) the nature of any previous relationship with any fellow arbitrator (including prior joint
service as an arbitrator);
(d) the extent of any prior knowledge he may have of the dispute;
(e) the extent of any commitments which may affect his availability to perform his duties as
arbitrator as may be reasonably anticipated.
4.3 The duty of disclosure continues throughout the arbitral proceedings as regards new facts
or circumstances.
4.4 Disclosure should be made in writing and communicated to all parties and arbitrators.
When an arbitrator has been appointed, any previous disclosure made to the parties should be
communicated to the other arbitrators.

Article 5 COMMUNICATIONS WITH PARTIES

5.1 When approached with a view to appointment, a prospective arbitrator should make
sufficient enquiries in order to inform himself whether there may be any justifiable doubts
regarding his impartiality or independence; whether he is competent to determine the issues
in dispute; and whether he is able to give the arbitration the time and attention required. He
may also respond to enquiries from those approaching him, provided that such enquiries are
designed to determine his suitability and availability for the appointment and provided that
the merits of the case are not discussed. In the event that a prospective sole arbitrator or
presiding arbitrator is approached by one party alone, or be one arbitrator chosen unilaterally
by a party (a “party-nominated” arbitrator), he should ascertain that the other party or parties,
or the other arbitrator, has consented to the manner in which he has been approached. In such
circumstances he should, in writing or orally, inform the other party or parties, or the other
arbitrator, of the substance of the initial conversation.
5.2 If a party-nominated arbitrator is required to participate in the selection of a third or
presiding arbitrator, it is acceptable for him (although he is not so required) to obtain the
views of the party who nominated him as to the acceptability of candidates being considered.
5.3 Throughout the arbitral proceedings, an arbitrator should avoid any unilateral
communications regarding the case with any party, or its representatives. If such
communication should occur, the arbitrator should inform the other party or parties and
arbitrators of its substance.
5.4 If an arbitrator becomes aware that a fellow arbitrator has been in improper
communication with a party, he may inform the remaining arbitrators and they should together
P 201 determine what action should be taken. Normally, the appropriate initial course of action is for
P 202 the offending arbitrator to be requested to refrain from making any further improper
communications with the party. Where the offending arbitrator fails or refuses to refrain from
improper communications, the remaining arbitrators may inform the innocent party in order
that he may consider what action he should take. An arbitrator may act unilaterally to inform a
party of the conduct of another arbitrator in order to allow the said party to consider a
challenge of the offending arbitrator only in extreme circumstances, and after communicating
his intention to his fellow arbitrators in writing.
5.5 No arbitrator should accept any gift or substantial hospitality, directly or indirectly, from
 any party to the arbitration. Sole arbitrators and presiding arbitrators should be particularly
meticulous in avoiding significant social or professional contacts with any party to the
arbitration other than in the presence of the other parties.

Article 6 FEES
Unless the parties agree otherwise or a party defaults, an arbitrator shall make no unilateral
arrangements for fees or expenses.

Article 7 DUTY OF DILIGENCE

All arbitrators should devote such time and attention as the parties may reasonably require
having regard to all the circumstances of the case, and shall do their best to conduct the
arbitration in such a manner that costs do not rise to an unreasonable proportion of the
interests at stake.

Article 8 INVOLVEMENT IN SETTLEMENT PROPOSALS

Where the parties have so requested, or consented to a suggestion to this effect by the arbitral
tribunal, the tribunal as a whole (or the presiding arbitrator where appropriate), may make
proposals for settlement to both parties simultaneously, and preferably in the presence of
each other. Although any procedure is possible with the agreement of the parties, the arbitral
tribunal should point out to the parties that it is undesirable that any arbitrator should discuss
settlement terms with a party in the absence of the other parties since this will normally have
the result that any arbitrator involved in such discussions will become disqualified from any
future participation in the arbitration.

Article 9 CONFIDENTIALITY OF THE DELIBERATIONS

The deliberations of the arbitral tribunal, and the contents of the award itself, remain
confidential in perpetuity unless the parties release the arbitrators from this obligation. An
arbitrator should not participate in, or give any information for the purpose of assistance in,
P 202 any proceedings to consider the award unless, exceptionally, he considers it his duty to
disclose any material misconduct or fraud on the part of his fellow arbitrators.
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.

Kluwer Arbitration is made available for personal use only. All content is protected by copyright and other intellectual property
laws. No part of this service or the information contained herein may be reproduced or transmitted in any form or by any means, or
used for advertising or promotional purposes, general distribution, creating new collective works, or for resale, without prior
written permission of the publisher.

If you would like to know more about this service, visit www.kluwerarbitration.com or contact our Sales staff at
sales@kluwerlaw.com or call +31 (0)172 64 1562.

KluwerArbitration

Document information
Publication
Yearbook Commercial
Arbitration 1997 - Volume
XXII
Bibliographic reference
'UNCITRAL Notes on
Organizing Arbitral
Proceedings', in Albert Jan
van den Berg (ed), Yearbook
Commercial Arbitration 1997
- Volume XXII, Yearbook
Commercial Arbitration,
Volume 22 (© Kluwer Law
International; Kluwer Law
International 1997) pp. 452 -
476
P 452 parties and of the members of the arbitral tribunal, and the need for a just and cost-efficient
P 453 resolution of the dispute.
P 453 similar meaning. The terms used partly depend on the stage of the proceedings at which the
P 454 meeting is taking place.
KluwerArbitration
UNCITRAL Notes on Organizing Arbitral Proceedings
Introduction
Purpose of the Notes
1. The purpose of the Notes is to assist arbitration practitioners by listing and briefly
describing questions on which appropriately timed decisions on organizing arbitral
proceedings may be useful. The text, prepared with a particular view to international
arbitrations, may be used whether or not the arbitration is administered by an arbitral
institution.
Non-Binding Character of the Notes
2. No legal requirement binding on the arbitrators or the parties is imposed by the Notes. The
arbitral tribunal remains free to use the Notes as it sees fit and is not required to give reasons
for disregarding them.
3. The Notes are not suitable to be used as arbitration rules, since they do not establish any
obligation of the arbitral tribunal or the parties to act in a particular way. Accordingly, the use
of the Notes cannot imply any modification of the arbitration rules that the parties may have
agreed upon.
Discretion in Conduct of Proceedings and Usefulness of Timely Decisions on
Organizing Proceedings
4. Laws governing the arbitral procedure and arbitration rules that parties may agree upon
typically allow the arbitral tribunal broad discretion and flexibility in the conduct of arbitral
proceedings. (5)
This is useful in that it enables the arbitral tribunal to take decisions on the organization of
proceedings that take into account the circumstances of the case, the expectations of the
5. Such discretion may make it desirable for the arbitral tribunal to give the parties a timely
indication as to the organization of the proceedings and the manner in which the tribunal
intends to proceed. This is particularly desirable in international arbitrations, where the
participants may be accustomed to differing styles of conducting arbitrations. Without such
guidance, a party may find aspects of the proceedings unpredictable and difficult to prepare
for. That may lead to misunderstandings, delays and increased costs.
Multi-party arbitration
6. These Notes are intended for use not only in arbitrations with two parties but also in
arbitrations with three or more parties. Use of the Notes in multi-party arbitration is referred
to below in paragraphs 86-88 (item 18).
Process of making decisions on organizing arbitral proceedings
7. Decisions by the arbitral tribunal on organizing arbitral proceedings may be taken with or
without previous consultations with the parties. The method chosen depends on whether, in
view of the type of the question to be decided, the arbitral tribunal considers that
consultations are not necessary or that hearing the views of the parties would be beneficial for
increasing the predictability of the proceedings or improving the procedural atmosphere.
8. The consultations, whether they involve only the arbitrators or also the parties, can be held
in one or more meetings, or can be carried out by correspondence or telecommunications such
as telefax or conference telephone calls or other electronic means. Meetings may be held at
the venue of arbitration or at some other appropriate location.
9. In some arbitrations a special meeting may be devoted exclusively to such procedural
consultations; alternatively, the consultations may be held in conjunction with a hearing on the
substance of the dispute. Practices differ as to whether such special meetings should be held
and how they should be organized. Special procedural meetings of the arbitrators and the
parties separate from hearings are in practice referred to by expressions such as “preliminary
meeting”, “pre-hearing conference”, “preparatory conference”, “pre-hearing review”, or terms of
List of matters for possible consideration in organizing arbitral proceedings
10. The Notes provide a list, followed by annotations, of matters on which the arbitral tribunal
may wish to formulate decisions on organizing arbitral proceedings.
11. Given that procedural styles and practices in arbitration vary widely, that the purpose of
 the Notes is not to promote any practice as best practice, and that the Notes are designed for
universal use, it is not attempted in the Notes to describe in detail different arbitral practices
or express a preference for any of them.
12. The list, while not exhaustive, covers a broad range of situations that may arise in an
arbitration. In many arbitrations, however, only a limited number of the matters mentioned in
the list need to be considered. It also depends on the circumstances of the case at which stage
or stages of the proceedings it would be useful to consider matters concerning the organization
of the proceedings. Generally, in order not to create opportunities for unnecessary discussions
and delay, it is advisable not to raise a matter prematurely, i.e. before it is clear that a
decision is needed.
13. When the Notes are used, it should be borne in mind that the discretion of the arbitral
tribunal in organizing the proceedings may be limited by arbitration rules, by other provisions
agreed to by the parties and by the law applicable to the arbitral procedure. When an
arbitration is administered by an arbitral institution, various matters discussed in the Notes
may be covered by the rules and practices of that institution.

Annotations
1. Set of Arbitration Rules
If the parties have not agreed on a set of arbitration rules, would they wish to do so
14. Sometimes parties who have not included in their arbitration agreement a stipulation that
a set of arbitration rules will govern their arbitral proceedings might wish to do so after the
arbitration has begun. If that occurs, the UNCITRAL Arbitration Rules may be used either
without modification or with such modifications as the parties might wish to agree upon. In the
P 454 alternative, the parties might wish to adopt the rules of an arbitral institution; in that case, it
P 455 may be necessary to secure the agreement of that institution and to stipulate the terms
under which the arbitration could be carried out in accordance with the rules of that
institution.
15. However, caution is advised as consideration of a set of arbitration rules might delay the
proceedings or give rise to unnecessary controversy.
16. It should be noted that agreement on arbitration rules is not a necessity and that, if the
parties do not agree on a set of arbitration rules, the arbitral tribunal has the power to
continue the proceedings and determine how the case will be conducted.

2. Language of Proceedings
17. Many rules and laws on arbitral procedure empower the arbitral tribunal to determine the
language or languages to be used in the proceedings, if the parties have not reached an
agreement thereon.
(a) Possible Need for Translation of Documents, in Full or in Part
18. Some documents annexed to the statements of claim and defence or submitted later may
not be in the language of the proceedings. Bearing in mind the needs of the proceedings and
economy, it may be considered whether the arbitral tribunal should order that any of those
documents or parts thereof should be accompanied by a translation into the language of the
proceedings.
(b) Possible Need for Interpretation of Oral Presentations
19. If interpretation will be necessary during oral hearings, it is advisable to consider whether
the interpretation will be simultaneous or consecutive and whether the arrangements should
be the responsibility of a party or the arbitral tribunal. In an arbitration administered by an
institution, interpretation as well as translation services are often arranged by the arbitral
institution.
(c) Cost of Translation and Interpretation
20. In taking decisions about translation or interpretation, it is advisable to decide whether
P 455 any or all of the costs are to be paid directly by a party or whether they will be paid out of the
P 456 deposits and apportioned between the parties along with the other arbitration costs.
3. Place of Arbitration
(a) Determination of the Place of Arbitration, If Not Already Agreed upon by the Parties
21. Arbitration rules usually allow the parties to agree on the place of arbitration, subject to the
requirement of some arbitral institutions that arbitrations under their rules be conducted at a
particular place, usually the location of the institution. If the place has not been so agreed
upon, the rules governing the arbitration typically provide that it is in the power of the arbitral
tribunal or the institution administering the arbitration to determine the place. If the arbitral
tribunal is to make that determination, it may wish to hear the views of the parties before
doing so.
22. Various factual and legal factors influence the choice of the place of arbitration, and their
relative importance varies from case to case. Among the more prominent factors are: (a)
suitability of the law on arbitral procedure of the place of arbitration; (b) whether there is a
multilateral or bilateral treaty on enforcement of arbitral awards between the State where the
 arbitration takes place and the State or States where the award may have to be enforced; (c)
convenience of the parties and the arbitrators, including the travel distances; (d) availability
and cost of support services needed; and (e) location of the subject-matter in dispute and
proximity of evidence.
Possibility of Meetings Outside the Place of Arbitration
23. Many sets of arbitration rules and laws on arbitral procedure expressly allow the arbitral
tribunal to hold meetings elsewhere than at the place of arbitration. For example, under the
UNCITRAL Model Law on International Commercial Arbitration “the arbitral tribunal may,
unless otherwise agreed by the parties, meet at any place it considers appropriate for
consultation among its members, for hearing witnesses, experts or the parties, or for inspection
of goods, other property or documents”(article 20(2)). The purpose of this discretion is to
permit arbitral proceedings to be carried out in a manner that is most efficient and
economical.

4. Administrative services that may be needed for the arbitral tribunal to carry out
its functions
24. Various administrative services (e.g. hearing rooms or secretarial services) may need to be
P 456 procured for the arbitral tribunal to be able to carry out its functions. When the arbitration is
P 457 administered by an arbitral institution, the institution will usually provide all or a good part
of the required admini-strative support to the arbitral tribunal. When an arbitration
administered by an arbitral institution takes place away from the seat of the institution, the
institution may be able to arrange for administrative services to be obtained from another
source, often an arbitral institution; some arbitral institutions have entered into cooperation
agreements with a view to providing mutual assistance in servicing arbitral proceedings.
25. When the case is not administered by an institution, or the involvement of the institution
does not include providing administrative support, usually the administrative arrangements
for the proceedings will be made by the arbitral tribunal or the presiding arbitrator; it may
also be acceptable to leave some of the arrangements to the parties, or to one of the parties
subject to agreement of the other party or parties. Even in such cases, a convenient source of
administrative support might be found in arbitral institutions, which often offer their facilities
to arbitrations not governed by the rules of the institution. Otherwise, some services could be
procured from entities such as chambers of commerce, hotels or specialized firms providing
secretarial or other support services.
26. Administrative services might be secured by engaging a secretary of the arbitral tribunal
(also referred to as registrar, clerk, administrator or rapporteur), who carries out the tasks
under the direction of the arbitral tribunal. Some arbitral institutions routinely assign such
persons to the cases administered by them. In arbitrations not administered by an institution
or where the arbitral institution does not appoint a secretary, some arbitrators frequently
engage such persons, at least in certain types of cases, whereas many others normally conduct
the proceedings without them.
27. To the extent the tasks of the secretary are purely organizational (e.g. obtaining meeting
rooms and providing or coordinating secretarial services), this is usually not controversial.
Differences in views, however, may arise if the tasks include legal research and other
professional assistance to the arbitral tribunal (e.g. collecting case law or published
commentaries on legal issues defined by the arbitral tribunal, preparing summaries from case
law and publications, and sometimes also preparing drafts of procedural decisions or drafts of
certain parts of the award, in particular those concerning the facts of the case). Views or
expectations may differ especially where a task of the secretary is similar to professional
functions of the arbitrators. Such a role of the secretary is in the view of some commentators
inappropriate or is appropriate only under certain conditions, such as that the parties agree
P 457 thereto. However, it is typically recognized that it is important to ensure that the secretary
P 458 does not perform any decision-making function of the arbitral tribunal.
5. Deposits in respect of costs
Amount to Be Deposited
28. In an arbitration administered by an institution, the institution often sets, on the basis of an
estimate of the costs of the proceedings, the amount to be deposited as an advance for the
costs of the arbitration. In other cases it is customary for the arbitral tribunal to make such an
estimate and request a deposit. The estimate typically includes travel and other expenses by
the arbitrators, expenditures for administrative assistance required by the arbitral tribunal,
costs of any expert advice required by the arbitral tribunal, and the fees for the arbitrators.
Many arbitration rules have provisions on this matter, including on whether the deposit should
be made by the two parties (or all parties in a multi-party case) or only by the claimant.
Management of Deposits
29. When the arbitration is administered by an institution, the institution's services may
include managing and accounting for the deposited money. Where that is not the case, it might
be useful to clarify matters such as the type and location of the account in which the money
will be kept and how the deposits will be managed.
Supplementary Deposits
30. If during the course of proceedings it emerges that the costs will be higher than
 anticipated, supplementary deposits may be required (e.g. because the arbitral tribunal
decides pursuant to the arbitration rules to appoint an expert).

6. Confidentiality of Information Relating to the Arbitration; Possible Agreement

Thereon
31. It is widely viewed that confidentiality is one of the advantageous and helpful features of
arbitration. Nevertheless, there is no uniform answer in national laws as to the extent to which
the participants in an arbitration are under the duty to observe the confidentiality of
information relating to the case. Moreover, parties that have agreed on arbitration rules or
other provisions that do not expressly address the issue of confidentiality cannot assume that
all jurisdictions would recognize an implied commitment to confidentiality. Furthermore, the
P 458 participants in an arbitration might not have the same understanding as regards the extent of
P 459 confidentiality that is expected. Therefore, the arbitral tribunal might wish to discuss that
with the parties and, if considered appropriate, record any agreed principles on the duty of
confidentiality.
32. An agreement on confidentiality might cover, for example, one or more of the following
matters: the material or information that is to be kept confidential (e.g. pieces of evidence,
written and oral arguments, the fact that the arbitration is taking place, identity of the
arbitrators, content of the award); measures for maintaining confidentiality of such information
and hearings; whether any special procedures should be employed for maintaining the
confidentiality of information transmitted by electronic means (e.g. because communication
equipment is shared by several users, or because electronic mail over public networks is
considered not sufficiently protected against unauthorized access); circumstances in which
confidential information may be disclosed in part or in whole (e.g. in the context of disclosures
of information in the public domain, or if required by law or a regulatory body).

7. Routing of Written Communications among the Parties and the Arbitrators

33. To the extent the question how documents and other written communications should be
routed among the parties and the arbitrators is not settled by the agreed rules, or, if an
institution administers the case, by the practices of the institution, it is useful for the arbitral
tribunal to clarify the question suitably early so as to avoid misunderstandings and delays.
34. Among various possible patterns of routing, one example is that a party transmits the
appropriate number of copies to the arbitral tribunal, or to the arbitral institution, if one is
involved, which then forwards them as appropriate. Another example is that a party is to send
copies simultaneously to the arbitrators and the other party or parties. Documents and other
written communications directed by the arbitral tribunal or the presiding arbitrator to one or
more parties may also follow a determined pattern, such as through the arbitral institution or
by direct transmission. For some communications, in particular those on organizational
matters (e.g. dates for hearings), more direct routes of communication may be agreed, even if,
P 459 for example, the arbitral institution acts as an intermediary for documents such as the
P 460 statements of claim and defence, evidence or written arguments.
8. Telefax and Other Electronic Means of Sending Documents
(a) Telefax
35. Telefax, which offers many advantages over traditional means of communication, is widely
used in arbitral proceedings. Nevertheless, should it be thought that, because of the
characteristics of the equipment used, it would be preferable not to rely only on a
telefacsimile of a document, special arrangements may be considered, such as that a
particular piece of written evidence should be mailed or otherwise physically delivered, or
that certain telefax messages should be confirmed by mailing or otherwise delivering
documents whose facsimile were transmitted by electronic means. When a document should
not be sent by telefax, it may, however, be appropriate, in order to avoid an unnecessarily
rigid procedure, for the arbitral tribunal to retain discretion to accept an advance copy of a
document by telefax for the purposes of meeting a deadline, provided that the document itself
is received within a reasonable time thereafter.
(b) Other Electronic Means (E.g. Electronic Mail and Magnetic or Optical Disk)
36. It might be agreed that documents, or some of them, will be exchanged not only in paper-
based form, but in addition also in an electronic form other than telefax (e.g. as electronic
mail, or on a magnetic or optical disk), or only in electronic form. Since the use of electronic
means depends on the aptitude of the persons involved and the availability of equipment and
computer programs, agreement is necessary for such means to be used. If both paper-based
and electronic means are to be used, it is advisable to decide which one is controlling and, if
there is a time-limit for submitting a document, which act constitutes submission.
37. When the exchange of documents in electronic form is planned, it is useful, in order to avoid
technical difficulties, to agree on matters such as: data carriers (e.g. electronic mail or
computer disks) and their technical characteristics; computer programs to be used in
preparing the electronic records; instructions for transforming the electronic records into
human-readable form; keeping of logs and back-up records of communications sent and
received; information in human-readable form that should accompany the disks (e.g. the
names of the originator and recipient, computer program, titles of the electronic files and the
P 460 back-up methods used); procedures when a message is lost or the communication system
P 461 otherwise fails; and identification of persons who can be contacted if a problem occurs.
 9. Arrangements for the Exchange of Written Submissions
38. After the parties have initially stated their claims and defences, they may wish, or the
arbitral tribunal might request them, to present further written submissions so as to prepare
for the hearings or to provide the basis for a decision without hearings. In such submissions, the
parties, for example, present or comment on allegations and evidence, cite or explain law, or
make or react to proposals. In practice such submissions are referred to variously as, for
example, statement, memorial, counter-memorial, brief, counter-brief, reply, réplique,
duplique, rebuttal or rejoinder; the terminology is a matter of linguistic usage and the scope or
sequence of the submission.
(a) Scheduling of Written Submissions
39. It is advisable that the arbitral tribunal set time-limits for written submissions. In enforcing
the time-limits, the arbitral tribunal may wish, on the one hand, to make sure that the case is
not unduly protracted and, on the other hand, to reserve a degree of discretion and allow late
submissions if appropriate under the circumstances. In some cases the arbitral tribunal might
prefer not to plan the written submissions in advance, thus leaving such matters, including
time-limits, to be decided in light of the developments in the proceedings. In other cases, the
arbitral tribunal may wish to determine, when scheduling the first written submissions, the
number of subsequent submissions.
40. Practices differ as to whether, after the hearings have been held, written submissions are
still acceptable. While some arbitral tribunals consider post-hearing submissions
unacceptable, others might request or allow them on a particular issue. Some arbitral
tribunals follow the procedure according to which the parties are not requested to present
written evidence and legal arguments to the arbitral tribunal before the hearings; in such a
case, the arbitral tribunal may regard it as appropriate that written submissions be made after
the hearings.
(b) Consecutive or Simultaneous Submissions
41. Written submissions on an issue may be made consecutively, i.e. the party who receives a
submission is given a period of time to react with its counter-submission. Another possibility is
to request each party to make the submission within the same time period to the arbitral
tribunal or the institution administering the case; the received submissions are then forwarded
P 461 simultaneously to the respective other party or parties. The approach used may depend on
P 462 the type of issues to be commented upon and the time in which the views should be clarified.
With consecutive submissions, it may take longer than with simultaneous ones to obtain views
of the parties on a given issue. Consecutive submissions, however, allow the reacting party to
comment on all points raised by the other party or parties, which simultaneous submissions do
not; thus, simultaneous submissions might possibly necessitate further submissions.

10. Practical Details Concerning Written Submissions and Evidence (E.g. Method of
Submission, Copies, Numbering, References)
42. Depending on the volume and kind of documents to be handled, it might be considered
whether practical arrangements on details such as the following would be helpful:
* Whether the submissions will be made as paper documents or by electronic means, or
both (see paragraphs 35-37);
* The number of copies in which each document is to be submitted;
* A system for numbering documents and items of evidence, and a method for marking
them, including by tabs;
* The form of references to documents (e.g. by the heading and the number assigned to the
document or its date);
* Paragraph numbering in written submissions, in order to facilitate precise references to
parts of a text;
* When translations are to be submitted as paper documents, whether the translations are
to be contained in the same volume as the original texts or included in separate volumes.

11. Defining Points at Issue; Order of Deciding Issues; Defining Relief Or Remedy
Sought
(a) Should a List of Points at Issue Be Prepared
43. In considering the parties' allegations and arguments, the arbitral tribunal may come to the
conclusion that it would be useful for it or for the parties to prepare, for analytical purposes
and for ease of discussion, a list of the points at issue, as opposed to those that are
undisputed. If the arbitral tribunal determines that the advantages of working on the basis of
such a list outweigh the disadvantages, it chooses the appropriate stage of the proceedings for
P 462 preparing a list, bearing in mind also that subsequent developments in the proceedings may
P 463 require a revision of the points at issue. Such an identification of points at issue might help
to concentrate on the essential matters, to reduce the number of points at issue by agreement
of the parties, and to select the best and most economical process for resolving the dispute.
However, possible disadvantages of preparing such a list include delay, adverse effect on the
flexibility of the proceedings, or unnecessary disagreements about whether the arbitral
tribunal has decided all issues submitted to it or whether the award contains decisions on
 matters beyond the scope of the submission to arbitration. The terms of reference required
under some arbitration rules, or in agreements of parties, may serve the same purpose as the
above-described list of points at issue.
(b) In Which Order Should the Points at Issue Be Decided
44. While it is often appropriate to deal with all the points at issue collectively, the arbitral
tribunal might decide to take them up during the proceedings in a particular order. The order
may be due to a point being preliminary relative to another (e.g. a decision on the jurisdiction
of the arbitral tribunal is preliminary to consideration of substantive issues, or the issue of
responsibility for a breach of contract is preliminary to the issue of the resulting damages). A
particular order may be decided also when the breach of various contracts is in dispute or
when damages arising from various events are claimed.
45. If the arbitral tribunal has adopted a particular order of deciding points at issue, it might
consider it appropriate to issue a decision on one of the points earlier than on the other ones.
This might be done, for example, when a discrete part of a claim is ready for decision while the
other parts still require extensive consideration, or when it is expected that after deciding
certain issues the parties might be more inclined to settle the remaining ones. Such earlier
decisions are referred to by expressions such as “partial”, “interlocutory” or “interim” awards or
decisions, depending on the type of issue dealt with and on whether the decision is final with
respect to the issue it resolves. Questions that might be the subject of such decisions are, for
example, jurisdiction of the arbitral tribunal, interim measures of protection, or the liability of
a party.
(c) Is There a Need to Define More Precisely the Relief or Remedy Sought
46. If the arbitral tribunal considers that the relief or remedy sought is insufficiently definite, it
may wish to explain to the parties the degree of definiteness with which their claims should be
P 463 formulated. Such an explanation may be useful since criteria are not uniform as to how specific
P 464 the claimant must be in formulating a relief or remedy.
12. Possible Settlement Negotiations and Their Effect on Scheduling Proceedings
47. Attitudes differ as to whether it is appropriate for the arbitral tribunal to bring up the
possibility of settlement. Given the divergence of practices in this regard, the arbitral tribunal
should only suggest settlement negotiations with caution. However, it may be opportune for
the arbitral tribunal to schedule the proceedings in a way that might facilitate the
continuation or initiation of settlement negotiations.

13. Documentary Evidence

(a) Time-limits for Submission of Documentary Evidence Intended to Be Submitted by The
Parties; Consequences of Late Submission
48. Often the written submissions of the parties contain sufficient information for the arbitral
tribunal to fix the time-limit for submitting evidence. Otherwise, in order to set realistic time
periods, the arbitral tribunal may wish to consult with the parties about the time that they
would reasonably need.
49. The arbitral tribunal may wish to clarify that evidence submitted late will as a rule not be
accepted. It may wish not the preclude itself from accepting a late submission of evidence if
the party shows sufficient cause for the delay.
(b) Whether the Arbitral Tribunal Intends to Require a Party to Produce Documentary Evidence
50. Procedures and practices differ widely as to the conditions under which the arbitral
tribunal may require a party to produce documents. Therefore, the arbitral tribunal might
consider it useful, when the agreed arbitration rules do not provide specific conditions, to
clarify to the parties the manner in which it intends to proceed.
51. The arbitral tribunal may wish to establish time-limits for the production of documents. The
parties might be reminded that, if the requested party duly invited to produce documentary
evidence fails to do so within the established period of time, without showing sufficient cause
P 464 for such failure, the arbitral tribunal is free to draw its conclusions from the failure and may
P 465 make the award on the evidence before it.
(c) Should Assertions about the Origin and Receipt of Documents and about the Correctness of
Photocopies Be Assumed as Accurate
52. It may be helpful for the arbitral tribunal to inform the parties that it intends to conduct
the proceedings on the basis that, unless a party raises an objection to any of the following
conclusions within a specified period of time: (a) a document is accepted as having originated
from the source indicated in the document; (b) a copy of a dispatched communication (e.g.
letter, telex, telefax or other electronic message) is accepted without further proof as having
been received by the addressee; and (c) a copy is accepted as correct. A statement by the
arbitral tribunal to that effect can simplify the introduction of documentary evidence and
discourage unfounded and dilatory objections, at a late stage of the proceedings, to the
probative value of documents. It is advisable to provide that the time-limit for objections will
not be enforced if the arbitral tribunal considers the delay justified.
(d) Are the Parties Willing to Submit Jointly a Single Set of Documentary Evidence
 53. The parties may consider submitting jointly a single set of documentary evidence whose
authenticity is not disputed. The purpose would be to avoid duplicate submissions and
unnecessary discussions concerning the authenticity of documents, without prejudicing the
position of the parties concerning the content of the documents. Additional documents may be
inserted later if the parties agree. When a single set of documents would be too voluminous to
be easily manageable, it might be practical to select a number of frequently used documents
and establish a set of “working” documents. A convenient arrangement of documents in the set
may be according to chronological order or subject-matter. It is useful to keep a table of
contents of the documents, for example, by their short headings and dates, and to provide that
the parties will refer to documents by those headings and dates.
(e) Should Voluminous and Complicated Documentary Evidence Be Presented Through
Summaries, Tabulations, Charts, Extracts or Samples
54. When documentary evidence is voluminous and complicated, it may save time and costs if
such evidence is presented by a report of a person competent in the relevant field (e.g. public
accountant or consulting engineer). The report may present the information in the form of
summaries, tabulations, charts, extracts or samples. Such presentation of evidence should be
P 465 combined with arrangements that give the interested party the opportunity to review the
P 466 underlying data and the methodology of preparing the report.
14. Physical Evidence Other than Documents
55. In some arbitrations the arbitral tribunal is called upon to assess physical evidence other
than documents, for example, by inspecting samples of goods, viewing a video recording or
observing the functioning of a machine.
(a) What Arrangements Should Be Made If Physical Evidence Will Be Submitted
56. If physical evidence will be submitted, the arbitral tribunal may wish to fix the time
schedule for presenting the evidence, make arrangements for the other party or parties to have
a suitable opportunity to prepare itself for the presentation of the evidence, and possibly take
measures for safekeeping the items of evidence.
(b) What Arrangements Should Be Made If an On-site Inspection Is Necessary
57. If an on-site inspection of property or goods will take place, the arbitral tribunal may
consider matters such as timing, meeting places, other arrangements to provide the
opportunity for all parties to be present, and the need to avoid communications between
arbitrators and a party about points at issue without the presence of the other party or parties.
58. The site to be inspected is often under the control of one of the parties, which typically
means that employees or representatives of that party will be present to give guidance and
explanations. It should be borne in mind that statements of those representatives or
employees made during an on-site inspection, as contrasted with statements those persons
might make as witnesses in a hearing, should not be treated as evidence in the proceedings.

15. Witnesses
59. While laws and rules on arbitral procedure typically leave broad freedom concerning the
manner of taking evidence of witnesses, practices on procedural points are varied. In order to
facilitate the preparations of the parties for the hearings, the arbitral tribunal may consider it
appropriate to clarify, in advance of the hearings, some or all of the following issues.
(a) Advance Notice about a Witness Whom a Party Intends to Present; Written Witnesses'
Statements
P 466 60. To the extent the applicable arbitration rules do not deal with the matter, the arbitral
P 467 tribunal may wish to require that each party give advance notice to the arbitral tribunal and
the other party or parties of any witness it intends to present. As to the content of the notice,
the following is an example of what might be required, in addition to the names and addresses
of the witnesses: (a) the subject upon which the witnesses will testify; (b) the language in which
the witnesses will testify; and (c) the nature of the relationship with any of the parties,
qualifications and experience of the witnesses if and to the extent these are relevant to the
dispute or the testimony, and how the witnesses learned about the facts on which they will
testify. However, it may not be necessary to require such a notice, in particular if the thrust of
the testimony can be clearly ascertained from the party's allegations.
61. Some practitioners favour the procedure according to which the party presenting witness
evidence submits a signed witness's statement containing testimony itself. It should be noted,
however, that such practice, which implies interviewing the witness by the party presenting the
testimony, is not known in all parts of the world and, moreover, that some practitioners
disapprove of it on the ground that such contacts between the party and the witness may
compromise the credibility of the testimony and are therefore improper (see paragraph 67).
Notwithstanding these reservations, signed witness's testimony has advantages in that it may
expedite the proceedings by making it easier for the other party or parties to prepare for the
hearings or for the parties to identify uncontested matters. However, those advantages might
be outweighed by the time and expense involved in obtaining the written testimony.
62. If a signed witness's statement should be made under oath or similar affirmation of
truthfulness, it may be necessary to clarify by whom the oath or affirmation should be
administered and whether any formal authentication will be required by the arbitral tribunal.
 (b) Manner of Taking Oral Evidence of Witnesses
(i) Order in Which Questions Will Be Asked and the Manner in Which the Hearing of Witnesses
Will Be Conducted
63. To the extent that the applicable rules do not provide an answer, it may be useful for the
arbitral tribunal to clarify how witnesses will be heard. One of the various possibilities is that a
witness is first questioned by the arbitral tribunal, whereupon questions are asked by the
parties, first by the party who called the witness. Another possibility is for the witness to be
questioned by the party presenting the witness and then by the other party or parties, while
the arbitral tribunal might pose questions during the questioning or after the parties on points
that in the tribunal's view have not been sufficiently clarified. Differences exist also as to the
P 467 degree of control the arbitral tribunal exercises over the hearing of witnesses. For example,
P 468 some arbitrators prefer to permit the parties to pose questions freely and directly to the
witness, but may disallow a question if a party objects; other arbitrators tend to exercise more
control and may disallow a question on their initiative or even require that questions from the
parties be asked through the arbitral tribunal.
(ii) Whether Oral Testimony Will Be Given under Oath or Affirmation And, If So, in What Form an
Oath or Affirmation Should Be Made
64. Practices and laws differ as to whether or not oral testimony is to be given under oath or
affirmation. In some legal systems, the arbitrators are empowered to put witnesses on oath,
but it is usually in their discretion whether they want to do so. In other systems, oral testimony
under oath is either unknown or may even be considered improper as only an official such as a
judge or notary may have the authority to administer oaths.
(iii) May Witnesses Be in the Hearing Room When They Are Not Testifying
65. Some arbitrators favour the procedure that, except if the circumstances suggest otherwise,
the presence of a witness in the hearing room is limited to the time the witness is testifying;
the purpose is to prevent the witness from being influenced by what is said in the hearing
room, or to prevent that the presence of the witness would influence another witness. Other
arbitrators consider that the presence of a witness during the testimony of other witnesses may
be beneficial in that possible contradictions may be readily clarified or that their presence
may act as a deterrent against untrue statements. Other possible approaches may be that
witnesses are not present in the hearing room before their testimony, but stay in the room after
they have testified, or that the arbitral tribunal decides the question for each witness
individually depending on what the arbitral tribunal considers most appropriate. The arbitral
tribunal may leave the procedure to be decided during the hearings, or may give guidance on
the question in advance of the hearings.
(c) The Order in Which the Witnesses Will Be Called
66. When several witnesses are to be heard and longer testimony is expected, it is likely to
reduce costs if the order in which they will be called is known in advance and their presence
can be scheduled accordingly. Each party might be invited to suggest the order in which it
P 468 intends to present the witnesses, while it would be up to the arbitral tribunal to approve the
P 469 scheduling and to make departures from it.
(d) Interviewing Witnesses Prior to Their Appearance at a Hearing
67. In some legal systems, parties or their representatives are permitted to interview
witnesses, prior to their appearance at the hearing, as to such matters as their recollection of
the relevant events, their experience, qualifications or relation with a participant in the
proceedings. In those legal systems such contacts are usually not permitted once the witness's
oral testimony has begun. In other systems such contacts with witnesses are considered
improper. In order to avoid misunderstandings, the arbitral tribunal may consider it useful to
clarify what kind of contacts a party is permitted to have with a witness in the preparations for
the hearings.
(e) Hearing Representatives of a Party
68. According to some legal systems, certain persons affiliated with a party may only be heard
as representatives of the party but not as witnesses. In such a case, it may be necessary to
consider ground rules for determining which persons may not testify as witnesses (e.g. certain
executives, employees or agents) and for hearing statements of those persons and for
questioning them.

16. Experts and Expert Witnesses

69. Many arbitration rules and laws on arbitral procedure address the participation of experts
in arbitral proceedings. A frequent solution is that the arbitral tribunal has the power to
appoint an expert to report on issues determined by the tribunal; in addition, the parties may
be permitted to present expert witnesses on points at issue. In other cases, it is for the parties
to present expert testimony, and it is not expected that the arbitral tribunal will appoint an
expert.
(a) Expert Appointed by the Arbitral Tribunal
70. If the arbitral tribunal is empowered to appoint an expert, one possible approach is for the
tribunal to proceed directly to selecting the expert. Another possibility is to consult the parties
as to who should be the expert; this may be done, for example, without mentioning a
 candidate, by presenting to the parties a list of candidates, soliciting proposals from the
P 469 parties, or by discussing with the parties the “profile” of the expert the arbitral tribunal
P 470 intends to appoint, i.e. the qualifications, experience and abilities of the expert.
(i) The Expert'S Term of Reference
71. The purpose of the expert's terms of reference is to indicate the questions on which the
expert is to provide clarification, to avoid opinions on points that are not for the expert to
assess and to commit the expert to a time schedule. While the discretion to appoint an expert
normally includes the determination of the expert's terms of reference, the arbitral tribunal
may decide to consult the parties before finalizing the terms. It might also be useful to
determine details about how the expert will receive from the parties any relevant information
or have access to any relevant documents, goods or other property, so as to enable the expert
to prepare the report. In order to facilitate the evaluation of the expert's report, it is advisable
to require the expert to include in the report information on the method used in arriving at the
conclusions and the evidence and information used in preparing the report.
(ii) The Opportunity of the Parties to Comment on the Expert'S Report, Including by Presenting
Expert Testimony
72. Arbitration rules that contain provisions on experts usually also have provisions on the right
of a party to comment on the report of the expert appointed by the arbitral tribunal. If no such
provisions apply or more specific procedures than those prescribed are deemed necessary,
the arbitral tribunal may, in light of those provisions, consider it opportune to determine, for
example, the time period for presenting written comments of the parties, or, if hearings are to
be held for the purpose of hearing the expert, the procedures for interrogating the expert by
the parties or for the participation of any expert witnesses presented by the parties.
(b) Expert Opinion Presented by a Party (Expert Witness)
73. If a party presents an expert opinion, the arbitral tribunal might consider requiring, for
example, that the opinion be in writing, that the expert should be available to answer
questions at hearings, and that, if a party will present an expert witness at a hearing, advance
P 470 notice must be given or that the written opinion must be presented in advance, as in the case
P 471 of other witnesses (see paragraphs 60-62).
17. Hearings
(a) Decision Whether to Hold Hearings
74. Laws on arbitral procedure and arbitration rules often have provisions as to the cases in
which oral hearings must be held and as to when the arbitral tribunal has discretion to decide
whether to hold hearings.
75. If it is up to the arbitral tribunal to decide whether to hold hearings, the decision is likely to
be influenced by factors such as, on the one hand, that it is usually quicker and easier to clarify
points at issue pursuant to a direct confrontation of arguments than on the basis of
correspondence and, on the other hand, the travel and other cost of holding hearings, and that
the need of finding acceptable dates for the hearings might delay the proceedings. The arbitral
tribunal may wish to consult the parties on this matter.
(b) Whether One Period of Hearings Should Be Held or Separate Periods of Hearings
76. Attitudes vary as to whether hearings should be held in a single period of hearings or in
separate periods, especially when more than a few days are needed to complete the hearings.
According to some arbitrators, the entire hearings should normally be held in a single period,
even if the hearings are to last for more than a week. Other arbitrators in such cases tend to
schedule separate periods of hearings. In some cases issues to be decided are separated, and
separate hearings set for those issues, with the aim that oral presentation on those issues will
be completed within the allotted time. Among the advantages of one period of hearings are
that it involves less travel costs, memory will not fade, and it is unlikely that people
representing a party will change. On the other hand, the longer the hearings, the more difficult
it may be to find early dates acceptable to all participants. Furthermore, separate periods of
hearings may be easier to schedule, the subsequent hearings may be tailored to the
development of the case, and the period between the hearings leaves time for analysing the
records and negotiations between the parties aimed at narrowing the points at issue by
agreement.
(c) Setting Dates for Hearings
77. Typically, firm dates will be fixed for hearings. Exceptionally, the arbitral tribunal may
initially wish to set only “target dates” as opposed to definitive dates. This may be done at a
stage of the proceedings when not all information necessary to schedule hearings is yet
P 471 available, with the understanding that the target dates will either be confirmed or rescheduled
P 472 within a reasonably short period. Such provisional planning can be useful to participants
who are generally not available on short notice.
(d) Whether There Should Be a Limit on the Aggregate Amount of Time Each Party Will Have for
Oral Arguments and Questioning Witnesses
78. Some arbitrators consider it useful to limit the aggregate amount of time each party has for
any of the following: (a) making oral statements; (b) questioning its witnesses; and (c)
questioning the witnesses of the other party or parties. In general, the same aggregate amount
 of time is considered appropriate for each party, unless the arbitral tribunal considers that a
different allocation is justified. Before deciding, the arbitral tribunal may wish to consult the
parties as to how much time they think they will need.
79. Such planning of time, provided it is realistic, fair and subject to judiciously firm control by
the arbitral tribunal, will make it easier for the parties to plan the presentation of the various
items of evidence and arguments, reduce the likelihood of running out of time towards the end
of the hearings and avoid that one party would unfairly use up a disproportionate amount of
time.
(e) The Order in Which the Parties Will Present Their Arguments and Evidence
80. Arbitration rules typically give broad latitude to the arbitral tribunal to determine the
order of presentations at the hearings. Within that latitude, practices differ, for example, as to
whether opening or closing statements are heard and their level of detail; the sequence in
which the claimant and the respondent present their opening statements, arguments,
witnesses and other evidence; and whether the respondent or the claimant has the last word.
In view of such differences, or when no arbitration rules apply, it may foster efficiency of the
proceedings if the arbitral tribunal clarifies to the parties, in advance of the hearings, the
manner in which it will conduct the hearings, at least in broad lines.
(f) Length of Hearings
81. The length of a hearing primarily depends on the complexity of the issues to be argued and
the amount of witness evidence to be presented. The length also depends on the procedural
style used in the arbitration. Some practitioners prefer to have written evidence and written
arguments presented before the hearings, which thus can focus on the issues that have not
P 472 been sufficiently clarified. Those practitioners generally tend to plan shorter hearings than
P 473 those practitioners who prefer that most if not all evidence and arguments are presented to
the arbitral tribunal orally and in full detail. In order to facilitate the parties' preparations and
avoid misunderstandings, the arbitral tribunal may wish to clarify to the parties, in advance of
the hearings, the intended use of time and style of work at the hearings.
(g) Arrangements for a Record of the Hearings
82. The arbitral tribunal should decide, possibly after consulting with the parties, on the
method of preparing a record of oral statements and testimony during hearings. Among
different possibilities, one method is that the members of the arbitral tribunal take personal
notes. Another is that the presiding arbitrator during the hearing dictates to a typist a
summary of oral statements and testimony. A further method, possible when a secretary of the
arbitral tribunal has been appointed, may be to leave to that person the preparation of a
summary record. A useful, though costly, method is for professional stenographers to prepare
verbatim transcripts, often within the next day or a similarly short time period. A written
record may be combined with tape-recording, so as to enable reference to the tape in case of
a disagreement over the written record.
83. If transcripts are to be produced, it may be considered how the persons who made the
statements will be given an opportunity to check the transcripts. For example, it may be
determined that the changes to the record would be approved by the parties or, failing their
agreement, would be referred for decision to the arbitral tribunal.
(h) Whether and When the Parties Are Permitted to Submit Notes Summarizing Their Oral
Arguments
84. Some legal counsel are accustomed to giving notes summarizing their oral arguments to the
arbitral tribunal and to the other party or parties. If such notes are presented, this is usually
done during the hearings or shortly thereafter; in some cases, the notes are sent before the
hearing. In order to avoid surprise, foster equal treatment of the parties and facilitate
preparations for the hearings, advance clarification is advisable as to whether submitting such
notes is acceptable and the time for doing so.
85. In closing the hearings, the arbitral tribunal will normally assume that no further proof is to
be offered or submission to be made. Therefore, if notes are to be presented to be read after
P 473 the closure of the hearings, the arbitral tribunal may find it worthwhile to stress that the notes
P 474 should be limited to summarizing what was said orally and in particular should not refer to
new evidence or new argument.

18. Multi-Party Arbitration

86. When a single arbitration involves more than two parties (multi-party arbitration),
considerations regarding the need to organize arbitral proceedings, and matters that may be
considered in that connection, are generally not different from two-party arbitrations. A
possible difference may be that, because of the need to deal with more than two parties,
multi-party proceedings can be more complicated to manage than bilateral proceedings. The
Notes, notwithstanding a possible greater complexity of multi-party arbitration, can be used in
multi-party as well as in two-party proceedings.
87. The areas of possibly increased complexity in multi-party arbitration are, for example, the
flow of communications among the parties and the arbitral tribunal (see paragraphs 33, 34 and
38-41); if points at issue are to be decided at different points in time, the order of deciding
them (paragraphs 44-45); the manner in which the parties will participate in hearing witnesses
(paragraph 63); the appointment of experts and the participation of the parties in considering
their reports (paragraphs 70-72); the scheduling of hearings (paragraph 76); the order in which
 the parties will present their arguments and evidence at hearings (paragraph 80).
88. The Notes, which are limited to pointing out matters that may be considered in organizing
arbitral proceedings in general, do not cover the drafting of the arbitration agreement or the
constitution of the arbitral tribunal, both issues that give rise to special questions in multi-
party arbitration as compared to two-party arbitration.

19. Possible Requirements Concerning Filing or Delivering the Award

89. Some national laws require that arbitral awards be filed or registered with a court or
similar authority, or that they be delivered in a particular manner or through a particular
authority. Those laws differ with respect to, for example, the type of award to which the
requirement applies (e.g. to all awards or only to awards not rendered under the auspices of an
arbitral institution); time periods for filing, registering or delivering the award (in some cases
those time periods may be rather short); or consequences for failing to comply with the
P 474 requirement (which might be, for example, invalidity of the award or inability to enforce it in a
P 475 particular manner).
90. If such a requirement exists, it is useful, some time before the award is to be issued, to plan
P 475 who should take the necessary steps to meet the requirement and how the costs are to be
borne.

References
5) A prominent example of such rules are the UNCITRAL Arbitration Rules, which provide in
article 15(1):
“Subject to these Rules, the arbitral tribunal may conduct the arbitration in such manner as
it considers appropriate, provided that the parties are treated with equality and that at any
stage of the proceedings each party is given a full opportunity of presenting his case.”
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Document information
Publication
International Commercial
Arbitration: Commentary and
Materials (Second Edition)
Bibliographic reference
'Part Three : Chapter 14.
Provisional Measures in
International Arbitration', in
Gary B. Born , International
Commercial Arbitration:
Commentary and Materials
(Second Edition), 2nd edition
(© Kluwer Law International;
Kluwer Law International
2001) pp. 919 - 980
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
KluwerArbitration
Part Three : Chapter 14. Provisional Measures in
International Arbitration
14 Provisional Measures in International Arbitration (1)
Contemporary litigation in developed legal systems is accompanied by procedural safeguards
and opportunities for all parties to be heard. One consequence of these protections is delay in
ultimate resolution of the parties' dispute, which can prejudice one party, sometimes
irreparably. Classic examples include dissipation of assets, destruction of evidence, loss of
market value of property, disruption of a joint venture's operations, disclosure or misuse of
intellectual property, and interference with customer relations. In such circumstances,
national legislatures and courts have developed means for granting immediate “provisional
measures,” (2) designed to safeguard parties from serious injury caused by delays in the
litigation process. (3)
P "919"
P "920"
Provisional measures have particular importance in international disputes. Cases involving
litigants from different nations pose special risks, including the increased danger that vital
evidence will be taken out of the reach of relevant tribunals or that assets necessary to satisfy
a judgment will be removed to a jurisdiction where enforcement is unlikely. As a consequence,
provisional measures are often more significant in international litigation than in purely
domestic cases.
Provisional measures are at least as important in international arbitration as in international
litigation, but are often less easily obtained. This Chapter examines the availability and role of
provisional measures in international arbitration.
The Chapter first explores the extent to which arbitrators are authorized to grant provisional
relief and the circumstances in which they will be willing to do so. Second, the Chapter
considers when national courts may grant provisional relief in aid of international arbitration.
Among other things, we examine whether the New York and Inter-American Conventions forbid
judicial orders granting provisional measures in aid of arbitration, the effect of institutional
arbitration rules on court-ordered provisional measures, and the circumstances in which
national courts will exercise their powers to grant provisional relief in aid of arbitration
(whether sited locally or abroad). Finally, we consider the enforceability in national courts of
provisional measures ordered by international arbitral tribunals.
A. Provisional Measures Ordered By International Arbitral Tribunals
1. Introduction
Provisional measures include a variety of orders designed to preserve the essential rights of
the parties to a legal dispute pending the ultimate resolution of the dispute. The provisional
measures that are available in a particular national court, and the circumstances in which they
will be granted, are matters of local law. (4) For the most part, developed legal systems
provide for the same general types of provisional measures.
First, litigants may seek to freeze or sequester property in the hands of adverse parties.
Sequestration orders are designed to prevent dissipation of the property or to preserve the
condition of the property for future inspection. Alternatively, a litigant may be ordered to
deposit property into the custody of a third party. (5)
P "920"
P "921"
Second, litigants may seek injunctive relief aimed at preserving the status quo between the
parties pending resolution of the merits of their dispute. For example, a party may be ordered
not to take certain steps – terminating an agreement, disclosing trade secrets, or using
disputed intellectual property or other rights – pending a decision on the merits. (6)
Third, litigants may seek orders requiring adverse parties to post security for satisfying the
final judgment in the case. Orders for security may be for either the amount in dispute in the
underlying controversy or for the fees of legal representation and other costs to be incurred in
resolving the dispute. (7)
Fourth, litigants may seek attachment of funds owned by adverse parties, or debts owed to
them. An attachment is intended to preserve sums necessary to satisfy a final judgment (of
damages or legal costs) against the owner of the property and, in particular, to prevent the
owner or others from removing the property from the territory of the forum court. Unlike most
other provisional measures, an attachment is usually directed against third parties – such as
banks or securities brokers, holding the defendants' property, or persons owing debts to the
defendant. (8)
1
 Fifth, litigants may seek the appointment of neutral third parties to take specified actions. For
example, an independent expert or referee may be appointed to inspect goods, a site, or other
property and render a factual statement as to its condition. (9)
Parties to an international arbitration will not infrequently wish to obtain one or more of the
foregoing types of provisional relief. Provisional measures are, in principle, potentially
available from either an arbitral tribunal or a national court. This section considers the
circumstances in which arbitral tribunals will be authorized – under the parties' arbitration
agreement, any relevant arbitration rules, and applicable national law – to grant provisional
relief. It also considers whether and how an arbitrator will be willing to exercise any power he
may enjoy to order provisional relief. In the immediately following section, we consider when
national courts will grant provisional relief in aid of an international arbitration.
2. Arbitrators' Authority to Order Provisional Relief
The threshold question for a party seeking pre-award relief is whether an arbitrator possesses
the authority to order provisional measures. (10) In general, that question requires consulting
P "921" three sources: (a) any applicable international arbitration convention or treaty, such as the
P "922" New York or Inter-American Convention; (b) applicable national laws; and (c) the parties'
arbitration agreement, including any relevant institutional arbitration rules.
a. Effect of International Arbitration Conventions on Power of Arbitrators to Order Provisional
Relief
For the most part, international arbitration conventions have little to say about the authority
of arbitrators to order provisional measures. The New York Convention contains no provision
expressly referring to awards of provisional measures by arbitrators. (11) The Inter-American
Convention is the same. The 1961 European Convention does address the general subject of
provisional relief, but it only provides that “[a] request for interim measures or measures of
conservation addressed to a judicial authority shall not be deemed incompatible with the
arbitration agreement, or regarded as a submission of the substance of the case to the court.”
(12) Like the New York Convention, however, the 1961 European Convention does not address
whether or when an arbitral tribunal may grant provisional measures.
b. Effect of National Law on Authority of Arbitrator to Order Provisional Relief
An arbitrator will seldom grant provisional relief unless he is satisfied that the national
arbitration legislation applicable to the arbitral proceedings allows him to do so. Equally
important, tribunal-ordered provisional relief will generally not be enforceable in a national
court unless the procedural law of the arbitration permits such relief and the law of the
enforcement jurisdiction provides for judicial enforcement of the tribunal's orders. (13)
There are significant differences among national arbitration laws on the subject of tribunal-
ordered provisional measures. In some nations, like Argentina and Italy, local arbitration law
contains a mandatory prohibition that apparently forbids arbitrators from ordering provisional
relief; the granting of provisional measures is reserved exclusively to local courts, which are
P "922" specifically authorized to issue provisional relief in aid of arbitration. (14) Other nations, like
P "923" Switzerland and the United States, authorize arbitrators to grant provisional measures
(absent contrary agreement) and provide for judicial enforcement of such orders. (15)
The following materials illustrate the varying approaches that national laws take to tribunal-
ordered provisional measures in international arbitration. In reviewing these materials,
consider the extent to which the availability of tribunal-ordered provisional relief under
national law is left to the parties' arbitration agreement, as well as the existence of any
presumptions where the parties' agreement is not clear.
ARGENTINE NATIONAL CODE OF CIVIL AND COMMERCIAL PROCEDURE
Article 753
753. Arbitrators cannot order compulsory measures or measures leading to enforcement. They
must request them from the judge who will have to lend the support of his jurisdictional powers
for the most swift and effective carrying out of the arbitral proceedings.
ITALIAN CODE OF CIVIL PROCEDURE
Article 818
The arbitrators may not grant attachment or other interim measures of protection.
SWISS INTERCANTONAL ARBITRATION CONVENTION OF 1969
Article 26
(generally superseded by Swiss Law on Private International Law)
26(1). The public judicial authorities alone have jurisdiction to make provisional orders.
26(2). However, the parties may voluntarily submit to provisional orders proposed by the
arbitral tribunal.
P "923"
P "924"
SWISS LAW ON PRIVATE INTERNATIONAL LAW

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© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
 Article 183
[excerpted below at p. 1034]
UNCITRAL MODEL LAW
Articles 5, 9 & 17
[excerpted below at pp. 1013, 1014, 1016]
Notes on National Arbitration Legislation Concerning Tribunal-Ordered Provisional Measures
1. Rationale for prohibitions under national laws against awards of provisional measures by
arbitrators. Consider Article 26 of the Swiss Intercantonal Arbitration Convention, Article 753 of
the Argentine National Civil and Commercial Procedure Code, and Article 818 of the Italian
Code of Civil Procedure. All three sections forbid arbitrators from granting provisional relief,
and reserve that power to the courts. What is the rationale for that prohibition? If an arbitral
tribunal can be trusted to resolve the merits of the parties' dispute, why can't it be permitted
to order provisional measures that merely preserve the status quo? Are there particular
reasons to doubt the efficacy and fairness of arbitral procedures in such matters (as compared
to judicial procedures)?
What consequences does an approach forbidding arbitrators from granting provisional
measures have for the efficacy of the arbitral process? For example, what sort of issues will a
court need to decide in granting provisional measures? What effect will judicial disposition of
these issues have on the arbitrators' consideration of the merits of the parties' dispute?
2. Trend of national arbitration legislation towards permitting arbitrators to grant provisional
relief. Consider Articles 183 and 184 of the Swiss Law on Private International Law, and compare
them to Article 26 of the Swiss Intercantonal Arbitration Convention; also consider Articles 9
and 17 of the UNCITRAL Model Law. In general, most developed arbitration statutes have
moved towards a willingness to permit arbitrators to grant provisional relief. That trend
reflects the increasing acceptance of arbitration as a satisfactory mechanism for resolving
complex international commercial disputes and an increasing recognition by national courts
that interlocutory judicial interference in the arbitral process is often counterproductive.
3. Power of arbitral tribunal under most developed national arbitration statutes to order
provisional relief where parties have not otherwise agreed. Consider Article 17 of the UNCITRAL
Model Law and Article 183 of the Swiss Law on Private International Law. How does each
provision deal with the arbitral tribunal's power to grant provisional measures? Is this an issue
which the parties may regulate by agreement? If the parties' arbitration agreement does not
expressly deal with the tribunal's power to award provisional measures, then what is the
presumptive rule? What is the rationale of this approach?
4. Power of arbitral tribunal under most U.S. judicial decisions to order provisional relief where
parties have so agreed. The FAA and Uniform Arbitration Act are silent on the arbitrators'
powers to order provisional measures. Nonetheless, most U.S. courts have expressly or
impliedly recognized the power of an arbitrator under the FAA to order provisional measures in
aid of a domestic arbitration, provided that this is contemplated by the parties' agreement.
See Pacific Reinsurance Management Corp. v. Ohio Reinsurance Corp., 935 F.2d 1019, 1022-1023
(9th Cir. 1991) (“Temporary equitable relief in arbitration may be essential to preserve assets or
enforce performance which, if not preserved or enforced, may render a final award
meaningless”); Island Creek Coal Sales Co. v. Gainesville, 729 F.2d 1046, 1049 (6th Cir. 1984)
(absent contrary provision in state law or parties' agreement, tribunal may award interim
injunctive relief); Sperry Int'l Trade, Inc. v. Government of Israel, 689 F.2d 301, 306 (2d Cir. 1982)
(“Under New York law arbitrators have power to fashion relief that a court might not properly
grant”); Konkar Maritime Enter., SA v. Compagnie Belge d'Affretement, 668 F.Supp. 267, 271
P "924" (S.D.N.Y. 1987); Compania Chilena de Navegacion Interoceanica, SA v. Norton, Lilly & Co., 652
P "925" F.Supp. 1512, 1517 (S.D.N.Y. 1987); Merrill Lynch, Pierce, Fenner & Smith v. Decaro, 577 F.Supp. 616,
625 (W.D. Mo. 1983). See also J. Brooks Securities, Inc. v. Vanderbilt Securities, Inc., 484 N.Y.S.2d
472, 474 (Sup. Ct. 1985); Shay v. 746 Broadway Corp. 409 N.Y.2d 69, 70 (Sup. Ct. 1978). The question
of arbitrators' authority to order provisional measures under the FAA is related to a tribunal's
power to grant injunctive relief. See supra pp. 813-14.
5. Lower U.S. court decisions holding that arbitral tribunal has no power under FAA to order
provisional relief where parties have not expressly so agreed. Despite a general rule to the
contrary, a few lower U.S. courts have held that arbitrators generally lack the power to issue
provisional relief in aid of a domestic arbitration unless the parties have expressly authorized
them to do so. See Swift Indus., Inc. v. Botany Indus., Inc., 466 F.2d 1125, 1134 (3d Cir. 1972)
(parties' agreement did not authorize tribunal to award provisional relief); Carolina Light &
Power Co. v. Uranex, 451 F.Supp. 1044 (N.D. Cal. 1979) (dicta). See also Charles Construction Co. v.
Derderian, 586 N.E.2d 992 (Mass. 1992) (AAA Rules held not to permit tribunal-ordered
provisional measures) (excerpted below).
6. No U.S. authority that FAA forbids parties from conferring power on arbitrators to grant
provisional relief. No U.S. court appears to have held that parties are forbidden by the FAA
from agreeing to vest arbitrators with power to award provisional relief in aid of a domestic
arbitration. Most U.S. decisions impliedly reject any such conclusion. See cases cited supra p.
924. Indeed, a refusal to give effect to an agreement giving arbitrators power to grant
provisional measures would appear inconsistent with the FAA's basic rule that arbitration
agreements are enforceable. See supra pp. 161, 332-35, 351-53. (Compare the decisions,

3
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
 discussed below, holding that Article II(3) of the New York Convention bars court-ordered
provisional relief. See infra pp. 936-37.)
7. Limits under national law on arbitrators' authority to grant provisional relief. National law
may authorize arbitrators to grant provisional measures only within specified limits. For
example, Article 17 of the UNCITRAL Model Law limits provisional measures to those that are
“necessary” and that concern the “subject-matter of the dispute.”
8. Effect of New York Convention on national law limitations on arbitrators' authority to grant
provisional relief. What effect (if any) does the New York Convention have on a nation's ability
to restrict an arbitrator's authority to grant provisional relief? Suppose that the parties'
arbitration agreement expressly authorizes the arbitrators to grant provisional measures? Does
Article II of the Convention require Contracting States to recognize agreements granting
arbitrators power to grant provisional measures? Does Article 1 of the Inter-American
Convention have such effects?
9. Arbitrators' power to grant provisional relief is ordinarily non-exclusive. Note that Articles 183
and 184 of the Swiss Law on Private International Law contemplate concurrent authority of the
arbitral tribunal and national courts to order provisional relief. Articles 9 and 17 of the
UNCITRAL Model Law are similar. As we will see below, most U.S. courts also acknowledge
concurrent authority of courts and arbitrators to grant provisional relief. See infra pp. 932, 945-
48.
Is it wise to permit two separate sources for provisional measures? or does it encourage forum-
shopping and jurisdictional disputes? Does the answer depend on whether it is the parties or
the arbitrators that may seek judicial relief? Does it depend on when judicial relief is sought?
Should parties have the freedom to exclude by agreement concurrent authority of courts and
arbitrators to grant provisional measures?
For examples of concurrent exercises of authority to order provisional measures, by both an
arbitral tribunal and a court, see Nagos Compania Maritima v. Del Bene, SACIF, 4 Soc. Mar. Arb.
297 (No. 2533) (1988); Palm Shipping v. Imbar Maritima, SA, 5 Soc. Mar. Arb. 191 (No. 2546) (1988);
Sperry International Trade v. Israel, 689 F.2d 301 (2d Cir. 1982).
10. Arbitrators generally lack authority to issue provisional measures against non-parties. An
arbitrator's powers are virtually always limited to the subject matter of the arbitration and to
the parties to the arbitration. As a consequence, the arbitrator generally can (and will) order
provisional measures only against the parties to the arbitration; he will not have the power to
order, for example, attachment of property held by a third party. Cf. Carolina Light & Power Co.
v. Uranex, 451 F.Supp. 1044 (N.D. Cal. 1979).
11. National law limits on agreements excluding the right to obtain provisional measures from a
court. In some nations, including the United States, local law may contain mandatory
provisions restricting the power of parties to agree to exclude recourse to the courts for
provisional relief. See infra p. 960.
12. Judicial enforcement and review of tribunal-ordered provisional relief. A corollary of
P "925" recognition of an arbitrator's power to grant provisional relief is the availability of judicial
P "926" enforcement of such orders. Consider briefly how Articles 35 and 36 of the UNCITRAL Model
Law, Articles 188-192 of the Swiss Law on Private International Law, and §§9 and 10 of the FAA
provide for enforcement of awards of provisional relief. See infra pp. 971-80. As discussed
below, national courts in most developed jurisdictions will enforce provisional measures
awarded by arbitral tribunals. Arbitral awards of provisional measures are subject to judicial
review, just as other arbitral awards are. For a discussion of standards of judicial review of
arbitral awards under U.S. law, see supra pp. 797-814.
13. Choice of law applicable to arbitral tribunal's power to grant provisional measures. What law
applies to determine an arbitral tribunal's power to grant provisional measures in an
international arbitration? In many cases, the most directly applicable national arbitration
legislation will be that of the arbitral situs. As we have seen, that law will ordinarily provide the
procedural law governing the arbitration. See supra pp. 411-13, 430-31. (In rare cases, the
parties will agree that a foreign law, other than that of the arbitral situs, will govern the
arbitration. See supra pp. 426-28.)
For example, what law would govern the arbitrators' power to grant provisional measures in an
arbitration sited in Argentina? Does Article 753 of the Argentine Code of Civil and Commercial
Procedure apply?
Suppose that parties agree to arbitrate in Switzerland and their dispute arises under a
contract governed by Italian law. Does Article 818 of the Italian Code of Civil Procedure apply?
Or does Article 183 of the Swiss Law on Private International Law apply? Isn't the latter choice
clearly correct? See generally supra pp. 430-31.
There is little authority on the law applicable to an arbitrator's power to grant provisional
measures. Most precedent looks to the law of the arbitral situs. See Interim Award in Case No.
1694 of 12 December 1996 (Netherlands Arbitration Institute), XXIII Y.B. Comm. Arb. 97 (1998)
(applying law of arbitral situs to arbitral tribunal's power to grant provisional measures). The
question of the law applicable to an arbitrator's power to grant provisional measures is also
discussed below, see infra pp. 932-33.
c. Effect of Institutional Arbitration Rules on Authority of Arbitrator to Order Provisional Relief

4
© 2018 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.
 As described above, developed national arbitration statutes generally neither forbid
arbitrators from granting provisional measures nor require that they have the power to do so.
Rather, under most leading national arbitration statutes, arbitrators ordinarily can order
provisional relief (and courts may enforce tribunal-ordered provisional measures), provided
that this is not excluded the parties' agreement. As a consequence, an arbitrator's power to
order provisional relief often turns largely upon the terms of the parties' arbitration
agreement, any applicable institutional arbitration rules, and presumptions about the parties'
likely intentions.
In practice, it is unusual (although by no means unheard of) (16) for the parties' arbitration
agreement expressly to address the subject of provisional relief. (17) Thus, the power of an
arbitrator under most developed national laws to order provisional relief often turns upon the
institutional rules (if any) selected by the parties. Many institutional arbitration rules expressly
address the power of an arbitral tribunal to grant provisional measures. Nonetheless, in ad hoc
arbitrations, or where institutional rules do not deal with the subject of provisional relief,
interpretation of the parties' arbitration agreement and application of presumptions under
national law will be required.
P "926"
P "927"
Excerpted below are sections of leading institutional rules relating to provisional measures,
including the UNCITRAL, LCIA, ICC, and AAA Commercial Arbitration Rules. Consider how each
set of rules deals with the subject of provisional measures. Also consider the opinion in Charles
Construction Co. v. Derderian, (18) which illustrates one judicial approach to the interpretation
of institutional rules.
UNCITRAL ARBITRATION RULES
Article 26
[excerpted below at p. 1028]
LCIA RULES
Article 25
[excerpted below at p. 1084]
ICC RULES (1988 VERSION)
Article 8(5)
Before the file is transmitted to the arbitrator, and in exceptional circumstances even
thereafter, the parties shall be at liberty to apply to any competent judicial authority for
interim or conservatory measures, and they shall not by so doing be held to infringe the
agreement to arbitrate or to affect the relevant powers reserved to the arbitrator.
ICC RULES (1998 VERSION)
Article 23
[excerpted below at p. 1066]
AAA COMMERCIAL ARBITRATION RULES
Article 36 (1999 version)
[excerpted below at p. 1053]
CHARLES CONSTRUCTION COMPANY v. DERDERIAN
586 N.E.2d 992 (Mass. 1992)
WILKINS, JUDGE. Because the applicable arbitration rules did not authorize them to do so, the
P "927" arbitrators had no authority to enter an interim order directing a party to provide security
P "928" toward the payment of any award the arbitrators might eventually enter. We, therefore,
affirm Superior Court judgments vacating the arbitrators' interim order for security. That award
had directed James Derderian, as trustee of Parkman Realty Trust, to furnish a $1,000,000
irrevocable letter of credit, payable on demand, to the American Arbitration Association, as
security for the payment of any arbitration award that might be entered against Derderian, as
trustee, in the arbitration proceeding.
The course of the arbitration seems atypical because it commenced in September, 1987, and,
after seventy-three hearing days, suspended early in 1990. Charles Construction Co., Inc., seeks
enforcement of the interim arbitration award in one of the actions before us, and Derderian
seeks an order vacating that award in the other.
In October, 1984, Derderian, as owner of property in Brookline (“owner”), and Charles, as
construction manager (“contractor”), entered into an associated general contractors' standard
form of agreement pursuant to which a condominium and parking garage were to be
constructed. That agreement provided for the arbitration of certain claims, disputes, and other
matters arising out of the agreement “in accordance with the Construction Industry Arbitration
Rules of the American Arbitration Association then obtaining.”
Disputes did arise, and they were submitted to arbitration. The owner asserted claims for more
than $2,800,000, and the contractor for more than $ 1,170,000. Hearings commenced in

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 September, 1987, and continued intermittently until January, 1990, when the contractor
requested the panel to issue an order for interim security. On February 16, 1990, in an interim
order, the arbitrators, purporting to act under §34 of the construction industry arbitration
rules, ordered the owner to provide the security that we have previously described. There is no
contractual provision apart from the arbitration rules on which the contractor relies. He points
to no statutory authorization for the arbitrators' award of interim relief. The owner contends
first that, if Charles is to obtain relief before the arbitration proceeding is concluded, it must
come from a court.
We reject the owner's claim that the contractor's only avenue for obtaining interim relief is
through a court order independent of the arbitration proceeding. We have indeed upheld the
entry of protective court orders even though a dispute between the parties is subject to
arbitration. See Hull Mun. Lighting Plant v. Massachusetts Mun. Wholesale Elec. Co., 399 Mass.
640, 648-649 (1987) (preliminary injunction upheld requiring contractual payments to continue
while dispute is arbitrated pursuant to court order); Salvucci v. Sheehan, 349 Mass. 659, 663
(1965) (bill to reach and apply fraudulently conveyed property may be maintained before
arbitration proceeding is concluded). If, however, there is an express agreement that
authorizes an arbitrator to grant interim relief, including any authorization set forth in
arbitration rules incorporated by agreement of the parties, there is no reason why an arbitrator
may not act under that authority. Indeed, in such an instance, the court might be obliged both
P "928" to defer to the parties' agreement to submit the matter of interim relief to arbitration and to
P "929" give any subsequent interim order the same deferential treatment that must be accorded to
an arbitrator's final order. Of course, a statute could authorize an arbitrator to grant interim
relief. Therefore, if the arbitrators had contractual or statutory authority to issue an interim
order, the contractor properly could have sought such an order from them and was not limited
to asking for interim relief from a court.
There is little authority on the question whether, absent any controlling statute or agreement of
the parties, an arbitrator has implicit authority to order a party to provide security, during the
pendency of the arbitration, against the possibility of a decision adverse to that party. Where
there is no contractual or statutory guidance, authorities that have considered the question
have not agreed on the answer.... (19) We agree in general that, in the absence of an agreement
or statute to the contrary, an arbitrator has inherent authority to order a party to provide
security while the arbitration is continuing. It is reasonable to assume that parties, in agreeing
to arbitration, implicitly intended that the arbitration not be fruitless and that interim orders
to preserve the status quo or to make meaningful relief possible would be proper. In such a
circumstance, the arbitrator's authority to act would reasonably be implied from the
agreement to arbitrate itself.
This general principle has no application in this case because we construe the construction
industry arbitration rules of the American Arbitration Association, which the contract
incorporates by reference, to restrict the authority of an arbitrator to provide interim relief. To
justify the issuance of the interim order, the contractor relies on §34 of the arbitration rules,
the same authority that the arbitrators relied on when issuing their order. Section 34, as it was
in effect when the interim order for security was entered in February, 1990, is entitled “Interim
Measures,” and states: “The arbitrator may issue such orders for interim relief as may be
deemed necessary to safeguard the property that is the subject matter of the arbitration
without prejudice to the rights of the parties or to the final determination of the dispute.” (20)
No property was the subject matter of the arbitration. The arbitration was not a dispute over
specific property but rather concerned claims of breach of contract. The fact that the owner
would be obliged to satisfy any arbitration award against him from assets of the Parkman
Realty Trust does not make those assets “the subject matter of the arbitration.” We do not give
§34 such an expansive reading. If the drafters of §34 for the American Arbitration Association
P "929" had intended that an arbitrator have authority to issue a preliminary order than a party
P "930" provide security, the rule would not have been written as it was, referring only to property
that is the subject matter of the arbitration. (21)
There is another arbitration rule to which the contractor points but on which it relies only by a
casual assertion. Section 43 of the construction industry arbitration rules, entitled “Scope of
Award,” permits an arbitrator to “grant any remedy or relief that the arbitrator deems just and
equitable and within the scope of the agreement of the parties....” That rule cannot authorize
interim relief of the sort that the arbitrators awarded in this case. Section 43 does not
explicitly refer to interim relief, and, if were to be read to do so, it would render unnecessary
§34, a rule that appears to deal explicitly and comprehensively with the subject of interim
measures. Moreover, whatever just and equitable relief is granted must be “within the scope of
the agreement of the parties.” That language seems to be focused on the arbitrator's final
disposition (unless perhaps the parties explicitly agreed to grant the arbitrators the right to
grant interim relief). (22)
Notes on Arbitrator's Power to Grant Provisional Relief Under Institutional Arbitration Rules
1. Institutional rules relating to provisional relief. Consider the excerpted sections from the
UNCITRAL, ICC, LCIA, and AAA Commercial Arbitration Rules. What are the differences between
these various approaches? What are the respective advantages and disadvantages of each
approach?
2. Presumptions concerning parties' intentions as to provisional measures in the absence of an
express agreement. As described above, the UNCITRAL Model Law, the Swiss Law on Private

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 International Law, and the FAA (as well as most other leading national arbitration statutes)
permit arbitrators to order provisional relief – provided that the parties have not otherwise
agreed. See supra pp. 924-26. In a significant number of cases, however, neither the parties'
agreement nor the institutional arbitration rules that they designate expressly address the
power of arbitrators to order provisional measures. See, e.g., Charles Construction supra, and
ICC Rules Article 8(5) (1988 version). In the absence of evidence regarding an express or implied
agreement, what legal rule should govern the availability of tribunal-ordered provisional
measures? That is, when the parties' agreement is silent, should or should not arbitrators be
presumed to have been intended to have the power to order provisional relief?
(a) Presumption that arbitrator lacks power to grant provisional relief (unless otherwise
agreed). Some authorities hold that an arbitral tribunal lacks the power to grant
provisional measures, unless otherwise agreed. In Swift Indus., Inc. v. Botany Indus., Inc.,
466 F.2d 1125 (3d Cir. 1972), the court held that the arbitrator lacked the power to order
provisional relief:
We have sought to distill from the Agreement the essence of the arbitrator's authority.
Whatever that authority may be, it is clear to us that it does not include the authority to
P "930" award a six million dollar cash bond to cover a liability which contrary to the
P "931" requirements of the applicable breach of warranty clause, has not yet been (and may not
be) “incurred or suffered,” in a situation where the parties did not provide for such
security in their agreement, although they might have done so. In our view, to award, as
an adjunct to declaratory relief, a form of prejudgment execution which the Agreement by
its lack of reference to security seems to exclude rather than to intend, is to eclipse the
framework of the agreement and to venture onto unprotected ground. We subscribe to
the observations ... that the draftsmen may be unable to perceive in advance what
specific remedy should be awarded to meet a particular contingency and that in
arbitration flexibility is important. But the principle of flexibility of relief cannot be
permitted to obscure or to effect a metamorphosis of the claim itself. That untoward
event would occur if we were to permit the arbitrator's award to stand in this case.
Is this persuasive?
(b) Presumption that arbitrators possess power to grant provisional relief (unless otherwise
agreed). In contrast, consider again Article 17 of the UNCITRAL Model Law and Article 183
of the Swiss Law on Private International Law. See supra pp. 923-24. What presumption
does each provision adopt? Also consider the Charles Construction decision. What
approach does the Massachusetts court take to the burden of establishing the existence
or non-existence of an agreement to permit the tribunal to award provisional relief? How
does the presumption adopted in Charles Construction differ (if at all) from that in the
UNCITRAL Model Law and the Swiss Law on Private International Law?
What is the presumption in Charles Construction concerning the arbitrator's power to
order provisional measures when the parties have not agreed to institutional arbitration
rules? Would (or could) a similar approach be taken to institutional arbitration rules
under the UNCITRAL Model Law and Swiss Law on Private International Law?
If the parties have agreed to institutional arbitration rules, what does Charles
Construction presume concerning the arbitrator's power to award provisional relief?

3. What presumption should be adopted regarding arbitrator's power to grant provisional relief?
Which approach to the arbitrator's implied authority – the UNCITRAL Model Law's, Charles
Construction's, or Swift's – is preferable? Would it be better to take an approach not accepted
in either the UNCITRAL Model Law or Charles Construction – i.e., that the tribunal presumptively
does not enjoy power to award provisional relief, absent an affirmative showing of an express
or implied agreement to that effect? Is the answer to this question influenced by the
availability of provisional measures from a national court? What are the likely expectations of
the parties in the absence of express agreement? What approach is most likely to produce a
fair and efficient dispute-resolution process?
4. U.S. judicial decisions concluding that arbitrators presumptively possess implied power to
grant provisional relief (unless otherwise agreed). As noted above, most U.S. courts have
adopted a position similar to that of the UNCITRAL Model Law – i.e., that parties will generally
be presumed, absent contrary agreement, to have conferred the power to award provisional
relief on their arbitrator, even where institutional arbitration rules are involved. See supra pp.
925-26; Island Creek Coal Sales Co. v. Gainesville, 729 F.2d 1046 (6th Cir. 1984); Sperry
International Trade, Inc. v. Israel, 689 F.2d 301 (2d Cir. 1982); Konkar Maritime Enter., SA v.
Compagnie Belge d'Affretement, 668 F.Supp. 267 (S.D.N.Y. 1987); Compagnie Chilena de
Navigacion Interoceanica SA v. Norton, Lilly & Co., 652 F.Supp. 1512 (S.D.N.Y. 1987); Southern Seas
Navigation Ltd v. Petroleos Mexicanos of Mexico City, 606 F.Supp. 692 (S.D.N.Y. 1985).
Most commentators on international arbitration also conclude that arbitral tribunals should
presumptively have the power to order provisional relief (unless otherwise agreed): “The
authority of arbitrators to grant conservatory and provisional measures stems from their
inherent powers to conduct the arbitral proceedings and, more specifically, any additional
authority granted to them in the contract between the parties.” Hoellering, The Practices and
Experience of the American Arbitration Association, in ICC, Conservatory and Provisional Measures
in International Arbitration 31 (1993) (emphasis added). See also Higgins, Interim Measures in

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 Transnational Maritime Arbitration, 65 Tulane L. Rev. 1519, 1535-36 (1991) (“By expressly
consenting to the arbitration of their dispute, the parties implicitly accord to the arbitrators a
general grant of power to exercise any authority necessary to reach a determination on the
merits of the dispute.”).
5. Arbitrators' power to grant provisional measures under the ICC Rules. The ICC Rules have
recently been revised to more directly address the arbitral tribunal's power to grant
provisional measures.
P "931"
P "932" (a) Lack of express authority to order provisional measures under Article 8(5) of 1988 ICC
Rules. Consider Article 8(5) of the 1988 version of the ICC Rules. Does this provision
affirmatively grant an ICC arbitrator the power to award provisional relief? See Schwartz,
The Practices and Experiences of the ICC Court, in ICC, Conservatory and Provisional
Measures in International Arbitration 46 (1993) (“the arbitrators themselves are not
expressly authorized to issue [provisional] measures”); Paulsson, A Better Mousetrap: 1990
ICC Rules for a Pre-Arbitral Referee Procedure, 18 Int'l Bus. Law. 214 (1990). Compare ICC
Rules Article XVIII (1922) (“In all cases, the arbitrators, at the request of either of the
interested parties, shall have the right to render a provisional decision, providing for
such measures of preservation as may be indispensable....”).
How would Article 8(5) of the 1988 ICC Rules be interpreted under the analysis in Charles
Construction?

(b) Authority to order provisional measures under Article 23 of 1998 ICC Rules. Compare Article
23 of the 1998 ICC Rules to its predecessor in the 1988 ICC Rules. Note that Article 23
expressly grants the arbitral tribunal authority to order “interim or conservatory
measures.” Is this a desirable change to the ICC Rules? Compare Article 23 of the 1998 ICC
Rules with Article 25 of the 1998 LCIA Rules. Which approach is wiser?
6. Interpretation of other leading institutional arbitration rules. Consider again Article 26 of the
UNCITRAL Rules, Article 25 of the LCIA Rules, and Articles 8(5) and 23 of the 1988 and 1998 ICC
Rules. How would each be interpreted under the analysis in Charles Construction? Consider
Article 36 of the 1999 AAA Commercial Arbitration Rules, which replaced the version of the AAA
Rules at issue in Charles Construction. Would the decision be decided differently under the new
rule?
7. ICC Rules for a Pre-Arbitral Referee Procedure. Some arbitral institutions have adopted
specialized rules that seek to provide a non-judicial mechanism for obtaining urgently-needed
provisional relief. The ICC Rules for a Pre-Arbitral Referee Procedure are the leading example
of such efforts. See generally Hausmaninger, The ICC Rules for a Pre-Arbitral Referee Procedure: A
Step Towards Solving the Problem of Provisional Relief in International Commercial Arbitration, 7
ICSID Rev. 82 (1992); Paulsson, A Better Mousetrap: 1990 ICC Rules for a Pre-Arbitral Referee
Procedure, 18 Int'l Bus. Law. 214 (1990). At least to date, however, neither these rules nor other
private efforts to provide access to provisional relief have proven successful. That is because
parties must agree in writing to the use of this specialized procedure and, given the realities of
litigation, this cannot often be expected to occur after a dispute has arisen. At earlier stages,
parties have not generally been sufficiently focussed on the procedural intricacies of future
disputes to make provision for specialized issues. As a consequence, although the ICC's Pre-
Arbitral Referee Procedure has attracted substantial commentary, it has not yet been tested in
a single case.
Why has the ICC not included a pre-arbitral referee procedure in its generally-applicable
arbitration rules, to be incorporated whenever the parties agree to ICC arbitration?
8. Arbitrators' power to order security and counter-security. A key feature of provisional relief is
security – either for ultimate liability or for attorneys' fees and other legal costs – and counter-
security – for the damages caused by provisional measures granted for a party that ultimately
is unsuccessful. Consider the institutional rules set forth above; what provisions do these rules
make for security orders by tribunals? U.S. courts have generally upheld the authority of
arbitrators to make security orders. E.g., Loral Corp. v. Swiftships, Inc., 77 F.3d 420 (11th Cir. 1996)
(confirming arbitral award requiring defendant to deposit milestone payments received from
third party into escrow account); Sperry International Trade, Inc. v. Israel, 532 F.Supp. 901, 905
(S.D.N.Y. 1982), aff'd, 689 F.2d 301 (2d Cir. 1982); Compania Chilena de Navegacion Interoceanica,
SA v. Norton, Lilly & Co., 652 F.Supp. 1512, 1516 (S.D.N.Y. 1987); Konkar Maritime Enterprise, SA v.
Compagnie Belge D'Affretement, 668 F.Supp. 267, 271 (S.D.N.Y. 1987) (upholding tribunal's order,
prior to conducting hearing, that one party post security for claims against it; “The issue of
security ... was implicit in the submission of the main dispute to the Panel”). But see Swift
Indus., Inc. v. Botany Indus., Inc., 466 F.2d 1125 (3d Cir. 1972).
9. U.S. lower court decisions rejecting claims that foreign court had exclusive authority to order
provisional relief. A few cases have raised (and rejected) the claim that the arbitral tribunal
may not order provisional relief, because a foreign court enjoys the exclusive power to do so
under foreign law. See Warth Line, Ltd v. Merinda Marine Co., 778 F.Supp. 158 (S.D.N.Y. 1991); In re
Noble Navigation Corp., No. 83-3983 (S.D.N.Y. June 4, 1984).
10. Choice of law applicable to arbitral tribunal's power to grant provisional measures. Consider
P "932" again (see supra pp. 426-31, 926) what law governs an arbitral tribunal's power to grant
P "933" provisional measures. Note the presumptive applicability of the law of the arbitral situs, as
(usually) the law governing the arbitral proceedings. See supra pp. 430-31.

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 Recall, however, that under most developed arbitration legislation the arbitrator's power to
grant provisional relief will depend upon the parties' arbitration agreement. See supra pp. 924-
26. As we have seen, the arbitration agreement may be subject to a different law than that
governing the arbitral proceedings. See supra pp. 95-117. And, in interpreting the parties'
arbitration agreement on the issue of provisional measures, it is the law governing the
arbitration agreement which would ordinarily apply to determine what the parties have
agreed. How does the law governing the arbitration agreement relate in these circumstances to
the procedural law of the arbitration?
3. Arbitrators' Exercise of Authority to Order Provisional Relief
Assuming an arbitrator possesses the power to order provisional relief, how do arbitrators in
fact choose to exercise that authority? The short answer is that arbitrators are not always able
or willing to act with the expedition and vigor that provisional relief typically requires. (23)
Preliminarily, many arbitrators are more reluctant than national courts to order provisional
measures. (24) Arbitrators often are sensitive to the fact that their powers derive from private
agreement, to the legal uncertainties outlined below concerning their powers to order
provisional measures, and to the difficulties of enforcement. Similarly, arbitral tribunals will
be concerned about prejudging the merits of the parties' dispute or appearing partial. To a
much greater measure than national courts, arbitrators are reluctant to push the limits of their
authority.
Finally, the process of considering whether to order provisional measures can be time-
consuming and distracting, particularly for arbitrators who are lawyers with active private
practices. Arbitrators also act with the knowledge that their ability to enforce provisional
measures will often require resort to national courts. For all these reasons, arbitrators are
usually hesitant to order compulsory provisional measures, even in circumstances in which a
national court might do so.
P "933"
P "934"
Moreover, even when arbitrators are willing to grant provisional relief, it is often not
practicable for them to do so. Provisional measures are usually needed at the outset of the
parties' dispute. Ordinarily, however, no arbitral tribunal will be in place and functioning at
the beginning of a dispute; even after the request for arbitration has been filed, the process of
selecting and confirming the arbitrators can take several months. (25) As a consequence,
provisional measures can often not practicably be obtained from the arbitrators.
Nevertheless, arbitrators will usually want to do justice and sometimes issue awards granting
provisional relief in terms little different from that of a court. See, for example, the excerpts
from the tribunal's provisional measures in Sperry International Trade v. Israel, excerpted
above, which are indistinguishable from a district court's preliminary injunction. There are
even instances of arbitrators granting provisional measures sua sponte, without having been
requested to do so by either party. (26)
Under many nations' laws, courts have the power to order provisional relief on an ex parte
basis – in the absence of the party against whom the provisional measures are directed. Where
the potential removal of assets or destruction of evidence is at issue, ex parte proceedings are
often critical to obtaining effective practical relief. Nevertheless, most institutional arbitration
rules appear not to permit ex parte provisional measures. (27) Additionally, substantial issues
would be raised under applicable national laws concerning ex parte arbitral hearings. One of
the bases under Article V of the New York Convention and Article 5 of the Inter-American
Convention for denying recognition to an award is the tribunal's failure to allow a party to
“present his case,” which arguably would be the case if ex parte relief was granted. (28)
Finally, a party that seeks provisional measures will often face a counter-demand for security
for damages in the event that the party seeking the relief fails to prevail on the merits. For
example, if a party seeks an order forbidding certain conduct (such as sales of a licensed
product), it should anticipate a request that it provide security for lost profits on such sales.
(29)
P "934"
P "935"
B. Provisional Measures Ordered by National Courts in Aid of Arbitration (30)
The arbitral tribunal is not necessarily the sole source of provisional relief in connection with
an international arbitration. In addition, national courts may also be able and willing to grant
provisional measures. This section examines the circumstances when this will occur.
1. Introduction
Although one of the attractions of arbitration is its promise of speedy dispute resolution, the
arbitral process usually does not offer a particularly quick, or satisfactory, means of obtaining
provisional relief. As noted above, until the arbitral tribunal is in place, there is no prospect of
obtaining provisional relief from it. Moreover, at least to date, the ICC Pre-Arbitral Referee
Rules and other similar efforts have failed to provide a satisfactory non-judicial mechanism for
obtaining provisional measures in arbitration. Where attachments and other provisional
measures binding third parties are concerned, arbitrators can virtually never provide effective
relief.

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 As a consequence, parties to arbitration agreements who require urgent provisional relief often
must seek the assistance of national courts. (31) The willingness of a national court to grant
provisional relief in aid of arbitration is a matter of national law. As in most issues relating to
international arbitration, three sources of authority bear on this question: (a) the New York
Convention and other applicable international agreements; (b) applicable national arbitration
legislation; and (c) the applicable institutional arbitration rules agreed upon by the parties,
together with other relevant provisions of their arbitration agreement.
P "935"
P "936"
2. Effect of the New York Convention and Other International Agreements on the Authority of
National Courts to Grant Provisional Relief in Aid of International Arbitrations
The New York Convention does not contain any provision dealing expressly with provisional
relief (whether granted by an arbitral tribunal or a national court). As described above,
however, the Convention does contain in Article II a requirement that courts of signatory states
enforce arbitration agreements. In particular, Article II(3) provides:
The court of a Contracting State, when seized of an action in a matter in respect of which the
parties have made an agreement within the meaning of this article, shall, at the request of one
of the parties, refer the parties to arbitration, unless it finds that the said agreement is null
and void, inoperative or incapable of being performed.
The impact of Article II(3) on court-ordered provisional measures in aid of arbitration is
unsettled, particularly in the United States. A few U.S. courts have interpreted Article II(3) of
the Convention as forbidding national courts from ordering attachments prior to the
commencement of arbitration pursuant to a preexisting arbitration agreement. (32) Other U.S.
decisions have expressly refused to adopt that reading of Article II(3). (33) In contrast, non-U.S.
decisions and academic commentary almost unanimously reject the view that Article II(3)
forecloses court-ordered provisional relief in aid of arbitration. (34)
The seminal decision holding that Article II(3) forbids court-ordered provisional relief in aid of
arbitration was McCreary Tire & Rubber Co. v. CEAT, SpA. (35) The case arose from a distribution
agreement which went awry, triggering disputes which fell within a provision calling for ICC
arbitration in Belgium. The U.S. party (McCreary) then commenced litigation, on the merits, in
federal district court in Massachusetts; the district court stayed the action and ordered
arbitration. Undeterred, McCreary next commenced a new action in federal district court in
Pennsylvania, reasserting its underlying breach of contract claims against CEAT and, in
addition, seeking to attach sums owed to CEAT by a Pittsburgh bank. On appeal, the Third
Circuit held that no attachment should be granted and that arbitration should be compelled.
P "936"
P "937"
The McCreary court rested its decision on Article II(3) of the New York Convention and on its
understanding of the parties' arbitration agreement:
What is plainly there to see is that [McCreary's federal court action] is a violation of McCreary's
agreement to submit the underlying disputes to arbitration.... Quite possibly, foreign
attachment may be available for the enforcement of an arbitration award. This complaint does
not seek to enforce an arbitration award by foreign attachment. It seeks to bypass the agreed
upon method of settling disputes. Such a bypass is prohibited by the Convention.... The
Convention forbids the courts of a contracting state from entertaining a suit which violates an
agreement to arbitrate. Thus, the contention that arbitration is merely another method of trial,
to which state provisional remedies should equally apply, is unavailable.... The obvious
purpose of the enactment of [the implementing legislation of the FAA for the New York
Convention], permitting removal [to federal district court] of all cases falling within the terms
of the treaty, is to prevent the vagaries of state law from impeding its full implementation.
Permitting a continued resort to foreign attachment in breach of the agreement is inconsistent
with that purpose. (36)
In short, the McCreary court concluded that McCreary's U.S. judicial action for provisional relief
was in fact designed to frustrate the arbitral process that it had agreed to and, therefore, that
the New York Convention precluded the suit and the request for attachment.
McCreary was followed, and extended, in other lower U.S. court decisions. (37) For example, the
New York Court of Appeals held in Cooper v. Ateliers de la Motobecane, SA, (38) excerpted
below, that the Convention foreclosed an attachment action that was apparently part of an
effort to circumvent arbitration. In addition, however, subsequent decisions applied the
McCreary/Cooper rationale where court-ordered provisional measures were fairly clearly in aid
of a pending arbitration (rather than in circumvention of it). (39)
Other lower U.S. courts have refused to follow McCreary and Cooper. They have concluded that
Article II(3) of the New York Convention does not speak to the question of provisional relief in
aid of arbitration. The Uranex decision, (40) also excerpted below, is the seminal ruling in this
line of authority.
P "937" Finally, other U.S. courts have limited Cooper and McCreary by distinguishing between the
P "938" prejudgment attachment which they involved and other types of provisional relief (such as
preliminary injunctions). These courts have concluded that, whatever the rule with respect to
prejudgment attachments, other forms of provisional relief are available in aid of arbitration.
The decision in Borden, Inc. v. Meiji Milk Products Co., (41) excerpted below, is a leading

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 example of this line of authority.
COOPER v. ATELIERS DE LA MOTOBECANE, SA
442 N.E.2d 1239 (N.Y. 1982)
COOKE, CHIEF JUDGE. The [New York] Convention was drafted to minimize the uncertainty of
enforcing arbitration agreements and to avoid the vagaries of foreign law for international
traders. This policy would be defeated by allowing a party, contrary to contract, to bring
multiple suits and to obtain an order of attachment before arbitration....
Plaintiff and others not here involved entered into a contract with defendant, a French
corporation, to establish a New York corporation to distribute defendant's products. The
agreement provided that plaintiff and others could each tender his or her shares for
repurchase to defendant or the New York corporation, the two being jointly and severally
obligated to buy such shares according to a price-setting formula. Disputes over valuation were
to be resolved by arbitration in Switzerland.
In April, 1978, plaintiff tendered his shares for repurchase. Negotiations ensued until defendant
finally demanded arbitration. In September, 1978, plaintiff sought a permanent stay of
arbitration [and eventually] ... the Appellate Division ... issued a stay [in “Action I.”] ... During
the pendency of Action I, in January, 1979, plaintiff commenced this action for a money
judgment (“Action II”) and obtained an ex parte attachment of a debt owed by the New York
corporation to defendant.... [The New York] Supreme Court confirmed the attachment [as did
the Appellate Division.]....
It has long been the policy in New York to encourage the use of arbitration “as an easy,
expeditious and inexpensive method of settling disputes, and as tending to prevent
litigation.”Fudickar v. Guardian Mut. Life Ins. Co., 62 N.Y. 392, 399. This support has not
diminished over the last century. The desirability of arbitration is enhanced in the context of
international trade, where the complexity of litigation is often compounded by lack of
familiarity with foreign procedures and law. Thus, resolving disputes through arbitration allows
all parties to avoid unknown risks inherent in resorting to a foreign justice system.
The prevalent problem in international contracts containing arbitration clauses has been in
enforcing the agreement to arbitrate. The old antagonism to arbitration is shared by many
countries, so that there is often uncertainty whether a contracting party may be compelled to
P "938" arbitrate or whether an arbitrator's award may be enforced.... It was against this background
P "939" that the [New York] Convention was drafted.... Generally, the [New York] Convention eased
the difficulty in enforcing international arbitration agreements by minimizing uncertainties
and shifting the burden of proof to the party opposing enforcement. The question whether an
arbitral award is “foreign,” a matter unclear in some civil law countries, is answered by
adopting a territorial definition of domesticity. When an action is brought in court and a party
asserts the arbitration agreement, the court “shall ... refer the parties to arbitration, unless it
finds that the said agreement is null and void, inoperative or incapable of being performed.”
Article II(3). Moreover, foreign arbitration awards are to be enforced on the same terms as
domestic awards. Article III.
Of particular relevance to the present controversy are the [New York] Convention's provisions
for objecting to the award and requiring security. Unlike the earlier Geneva Treaties, the [New
York] Convention requires the party opposing enforcement to prove the award's invalidity, and
it limits the grounds for objection. Moreover, if enforcement is opposed, the proponent of the
award may request that the other party be ordered to give suitable security. This gives the
courts a tool to discourage attempts to avoid arbitration awards which attempts are made
merely as obstructionist tactics.
The provisional remedy of attachment is, in part, a device to secure the payment of a money
judgment. It is available only in an action for damages (see CPLR 6201). Under the appropriate
circumstances, it can be obtained in a matter that is subject to arbitration: an order of
attachment will remain valid if it was obtained with notice or has been confirmed in a contract
action before a defendant obtains a stay of proceedings because the underlying controversy is
subject to arbitration. See American Reserve Ins. Co. v. China Ins. Co., 297 N.Y. 322, 326-327. It
should be noted, however, that attachment would not be available in a proceeding to compel
arbitration (see CPLR 7503(a)) as that is not an action seeking a money judgment.
It is open to dispute whether attachment is even necessary in the arbitration context.
Arbitration, as part of the contracting process, is subject to the same implicit assumptions of
good faith and honesty that permeate the entire relationship. Voluntary compliance with
arbitral awards may be as high as 85%. Moreover, parties are free to include security clauses
(e.g., performance bonds or creating escrow accounts) in their agreements to arbitrate. The
[New York] Convention apparently considered the problem and saw no need to provide for
prearbitration security. Moreover, the list of signatory countries provides assurance to a
contracting party that it will be able to enforce an arbitral award almost anywhere in the
world. More important here, however, is the injection of uncertainty – the antithesis of the [New
York] Convention's purpose – that would occur by permitting attachments and judicial
proceedings. Once again, the foreign business entity would be subject to foreign laws with
which it is unfamiliar.
The [New York] Convention was implemented in the United States in 1970. This act amended
P "939" the [FAA] by re-enacting the earlier sections and denominating them “Chapter 1,” and adding
P "940"

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 P "940" “Chapter 2” to provide a vehicle for enforcing the [New York] Convention. In McCreary Tire and
Rubber Co. v. CEAT, 501 F.2d 1032, the Third Circuit ruled that the language “refer the parties to
arbitration” precludes the courts from acting in any capacity except to order arbitration, and
therefore an order of attachment could not be issued. To hold otherwise would defeat the
purpose of the [New York] Convention (see id.; accord I.T.A.D. Assoc. v. Podar Bros., 636 F.2d 75
(4th Cir.); Metropolitan World Tanker Corp. v. P.N. Pertambangan Minjakdangas Bumi Nasional,
427 F.Supp. 2 (S.D.N.Y.); Siderius, Inc. v. Compania de Acero del Pacifico, SA, 453 F.Supp. 22
(S.D.N.Y.)).
Plaintiff relies on a number of cases to the contrary (see Paramount Carriers Corp. v. Cook Inds.,
465 F.Supp. 599 (S.D.N.Y.); Compania de Navegacion y Financiera Bosnia, SA v. National Unity
Mar. Salvage Corp., 457 F.Supp 1013 (S.D.N.Y.); Atlas Chartering Serv. v. World Trade Group, 453
F.Supp. 861 (S.D.N.Y.); Carolina Power & Light Co. v. Uranex, 451 F.Supp. 1044 (N.D. Cal.)). Most of
these cases are distinguishable, however. The implementing statute provides that normal
Federal arbitration law applies to the extent it is not inconsistent with the [New York]
Convention [9 U.S.C. §208]. That law specifically permits attachment to be used in admiralty
cases [9 U.S.C. §8]. In all of the cases relied on by plaintiff, except for National Unity Mar. and
Carolina Power, the courts relied on §8 in approving attachment in a case arising out of a
maritime contract. In National Unity Mar., the court discussed neither §8 nor the [New York]
Convention in approving attachment in a maritime contract case. Only in Carolina Power did
the court allow attachment in a case not involving a maritime contract falling under the
Convention. That court rejected McCreary's reasoning that it must divest itself of jurisdiction.
Instead, concerned that the plaintiff would be unable to enforce an eventual arbitral award,
the District Court approved the security attachment, a rationale that, as discussed above, is
not compelling.
The controversy now before this court demonstrates the soundness of the decisions reached by
the Third and Fourth Circuits. Defendant agreed to arbitrate disputes, but instead has become
embroiled in two lawsuits. Action II, the instant case, is nothing more than plaintiff's attempt to
circumvent Special Term's ruling in Action I denying the stay of arbitration. Indeed, the
chronology of events indicates that the order of attachment should never have issued at all, as
the underlying dispute is subject to arbitration.
Whenever a matter of foreign relations is involved, one must consider the mirror image of a
particular situation. Is it desirable to subject American property overseas to whatever rules of
attachment and other judicial process may apply in some foreign country when our citizen has
agreed to arbitrate a dispute? It can be assumed that American business entities engaging in
international trade would not encourage such a result. Permitting this type of attachment to
stand would expose American business to that risk in other countries.
The essence of arbitration is resolving disputes without the interference of the judicial process
and its strictures. When international trade is involved, this essence is enhanced by the desire
P "940" to avoid unfamiliar foreign law. The [New York] Convention has considered the problems and
P "941" created a solution, one that does not contemplate significant judicial intervention until after
an arbitral award is made. The purpose and policy of the [New York] Convention will be best
carried out by restricting prearbitration judicial action to determining whether arbitration
should be compelled.
MEYER, DISSENTING. Respectfully, I dissent.... In response to the majority I add that: (1) nothing
in the [New York] Convention or in the history of its negotiation or its implementation by
Congress suggests that the word “refer” as used in §3 of article II of the [New York] Convention
was intended to foreclose the use of attachment where permitted by the law of the jurisdiction
in which the attachment is obtained; (2) in light of the majority's concessions that foreign
arbitration awards are enforced on the same terms as domestic awards, that there are
circumstances under which a domestic award may be enforced under our law through use of a
preaward attachment, and that the [New York] Convention speaks only in terms of postaward
security, and of the fact that the [New York] Convention does not specifically address the
subject of preaward attachment, the [New York] Convention cannot properly be said to have
proscribed such an attachment by implication; and (3) the use of attachment in maritime
contract cases arbitrated under the Federal statute cannot properly be distinguished from
arbitration-related attachment permitted under State statutory and decisional law, for the
[New York] Convention makes no distinction; it either permits or proscribes both. In my view,
absent more specific language of proscription in the [New York] Convention, it permits both....
CAROLINA POWER & LIGHT COMPANY v. URANEX
451 F.Supp. 1044 (N.D. Calif. 1977)
PECKHAM, CHIEF JUDGE. In 1973 Carolina Power & Light Company (“CP&L”), a North Carolina
public utility company, contracted with defendant Uranex for the delivery of uranium
concentrates to CP&L during the period 1977 to 1986. Uranex is a French groupement d'interet
economique that markets uranium internationally. Following the recent and dramatic rise in
the price of uranium fuel in the world market, Uranex either would not or could not deliver at
the contract price, and requested renegotiation....
Earlier this year CP&L filed the present action against Uranex, and proceeded ex parte to
attach an 85 million dollar debt owed to Uranex by Homestake Mining Company
(“Homestake”), a San Francisco based corporation that markets uranium throughout the United
States. The 85 million dollars is due to Uranex pursuant to a uranium supply contract between

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 Homestake and Uranex, and has no relationship to the present litigation except as a potential
source for CP&L to satisfy any judgement that might issue. But for the attachment the funds
would have been transferred out of the country in the ordinary course of business.
The contract between CP&L and Uranex provides that disputes are to be submitted to
P "941" arbitration in New York. At the time this lawsuit was filed CP&L sought to compel Uranex to
P "942" enter arbitration. Since that time, however, Uranex voluntarily has entered arbitration and
those proceedings are now going on in New York. Both parties agree that because of the
arbitration agreement this court cannot adjudicate the merits of the dispute, but CP&L
contends that the court should stay this action and maintain the attachment in order to
protect any award that CP&L might receive in the New York arbitration. CP&L claims that
Uranex has no other assets in this country with which to satisfy a judgment, and Uranex
apparently does not dispute this proposition. Uranex has moved the court on several grounds
to dismiss the complaint and quash the writ of attachment....
[In a portion of the opinion not excerpted here, the District Court concluded that it possessed
quasi in rem jurisdiction over Uranex sufficient to permit attachment of the debt owed to it.]
[W]here the facts show that the presence of defendant's property within the state is not merely
fortuitous, and that the attaching jurisdiction is not an inconvenient arena for defendant to
litigate the limited issues arising from the attachment, assumption of limited jurisdiction to
issue the attachment pending litigation in another forum would be constitutionally
permissible.
In this litigation CP&L has established acts by affidavit, in large part uncontroverted by
defendant, that are adequate to support jurisdiction to order the attachment. As described
above, Uranex apparently has no other assets within the United States, and Uranex's business
appears unlikely to bring such assets into the country in the future. (42) San Francisco is the
corporate headquarters of Homestake, and the presence of the debt drives necessarily from
the dealings between Homestake and Uranex. California is not an exceptional or inconvenient
forum for Uranex to litigate issues that pertain to the 85 million dollar debt due from
Homestake....
The chief difficulty with the course outlined above is that there is at present no action against
Uranex pending before any court with in personam jurisdiction. Arbitration has commenced in
New York, but the attachment in this jurisdiction cannot be predicated on such informal
proceedings. The arbitrator would not have authority to issue any attachment in New York, and
P "942" until CP&L files an action seeking to resolve the underlying controversy Uranex cannot
P "943" challenge that court's in personam jurisdiction. In the present posture of the litigation CP&L
is left in the position of a litigant who seeks an attachment premised only on the promise that
he will at some point file and prosecute the underlying action. Ordinarily such circumstances
should require this court to dismiss the action and quash the attachment. The court, however,
is mindful of the unique situation of this litigation. CP&L hardly can be faulted for failing to file
simultaneous actions, for when this action was filed in January few attorneys would have
doubted that this court would have quasi in rem jurisdiction to adjudicate the underlying
controversy. Furthermore, any dismissal of this action undoubtedly would be stayed pending
appeal by the plaintiff. Accordingly, given the exceptional circumstances of this litigation, the
court will maintain the attachment, in the amount stated [below] ... for 30 days from the date of
this order, during which time plaintiff CP&L must file an action directed to the underlying
merits in a jurisdiction that has in personam jurisdiction over defendant Uranex.
In 1970 the United States became a party to the [New York] Convention which provides
generally that member nations will enforce provisions for arbitration in international
commercial agreements and recognize arbitral awards made in other member nations. France
is also a contracting nation to the Convention. There is little question that the Convention
would apply to the contract at issue in this litigation. As described above, both Uranex and
CP&L agree that they must pursue arbitration in New York as provided in the arbitration clause
of their contract. Uranex, however, argues that it would be inconsistent with the Convention for
this court to maintain the attachment pending the arbitration. (43)
The Convention and its implementing statues contain no reference to prejudgment attachment,
and provide little guidance in this controversy. Article II of the Convention states only that a
“court of a Contracting State ... shall, at the request of one of the parties, refer the parties to
arbitration.” To implement this aspect of the Convention, §206 of Title 9 provides that “[a] court
having jurisdiction under this chapter may direct that arbitration be held in accordance with
P "943" the agreement at any place therein provided for, whether that place is within or without the
P "944" United States.” The language of these provisions provides little apparent support for
defendant's argument.
Uranex, however, relies upon the decisions of the Third Circuit in McCreary Tire & Rubber Co. v.
CEAT, SpA, 501 F.2d 1032 (3d Cir. 1974).... At least one district court has chosen to follow the
rationale of the McCreary opinion in applying the Convention to prejudgment attachments. See
Metropolitan World Tanker, Corp. v. P.N. Pertambangan Minjakdangas Bumi Nasional (P.M.
Pertamina), 427 F.Supp. 2 (S.D.N.Y. 1975).
This court, however, does not find the reasoning of McCreary convincing. As mentioned above,
nothing in the text of the Convention itself suggests that it precludes prejudgment attachment.
The [FAA], 9 U.S.C. §§1 et. seq. (1970), which operates much like the Convention for domestic
agreements involving maritime or interstate commerce, does not prohibit maintenance of a
prejudgment attachment during a stay pending arbitration:

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 After declaring (§2 [of the FAA]) such agreements [to arbitrate] to be enforceable, Congress, in
succeeding sections, implemented the declared policy. By §3 it provided that “if any suit or
proceeding be brought in any of the courts of the United States upon any issue referable to
arbitration under an agreement in writing for such arbitration, the court ... shall on application
of one of the parties stay the trial ... until such arbitration has been had” if the applicant is not
in default in proceeding with such arbitration. The section obviously envisages action in a court
on a cause of action and does not oust the court's jurisdiction of the action, though the parties
have agreed to arbitrate. And, it would seem there is nothing to prevent the plaintiff from
commencing the action by attachment if such procedure is available under the applicable law.
This section deals with suits at law or in equity. The concept seems to be that a power to grant
a stay is enough without the power to order that the arbitration proceed, for, if a stay be
granted, the plaintiff can never get relief unless he proceeds to arbitration.
Barge “Anaconda” v. American Sugar Refining Co., 322 U.S. 42, 44-45 (1944). See also Murray Oil
Products Co. v. Mitsui & Co., 146 F.2d 381 (2d Cir. 1944). The McCreary court makes two rather
elliptical comments to distinguish the [FAA] from the Convention. First, the court notes that the
[FAA] only directs courts to “stay the trial of the action,” while the Convention requires a court
to “refer the parties to arbitration.” 501 F.2d at 1038. From this difference the McCreary court
apparently concludes that while the [FAA] might permit continued jurisdiction and even
maintenance of a prejudgment attachment pending arbitration, application of the Convention
completely ousts the court of jurisdiction. The use of the general term “refer,” however, might
reflect little more than the fact that the Convention must be applied in many very different
P "944" legal systems, and possibly in circumstances where the use of the technical term “stay” would
P "945" not be a meaningful directive. Furthermore, §4 of [FAA] grants district courts the power to
actually order the parties to arbitration, but this provision has not been interpreted to deprive
the courts of continuing jurisdiction over the action.
Second, the McCreary court found support for its position in the fact that the implementing
statutes of the Convention provide for removal jurisdiction in the federal courts. See 9 U.S.C.
§205 (1970). The Third Circuit concluded that “[t]he obvious purpose [of providing for removal
jurisdiction] ... was to prevent the vagaries of state law from impeding its [the Convention's] full
implementation. Permitting a continued resort to foreign attachment ... is inconsistent with
that purpose.” It must be noted, however, that any case falling within §4 of the [FAA] also would
be subject to removal pursuant to 28 U.S.C. §1441. Furthermore, removal to federal court could
have little impact on the “vagaries” of state provisional remedies, for pursuant to Rule 64 of
the Federal Rules of Civil Procedure the district courts employ the procedures and remedies of
the states where they sit. Finally, it should be noted that in other contexts the Supreme Court
has concluded that the availability of provisional remedies encourages rather than obstructs
the use of agreements to arbitrate. See Boys Market, Inc. v. Retail Clerks Union, 398 U.S. 235
(1970).
In sum, this court will not follow the reasoning of McCreary Tire & Rubber Company v. CEAT, SpA,
supra. There is no indication in either the text or the apparent policies of the Convention that
resort to prejudgment attachment was to be precluded....
Notes on New York Convention's Effect on Court-Ordered Provisional Measures in Aid of
Arbitration
1. Cooper and McCreary: Article II(3) forbids court-ordered provisional relief in aid of arbitration.
The plain language of both the McCreary and the Cooper opinions is that Article II(3) divests a
national court of jurisdiction to order attachment in aid of arbitration, or to do anything else
other than compel arbitration. As the McCreary court concluded, “the purpose and policy of the
UN Convention will be best carried out by restricting prearbitration judicial action to
determining whether arbitration should be compelled.”
A number of lower courts have followed the language of Cooper in holding that Article II(3) of
the Convention prohibits national courts from ever ordering attachments in aid of an
international arbitration that is subject to the Convention. See I.A.T.D. Assoc. Inc. v. Podar Bros.,
636 F.2d 75 (4th Cir. 1981); Metropolitan World Tanker Corp. v. P.N. Pertambangan Minjakdangas
Bumi Nasional, 427 F.Supp. 2 (S.D.N.Y. 1975) (attachment); Drexel Burnham Lambert Inc. v.
Ruebsamen, 139 A.D.2d 323 (1st Dept. 1988); Shah v. Eastern Silk Industries Ltd, 493 N.Y.S.2d 150
(App. Div. 1985).
2. Rationale of Cooper and McCreary. It is important, in properly analyzing McCreary and
Cooper, to recall their facts. In both decisions, two circumstances were present: (a) the party
seeking attachment was vigorously resisting arbitration and was held by the court to be
seeking attachment as a means of litigating, rather than arbitrating, the parties' underlying
dispute; and (b) the arbitral situs was outside of the United States, within another signatory to
the New York Convention (Belgium in McCreary; Switzerland in Cooper).
Put aside these two factors, however, and consider for the moment only the stated rationale for
the Cooper opinion: Article II(3) of the New York Convention forbids court-ordered attachment
in aid of arbitration. Is that a sensible rule?
As we have seen, provisional relief is often necessary in order to ensure that the arbitral
process functions and that the parties' rights are respected. See supra pp. 919-21. As we have
seen, however, arbitrators often cannot provide provisional relief – especially where they are
not yet in place – and they generally cannot order attachments (as to third parties). Given this,
P "945" the Cooper rationale threatens, rather than furthers, the arbitral process, by denying what is
P "946"

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 P "946" often the only realistic means of preserving the status quo. That view is shared by the
overwhelming majority of commentators. See Ebbs, Flight of Assets From the Jurisdiction “In the
Twinkling of a Telex”: Pre- and Post-Award Conservatory Relief in International Commercial
Arbitration, 7 J. Int'l Arb. 9 (1990); Brower & Tupman, Court-Ordered Provisional Measures under
the New York Convention, 80 Am. J. Int'l L. 24 (1986); Becker, Attachments in Aid of International
Arbitration – The American Position, 1 Arb. Int'l 40 (1985); McDonnell, The Availability of
Provisional Relief in International Commercial Arbitration, 20 Colum. J. Trans. L. 273 (1984); New
York City Bar Report on the Advisability and Availability of Provisional Remedies in the
Arbitration Process, The Record December 1984, 625, 629. See also Channel Tunnel Group Ltd v.
Balfour Beatty Constr. Ltd [1993] A.C. 334 (House of Lords) (rejecting Cooper reading of Article
II(3)).
Consider the argument, advanced in Cooper, that parties to an arbitration agreement
bargained to exclude the involvement of national courts, and that permitting court-ordered
provisional measures would be inconsistent with this basic bargain. Is this a complete answer,
particularly in cases where the absence of provisional measures would render the arbitration
process ineffectual? Doesn't the court's concern go to the particular judicial forum where
provisional measures can be obtained, and not to the question whether those measures are
available at all? See infra pp. 960-71 discussing forum selection in the context of provisional
measures.
The Cooper court also reasons that provisional measures are not really very important in
arbitration. That is simply wrong. Provisional relief is often of critical importance in
international disputes. See supra pp. 919-21.
More plausible is the suggestion in Cooper that parties should be left to agree specifically to
allow national courts to order pre-award security measures. That argument at least properly
focuses attention on the primacy of the parties' agreement and the needs of the arbitral
process. But nothing in Cooper justifies the court's allocation of the burden of proof and its
requirement for an express agreement to permit court-ordered provisional measures. For the
reasons set forth above, it is more likely that, absent contrary agreement, the parties intended,
and justice would be served by, the availability of court-ordered provisional measures that are
genuinely in aid of arbitration.
3. Lower U.S. court decisions rejecting argument that Article II(3) forbids court-ordered
provisional relief. The weight of lower U.S. court authority has followed Uranex and rejected the
argument that Article II(3) flatly forbids all court-ordered provisional measures in aid of
arbitration. For other lower court decisions adopting the Uranex position, see Daye Nonferrous
Metals Co. v. Trafigura Beheer BV, 1997 WL 375680 (S.D.N.Y. 1997) (granting injunctive relief
against transfers of funds, in aid of arbitration in Paris); Alvenue Shipping v. Delta Petroleum
(U.S.A.), Ltd, 876 F.Supp. 482, 487 (S.D.N.Y. 1994) (granting preliminary injunctive relief in aid of
arbitration in New York Convention signatory); Filantro SpA v. Chilewich Int'l Corp., 789 F.Supp.
1229 (S.D.N.Y. 1992) (McCreary is “facially absurd”), app. dismissed, 984 F.2d 58 (2d Cir. 1993);
Andros Compania Maritima SA v. Andre & Cie, SA, 430 F.Supp. 88 (S.D.N.Y. 1977); Compania de
Navegacion y Financiera Bosnia SA v. National Unity Marine Salvage Corp., 457 F.Supp. 1013, 1014
(S.D.N.Y. 1978); Atlas Chartering Services, Inc. v. World Trade Group, Inc., 453 F.Supp. 861, 863
(S.D.N.Y. 1978); Atwood Navigation, Inc. v. M/V Rizal, 1989 WL 16306 (E.D. Pa. Feb. 24, 1989)
(suggesting McCreary is inapplicable to maritime attachment). See also Tampimex Oil Ltd v.
Latina Trading Corp., 558 F.Supp. 1201 (S.D.N.Y. 1983) (granting provisional relief without
discussion).
4. Authorities rejecting conclusion that Article II(3) precludes court-ordered provisional
measures in aid of arbitration. Virtually all non-U.S. authorities reject the conclusion that
Article II(3) of the New York Convention precludes court-ordered provisional measures in aid of
arbitration. A. van den Berg, The New York Arbitration Convention of 1958 139-40 (1981) (“There ...
seems to be no doubt as to the possibility of a pre-award attachment, that is to say an
attachment before or during the arbitration, in order to secure the subject matter in dispute or
the payment under the award if rendered in favor of the party who has applied for the
attachment”); Scherk Enterprises AG v. Societe des Grandes Marques, No. 3989, IV Y.B. Comm. Arb.
286 (Corte di Cassazione May 12, 1977); The Rena K, 1 Lloyd's Law Rep. 545 (1978).
5. New York legislative response to Cooper. The interpretation of the New York Convention in
Cooper was widely criticized in New York (and elsewhere). See Committee on Arbitration and
Alternative Dispute Resolution of the Association of the Bar of the City of New York, The
Advisability and Availability of Provisional Remedies in the Arbitration Process, 39 The Record 625
(1984); Becker, Attachments and International Arbitration – An Addendum, 2 Arb. Int'l 365 (1986).
P "946" As a consequence, §7502 of the New York Civil Practice Law and Rules was amended, adding a
P "947" new sub-paragraph (c), excerpted above. Subparagraph (c) permits New York state courts to
grant attachments and preliminary injunctive relief “in connection with an arbitrable
controversy,” provided that an arbitral award may be rendered ineffectual without interim
relief. Does §7502(c) affect the interpretation of the New York Convention in Cooper?
6. Rationale of Uranex: Article II(3) permits court-ordered attachments in aid of arbitration.
Consider the rationale of the Uranex decision. What exactly does the court conclude Article
II(3) means? Suppose that a foreign court entertains an attachment action in circumstances
like those in McCreary and Cooper, and grants an attachment that is plainly intended to
frustrate the arbitral process. Does that violate the New York Convention? Wouldn't Article II(3)
of the Convention forbid such actions?

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 In Uranex, however, note that there was no evidence that the pre-award attachment was
designed to do anything other than secure the arbitration award (and hence, aid the arbitral
process). Although the rationale articulated in Cooper and McCreary would not permit such an
attachment, Uranex does. Which interpretation of the Convention – Uranex or Cooper/McCreary
– is sounder?
7. McCreary and Cooper revisited: effect of Article II(3) where the parties' arbitration agreement
is violated. Consider again the specific results – as opposed to the rationale – in both McCreary
and Cooper. Was it not clear in each case that the judicial attachment action was an effort to
circumvent the arbitration process that the parties had agreed upon? Note that the McCreary
court specifically grounded its holding – that Article II(3) of the Convention would be violated
by the attachment – on its conclusion that the attachment action “breached” the parties'
arbitration agreement.
Assuming that an attachment (or other) action in a national court does violate the parties'
arbitration agreement, then the results in both Cooper and McCreary are unexceptional – and
indeed both desirable and mandated by Article II(3). It is no more inappropriate to refuse to
entertain such an action than it would be to entertain an action on the merits in violation of
the parties' arbitration agreement. Indeed, the basic reading of Article II(3) adopted by
McCreary – that Article II(3) forbids judicial actions in national courts in violation of the parties'
arbitration agreement – also appears sound.
Note that, while parts of the rationale and the specific results in Cooper and McCreary can be
explained as involving litigation that was designed to frustrate the arbitral process,
subsequent decisions following Cooper and McCreary cannot. In these cases, Article II(3) was
invoked where it was clear that court-ordered provisional measures were not intended to
circumvent the arbitral process. See Drexel Burnham Lambert Inc. v. Ruebsamen, 139 A.D.2d 323
(1st Dept. 1988) (attachment solely in aid of arbitration); Shah v. Eastern Silk Industries Ltd, 493
N.Y.S.2d 150 (App. Div. 1985); Faberge International Inc. v. Di Pino, 491 N.Y.S.2d 345 (App. Div.
1985); I.T.A.D. Associates, Inc. v. Podar Bros., 636 F.2d 75 (4th Cir. 1981). See also Lafarge Coppee v.
Venezolana de Cementos, S.A.C.A., 31 F.3d 70 (2d Cir. 1994) (discussing grant of provisional
injunctive relief in aid of arbitration).
8. Cooper and McCreary revisited again: was the parties' arbitration agreement violated? Note
that both Cooper and McCreary involved ICC arbitrations, and therefore that Article 8(5) of the
then-prevailing 1988 ICC Rules was applicable. As we have seen, supra pp. 931-32, Article 8(5) of
the 1988 ICC Rules specifically provided that “[b]efore the file is transmitted to the arbitrators,
and in exceptional circumstances even thereafter, the parties shall be at liberty to apply to
any competent judicial authority for interim or conservatory measures, and they shall not by so
doing be held to infringe the agreement to arbitrate or to affect the relevant powers reserved
to the arbitrator.” What light does Article 8(5) shed upon the correctness of the conclusion in
McCreary that the attachment action was a violation of the parties' arbitration agreement?
Even though the ICC Rules provided that seeking attachment does not in principle violate the
parties' arbitration agreement, does that mean that it never does? Even where the attachment
is plainly part of a scheme to substitute litigation for arbitration?
9. Arbitration agreements permitting court-ordered provisional relief. The Cooper court
apparently suggests that the parties could have specifically agreed to permit court-ordered
provisional measures. (The court's suggestion ignores the fact that, by agreeing to ICC
arbitration (and Article 8(5) of the 1988 ICC Rules), the parties in Cooper did just that.) Cooper
rests on Article II(3) and a court's obligation to refer the parties to arbitration; even under the
Cooper rationale, Article II(3) would appear to permit court-ordered provisional measures
when that is what the parties specifically agreed.
If the parties' agreement does expressly permit court-ordered provisional measures, it must
still be interpreted. Suppose that the parties in Cooper had agreed that “either party shall
have the right at any time to seek provisional measures from any national court in aid of
P "947" arbitration hereunder.” Would that clause, or any similar language, have allowed the
P "948" attachment actions in either Cooper or McCreary? Where judicial actions for provisional
measures are designed to frustrate the arbitral process, even general clauses permitting court-
ordered provisional measures should not apply.
10. Need for U.S. Supreme Court interpretation of Article II(3). There is a clear conflict between
the rationale of McCreary and Cooper, on the one hand, and Uranex, on the other. Moreover, as
described above, lower courts have applied the Cooper rationale to cases in which
attachments were not sought to circumvent or frustrate the arbitral process. See supra p. 947.
U.S. Supreme Court resolution of this issue would materially assist the international arbitral
regime, remove a serious uncertainty that affects the rights of U.S. companies engaged in
international commerce, and potentially bring the United States into step with other
Convention signatories, see supra p. 946. The uncertainty resulting from the Uranex versus
McCreary split is particularly serious because of the urgency that often attends requests for
provisional relief.
11. Proper application of Article II(3) to provisional relief. Resolution of the Cooper versus Uranex
division of authority also requires a more precise analytical approach to Article II(3) than that
displayed by either the lower courts or most commentators. First, a correct resolution of any
dispute over provisional relief requires a careful parsing of the parties' arbitration agreement
and any institutional rules incorporated by that agreement: do the parties' agreement and any

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 applicable rules permit pre-award court-ordered attachments, and if so, which ones?
Second, if the parties' agreement and applicable institutional rules provide no express answer,
what should the parties be presumed to have intended? Absent express contrary language, the
presumption should be that court-ordered provisional relief in aid of arbitration is permitted,
but efforts to circumvent arbitration are not.
Third, is the action for pre-award court-ordered attachment sought in a particular case
consistent with, or inconsistent with, the parties' arbitration agreement? This requires careful
analysis of both the relevant arbitration agreement and the relevant request for court-ordered
provisional measures.
Only with these three conclusions in hand can Article II(3) sensibly be considered: that
consideration should generally conclude that Article II(3) does not forbid court-ordered pre-
award attachments in aid of arbitration, except when they are contrary to the terms of the
parties' arbitration agreement or applicable institutional rules. Conversely, Article II(3) should
forbid court-ordered provisional relief that is intended to frustrate or circumvent the arbitral
process or that is contrary to the parties' agreement.
This analysis places a premium on deciding when a request for provisional relief is “in aid” of
arbitration, rather than an effort to circumvent it. Resolution of this question will depend on
the timing of a request, the availability of provisional relief from the arbitrators, the extent to
which provisional measures will effectively resolve the underlying dispute, and the hardship
suffered by the parties.
12. Lower U.S. court decisions granting maritime/admiralty remedies in aid of arbitration. Just as
some courts, see infra pp. 954-55, have distinguished between attachments and preliminary
injunctions, other decisions have distinguished traditional maritime provisional remedies
(such as vessels arrests or maritime attachments). Many of these courts have refused to apply
the McCreary/Cooper interpretation of Article II(3) of the Convention to these remedies. See
E.A.S.T., Inc. of Stamford v. M/V Alaia, 876 F.2d 1168 (5th Cir. 1989); Castelan v. M/V Mercantil
Parati, 1991 U.S. Dist. Lexis 6472 (D.N.J. 1991); Construction Exporting Enterprises v. Nikki Maritime,
Ltd, 558 F.Supp. 1372 (S.D.N.Y. 1983) (relying on Supplemental Rule B(1) and traditional
maritime attachment); Atlas Chartering Services v. World Trade Group, 453 F.Supp. 861, 863
(S.D.N.Y. 1978) (same). See Higgins, Interim Measures in Transnational Maritime Arbitration, 65
Tulane L. Rev. 1519 (1991).
Some lower courts have rejected this result. See Metropolitan World Tanker Corp. v. P.N.
Pertambangan Minjakdangas Bumi Nasional, 427 F.Supp. 2 (S.D.N.Y. 1975).
13. Which national court is competent to order an attachment in aid of an inter-national
arbitration? As noted above, in both McCreary and Cooper the parties had agreed to arbitrate
their disputes in an arbitral forum outside of the United States – Belgium and Switzerland,
respectively. What relevance, if any, does that have for the power of a U.S. court to order pre-
award attachment under the New York Convention?
Is there anything in the Convention that suggests that only the court where the arbitration
proceeding will be conducted should have the authority to order pre-award attachment?
Would that be a sensible rule? Is it likely that jurisdictional disputes, forum-shopping,
multiplicitous litigation, or other ills will result from a different rule? Is there any basis,
however, for finding such a rule in the text of the Convention? The question of what nation's
courts can or should entertain requests for provisional relief in aid of arbitration is considered
in detail below. See infra pp. 960-71.
P "948"
P "949"
14. Applicability of Cooper outside New York Convention. Suppose that an arbitration
agreement is not subject to the New York Convention, for example, because the Convention's
requirements concerning reciprocity or “non-domestic” agreements are not satisfied. In that
case, the Cooper rationale would presumably not apply – although a U.S. court might
nonetheless conclude that §§2, 3 and 4 of the FAA required the same result, or that Cooper's
underlying policy of deference to the perceived needs of the arbitral process counselled
against granting provisional relief as a matter of national law or comity.
The New York Appellate Division has held that Cooper was not applicable, and that an
attachment in aid of arbitration could be granted, where the party against whom the
attachment was sought was based in a nation that was not a signatory to the New York
Convention:
[Cooper] involved a dispute between American and French parties, both of whose Nations were
signatories to the [New York] Convention. However, the countries in which the parties to the
agreements here in dispute reside and do business are not signatories to the [New York]
Convention. So far as appears, there is nothing in the [New York] Convention which precludes
attachment, although it requires that Nations which are signatories provide for enforcement of
arbitration awards by the respective countries. The rationale of Cooper is that the signatory
Nation will appropriately provide for security for such enforcement, without prejudgment
attachment. Whatever the effect of those provisions, they cannot be binding in this case. If [the
party seeking attachment] is successful [on the merits], it will have to sue to enforce the
arbitration award in Argentina, a nonsignatory State. Intermar will not have the benefit of the
Convention's enforcement provisions....

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 Intermar Overseas, Inc. v. Argocean SA, 503 N.Y.S.2d 736 (App. Div. 1986).
The reasoning in the foregoing excerpt is flawed, but its result is sensible. The Convention's
applicability does not depend on the parties' nationality, but instead on the character of the
parties' arbitration agreement and the arbitral situs. See supra pp. 124-26, 145-48. Nonetheless,
the Intermar court does suggest a relevant consideration for the exercise of a court's discretion
to grant pre-award provisional measures – namely, to what extent does it appear that the
ultimate award will be difficult to enforce.
For other decisions holding that the McCreary/Cooper interpretation of Article II(3) is not
applicable outside the New York Convention context, see MCT Shipping Corp. v. Sabet, 497
F.Supp. 1078, 1086 (S.D.N.Y. 1980); Coastal States Trading, Inc. v. Zenith Nav. SA, 446 F.Supp. 330,
341-42 (S.D.N.Y. 1977) (holding (wrongly) that agreement had no “reasonable relation” to foreign
state under FAA §202, and therefore that Convention and Article II(3) did not apply).
15. Prohibition against court-ordered provisional measures under ICSID Convention. One arbitral
regime that excludes court-ordered provisional measures in aid of arbitration is ICSID. See
supra p. 17. Article 26 of the ICSID Convention provides:
“Consent of the parties to arbitration under this Convention shall, unless otherwise stated, be
deemed consent to such arbitration to the exclusion of any other remedy.”
Article 26 has been interpreted by several ICSID arbitral tribunals and other authorities as
precluding actions seeking provisional measures from a national court. Holiday Inns
SA/Occidental Petroleum Corp. v. Government of Morocco, ICSID Case No. Arb. 72/1; Guinea v.
Maritime Int'l Nominees Est., Case No. 6,551, 24 Int'l Legal Mat. 1639 (Tribunal of Antwerp 1985);
Guinea and Soguipêche v. Atlantic Triton Co., 24 Int'l Legal Mat. 340 (Rennes Ct. of App. 1985),
rev'd, 26 Int'l Legal Mat. 373 (Cour de Cassation 1986); Lalive, The First “World Bank” Arbitration
(Holiday Inns v. Marocco) – Some Legal Problems, 1980 Brit. Y. B. Int'l L. 123 (1982); Friedland,
Provisional Measures and ICSID Arbitrations, 2 Arb. Int'l 335 (1986); Brower & Goodman,
Provisional Measures and the Protection of ICSID Jurisdictional Exclusivity Against Municipal
Proceedings, 6 Foreign Inv. L. J. 4361 (1991).
What is the rationale for extending Article 26 of the ICSID Convention to provisional measures?
Is this wise? What aspects of the ICSID regime argue for this application of Article 26?
When might parties have “otherwise” agreed to court-ordered provisional measures in aid of an
ICSID arbitration? Should such an agreement be more heavily implied than other forms of
judicial relief?
Rule 39(5) of the ICSID Arbitration Rules provides: “Nothing in this Rule shall prevent the
P "949" parties, provided that they have so stipulated in the agreement recording their consent, from
P "950" requesting any judicial or other authority to order provisional measures, prior to the
institution of the proceedings, or during the proceeding, for the preservation of their
respective rights and interests.”
16. Court-ordered attachment or other measures in aid of execution of arbitration award.
Suppose that an arbitration goes forward, without provisional measures, and produces an
award. The prevailing party then has the award confirmed, for example, in the United States;
when the losing party refuses to pay, does the Convention interpose any obstacle to court-
ordered attachment or other measures in aid of execution? See Sanders, Consolidated
Commentary, XIV Y.B. Comm. Arb. 528, 570 (1989) (“no court has doubted that an attachment in
connection with the enforcement of an arbitral award, in order to secure payment under the
award, is compatible with the Convention.”); Cooper v. Ateliers de la Motobecane SA, 442 N.E.2d
1239 (Ct. App. 1982). In fact, not only does the Convention not preclude court-ordered
attachment in aid of execution of an arbitral award, it arguably requires such action – at least if
it is available in purely domestic arbitration matters.
3. Effect of National Arbitration Legislation on the Authority of National Courts to Grant
Provisional Relief in Aid of International Arbitration (44)
The authority and willingness of a national court to order provisional measures in aid of
arbitration is defined by national law. Even if the New York Convention does not forbid court-
ordered provisional measures in aid of arbitration, national law may do so.
For example, as discussed below, some lower U.S. courts have concluded that the domestic FAA
denies them jurisdiction to order provisional measures in aid of arbitration. (45) Moreover,
where court-ordered provisional measures are permitted, national law defines the
circumstances in which such relief may be granted; as discussed below, U.S. courts have
adopted a variety of different approaches to this issue. (46) And finally, national law defines
when a national court is the appropriate forum for issuing provisional measures in aid of an
international arbitration. (47)
Excerpted below are Article 17 of the UNCITRAL Model Law and two U.S. decisions – Dongsan
Construction Co. (48) and Borden, Inc. v. Meiji Milk Products. (49) All three authorities address
the availability of injunctive relief in aid of an international arbitration under national law.
Also excerpted below is §7502(c) of the New York Civil Practice Law and Rules, which sets out
the circumstances under New York law in which injunctive relief in aid of arbitration may be
granted.
P "950"
P "951"

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 UNCITRAL MODEL LAW
Article 17
[excerpted below at p. 1016]
ROGERS, BURGUN, SHAHINE & DESCHLER, INC. v. DONGSAN CONSTRUCTION CO.
598 F.Supp. 754 (S.D.N.Y. 1984)
KRAM, DISTRICT JUDGE. Rogers, Burgun, Shahine & Deschler, Inc. (“RBSD”) is a New York
corporation engaged in business as architectural designers of hospitals. Dongsan Construction
Company, Ltd. (“Dongsan”) is a Korean corporation, with offices in New Jersey, engaged in
business as general contractors in construction projects.
In 1982, Saudi Arabia undertook to build a hospital in Jubail. Dongsan secured the main
contract on this project. Dongsan subcontracted a portion of the architectural and engineering
design work on the project to RBSD (the “Subcontract”). Under the Subcontract, RBSD agreed to
perform certain services, some of which RBSD, in turn, subcontracted to other entities. In return
for those services, Dongsan agreed to pay RBSD some $2,596,086. Dongsan further agreed to pay
RBSD twenty per cent of that amount ($519,217) in advance of RBSD's performance. In order to
secure this advance payment, RBSD provided Dongsan a Letter to Guarantee from Bank Al-
Jazira in the full amount of the advance payment. The amount guaranteed by this letter was to
decrease periodically commensurate with the percentage of work performed by RBSD and
paid for by Dongsan. The Subcontract also provided in broad terms for resolution of disputes
by arbitration in Paris, France, under the rules of Conciliation and Arbitration of the
International Chamber of Commerce. (50)
RBSD has performed some of the services required by the Subcontract and Dongsan has paid
RBSD for that work. Pursuant to the terms of the Letter of Guarantee, the amount currently
secured is $155,766.... [A] dispute arose with respect to RBSD's performance.... RBSD claims that
the dispute concerns a very small portion of the work performed or owing.... Dongsan notified
RBSD that it intended to complete certain of RBSD's obligations itself, effecting a partial
termination of the Subcontract as modified. Additionally, Dongsan indicated that it would
P "951" withhold the remaining balance due RBSD under the Subcontract to set-off the anticipated
P "952" expenses in completing those parts of RBSD's services it had terminated. RBSD claims that it
has substantially performed all of its obligations due to date, that it is owed some $752,865 for
actual and tendered performance, and that it is entitled to the release of the remaining
$155,766 held by way of the Letter of Guarantee as security.
RBSD filed the complaint herein on November 5, 1984, alleging breach of contract by Dongsan
and seeking inter alia the $908,631 allegedly owed to RBSD by Dongsan and a preliminary
injunction enjoining Dongsan from calling the Letter of Guarantee.... RBSD moved this Court for
the preliminary injunction, pursuant to Fed.R.Civ.P. 65. The Court thereby also entered a
temporary restraining order against Dongsan enjoining it from calling the Letter of Guarantee....
On November 21, 1984, Dongsan filed its motion to dismiss or stay this action pending
arbitration of the disputes herein. [The Court first held that RBSD's substantive claims were
arbitrable.] ...
The fact that this dispute is to be arbitrated does not deprive the Court of its authority to
provide provisional remedies. See Erving v. Virginia Squires Basketball Club, 349 F.Supp. 716,
719-29 (E.D.N.Y.), aff'd, 468 F.2d 1064, 1067 (2d Cir. 1972); Boys Markets, Inc. v. Retail Clerk's Union,
398 U.S. 235 (1970). The Court must, therefore, decide if this is “a proper case” for an injunction.
Erving, 468 F.2d at 1067.
The standards governing the issuance of a preliminary injunction are well established in this
Circuit. A preliminary injunction will issue only upon
a showing of (a) irreparable harm and (b) either (1) likelihood of success on the merits or (2)
sufficiently serious questions going to the merits to make them a fair ground for litigation and a
balance of hardships tipping decidedly toward the party requesting the preliminary relief.
Jackson Dairy, Inc. v. H.P. Hood & Sons Inc., 596 F.2d 70, 72 (2d Cir. 1979). I find that the second
prong test has been met in the present case.
The relief sought in this case is minimal. RBSD seeks only to preserve the status quo with
respect to the Letter of Guarantee. “The status quo has been frequently defined as the last
uncontested status which preceded the pending controversy.”Flood v. Kuhn, 309 F.Supp. 793,
798 (S.D.N.Y. 1970), aff'd, 443 F.2d 264 (2d Cir. 1971), aff'd, 407 U.S. 258 (1972). The last uncontested
status in this case found Dongsan holding a Letter of Guarantee for $155,766 with RBSD holding
that sum to indemnify Bank Al-Jazira for the letter should it be called. Dongsan's argument that
the status quo would be preserved by allowing it to call the letter and take the $155,766
secured thereby is unavailing. (51) RBSD seeks only to prevent Dongsan from calling this letter.
(52)
P "952"
P "953"
The contract dispute involves nearly one million dollars. Dongsan is a Korean corporation with
apparently no fixed assets in the United States. Dongsan does maintain an office in New Jersey
and a large amount of liquid assets in bank accounts in New York and New Jersey. Those assets,
however, because they are all liquid, could easily be depleted or removed from the United
States. If that were to occur, RBSD's ability to recover in this Court or any arbitration award

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 obtained in Paris would be frustrated.
With respect to the Letter of Guarantee, the potential for frustration of RBSD's recovery is
doubled. The monies securing the letter are currently in RBSD's possession. If Dongsan is
permitted to call the letter, those assets would be transferred, essentially, from RBSD to
Dongsan. Any arbitral determination that RBSD is entitled to recover from Dongsan, or that
Dongsan was not entitled to call the letter, would be meaningless if Dongsan were to transfer
its liquid assets, increased by the monies securing the letter, out of the reach of this Court.
Since there would then be no adequate remedy at law for RBSD in this Court, the Court finds
that there could be irreparable harm to RBSD if Dongsan is not enjoined from calling the letter.
Dongsan's argument that RBSD would be able to enforce any arbitration award in Korea does
not change this finding. RBSD would still have no adequate remedy at law here, in this Court.
See Petroleum Exploration, Inc. v. Public Service Comm'n, 304 U.S. 209, 217 (1938). In those cases,
the federal courts held that legal remedies in state courts did not suffice to make injunctive
relief in federal courts unavailable. The absence of legal remedy is to be determined in this
Court. If the availability of legal remedies in state court is not sufficient to preclude injunctive
relief here, a fortiori the availability of a legal remedy in a foreign country is not sufficient. (53)
The parties are in hot dispute about the underlying contractual claims. Plaintiff claims it is due
nearly $1,000,000. Defendant asserts that plaintiff's obligation to indemnify could total
$10,000,000. Certainly this is sufficient to establish serious questions going to the merits for the
arbitrator's decision.
Finally, the Court finds that the balance of hardships tips decidedly toward RBSD. If the status
quo is maintained, defendant feels no hardship whatsoever. Dongsan maintains security in the
sum of $155,766 should the arbitrators determine that it is entitled to any or all of that sum (or
more), and loses nothing that it currently has. If the status quo is not maintained, and Dongsan
is permitted to call the letter RBSD stands to lose its own money (the $155,766) without
recourse here.
Accordingly, RBSD's motion is granted. RBSD is to file proof of extension of the Letter of
P "953" Guarantee for one year (to be extended further if necessary) by December 15, 1984. Dongsan,
P "954" and any of its officers, directors, controlling persons, parents, affiliates, and/or subsidiaries,
is hereby enjoined from directing the Bank Al-Jazira to honor or pay the Letter of Guarantee
involved herein.
BORDEN, INC. v. MEIJI MILK PRODUCTS CO.
919 F.2d 822 (2d Cir. 1990)
[excerpted below at pp. 966-69]
NEW YORK CIVIL PRACTICE LAW AND RULES
§7502(c)
7502(c). Provisional remedies. The supreme court in the county in which an arbitration is
pending, or, if not yet commenced, in a county specified in [§7502(a)] (54) may entertain an
application for an order of attachment or for a preliminary injunction in connection with an
arbitrable controversy, but only upon the ground that the award to which the applicant may be
entitled may be rendered ineffectual without such provisional relief.... The provisions of article
62 and 63 of this chapter [relating to attachments and injunctions] shall apply to the
application, including those relating to undertakings and to the time for commencement of an
action (arbitration shall be deemed an action for this purpose) if the application is made
before commencement, except that the sole ground for the granting of the remedy shall be
stated above.
Notes on Effect of National Law On Court-Ordered Provisional Relief in Aid of Arbitration
1. Availability of court-ordered provisional relief under UNCITRAL Model Law. Consider Article 17
of the UNCITRAL Model Law. What effect does it have on the power of a national court to grant
provisional measures in aid of an international arbitration? What other sources of law would be
relevant to determining whether a local court would be willing to grant provisional measures?
2. Dongsan and Borden – injunctive relief versus attachment under the New York Convention. In
contrast to Cooper and McCreary, the courts in Dongsan and Borden were both willing, in
principle, to grant provisional relief in aid of international arbitrations subject to the New York
Convention. Borden specifically considered the McCreary rationale and rejected it as applied
to injunctive relief (as distinguished from attachments).
P "954"
P "955"
Is there any principled basis for distinguishing between the effect of Article II(3) on an
attachment and a preliminary injunction? Consider the final footnote to the Dongsan opinion.
Is there a principled basis for holding that Article II(3) forbids attachments (because they
restrict a party's use of its property), but permits injunctions (because they may only restrict a
party's ability to acquire additional assets)? Does anything in the language of Article II(3) or the
rationale of Cooper and McCreary support such a distinction?
A number of other U.S. lower court decisions have granted injunctive relief in aid of arbitration,
notwithstanding the Cooper/McCreary interpretation of Article II(3) of the Convention. See, e.g.,
Andros Compania Maritima, SA v. Andre & Cie, SA, 430 F.Supp. 88, 92 (S.D.N.Y. 1977) (rejecting

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 McCreary's interpretation of Article II). See also supra pp. 946-47.
3. Provisional relief under N.Y. C.P.L.R. §7502(c). Section 7502(c) permits attachments in aid of
arbitration if the ultimate arbitral award “may be rendered ineffectual without such
provisional relief.” Importantly, the substantive requirements of chapter 62 of the New York
Civil Practice Law, which ordinarily defines the availability of an attachment, need not be
satisfied in order to obtain relief under §7502(c). National Telecommunication Ass'n, Ltd v.
National Communications Ass'n, Inc., 592 N.Y.S.2d 591 (App. Div. 1993).
Under N.Y. Civil Practice Law §6201, an attachment is available if one of the following four
grounds is satisfied: (a) the defendant is a foreign corporation not qualified to do business in
New York; (b) the defendant cannot, despite diligent efforts, be personally served with process;
(c) the defendant, with the intent to frustrate the award, has disposed of or removed his
property from the state; or (d) the action is to enforce another court's judgment. In addition,
the plaintiff must show that it has a cause of action, on which it will probably succeed, and that
the amount sought exceeds all known counterclaims. N.Y. Civil Practice Law §6212. Even if these
requirements are satisfied, attachment is a discretionary remedy and may be denied. Merrill
Lynch, Pierce, Fenner & Smith v. Kelly, 585 F.Supp. 1245 (S.D.N.Y. 1984).
Section 7502(c) relaxes these requirements, permitting an attachment based solely on a
showing that the arbitral award “may be rendered ineffectual without such provisional relief.”
N.Y. Civil Practice Law §7502, 1985 Supplementary Practice Commentary (McKinney 1986 Supp.).
For decisions granting relief under §7502, see Habitations Ltd, Inc. v. BKL Realty Sales Corp., 554
N.Y.S.2d 117 (App. Div. 1990) (considering only §7502(c) requirements); Saferstein v. Wendy, 523
N.Y.S.2d 725 (Sup. Ct. 1987) (granting injunction, but holding that §7502(c) “was not designed to
make the court a simple rubber stamp,” and applying traditional equitable principles).
4. Applicability of U.S. state standards for securing judgments in federal court under Rule 64. A
federal court faced with a motion for a remedy for “seizure of person or property for the
purpose of securing satisfaction of the judgment ultimately to be entered in the action,” Fed. R.
Civ. P. Rule 64, is ordinarily obliged to apply state law. See Carolina Power & Light Co. v. Uranex,
451 F.Supp. 1044 (N.D. Calif. 1977); In re Feit & Drexler, Inc., 760 F.2d 406, 415 n.2 (2d Cir. 1985); C.
Wright & A. Miller, Federal Practice and Procedure §2931-36 (1971). In an action seeking security
in aid of arbitration in New York, that would be N.Y. C.P.L.R. §7502(c). Rule 64 provides an
exception to the general applicability of state law where a federal statute applies: “any
existing statute of the United States governs to the extent to which it is applicable.”
5. Federal law generally governs availability of preliminary injunctions in federal courts. Rule
64 is, by its terms, applicable only to actions for “arrest, attachment, garnishment, replevin,
sequestration and other corresponding or equivalent remedies, however designated.” When an
action seeks provisional injunctive relief to preserve the status quo between the parties, some
courts have held Rule 64 inapplicable even where the relief ordered included prohibitions on
transfers of assets. See Commodity Futures Trading Commission v. Morgan, Harris & Scott Ltd,
484 F.Supp. 669 (S.D.N.Y. 1979); Bricklayers Fringe Benefits etc. v. North Perry Baptist Church etc.,
590 F.2d 207 (6th Cir. 1979), cert. denied, 444 U.S. 834 (1980).
Where injunctive relief is sought, and Rule 64 does not apply, federal common law is generally
held to govern the availability and scope of provisional relief (such as a temporary restraining
order or a preliminary injunction). See C. Wright & A. Miller, Federal Practice and Procedure
§2942-44 (1971); Guaranty Trust Co. v. York, 326 U.S. 99, 106-07 (1945); Direx Israel, Ltd v.
Breakthrough Medical Corp., 952 F.2d 802, 811 (4th Cir. 1992); Ferrero v. Associated Materials, Inc.,
923 F.2d 1441, 1448 (11th Cir. 1991); Equifax Services, Inc. v. Hitz, 905 F.2d 1355, 1361 (10th Cir.
1990).
6. Availability of court-ordered provisional measures in aid of arbitration under the FAA. Assume
that: (a) the New York Convention does not forbid court-ordered provisional measures in aid of
P "955" arbitration; and (b) under either Rule 64 and state law or under federal standards for
P "956" injunctive relief, provisional measures could be granted. Even then, does the FAA permit
such relief, and, if so, does the FAA alter the availability or scope of provisional measures?

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 (a) Lower court decisions holding court-ordered provisional measures available under the FAA.
A number of lower U.S. courts have held, under the domestic FAA, that they possess the
authority to order injunctive relief in aid of arbitration, at least in certain circumstances.
Peabody Coalsales Co. v. Tampa Elec. Co., 36 F.3d 46 (8th Cir. 1994) (granting injunctive
relief preserving status quo pending arbitration); Blumenthal v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 910 F.2d 1049, 1052-54 (2d Cir. 1990) (rejecting argument that §4
precludes court-ordered provisional relief); Ortho Pharmaceutical Corp. v. Amgen, Inc.,
882 F.2d 806, 812 (3d Cir. 1989); Transportes Caribe, SA v. M/V Feder Trader, 860 F.2d 637,
638 (5th Cir. 1988) (pending arbitration does not affect district court's authority to grant
security); PMS Distributing Co., Inc. v. Huber & Suhner AG, 854 F.2d 355 (9th Cir. 1988);
Merrill Lynch, Pierce, Fenner & Smith v. Dutton, 844 F.2d 726, 727-28 (10th Cir. 1988);
Teradyne, Inc. v. Mostek Corp., 797 F.2d 43, 51 (1st Cir. 1986) (“district court can grant
injunctive relief in an arbitrable dispute pending arbitration”); Merrill Lynch, Pierce,
Fenner & Smith v. Bradley, 756 F.2d 1048, 1051-54 (4th Cir. 1985) (holding that §3 did not
abrogate district court's equitable power and that injunctive relief would further FAA's
policies); Rose-Lino Bev. Distrib. v. Coca-Cola Bottling Co., 749 F.2d 124, 125 (2d Cir. 1984)
(“fact that a dispute is to be arbitrated ... does not absolve the court of its obligation to
consider the merits of a requested preliminary injunction”); Guinness-Harp Corp. v. Jos.
Schlitz Brewing Co., 613 F.2d 468 (2d Cir. 1980) (relying on parties' apparent agreement to
maintain status quo pending arbitration); Bosworth v. Ehrenreich, 823 F.Supp. 1175 (D.N.J.
1993) (granting preliminary injunction “to help stabilize the corporate operations pending
arbitration”); Organizing Committee for the 1998 Goodwill Games, Inc. v. Goodwill Games,
Inc., 919 F.Supp. 21 (D.D.C. 1995) (granting injunctive relief to preserve status quo pending
arbitration); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Kramer, 816 F.Supp. 1242 (N.D.
Ohio 1992) (“under certain circumstances, a district court has the discretion to grant one
party a preliminary injunction to preserve the status quo pending the arbitration of the
parties' dispute”); Albatross S.S. Co. v. Manning Bros., Inc., 95 F.Supp. 459, 463 (S.D.N.Y.
1951); Merrill Lynch, Pierce, Fenner & Smith v. District Court, 672 P.2d 1015 (Colo. S. Ct. 1983).
See also The Anaconda v. American Sugar Refining Co., 322 U.S. 42 (1944) (§8 of FAA
preserves right to court-ordered maritime arrest).
(b) Lower court decisions holding court-ordered provisional measures not available under FAA.
A few lower courts have concluded that §§3 and 4 of the FAA – like the McCreary/Cooper
interpretation of Article II(3) of the New York Convention – impliedly preclude court-
ordered provisional relief in aid of arbitration absent contrary agreement. E.g., Merrill
Lynch, Pierce, Fenner & Smith, Inc. v. Hovey, 726 F.2d 1286 (8th Cir. 1984) (holding that,
absent agreement permitting court-ordered provisional measures, “unmistakably clear
congressional purpose” was to bar such); Jab Indus., Inc. v. Silex SpA, 601 F.Supp. 971, 979
(S.D.N.Y. 1985); Merrill Lynch, Pierce, Fenner & Smith v. DeCaro, 577 F.Supp. 616, 625 (W.D.
Mo. 1983); Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Thompson, 574 F.Supp. 1472, 1478-79
(E.D. Mo. 1983); Merrill Lynch, Pierce, Fenner & Smith Inc. v. McCollum, 666 S.W.2d 604 (Ct.
App. Tex. 1984). See also Buffalo Forge Co. v. United Steelworkers, 428 U.S. 397, 410-12
(1976) (dicta that court-ordered provisional measures might interfere with labor
arbitration).
(c) Standards under FAA for availability of preliminary injunction in aid of arbitration. There is
no language in the FAA that expressly addresses the subject of provisional relief. In
Dongsan and Borden, the courts applied generally-applicable federal standards for
injunctive relief. Is it appropriate to apply generally-applicable standards for obtaining
preliminary injunctions where the relief is in aid of arbitration? Isn't there some
particular need to take into account the possibility of obtaining relief from the arbitral
tribunal or the risk of interfering with the arbitral process? Before reaching a conclusion,
consider the following notes.
7. Wisdom of permitting court-ordered provisional measures in aid of arbitration. Should
national courts grant provisional relief in aid of arbitration? As a general matter, does it help
or harm the arbitral process? Consider:
The Courts are not limited in their equity powers to the specific function of enforcing
arbitration agreements but may exercise those powers required to preserve the status quo of
the subject matter in controversy pending the enforcement of the arbitration provision. To rule
otherwise would in effect permit a party to take the law into its own hands while the
P "956" proceeding is carried on as a result of the specific direction of the Court [compelling
P "957" arbitration].... It would be an oddity in the law if the Court, after compelling a party to live
up to his undertaking to arbitrate, had to stand idly by during the pendency of the arbitration
which it has just directed and permit him to assert his “right to breach a contract and to
substitute payment of damages for non-performance.”
Albatross S.S. Co. v. Manning Bros., 95 F.Supp. 459, 463 (S.D.N.Y. 1951).
What is the relevance of the parties' arbitration agreement in deciding whether court-ordered
provisional measures should be available? Suppose the parties specifically agree to permit
court-ordered provisional measures? To prohibit such measures? If the parties do not expressly
deal with the subject, what should they be presumed to intend?
8. Arbitration agreements expressly permitting recourse to national courts for injunctive relief.
Some contracts include provisions expressly permitting resort by the parties to national courts
for injunctive relief. Consider the following:

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 The parties may seek from the Arbitral Tribunal and from any judicial courts of proper
jurisdiction equitable relief by way of temporary and permanent injunctions.
Remy Amerique, Inc. v. Touzet Distribution SARL, 816 F.Supp. 213, 215 (S.D.N.Y. 1993). What does
this clause mean? Is it wise to include such a provision in an arbitration agreement? Why not?
The Remy Amerique court held that the clause only authorized temporary judicial relief in aid
of arbitration. Id.
Consider also:
“[T]he CLUB shall have the right in its sole discretion to institute judicial proceedings for the
purpose of obtaining an injunction or other equitable relief pursuant to paragraph 5 hereof
[relating to injunctions preventing PLAYER from “playing basketball for any person, firm ...” or
from committing “any other breach of this contract.”]
Erving v. Virginia Squires Basketball Club, 468 F.2d 1064 (2d Cir. 1972). The court upheld the
clause as “the only way to preserve the status quo during the pendency of the arbitration
proceeding.”See also Guinness-Harp Corp. v. Jos. Schlitz Brewing Co., 613 F.2d 468 (2d Cir. 1980).
Compare Jobs Industries, Inc. v. Silex SpA, 601 F.Supp. 971 (S.D.N.Y. 1985) (declining to grant
court-ordered provisional relief, notwithstanding clause in arbitration agreement that nothing
in it “shall limit the ability of any party ... from seeking from a court of competent jurisdiction,
any provisional remedy”); G. Born, International Arbitration and Forum Selection Agreements 42-
43 (1999).
9. Standards under the FAA for the issuance of court-ordered provisional measures in aid of
arbitration. Assuming that U.S. courts have the power to grant provisional relief in aid of
arbitration under the FAA, what standards should govern the exercise of that power? Lower U.S.
courts have reached divergent conclusions.
(a) Provisional measures must be absolutely necessary. Some lower U.S. courts have held that
provisional relief will not be granted unless it is absolutely necessary to protect the
arbitral process. E.g., Merrill Lynch, Pierce, Fenner & Smith v. Bradley, 756 F.2d 1048, 1053
(4th Cir. 1985) (“where a dispute is subject to mandatory arbitration under the Federal
Arbitration Act, a district court has the discretion to grant a preliminary injunction to
preserve the status quo pending the arbitration of the parties' dispute if the enjoined
conduct would render that process a ‘hollow formality.’”).
(b) Generally-applicable standards for preliminary injunctive relief. Other courts, however,
have refused to acknowledge any such limits on the traditionally broad equitable powers
of district courts, and have instead held that ordinary standards governing the grant of
preliminary injunctive relief are applicable. Among other things, the district court enjoys
substantial discretion in deciding whether to grant relief. E.g., Teradyne, Inc. v. Mostek
Corp., 797 F.2d 43, 51 (1st Cir. 1986); Roso-Lino Beverage Distributors, Inc. v. Coca-Cola
Bottling Co., 749 F.2d 124 (2d Cir. 1984); Sauer-Getriebe KG v. White Hydraulics, Inc., 715 F.2d
348 (7th Cir. 1984), cert. denied, 464 U.S. 1070 (1984); Merrill Lynch, Pierce, Fenner & Smith,
Inc. v. Kramer, 816 F.Supp. 1242 (N.D. Ohio 1992) (granting preliminary injunction in aid of
P "957" arbitration, applying generally applicable preliminary injunction standards, forbidding
P "958" disclosure of trade secrets and solicitation of clients).
(c) Sui generis standards. And finally, some U.S. lower courts have considered a blend of
traditional equitable standards, implied expectations of the parties, and needs of the
arbitral process. Ortho Pharmaceutical Corp. v. Amgen, Inc., 882 F.2d 806, 813-14 (3d Cir.
1989) (in applying traditional equitable standards, “the district court must focus on
preservation of the integrity of the arbitration process”); Guinness-Harp Corp. v. Jos.
Schlitz Brewing Co., 613 F.2d 468 (2d Cir. 1980) (relying on provisions in contract suggesting
that status quo was to be preserved pending arbitration).
(d) Importance of parties' arbitration agreement to availability of court-ordered provisional
measures in aid of arbitration. Properly understood, the FAA should permit courts to grant
provisional relief in aid of arbitration where such relief was contemplated by the parties'
agreement and satisfies applicable standards for granting equitable relief. Thus, if the
parties' arbitration agreement expressly provides for court-ordered provisional
measures, it should be available when general equitable standards are met. Lower courts
have generally acted consistently with this proposition. See Connecticut Resources
Recovery Authority v. Occidental Petroleum Corp., 705 F.2d 31, 33-35 (2d Cir. 1983); Guinness
Harp Corp. v. Jos. Schlitz Brewing Corp., 613 F.2d 468 (2d Cir. 1980) (federal court “is
empowered to grant specific performance of the agreement to arbitrate” and “[h]ere
maintenance of the status quo pending arbitration relates in a substantial way to the
performance of the agreement”); Erving v. Virginia Squires Basketball Club, 468 F.2d 1064
(2d Cir. 1972); Detroit Newspaper Publishers' Ass'n v. Detroit Typographical Union No. 18, 471
F.2d 872 (6th Cir. 1972), cert. denied, 411 U.S. 967 (1973) (reversing court-ordered
preliminary injunction on grounds that parties' agreement did not contemplate such
relief; relying, dubiously, on fact that “status quo” provision was not part of arbitration
clause). But compare Teradyne, Inc. v. Mostek Corp., 797 F.2d 43 (1st Cir. 1986) (not
considering parties' agreement).

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 (e) Presumptions concerning parties' intentions to permit court-ordered provisional measures.
Often, the parties' agreement will not expressly address the availability of court-ordered
provisional measures in aid of arbitration. In those circumstances, courts must adopt
presumptions concerning what the parties likely intended. Most U.S. lower courts have
presumed that the parties intended to permit court-ordered provisional measures,
provided that they are genuinely in aid of arbitration. Blumenthal v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 910 F.2d 1049, 1052-53 (2d Cir. 1990) (rejecting argument that “district
court injunctions pending arbitration are available only when the contract expressly so
provides”); Roso-Lino Beverage Distributors, Inc. v. Coca-Cola Bottling Co., 749 F.2d 124, 125
(2d Cir. 1984); Ortho Pharmaceutical Corp. v. Amgen, Inc., 882 F.2d 806, 812 (3d Cir. 1989)
(“an arbitration agreement reflects the parties' intention to adhere to an orderly process
of alternative dispute resolution [and] we do not construe such an agreement as
constituting a ‘waiver’ by either party of the right to seek preliminary injunctive relief
necessary to prevent one party from unilaterally eviscerating the significance of the
agreed-upon procedures”). Compare the discussions above of the parties' intentions
regarding provisional relief under the New York Convention. See supra pp. 947-48.
10. Court-ordered provisional measures under leading institutional arbitration rules. Consider
Article 26(3) of the UNCITRAL Rules, Article 25(3) of the 1998 LCIA Rules, Article 23(2) of the 1998
ICC Rules, and Article 36(c) of the AAA Commercial Arbitration Rules. Which, if any, of these
provisions satisfy some of the more stringent standards adopted under the FAA for grants of
court-ordered provisional measures in aid of arbitration? Do the clauses authorize a national
court to issue provisional relief?
11. Limitations imposed by parties' arbitration agreement or applicable institutional rules on
national court's power to grant pre-award provisional measures. The parties' arbitration
agreement or institutional rules incorporated by it may impose, or purport to impose, limits on
the authority of national courts to grant provisional measures. These limits may be expressly
included in the parties' arbitration agreement. More likely, they will be included in
institutional arbitration rules incorporated into the parties' agreement or implied by national
law.
(a) ICC Rules. A leading example of institutional rules limiting court-ordered provisional
measures is Article 23(2) of the 1998 ICC Rules. (Article 8(5) of the 1988 ICC Rules was
broadly similar.) Article 23(2) of the 1998 ICC Rules imposes limits on the right of the
parties to seek provisional relief from national courts. The provision attempts to make it
clear that, prior to constitution of the arbitral tribunal, requests for court-ordered
provisional measures are permitted; after the tribunal is constituted, however, judicial
relief is permitted only in “appropriate circumstances.” And, under Article 23(2), only
“interim or conservatory measures” are provided for.
What should qualify as “appropriate circumstances”? Note that Article 8(5) of the 1988 ICC
P "958" Rules permitted court-ordered provisional measures, after the arbitral tribunal had
P "959" received the file, only in “exceptional circumstances.” What weight should be
attributed to the revision of the ICC Rules? Note also that, even after a tribunal is in
place, it may be difficult to convene a meeting of the tribunal on short notice. It is
feasible for the parties to make written submissions on extremely short notice, but oral or
evidentiary hearing are usually not possible. That may, as a practical matter, make it
difficult to obtain provisional relief from the tribunal.
Who decides whether or not “appropriate” or “exceptional” circumstances, permitting
court-ordered provisional measures, is satisfied? The arbitral tribunal? A national court?
Someone else? Suppose that, after a tribunal is constituted and the Terms of Reference
are finalized, a party seeks court-ordered provisional measures. What is the party's
obligation to inform the arbitral tribunal? What if the arbitral tribunal orders a party to
withdraw its application for court-ordered provisional measures? What if the arbitral
tribunal indicates that the party “ought” to suspend its application for court-ordered
provisional measures?

(b) UNCITRAL Rules. Consider Article 26(3) of the UNCITRAL Rules. What effect does it have on
requests for court-ordered provisional measures? Is there any difference, express or
implied, between requests made before and those made after a tribunal is constituted.
(c) LCIA Rules. Consider Article 25(1) of the 1998 LCIA Rules. What effect does it have on
requests for court-ordered provisional measures? Compare Article 25(1) to the present ICC
Rules. Which is preferable?
12. Preemption by the FAA of state laws permitting provisional measures in aid of arbitration. As
we have seen, if the New York Convention prohibits court-ordered provisional measures in aid
of arbitration, then it preempts inconsistent state laws providing that such measures are
available. See, e.g., Cooper v. Ateliers de la Motobecane, 442 N.E.2d 1239 (Ct. App. 1982); supra
pp. 945-46.
Similarly, if the FAA prohibits provisional relief in aid of arbitration, it should preempt
inconsistent state law. And, where the FAA is held to set forth standards for provisional
measures in aid of arbitration, those standards should preempt state law.

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 It is not clear what effect a state choice-of-law clause will have, under Volt Information, on the
availability of court-ordered provisional measures pursuant to state law. See supra pp. 358-80.
13. Decisions refusing to limit court-ordered relief to cases where tribunal cannot act. Some
parties have argued that, even if the FAA permits provisional measures pending arbitration,
“such injunctions should issue only after the movant has proved that the arbitrators are unable
to provide the requested relief in a timely fashion.”Blumenthal v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 910 F.2d 1049, 1054 (2d Cir. 1990). Courts have rejected those efforts. Id.
14. Intra-state forum-shopping after Cooper and Borden. Under Cooper, a New York state court
is bound to interpret Article II(3) of the federal New York Convention as precluding provisional
measures in aid of arbitration; under Borden, a federal court in New York is apparently free
under Article II(3) of the Convention to grant at least some provisional measures. The converse
may be true in the Third Circuit, where the federal courts are required by McCreary to deny
provisional relief, and state courts may not be. Hence, whether a request for provisional relief
is litigated in state or federal court may very well be outcome-determinative in some
jurisdictions. Isn't this absurd?
15. Arbitrator's power to “vacate” court-ordered provisional measures. Suppose that a court
orders provisional relief in aid of arbitration, and that the arbitral tribunal thereafter is
constituted and concludes that the court-ordered relief is inappropriate. Can the arbitrators
“vacate” the relief? For one decision holding that they may, see Blumenthal v. Merrill Lynch,
Pierce, Fenner & Smith, Inc., 910 F.2d 1049 (2d Cir. 1990).
16. When is a request for court-ordered provisional measures a waiver of a party's right to
arbitrate? As we have seen, the right to arbitrate can be waived. See supra pp. 239-42. Parties
that seek provisional measures from a court must exercise particular care to ensure that they
are not, in pursuing such relief, deemed to have waived their right to enforce the parties'
arbitration agreement. In general, however, U.S. courts have not construed requests for court-
ordered provisional measures in that manner. E.g., Valero Refining, Inc. v. M/T Lauberhorn, 813
F.2d 60, 65-66 (5th Cir. 1987) (party “sought judicial assistance to further the arbitration process
when [adverse party] refused to name an arbitrator”); Sauer-Getriebe KG v. White Hydraulics,
Inc., 715 F.2d 348, 349-50 (7th Cir. 1984), cert. denied, 464 U.S. 1070 (1984); Rogers, Burgun,
Shahine & Deschler, Inc. v. Dongsan Construction Co., Ltd, 598 F.Supp. 754, 757-58 (S.D.N.Y. 1984);
United Nuclear Corp. v. General Atomic Co., 597 P.2d 290 (N.M. 1979).
Note that leading institutional arbitration rules specifically provide for the possibility of
P "959" seeking court-ordered provisional measures, and that seeking such relief is not necessarily a
P "960" waiver of arbitration. See UNCITRAL Rules Article 26; AAA International Rules Article 22(3); ICC
Rules Article 23(2). Nevertheless, on particular facts (and under a particular arbitration
agreement) seeking court-ordered provisional relief might constitute a waiver. See supra pp.
239-42 for a discussion of the standards for finding a waiver under the FAA.
17. Damages for wrongful attachment. A party who obtains an attachment will be strictly liable
under New York law (and that of some other jurisdictions) for damages caused by a wrongful
attachment. N.Y. Civil Practice Law §6212.
18. Enforceability of agreements limiting or excluding court-ordered provisional measures.
Suppose that the parties' arbitration agreement excludes all recourse to national courts for
interim relief. Is such an exclusion subject to challenge as contrary to public policy? See
Hausmaninger, The ICC Rules for a Pre-Arbitral Referee Procedure: A Step Towards Solving the
Problem of Provisional Relief in International Commercial Arbitration, 7 ICSID Rev. 82 (1992)
(suggesting that parties cannot exclude court-ordered provisional relief because arbitral
measures are inadequate substitute); Anaconda v. American Sugar Refining Co., 322 U.S. 42
(1944). Note, however, that under McCreary, the exclusion of court-ordered provisional
measures is not merely permitted, but is required, by public policy. See also Mills, State
International Arbitration Statutes and the U.S. Arbitration Act: Unifying the Availability of Interim
Relief, 13 Ford. L. Rev. 604 (1989).
19. Due process limits on U.S. courts' power to grant provisional relief in aid of arbitration. The
due process clauses of the 5th and 14th amendments impose limits on assertions of judicial
jurisdiction by U.S. courts. See G. Born, International Civil Litigation in United States Courts 67-78
(3d ed. 1996). Those limits apply, albeit in special forms, in the context of actions for
provisional relief in aid of foreign suits. In general, the presence of assets, not transitorily in
the jurisdiction, should be sufficient to support quasi in rem jurisdiction solely for the purpose
of ordering provisional relief. Shaffer v. Heitner, 433 U.S. 186, 210-11 (1977). For a peculiar
decision, apparently requiring an action in a U.S. court (rather than an arbitral proceeding) to
support a request for provisional relief, see Carolina Power & Light Co. v. Uranex, 451 F.Supp.
1044 (N.D. Calif. 1977).

C. Appropriate National Court to Grant Pre-Award Provisional Measures in Aid of an

International Arbitration
Assuming that Article II(3) of the New York Convention does not impose a blanket prohibition
on court-ordered pre-award provisional measures and that national law permits such
measures in domestic matters, there remains the further question of which national courts
should be willing to order that relief in aid of a particular international arbitration. That
question in turn prompts inquiry into two subsidiary questions: (a) which nation's (or nations')
courts are competent to order such provisional relief in aid of a particular international

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 arbitration; and (b) in what circumstances should a national court which has competence to
order provisional measures in aid of an international arbitration be willing to order such relief?
For example, should courts in State A grant provisional measures only in aid of arbitrations
conducted in State A, or should relief also be available in aid of arbitrations sited elsewhere?
The following materials explore how national courts approach these questions. The Channel
Tunnel decision illustrates an English court's response to a request for provisional measures in
aid of a Belgian arbitration. The Borden decision, excerpted below, illustrates the same
problem from a U.S. perspective.
P "960"
P "961"
CHANNEL TUNNEL GROUP LIMITED v. BALFOUR BEATTY CONSTRUCTION LIMITED
[1993] A.C. 334 (House of Lords)
LORD MUSTILL. [Channel Tunnel Group Limited (“appellants”) won a concession from the U.K.
and French governments to construct and operate a tunnel under the English Channel. Balfour
Beatty Construction Limited and others (“respondents”) entered into a construction contract
with appellants to design and commission the Tunnel. The construction contract contained the
following arbitration and choice of law clauses:
Clause 67 – Settlement of Disputes
67(1). If any dispute or difference shall arise between the employer and the contractor during
the progress of the works ... then ... such dispute or difference shall at the instance of either the
employer or the contractor in the first place be referred in writing to and be settled by a panel
of three persons (acting as independent experts but not as arbitrators) who shall unless
otherwise agreed by both the employer and the contractor within a period of 90 days after
being requested in writing by either party to do so, and after such investigation as the panel
think fit, state their decision in writing and give notice of the same to the employer and the
contractor....
67(2). The contractor shall in every case continue to proceed with the works with all due
diligence and the contractor and the employer shall both give effect forthwith to every such
decision of the panel (provided that such decision shall have been made unanimously) unless
and until the same shall be revised by arbitration as hereinafter provided. Such unanimous
decision shall be final and binding upon the contractor and the employer unless the dispute or
difference has been referred to arbitration as hereinafter provided.
67(3) ... [If either party is dissatisfied with the experts' decision, or if the experts render no
decision, or if the experts' decision is not obeyed,] then either the employer or the contractor
may ... notify the other party in writing that the dispute or difference is to be referred to
arbitration....
67(4). All disputes or differences in respect of which a notice has been given under Clause 67(3)
by either party that such dispute or difference is to be referred to arbitration and any other
dispute or difference of any kind whatsoever which shall arise between the employer or the
Maitre d'Oeuvre and the contractor in connection with or arising out of the contract, or the
execution of the works or after their completion and whether before or after the termination,
abandonment, or breach of the contract shall be finally settled under the Rules of Conciliation
P "961" and Arbitration of the International Chamber of Commerce by three arbitrators appointed
P "962" under such Rules. The employer and the contractor shall each nominate and appoint one
arbitrator and the third arbitrator shall be appointed by the International Chamber of
Commerce. The seat of such arbitration shall be Brussels....
Clause 68
The construction, validity and performance of the contract shall in all respects be governed by
and interpreted in accordance with the principles common to both English law and French law,
and in the absence of such common principles by such general principles of international
trade law as have been applied by national and international tribunals. Subject in all cases,
with respect to the works to be respectively performed in the French and in the English part of
the site, to the respective French or English public policy (order public) provisions.
Disputes arose over the price that would be payable for work relating to the cooling system.
The respondents demanded more money in progress payments than the appellants were
willing to pay, and when that demand failed, threatened to cease work. In response, the
appellants commenced an action in the English courts, seeking an injunction forbidding the
respondents from ceasing work. The respondents moved to stay the English judicial
proceedings under the English Arbitration Act, 1975. The trial judge held that he would have
granted an injunction, but accepted respondents' undertaking that they would not cease work.
The Court of Appeal reversed, staying the injunction proceeding and indicating that it would
not have entered an injunction. On April 23, 1992, the appellants filed a request for arbitration
with the ICC pursuant to ICC Rules.
The House of Lords first held that the English courts had the power to stay the injunction
proceedings in favor of the expert/arbitration mechanism contemplated by the construction
contract. First, English courts possess inherent discretionary power to stay their proceedings in
deference to foreign judicial or arbitral proceedings; that discretion should be exercised where
“large commercial enterprises, negotiating at arms length in the light of long experience of
construction contracts,” agree to arbitration. Second, §1 of the 1975 Arbitration Act would

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 appear to require a stay. Although Article II(3) of the New York Convention would not appear to
apply, because it provides only for a court to “refer the parties to arbitration,” not an experts'
review, the English Arbitration Act was more broadly cast. The House of Lords then went on to
consider whether an interim injunction, pending the experts' decision or the arbitration
decision, could be issued by an English court.]
Thus far, the question has been whether the appellant's claim for a final injunction should be
allowed to proceed to trial in the High Court. [If not,] a difficult and important question will
arise concerning the power of the court to order the respondents back to work pending the
decision of the panel or, as the case may be, the arbitrators.... [First, appellants argue that an
P "962" injunction could issue under §12(6)(h) of the Arbitration Act 1950, which provides that “The High
P "963" Court shall have, for the purpose of and in relation to a reference, the same power of making
orders in respect of ... (h) interim injunction ... as it has for the purpose of and in relation to an
action in the High Court.” ]
It is by now firmly established that more than one national system of law may bear upon an
international arbitration. Thus, there is the proper law which regulates the substantive rights
and duties of the parties to the contract from which the dispute has arisen. Exceptionally, this
may differ from the national law governing the interpretation of the agreement to submit the
dispute to arbitration. Less exceptionally it may also differ from the national law which the
parties have expressly or by implication selected to govern the relationship between
themselves and the arbitrator in the conduct of the arbitration: the “curial law” of the
arbitration as it is often called. The construction contract [in this case] provides an example.
The proper substantive law of this contract is the law, if such it can be called, chosen in clause
68. But the curial law must I believe be the law of Belgium. Certainly there may sometimes be
an express choice of a curial law which is not the law of the place where the arbitration is to be
held: but in the absence of an explicit choice of this kind, or at least some very strong pointer
in the agreement to show that such a choice was intended, the inference that the parties when
contracting to arbitrate in a particular place consented to having the arbitral process
governed by the law of that place is irresistible.
In all these instances one or more national law may be relevant because they are expressly or
impliedly chosen by the parties to govern the various aspects of their relationship. As such,
they govern the arbitral process from within. But national laws may also apply ab extra, when
the jurisdiction of the national court is invoked independently of any prior consent by the
parties. An obvious case exists where the claimant, in face of an arbitration agreement, brings
an action before a national court which must apply its own local law to decide whether the
action should be stayed, or otherwise interfered with.... But a national court may also be
invited, as in the present case, to play a secondary role, not in the direct enforcement of the
contract to arbitrate, but in the taking of measures to make the work of the chosen tribunal
more effective. Here, the matter is before the court solely because the court happens to have
under its own procedural rules the power to assert a personal jurisdiction over the parties, and
to enforce protective measures against them. Any court satisfying this requirement will serve
the purpose, whether or not it has any prior connection with the arbitral agreement or the
arbitral process. In the present case, the English court has been drawn into this dispute only
because it happens to have territorial jurisdiction over the respondents, and the means to
enforce its order against them. The French court would have served just as well, and if the
present application had been made in Paris we should have found the French court
considering the same questions as have been canvassed on this appeal....
The distinction between the internal and external application of national arbitration laws is
P "963" important. In my opinion, when deciding whether a statutory or other power is capable of
P "964" being exercised by the English court in relation to clause 67, and if it is so capable whether it
should in fact be so exercised, the court should bear constantly in mind that English law, like
French law, is a stranger to this Belgian arbitration, and that the respondents are not before
the English court by choice. In such a situation the court should be very cautious in its
approach both to the existence and to the exercise of supervisory and supportive measures,
lest it cut across the grain of the chosen curial law. Thus, in the present instance I believe that
we should approach §12 of the Act of 1950 by asking – Can Parliament have intended that the
power to grant an interim injunction should be exercised in respect of an arbitration
conducted abroad under a law which is not the law of England? ... It seems to me absolutely
plain ... that Parliament cannot have intended these provisions to apply to a foreign
arbitration. I can see no reason why Parliament should have had the least concern to regulate
the conduct of an arbitration carried on abroad pursuant to a foreign arbitral law....
[Second, appellants relied on §37(1) of the Supreme Court Act 1981 as providing authority to
issue an interim injunction. Section 37(1) provides that “the High Court may be order (whether
interlocutory or final) grant an injunction in all cases in which it appears to the court to be just
and convenient to do so.” The House of Lords concluded that the High Court possessed the
power under this provision to issue an injunction in aid of a foreign arbitration. In addition, the
House of Lords reasoned:] I am unable to agree with those decisions in the United States (there
has been no citation of authority on this point from any other foreign source) which form one
side of a division of authority as yet unresolved by the Supreme Court. These decisions are to
the effect that interim measures must necessarily be in conflict with the obligations assumed
by the subscribing nations to the New York Convention, because they “bypass the agreed upon
method of settling disputes”: see McCreary Tire & Rubber Co. v. CEAT SpA, (1974) 501 F.2d 1032,
1038. I prefer the view that when properly used such measures serve to reinforce the agreed

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 method, not to bypass it....
On the assumption that the court does have power to grant the appellants an injunction, a
decision on whether the power should be exercised requires the making of certain
assumptions.... Only one item of substantive relief was claimed by the writ, and although this
was cast in negative form it was in substance a claim for a final mandatory injunction: or, what
seems to me the same thing, an order for specific performance of the respondents' obligation
to work continuously on the contract. Absent any evidence of Belgian law, we must also assume
that this is an order which the panel and arbitrators would have power to make, if minded to
do so. How long the proceedings will take is impossible to predict, apart from saying that if the
appellants had gone straight to the panel in October 1991 rather than starting an action, the
clause 67 proceedings would no doubt have been comfortably finished by now. At all events,
we should in my opinion assume that if the panel rules in favor of the appellants the
respondents will appeal to the arbitrators, and that a final ruling on the claim is not likely to
emerge for some considerable time....
P "964" Amidst all these assumptions, there is one hard fact which I believe to be conclusive, namely
P "965" that the injunction claimed from the English court is the same as the injunction to be
claimed from the panel and the arbitrators, except that the former is described as
interlocutory or interim. In reality its interim character is largely illusory, for as it seems to me
an injunction granted in November 1991, and a fortiori an injunction granted today, would
largely pre-empt the very decision of the panel and arbitrators whose support forms the raison
d'etre of the injunction. By the time that the award of the panel or arbitrators is ultimately
made, with the respondents having continued to work meanwhile it will be of very modest
practical value, except as the basis for a claim in damages by the respondents....
In these circumstances, I do not consider that the English court would be justified in granting
the very far-reaching relief which the appellants claim. It is true that mandatory interlocutory
relief may be granted even where it substantially overlaps the final relief claimed in the
action; and I also accept that it is possible for the court at the pre-trial stage of a dispute
arising under a construction contract to order the defendant to continue with a performance of
the works. But the court should approach the making of such an order with the utmost caution,
and should be prepared to act only when the balance of advantage plainly favors the grant of
relief. In the combination of circumstances which we find in the present case I would have
hesitated long before proposing that such an order should be made, even if the action had
been destined to remain in the High Court. These hesitations are multiplied by the presence of
clause 67. There is always a tension when the court is asked to order, by way of interim relief in
support of an arbitration, a remedy of the same kind as will ultimately be sought from the
arbitrators: between, on the one hand, the need for the court to make a tentative assessment
of the merits in order to decide whether the plaintiff's claim is strong enough to merit
protection, and on the other the duty of the court to respect the choice of tribunal which both
parties have made, and not to take out of the hands of the arbitrators (or other decision-
makers) a power of decision which the parties have entrusted to them alone. In the present
instance I consider that the latter consideration must prevail. The court has stayed the action
so that the panel and the arbitrators can decide whether to order a final mandatory injunction.
If the court now itself orders an interlocutory mandatory injunction, there will be very little left
for the arbitrators to decide.
Any doubts on this score are to my mind resolved by the choice of the English rather than the
Belgian courts as the source of interim relief. Whatever exactly is meant by the words
“competent judicial authority” in article 8.5 of the ICC Rules, the Belgian court must surely be
the natural court for the source of interim relief. If the appellants wish the English court to
prefer itself to this natural forum it is for them to show the reason why, in the same way as a
plaintiff who wishes to pursue a substantive claim otherwise than in a more convenient foreign
court: Spiliada Maritime Corporation v. Cansulex Ltd [1987] A.C. 460, 476E. They have not done so.
Apparently no application for interim relief has been made to the court in Brussels. It is
perhaps just permissible to take notice that the contemporary Belgian law of arbitration
P "965" differs from the law of other European countries, but beyond this I would certainly not be
P "966" willing to go since, most remarkably, no evidence of Belgian law is before the court. If the
appellants had wished to say that the Belgian court would have been unable or unwilling to
grant relief, and that the English court is the only avenue of recourse, it was for them to prove
it, and they have not done so. Moreover, even if evidence to this effect had been adduced I
doubt whether it would have altered my opinion. This is not a case where a party to a standard
form of contract finds himself burdened with an inappropriate arbitration clause to which he
had not previously given his attention. I have no doubt that the dispute-resolution mechanisms
of clause 67 were the subject of careful thought and negotiation. The parties chose an
indeterminate “law” to govern their substantive rights; an elaborate process for ascertaining
those rights; and a location for that process outside the territories of the participants. This
conspicuously neutral, “anational” and extra-judicial structure may well have been the right
choice for the special needs of the Channel Tunnel venture. But whether it was right or wrong, it
is the choice which the parties have made. The appellants now regret that choice. To push their
claim for mandatory relief through the mechanisms of clause 67 is too slow and cumbersome to
suit their purpose, and they now wish to obtain far reaching relief through the judicial means
which they have been so scrupulous to exclude. Notwithstanding that the court can and should
in the right case provide reinforcement for the arbitral process by granting interim relief I am
quite satisfied that this is not such a case, and that to order an injunction here would be to act
contrary both to the general tenor of the construction contract and to the spirit of international

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 arbitration.
BORDEN, INC. v. MEIJI MILK PRODUCTS CO., LTD
919 F.2d 822 (2d Cir. 1990)
TIMBERS, CIRCUIT JUDGE. Borden, Inc. (“Borden”) commenced this action on August 30, 1990,
seeking a preliminary injunction in aid of arbitration. The court granted the motion of appellee
Meiji Milk Products Co., Ltd. (“Meiji”) to dismiss [on forum non conveniens grounds. Borden
appealed.] Borden, a New Jersey corporation with offices in New York City, is a multi-national
corporation engaged in the manufacture and distribution of food, dairy and consumer products
... throughout the world. Meiji, a Japanese corporation with offices in New York City, is engaged
in the manufacture of ... milk products in Japan and other parts of the world. In 1983, Borden
and Meiji entered into a Trademark License and Technical Assistance Agreement (the
“agreement”), pursuant to which Borden licensed the use of its name and logo to Meiji to be
used on a variety of margarine products manufactured and sold by Meiji in Japan for a period
of seven years. The agreement, which was performed entirely in Japan, expired by its terms on
October 3, 1990.
For the past seven years, Meiji has sold a number of margarine products bearing the Borden
P "966" trademark. The formulas and techniques used to manufacture the margarine products are
P "967" owned by Meiji. Meiji has obtained protection under Japanese Design Patent law for the
margarine packaging it has used. Although the agreement has now expired, Meiji continues to
market margarine, in Japan, in the packaging it had been using while the agreement was in
force, but now without any use of the Borden trademark or logo. Borden contends that the use
of the packaging is an “appropriation” in violation of the agreement.
Section 16 of the agreement specifically provides that all disputes arising in connection with
the agreement shall be finally settled by arbitration pursuant to the Japanese-American Trade
Arbitration Agreement of September, 1952. Accordingly, on August 24, 1990, Borden filed a
demand for arbitration, alleging that Meiji had breached the agreement and unfairly
competed with Borden. Meiji contends that Japanese patent law authorizes its continued use
of the packaging and asserts that the agreement between the parties is silent as to any use by
Meiji of packaging after termination of that agreement. The site of arbitration – which will be
either New York or Japan – has not yet been determined.
On August 30, 1990, Borden commenced this action in the Southern District of New York,
alleging claims for breach of contract and wrongful destruction of goodwill. Borden sought to
compel arbitration pursuant to 9 U.S.C. §206 (1988). It also sought a preliminary injunction
against Meiji's use of the disputed packaging. Jurisdiction was based both on diversity and the
[New York] Convention. [The district court judge had granted a temporary restraining order, but
refused to grant a preliminary injunction, instead dismissing Borden's action on forum non
conveniens grounds. Borden appealed.] ...
As a threshold matter, we address the question of the court's subject matter jurisdiction to
entertain the application for preliminary injunctive relief in aid of arbitration.... Meiji's
argument is that, since the agreement between the parties contains an arbitration clause, the
Convention is applicable. Article II(3) of the Convention provides that “the court of a
Contracting State, when seized of an action in a matter in respect of which the parties have
made an agreement within the meaning of this article, shall, at the request of one of the
parties, refer the parties to arbitration....” ... Borden concedes that the Convention is
applicable, but argues that the Convention does not oust the court of jurisdiction to issue an
injunction in aid of arbitration. We agree.
Federal courts are charged with enforcing the Convention. 9 U.S.C. §201 (1988). Specifically, a
court may direct that arbitration be held in accordance with the agreement at any place
therein provided for.... Such court may also appoint arbitrators....” Id. at §206. Furthermore, the
courts are empowered to confirm an arbitration award once rendered. Id. at §207.
Meiji argues that a court's jurisdiction is limited to compelling arbitration or confirming an
arbitration award. In the instant case, however, Borden specifically invoked §206, seeking to
have the district court compel arbitration and appoint arbitrators. We hold that entertaining
an application for a preliminary injunction in aid of arbitration is consistent with the court's
P "967" powers pursuant to §206. Cf. McCreary Tire & Rubber Co. v. CEAT SpA, 501 F.2d 1032, 1037-38 (3d
P "968" Cir. 1974) (district court order refusing to vacate an attachment reversed, because underlying
complaint sought to bypass arbitration altogether and “the Convention forbids the courts of a
contracting state from entertaining a suit which violates an agreement to arbitrate”);
International Shipping Co. v. Hydra Offshore, Inc., 875 F.2d 388, 391 n.5 (2d Cir.) (district court
properly held that jurisdiction could not be premised on the Convention because “the party
invoking its provisions did not seek either to compel arbitration or to enforce an arbitral
award”), cert. denied, 493 U.S. 1003 (1989).
In the instant case, far from trying to bypass arbitration, Borden sought to have the court
compel arbitration. New York law specifically provides for provisional remedies in connection
with an arbitrable controversy, N.Y. Civil Practice Law & Rules (“CPLR”) §7502(c) (McKinney
Supp. 1990), and the equitable powers of federal courts include the authority to grant it. Murray
Oil Products Co. v. Mitsui & Co., 146 F.2d 381 (2d Cir. 1944) Entertaining an application for such a
remedy, moreover, is not precluded by the Convention but rather is consistent with its
provisions and its spirit. In Murray, we held that an arbitration clause “does not deprive the
promisee of the usual provisional remedies....”Id. at 384. We held that the desire for speedy

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 decisions in arbitration “is entirely consistent with a desire to make as effective as possible
recovery upon awards, after they have been made, which is what provisional remedies do.”Id.
We hold that the district court properly exercised subject matter jurisdiction.
We deal next with Borden's claim that state procedural rules precluded the district court from
dismissing this action on the ground of forum non conveniens. Borden relies on a state law
provision, N.Y. CPLR §327(b) (McKinney 1990), which provides that a court “shall not ... dismiss ...
on the ground of inconvenient forum, where the action arises out of or relates to a contract,
agreement or undertaking to which §5-1402 of the general obligations law applies....” By its
terms, however, N.Y. General Obligations Law §5-1402 (McKinney 1989) applies only when a
contract contains a provision whereby a foreign corporation “agrees to submit to the
jurisdiction of the courts of this state.”Id. at §5-1402(1)(b). The district court correctly concluded
that Meiji did not submit to the jurisdiction of the New York state courts simply by agreeing to
be bound by arbitration that might or might not be in New York. Moreover, the New York
choice-of-law clause in the parties' agreement is not the equivalent of a choice-of-forum
clause. Oil Basins Ltd v. Broken Hill Proprietary Co., 613 F.Supp. 483, 487 (S.D.N.Y. 1985). For this
same reason, the provision in the agreement that the contract is deemed to have been made
in New York is not equivalent to an express choice of forum clause.
We hold that N.Y. CPLR §327(b) is inapplicable to the instant case. We accordingly need not
reach the issue of whether the mandate of §327(b) would control in this case.... We may thus
proceed by applying federal law to the forum non conveniens issue.
P "968" This brings us finally to the merits of the forum non conveniens issue. Our review of the district
P "969" court's dismissal on that basis is extremely limited. [Piper Aircraft Co. v. Reyno, 454 U.S. 235,
257 (1981)].... The district court in the instant case carefully considered the ... factors [set forth
in Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508-09 (1947).] It found that only the Japanese market
and consumers are affected by the parties' dispute and that all necessary fact witnesses are in
Japan. The court found further that an injunction issued in Japan clearly would be enforceable
there, whereas one obtained in this country might not be. Examining the public interests at
stake, the court found that Japan has a much greater interest in the litigation than does the
United States.... Under the circumstances of the instant case, we hold that the court's decision
to dismiss in light of the Gilbert factors was sufficiently justified.
Borden asserts that the court's application of the Gilbert factors was “misplaced” in the first
instance because Meiji allegedly failed to meet, “at the outset”, its burden of showing the
availability of an adequate remedy in Japan. We reject this contention....
Borden claims that the district court failed to recognize the limited, emergency nature of the
relief it was seeking, i.e., a preliminary injunction in aid of arbitration. Borden claims that there
is no provision for such a remedy in Japan when the arbitration is pending outside Japan.
Borden's implication that arbitration currently is pending in New York is itself disingenuous. In
fact, a determination has not yet been made whether the underlying arbitration will be in New
York or in Japan. Moreover, even if the arbitration were to proceed in the United States, the
record relied upon by the court indicates a good possibility that a Japanese court would grant
preliminary relief even if the underlying arbitration were going forward in New York. The court
explicitly found that “there has been an adequate showing on Meiji's part that there is an
alternative remedy available to Borden in the Japanese courts.” This finding is adequately
supported by the record.
Third, although Borden suggests that, in order for Japan to be considered an adequate forum,
Japan must provide precisely the same remedies and in the same time-frame, this simply is
not so. Rather, “some inconvenience or the unavailability of beneficial litigation procedures
similar to those available in the federal district courts does not render an alternative forum
inadequate.”Shields v. Mi Ryung Constr. Co., 508 F.Supp. 891, 895 (S.D.N.Y. 1981).
We do agree with Borden, however, that its rights would be unduly prejudiced if it were forced
to wait years or even months to have a Japanese court review its application for some measure
of temporary relief. The district court ordered that Borden may move to restore this action if
preliminary injunctions prove to be unavailable in Japan. In dismissing the action only
conditionally, the court sought to protect Borden's rights. Calavo Growers v. Belgium, 632 F.2d
963, 968 (2d Cir. 1980), cert. denied, 449 U.S. 1084 (1981). In order to provide a further measure of
protection to Borden, we modify the district court's order so that Borden may reapply for a
preliminary injunction in the Southern District of New York if the Japanese court does not
decide Borden's application within 60 days after it is submitted. Meiji agreed to this
modification of the district court's order at oral argument....
P "969"
P "970"
Notes on Forum Selection Issues Relating to Court-Ordered Provisional Measures In Aid of
International Arbitration
1. Should a national court ever order provisional measures in aid of an international arbitration
seated in another country? Consider the various arguments set out in the Channel Tunnel case
against an English court's interference in a Belgian arbitration. “English law, like French law, is
a stranger to this Belgian arbitration, and ... the respondents are not before the English court
by choice. In such a situation, the court should be very cautious in its approach both to the
existence and to the exercise of supervisory and supportive measures, lest it cut across the
grain of the chosen curial law.” Should a court in State A ever grant provisional measures in aid
of an arbitration to be conducted in State B with the law of State B as the curial law? If a court

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 does so, will it not risk intruding unacceptably upon the supervisory functions of the courts of
State B? Why can't the courts of State B be left to issue all provisional relief?
2. “Foreign” court-ordered provisional measures when the “domestic” court cannot grant
effective relief. Note that the courts of the state where the arbitration is being conducted may
not be in a position to grant effective provisional relief. Particularly where attachment or
similar remedies are sought, only the jurisdiction where the defendant's assets are located
may be able to grant meaningful provisional relief. That is because security measures often
have only territorial effect and, even when they purport to apply extraterritorially,
enforcement may be impossible. See G. Born, International Civil Litigation in United States
Courts 935-36 (3d ed. 1996). In those circumstances, according exclusive jurisdiction to the state
where the arbitration is pending may not be warranted. Even assuming that this is correct, and
proven, is it not relevant whether the state where the arbitration is pending would grant
provisional measures if the asset in question were within its jurisdiction?
In cases involving in personam relief – as in Borden and Channel Tunnel – is there any reason
that courts of nations other than the arbitral situs should entertain actions for provisional
relief? Both Borden and Channel Tunnel resolve this question by concluding (under U.S. and
English law, respectively) that a court has the power to grant provisional relief in aid of a
foreign (or potentially foreign) arbitration. Is that resolution persuasive? What are the reasons
for and against it?
3. Exercise of discretion to order provisional relief. While asserting the power to order
provisional measures in aid of a “foreign” arbitration, both Borden and Channel Tunnel refused
to exercise that power in the case before them. Both courts cited a variety of factors
counselling against the exercise of this authority.
(a) Factors relevant to issuance of provisional relief in aid of foreign arbitration. Consider the
various factors cited by the English and U.S. courts. Are the factors the same? Which are
more relevant to the issue of injunctive relief in aid of arbitration?
(b) Channel Tunnel factors. The Channel Tunnel court considered: (a) the situs of the
arbitration; (b) the curial law; (c) the substantive law governing the parties' relations; (d)
the fortuitous involvement of English courts, merely because the defendants were
domiciled there; (e) the fact that the requested “interim” relief in fact would have
resolved much of the parties' dispute; (f) the fact that courts should generally be
reluctant to grant provisional relief in aid of any arbitration; and (g) the fact that a
Belgian court was the “natural court” to consider the issue, since the arbitration was sited
in Belgium.
(c) Borden factors. In contrast, the Borden court considered: (a) the location of the conduct
giving rise to the parties' underlying dispute; (b) the location of the evidence and
witnesses; (c) the respective interests of the possible judicial fora in issuing relief; and (d)
the ease of enforcing the court's order.
(d) Appropriate factors. Although answering the same basic question, the Channel Tunnel and
Borden court considered entirely different sets of factors. Which set of factors is more
relevant to the question whether a particular national court should grant relief? Are all of
the factors relevant? In addition, is it not relevant whether (a) the arbitral panel is
constituted and functioning; (b) if not, the reasons for that; (c) the attitude of the tribunal
towards the request for relief; and (d) the availability of effective provisional measures
from other courts? If you could consider only one of the above factors, which would it be?
What factors should be relevant to a decision by a court in one country to grant
provisional measures in aid of an arbitration conducted in another country? Is it not
relevant, as suggested above, that the court is asked to take action with respect to an
asset located within its jurisdiction, which the courts of the arbitral forum could not
reach?
P "970"
P "971"
4. Borden revisited – provisional relief when arbitral forum has not been selected. Finally, note
that in Borden the arbitral forum had not yet been designated, and New York might well have
been the arbitral situs. If the arbitral situs were New York, what effect should this have on the
availability of provisional measures in a U.S. court?
Was Borden correctly decided? Suppose that the arbitration were conducted in New York. In
that case, should the New York court have granted the requested relief?
5. U.S. decisions granting provisional measures in aid of a “foreign” arbitration. In contrast to
Borden, a number of lower U.S. courts have granted provisional relief in aid of arbitrations
being conducted in a foreign country, under the arbitration law of that country, albeit often
without analysis. E.g., Tampimex Oil Ltd v. Latina Trading Corp., 558 F.Supp. 1201 (S.D.N.Y. 1983)
(granting attachment of New York bank account in aid of arbitration in London); Atlas
Chartering Services v. World Trade Group, 453 F.Supp. 861, 863 (S.D.N.Y. 1978) (granting
attachment of funds in two accounts in New York banks in aid of arbitration in London); Andros
Compania Maritima SA v. Andre and Cie, 430 F.Supp. 88 (S.D.N.Y. 1977) (granting maritime
attachment in aid of arbitration pending in London); Paramount Carriers Corp. v. Cook
Industries, 456 F.Supp. 598 (S.D.N.Y. 1979) (same); Carolina Power & Light Co. v. Uranex, 451
F.Supp. 1044 (N.D. Calif. 1977).

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 For an extreme statement of this, consider Castelan v. M/V Mercantil Parati, 1991 U.S. Dist. Lexis
6472 (D.N.J. 1991), where the parties' agreement provided for arbitration in London, under
English law. The district court concluded that, under English law, the plaintiff in the U.S. action
could not have obtained provisional relief from an English court; nevertheless, because U.S.
standards for maritime arrest were satisfied, the court arrested the defendant's vessel in aid of
the arbitration. Is that wise?
6. Law governing request for provisional measures in aid of a “foreign” arbitration. If a U.S.
court can grant provisional relief in aid of a “foreign” arbitration, should it apply U.S. or foreign
law? As a practical matter, U.S. courts have uniformly applied U.S. law. See the cases cited
above, supra p. 955-58. That is also consistent with traditional conflict of laws rules.
Restatement (Second) Conflict of Laws §130 (1971). Is it right? If the primary reason to permit
courts to aid foreign arbitrations is necessity and convenience, shouldn't the courts apply the
same substantive rules as those under the curial law?
7. Availability of forum non conveniens argument in response to action in U.S. courts for
provisional measures in aid of arbitration. As Borden illustrates, in an action in federal court for
provisional measures in aid of arbitration, the forum non conveniens doctrine is available as a
defense. That decision is consistent with many lower U.S. court decisions in other contexts,
such as the enforcement of arbitration agreements, see supra pp. 400-07.
8. Basis for federal subject matter jurisdiction over action seeking provisional measures in aid
of arbitration. According to Borden, “an application for a preliminary injunction in aid of
arbitration” falls within the court's power to compel arbitration and appoint arbitrators under
§206 of the FAA. That is a sensible reading of §206, although other lower courts have adopted
narrower views of comparable provisions. Tesoro Petroleum Corp. v. Asamera (South Sumutra)
Ltd, 798 F.Supp. 400 (W.D. Tex. 1992); supra pp. 767-68.
If §206 is not available, then §4 of the FAA would presumably apply, but as discussed
elsewhere, the domestic FAA does not provide an independent basis for federal subject matter
jurisdiction. See supra p. 387. Alienage or some other independent jurisdictional basis would be
required.

D. Judicial Enforcement of Provisional Measures Ordered by Arbitrators

Notwithstanding the practical and legal obstacles, discussed above, arbitral tribunals
sometimes do order provisional relief in aid of a international arbitration. When they do, the
issue of enforcement often arises: how can a recalcitrant party be required to comply with
provisional measures ordered by an arbitral tribunal?
P "971" The starting point for exploration of the issue of enforceability is the general proposition that
P "972" arbitrators lack the legal authority, under virtually all national legal regimes, coercively to
enforce their orders. “The most important and obvious such difference [between court-ordered
and tribunal-ordered provisional measures] is that orders given by arbitrators are not self-
executing, like those of courts, and must generally take the form of directions to the parties to
perform or refrain from performing certain acts.” (55)
That general proposition is, however, not strictly accurate. First, the ability of an arbitrator
actually to enforce his orders is a matter of national law, and there may be circumstances in
which local law permits the functional equivalent of judicial enforcement. For example, when
the parties have previously posted security, or put evidence or other property into the
tribunal's custody, the tribunal may possess the power, subject to judicial challenge, to
“enforce” its orders by withholding or transferring the funds or property.
Second, it is at least arguable under some national laws, that arbitrators have the power to
impose sanctions on a party for failing to comply with their interim orders. (56) Those sanctions
would, if not themselves obeyed, require judicial enforcement, however, and it is not clear
whether most national courts would grant such enforcement. (57)
Third, the arbitrators' most potent enforcement mechanisms are their ability to draw adverse
inferences of fact from a party's non-compliance with their orders and to form a negative view
of a parties' substantive case. That threat is most pointed, and most justifiable, where a
tribunal's discovery orders are flouted. (58) But any party that willfully refuses to comply with
an arbitrator's orders must reckon with the consequences that its refusal will almost inevitably
have for the tribunal's view of it and, for better or worse, the party's legal position.
Beyond these mechanisms for “self-enforcement,” however, is the possibility of judicial
enforcement of an arbitrator's award of provisional measures. In principle, the FAA permits the
enforcement of tribunal-ordered provisional measures in U.S. courts. (59) Judicial enforcement
actions for provisional measures will typically arise in the same procedural context as actions
to enforce final awards. Thus, one party will seek to confirm, or the opposing party will seek to
vacate, an interim award of provisional measures in a national court. In the United States, this
will result in actions under the FAA (or state law) either to enforce or to vacate the award – a
subject discussed in detail above. (60)
Actions to enforce provisional measures raise many of the same issues that are present in other
P "972" enforcement contexts – such as the appropriate standard of judicial review. In addition,
P "973" however, the enforcement of tribunal-ordered provisional measures is particularly likely to
raise questions as to whether the arbitral tribunal exceeded its authority, whether judicial
review or enforcement of an interim award (rather than a final award) is appropriate, and the

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 extent to which the tribunal's measures are consistent with court-ordered measures.
Excerpted below are provisions from the UNCITRAL Model Law and the Swiss Law on Private
International Law dealing with the enforceability of awards of provisional measures. In
addition, reread the Charles Construction decision, excerpted above, (61) which illustrates how
national courts must consider whether the parties' arbitration agreement contemplated an
award of provisional measures. Finally, consider the opinion in Sperry International Trade, Inc.
v. Israel, which suggests some of the questions which can arise concerning other aspects of
enforcement of tribunal-ordered provisional measures.
UNCITRAL MODEL LAW
Articles 35 & 36
[excerpted below at pp. 1020-21]
SWISS LAW ON PRIVATE INTERNATIONAL LAW
Articles 188-192
[excerpted below at pp. 1034-35]
SPERRY INTERNATIONAL TRADE, INC. v. ISRAEL
689 F.2d 301 (2d Cir. 1982)
KEARSE, CIRCUIT JUDGE. The principal question on these appeals concerns the power of
arbitrators to make certain rulings, in light of a prior decision of this Court in this litigation
reversing the district court's granting of a preliminary injunction on the ground that the moving
party had failed to prove irreparable injury. [The] Government of Israel (“Israel”) appeals from
an order of the United States District Court for the Southern District of New York ... confirming
an arbitration award in a proceeding between Israel and petitioner-appellee Sperry
International Trade, Inc. (“Sperry”). Because we conclude that the award was within the
arbitrators' powers and did not disregard the law, we affirm....
In July 1978, [Sperry] ... and Israel executed a contract (the “Contract”) requiring Sperry to
design and construct a communication system for the Israeli Air Force. As contemplated by
paragraph 59 of the Contract, Sperry caused Citibank, N.A. (“Citibank”) to open a clean
P "973" irrevocable letter of credit in Israel's favor for a sum eventually set at approximately $15
P "974" million. Paragraph 59 gave Israel the right to draw on this letter of credit, to the extent of its
payments to Sperry, upon presentation of a sight draft and Israel's own “certification that it is
entitled to the amount covered by such draft by reason of a clear and substantial breach” of
the Contract. The provision for payment in the letter of credit itself stated, somewhat
differently, as follows:
FUNDS UNDER THIS CREDIT ARE AVAILABLE TO YOU AGAINST YOUR SIGHT DRAFT DRAWN ON US ...
PROVIDED SUCH DRAFT IS ACCOMPANIED BY YOUR CERTIFICATION THAN YOU ARE ENTITLED TO
THE AMOUNT COVERED BY SUCH DRAFT BY REASON OF NONDELIVERY IN ACCORDANCE WITH
CONTRACT NO. 6977 OR BY REASON OF DENIAL OF THE NECESSARY LICENSES.
Paragraph 45 of the Contract provided that all Contract disputes that could not be resolved by
negotiation were to be submitted to arbitration in accordance with the rules of the American
Arbitration Association. On August 3, 1981, Sperry initiated arbitration proceedings, seeking a
declaration that Israel had breached its contractual obligations and demanding damages of
approximately $10 million. Sperry alleged that its attempts to perform its obligations under
the Contract had been seriously and substantially frustrated by wrongful actions and inactions
of Israel. Israel denied Sperry's allegations and asserted eleven counterclaims, claiming, inter
alia, nonperformance of the Contract by Sperry.
On September 11, 1981, Sperry instituted suit in the district court to compel arbitration and to
enjoin Israel from drawing on the letter of credit pending a decision by the arbitrators. The
district court enjoined Israel from making the certification that would enable it to draw on the
letter of credit, “pending an early ruling by the arbitrators” as to “whether it is equitable and
proper in the circumstances that Israel shall or shall not draw on the letter of credit.” On
January 21, 1982, we reversed the district court's order granting the preliminary injunction
because Sperry had made no showing that it would be irreparably injured in the absence of
such an injunction. We declined to express a view as to the merits of the controversy. Sperry I,
670 F.2d at 11 & n.4.
On January 27, 1981, Israel furnished Citibank with a sight draft and certification acceptable to
Citibank for drawing down the letter of credit, and requested Citibank to transmit the proceeds
to an account at another bank in New York. On January 31, however, before the proceeds had
been transmitted, Sperry obtained an ex parte order of attachment in New York State Supreme
Court. Israel removed the action to federal court pursuant to 28 U.S.C. §1441(d) (1976) and
moved to vacate the order of attachment; Sperry cross-moved to confirm the attachment.
Argument on these motions was scheduled for February 9, with the expectation that by that
time the arbitrators would have ruled on the letter of credit question. On February 8, the
arbitration panel held its first hearing and considered Sperry's motion to require Israel to
P "974" withdraw its certification and demand for payment, and to enjoin it permanently from drawing
P "975" down the letter of credit. Early on the morning of February 9, the arbitrators made their
award on these issues (the “Award”), ordering that the proceeds of the letter of credit be held
in an escrow account in the joint names of Israel and Sperry. (62)

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 This action was promptly reported to Judge John M. Cannella, before whom the parties argued
the motions to vacate or confirm Sperry's attachment. Sperry stated that it would move for an
order confirming the arbitrators' Award, and that if the Award were confirmed, the attachment
would become “essentially moot and unnecessary.” On February 10 Judge Cannella vacated the
attachment on the ground “that the attachment [was] unnecessary to the security of [Sperry].”
N.Y. Civ. Prac. Law §6223(a) (McKinney 1980); see Fed. R. Civ. P. 64 (law of forum state applicable
to attachment). Judge Cannella also stayed Israel “from taking any further action to collect the
proceeds of [the] letter of credit ... or to remove the proceeds resulting from any payment of
that letter of credit from their present location at Citibank” pending a hearing on Sperry's
motion to confirm the arbitrators' award.
Sperry's motion to confirm the Award was heard before Judge Pollack on February 18, and was
P "975" opposed by Israel principally on the ground that the Award was inconsistent with our decision
P "976" in Sperry I, since the arbitrators allegedly had granted substantially the same relief Israel
claimed we had held impermissible. Judge Pollack rejected all of Israel's arguments (63) in a
reasoned opinion and confirmed the Award. On this appeal, Israel renews its contention that
our decision in Sperry I bars the arbitrators' Award. We disagree and affirm the order of the
district court.
It is beyond cavil that the scope of the district court's review of an arbitration award is limited.
Under 9 U.S.C. §9, “the court must grant ... an order [confirming an arbitration award] unless the
award is vacated, modified, or corrected as prescribed in [9 U.S.C. §§10 and 11].” Section 10
permits the court to vacate an award only in specific situations, such as “[w]here the award was
procured by corruption, fraud, or undue means,” §10(a); “[w]here there was evident partiality or
corruption in the arbitrators,” §10(b); “[w]here the arbitrators were guilty of [certain types of]
misconduct ... or of any other misbehavior by which the rights of any party have been
prejudiced,” §10(c); or “[w]here the arbitrators exceeded their powers,” or failed to make “a
mutual, final, and definite award upon the subject matter submitted,” §10(d). In addition, an
award may be set aside on “the nonstatutory ground of ‘manifest disregard’ of the law,”Drayer
v. Krasner, 572 F.2d 348, 352 (2d Cir.), cert. denied, 436 U.S. 948 (1978).... (64)
In the present case Israel argues that the arbitrators exceeded their powers, in violation of
§10(d), and that the Award was made in manifest disregard of the law. Israel bases these
contentions on our decision in Sperry I, vacating the preliminary injunction issued by the
district court and issuing our mandate promptly, which it construes as having established (a)
that, as a matter of law, Sperry was not entitled to any restraint for any period of time on
Israel's right to the $15 million represented by the letter of credit, and (b) that Israel should
have the immediate right to those funds without having to relitigate the issue before the
Arbitrators.
On this view of Sperry I, Israel argues that the arbitrators were barred from prohibiting Israel
from drawing down the letter of credit, and that in making the Award the arbitrators exceeded
their powers and manifestly disregarded such principles as res judicata, collateral estoppel,
and law of the case. Israel's attack on the Award as violative of Sperry I must fail, however, for
Israel has rather badly misstated our decision. In Sperry I we reiterated the standard criteria
that govern the district courts' granting of preliminary injunctions, see Jackson Dairy, Inc. v. H.P.
P "976" Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979) (per curiam), and ruled that Sperry had failed to
P "977" prove the likelihood of irreparable injury required to obtain such relief, because the only
potential harm it had shown was strictly monetary. Sperry I, 670 F.2d at 11-13. This was the only
ground of our decision. Nowhere did we state that Israel had a right to the funds or suggest that
Sperry had breached the Contract in such a way as to give Israel the right to draw down the
letter of credit. Indeed, we expressly declined to state a view as to such issues as Sperry's
likelihood of prevailing on the merits and the seriousness of the dispute as to the merits of
Sperry's claim. See id. at 11 n.4. And the question of what powers the arbitrators might have to
interpret the Contract or to rule in any way on the propriety of any certification Israel might
make was not before us. To the extent, therefore, that Israel's contention that the arbitrators
exceeded their powers or manifestly disregarded the law depends on the proposition that the
Award was somehow foreclosed by Sperry I, it fails because of Israel's false premise.
Nor do we find merit in Israel's contention that under New York law the arbitrators had no
power to prevent Israel's sole possession of proceeds of the letter of credit pending a decision
on the merits of the contractual claims and counterclaims. Preliminarily, we note that, “in
keeping with the practice that is customary for arbitration under the [American Arbitration]
Association's Rules,” (Israel's Brief in No. 82-7181, at 14) the arbitrators gave no explanation for
the Award. We are thus left to theorize as to the basis of the Award, and New York law requires
that all reasonable efforts be made to find a ground on which to sustain it. See Moyer v. Van-
Dye-Way Corp., 126 F.2d 339, 341 (3d Cir. 1942) (applying New York law); Fudickar v. Guardian
Mutual Life Insurance Co., 62 N.Y. 392, 401 (1875) (“It is a settled principle governing this subject,
and which ought never to be lost sight of, that all reasonable intendments and presumptions
are indulged in support of awards.”). One quite reasonable explanation of the Award comes
quickly to mind: that is, that the arbitrators' view was that any breach of the Contract by Sperry
had not been so “clear and substantial” (Contract paragraph 59) as to allow Israel in good faith
to draw down the letter of credit, and that any breach of the Contract by Israel was not so
egregious as to relieve Sperry of its contractual obligation to provide security for its own
performance of the Contract. We have been cited to no principle of law, from New York or
elsewhere, preventing the arbitrators in such circumstances from ruling that the $15 million be
held in the names of both parties until the contract disputes are determined.

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 Rather, New York law gives arbitrators substantial power to fashion remedies that they believe
will do justice between the parties. Thus, in Sprinzen v. Nomberg, 415 N.Y.S.2d 974, the New York
Court of Appeals stated as follows:
An arbitrator's paramount responsibility is to reach an equitable result, and the courts will not
assume the role of overseers to mould the award to conform to their sense of justice. Thus, an
arbitrator's award will not be vacated for errors of law and fact committed by the arbitrator....
P "977" Under New York law arbitrators have power to fashion relief that a court might not properly
P "978" grant. In Rochester City School District v. Rochester Teachers Association, 394 N.Y.S.2d 179
(1977), the court reversed the vacation of an arbitration award that ordered the petitioner
school district to grant sabbaticals to certain teachers, stating as follows:
In the final analysis ‘Arbitrators may do justice’ and the award may well reflect the spirit rather
than the letter of the agreement.... Thus courts may not set aside an award because they feel
that the arbitrator's interpretation disregards the apparent, or even the plain, meaning of the
words or resulted from a misapplication of settled legal principles. In other words a court may
not vacate an award because the arbitrator has exceeded the power the court would have, or
would have had if the parties had chosen to litigate, rather than to arbitrate the dispute. Those
who have chosen arbitration as their forum should recognize that arbitration procedures and
awards often differ from what may be expected in courts of law.
In sum, Sperry I did not foreclose the arbitrators' Award, and we are aware of no provision of
law contravened by the Award. Accordingly, we concur in the district court's ruling that Israel
has failed to advance any valid basis for denying Sperry's motion to confirm the Award.
CHARLES CONSTRUCTION COMPANY v. DERDERIAN
586 N.E.2d 992 (Mass. 1992)
[excerpted above at pp. 927-30]
Notes on Judicial Enforcement of Provisional Measures Ordered By Arbitral Tribunal
1. General availability of U.S. enforcement of tribunal-ordered provisional measures. Although
there are few decided cases, lower U.S. courts generally have been willing to recognize and
enforce arbitral awards of provisional measures. In addition to Sperry, see Island Creek Coal
Sales Co. v. City of Gainesville, 729 F.2d 1046 (6th Cir. 1984) (confirming award requiring party to
perform contract during pendency of arbitration); Konkar Maritime Enter., SA v. Compagnie
Belge D'Affretement, 668 F.Supp. 267 (S.D.N.Y. 1987) (upholding order to escrow funds); Southern
Seas Navigation Ltd v. Pemex, 606 F.Supp. 692 (S.D.N.Y. 1985) (“if an arbitral award of equitable
relief based upon a finding of irreparable harm is to have any meaning at all, the parties must
be capable of enforcing or vacating it at the time it is made”); Zephyros Maritime Agencies, Inc.
v. Mexicana de Cobre, SA, 662 F.Supp. 892 (S.D.N.Y. 1987); Compania Chilena de Nav. v. Norton,
Lilly & Co., 652 F.Supp. 1512, 1516 (S.D.N.Y. 1987) (upholding security order); Onyx Development
Corp. v. Ministry of Finance, 1989 U.S. Dist. Lexis 11995 (S.D.N.Y. June 24, 1988); Puerto Rico
Maritime Shipping Authority v. Star Lines Ltd, 454 F.Supp. 368, 375 (S.D.N.Y. 1978) (confirming
award for an accounting). Compare Pilkington Brothers plc v. AFG Indus Inc., 581 F.Supp. 1039 (D.
Del. 1984) (provisional injunctive relief issued by English court in aid of international
arbitration sited in London is not “award” entitled to recognition under New York Convention or
FAA).
2. Is an arbitral award of provisional relief sufficiently “binding” or “final” to be the subject of
judicial review? As discussed previously, national law sometimes permits enforcement only of
P "978" “final” awards. In Sperry, Israel argued in the district court that the tribunal's order of
P "979" provisional relief was not reviewable (or enforceable) because it was only an interim, and
not a final, award. Other lower courts have accepted similar arguments that review of
interlocutory arbitral orders is inappropriate, albeit not in the context of provisional relief. See
Michaels v. Mariforum Shipping SA, 624 F.2d 411 (2d Cir. 1980) (no judicial review of “Decision
and Interim Award” disposing of some, but not all, issues in dispute on the merits); supra pp.
466-67, for a discussion of the requirement of a “final” award.
As Sperry squarely held, most lower U.S. courts have concluded that arbitral awards of
provisional measures can be enforced under the FAA. See also Metallgesellschaft AG v. M/V
Capitan Constante, 790 F.2d 280 (2d Cir. 1986) (apparently provisional relief); Island Creek Coal
Sales Co. v. City of Gainesville, 729 F.2d 1046 (6th Cir. 1984); Southern Seas Navigation Ltd v.
Petroleos Mexicanos of Mexico City, 606 F.Supp. 692, 694-5 (S.D.N.Y. 1985) (“This award is not a
partial resolution of the parties' claims as an intermediate step in an ongoing arbitral process
but, in effect, the grant of a preliminary injunction.... To ... preclude Southern from enforcing
the award would render meaningless the arbitrators' power to grant such equitable relief”);
Puerto Rico Maritime Shipping Auth. v. Star Lines Ltd, 454 F.Supp. 368, 375 (S.D.N.Y. 1978).
Are these decisions correct? In what sense is an interim award of “provisional” measures
“final”?
3. Standard of judicial review of arbitrators' substantive decision to award provisional
measures. As Sperry illustrates, the standard for judicial review of an arbitrators' award of
provisional measures is similar to that of a final award on the merits of the case. Only a
showing of “manifest disregard,” or similar defects, see supra pp. 797-814, will permit non-
recognition of an award.
4. Arbitrators' discretion to fashion appropriate remedies. As discussed in detail elsewhere, see

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 supra p. 813, most developed national arbitration regimes permit arbitrators broad discretion
to fashion appropriate remedies. As Sperry illustrates, that discretion extends to matters of
provisional relief.
5. Excess of authority in ordering provisional measures. As in other arbitration contexts,
questions of enforcement often return one to the arbitration agreement. One basis for denying
enforcement of an arbitral award is the arbitrators' excess of authority. See supra pp. 849-59. As
Charles Construction illustrates, the “excess of authority” defense raises special issues in the
context of provisional measures. We have discussed those in detail above, see supra pp. 930-33.
6. State arbitration statutes dealing with enforcement of awards of interim relief. A number of
the U.S. states that have enacted state international arbitration statutes have specifically
addressed the subject of judicial enforcement of tribunal-ordered provisional measures. For
descriptions, see generally Mills, State International Arbitration Statutes and the U.S. Arbitration
Act: Unifying the Availability of Interim Relief, 13 Fordham Int'l L. J. 604, 637-38 (1990).
7. National arbitration legislation dealing with enforcement of awards of interim relief. The
willingness of a national court to enforce an arbitral award of provisional relief is, in the first
instance, a matter of national law. Consider, in addition to the sections of the FAA relied on in
Sperry and the state arbitration statutes cited above, Article 183 of the Swiss Law on Private
International Law. Article 183(2) provides that if party does not comply with tribunal-ordered
protective or provisional measures, “the arbitral tribunal may request the assistance of the
competent court.” Compare this to the FAA, which contemplates that a party to the arbitration,
as opposed to the tribunal, will seek to enforce interim arbitral awards. Which approach is
wiser? How will the tribunal “appear” before Swiss (or other) courts? Will it hire lawyers, and if
so, who will pay for them?
8. Form of provisional measures and review under ICC Rules. Tribunal-ordered provisional
measures do not always take the form of “awards.” Rather, provisional measures are issued in
the form of procedural directions to the parties. This can have important practical
implications, because the process of issuing an “award” – as opposed to less formal procedural
directions – can be time-consuming.
For example, the ICC Rules require that the ICC International Court of Arbitration approve all
“awards.” See ICC Rule 27 (“Before signing any Award, the Arbitral Tribunal shall submit it in
draft form to the Court....”). Article 23 of the 1998 ICC Rules permits arbitrators to grant
provisional measures either by order or by award. ICC arbitrators who have awarded
provisional relief have typically done so in the form of interim awards, approved by the ICC
International Court of Arbitration. But, the process of obtaining approval of an award is often
fairly slow – requiring up to a month, even if the award is approved without comment. And in
cases requiring provisional relief, this delay is often unacceptable.
A Working Party of the ICC Commission on International Arbitration, established in the late
1980's, concluded that provisional measures could properly take the form of interim awards,
P "979" approved under Article 21. Final Report on Interim and Partial Awards, ICC International Court of
P "980" Arbitration Bulletin at 26 (Dec. 1990). But the Working Party also concluded that the better
practice was only to issue procedural directions, and not an interim award, in order to avoid
the delays accompanying ICC review. Suppose that this recommendation is followed. Would
the resulting directions be enforceable as awards?
9. Relation between request for court-ordered provisional relief and request for tribunal-
ordered provisional relief. In Sperry, Sperry initially sought injunctive relief from the federal
courts in New York; that request was ultimately denied. See Sperry I, 670 F.2d at 11 & n.4. What
effect did the denial of court-ordered provisional measures have on Sperry's request for
tribunal-ordered provisional measures? What effect should the denial of court-ordered
provisional relief have had? Are the issues in the two fora the same? If Sperry elected to seek
provisional relief first from a court, should it not be bound by that refusal?
What if a court grants provisional relief in aid of arbitration. Can the tribunal subsequently
“vacate” that relief? For authority suggesting that it can, see Blumenthal v. Merrill Lynch, Pierce,
Fenner & Smith, Inc., 910 F.2d 1049, 1054 (2d Cir. 1990).
10. Res judicata effect of judicial denial of provisional measures in subsequent consideration of
provisional measures by arbitral tribunal. The issues in Sperry's two requests for provisional
relief were presumably substantially identical. The Second Circuit denied Sperry's request, on
the grounds that it had not established a sufficient likelihood of success on the merits. What
preclusive effect, if any, should this conclusion have in subsequent arbitral proceedings on
substantially the same issue? For an ICC arbitral tribunal's decision, refusing to grant interim
relief that would modify provisional measures previously granted by the national court in the
arbitral situs, see ICC Case No. 4998 of 1985, 1986 Journal du Droit International 1139.
Many requests for provisional relief require some sort of showing of likelihood of success on the
merits; the court will not grant provisional measures (such as attachment) unless the
requesting party makes some reasonable showing that it will prevail on the merits. What status
should factual findings by a court concerning likelihood of success on the merits have in an
arbitration between the same parties? Note that in many cases, the court's findings will not
purport to resolve disputed issues – but merely to indicate the existence of reasonable
arguments for particular positions. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Bradley, 756
F.2d 1048, 1054 (4th Cir. 1985) (“Nor can we accept ... that the district court's preliminary
injunction will prejudice the arbitrator's subsequent decision on the merits. The arbitrators are

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 sworn to render a decision based solely on the evidence presented to them.”).
11. Arbitrators' power to award damages for wrongfully obtained court-ordered provisional
measures. If a party does obtain provisional relief from a national court, and it subsequently
transpires that the relief was not justified, the aggrieved party generally can seek damages.
That is the case, for example, under New York law. See supra p. 960. In addition, the arbitral
tribunal itself may have the power to award damages for wrongfully obtained court-ordered
provisional relief. See, e.g., Warth Line, Ltd v. Merinda Marine Co., Ltd, 778 F.Supp. 158 (S.D.N.Y.
1991) (confirming New York arbitral tribunal's award of damages from arrest of vessel by
Belgian courts); In re Noble Navigation Corp., No. 83-3983 (S.D.N.Y. June 4, 1984). See also
Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 F.2d 1049, 1054-56 (2d Cir. 1990)
(arbitrators “vacated” court-ordered preliminary injunction, but did not award damages; court
permitted award of damages under F.R.Civ.P. 65(c)).
12. Does the New York Convention limit judicial enforcement of tribunal-ordered provisional
measures? As described above, some U.S. courts have held that Article II(3) of the New York
Convention forbids national courts from granting provisional relief in aid of arbitration; the
sole course of action available to national courts is to refer the parties to arbitration. See supra
pp. 945-46. Does the breadth of this rationale suggest that courts are also precluded from
enforcing provisional relief ordered by arbitrators? The only U.S. case that appears to have
considered the point concluded that the Convention did not restrict its ability to recognize and
enforce tribunal-ordered provisional measures. Ministry of Finance and Planning v. Onyx
Development Corp., 1989 U.S. Dist. Lexis 11995 (S.D.N.Y. June 24, 1988).
P "980"

References
1) For commentary, see Becker, Attachments in Aid of International Arbitration – The American
Position, 1 Arb. Int'l 40 (1985); Brody, An Argument for Pre-Award Attachment in International
Arbitration Under the New York Convention, 18 Cornell Int'l L. J. 99 (1985); Brower & Tupman,
Court-Ordered Provisional Measures Under the New York Convention, 80 Am. J. Int'l L. 24
(1986); Ebb, Flight of Assets From the Jurisdiction “In the Twinkling of a Telex”: Pre- and Post-
Award Conservatory Relief in International Commercial Arbitration, 7 J. Int'l Arb. 9 (1990);
Hausmaninger, The ICC Rules for a Pre-Arbitral Referee Procedure: A Step Towards Solving the
Problem of Provisional Relief in International Commercial Arbitration, 7 ICSID Rev. 82 (1992);
Hoellering, Interim Measures and Arbitration: The Situation in the United States, Arb. J. 22
(June 1991); Hoellering, Interim Relief in Aid of Commercial Arbitration, 1 Wisc. Int'l L. J. 1
(1984); International Bar Ass'n, Interim Court Remedies in Support of Arbitration (1987 eds. D.
Shenton & W. Kuhn); ICC, Conservatory and Provisional Measures in International Arbitration
(1993); Jarvin, Is Exclusion of Concurrent Courts' Jurisdiction Over Conservatory Measures to
be Introduced by a Revision of the Convention?, 6 J. Int'l Arb. 171 (1989); Karmel, Injunctions
Pending Arbitration and the Federal Arbitration Act: A Perspective From Contract Law, 54 U.
Chi. L. Rev. 1373 (1987); McDonnell, The Availability of Provisional Relief in International
Commercial Arbitration, 22 Colum. J. Transn. L. 273 (1984); Mills, State International
Arbitration Statutes and the U.S. Arbitration Act: Unifying the Availability of Interim Relief, 13
Ford. Int'l L. J. 604 (1989); Pew-Jarvis, Pre-Award Attachment in International Arbitration: The
Law in New York, 7 J. Int'l Arb. 31 (1990); Reichert, Provisional Remedies in the Context of
International Commercial Arbitration, 3 Int'l Tax & Bus. Law. 373 (1986); Note, Attachment
Under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral
Awards, 36 Wash. & Lee L. Rev. 1135 (1979); Note, Pre-Award Attachment Under the U.N.
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 21 Va. J. Int'l L.
785 (1981).
2) Provisional measures are also variously referred to as provisional relief or remedies,
interim relief or remedies, conservatory measures, or prejudgment or pre-award relief.
3) See generally International Bar Ass'n, Interim Court Remedies in Support of Arbitration (1987
eds. D. Shenton & W. Kuhn).
4) In some jurisdictions, it is possible to obtain provisional measures with extraterritorial
effect. For example, both U.S. and English courts will issue injunctions requiring or
forbidding a party from engaging in certain conduct abroad. See G. Born, International Civil
Litigation in United States Courts 484-85 (3d ed. 1996); United States v. First Nat'l City Bank,
379 U.S. 378 (1965). The enforcement of court-ordered provisional measures outside the
issuing court's territorial jurisdiction is often problematic.
5) UNCITRAL Rules Article 26(1); AAA International Rules Article 22(1).
6) E.g., Borden, Inc. v. Meiji Milk Products Co., 919 F.2d 822 (2d Cir. 1990); Albatross S.S. Co. v.
Manning Bros., 95 F.Supp. 459 (S.D.N.Y. 1951).
7) E.g., Sperry International Trade, Inc. v. Government of Israel, 689 F.2d 301 (2d Cir. 1982).
8) E.g., Carolina Power & Light Co. v. Uranex, 451 F.Supp. 1044 (N.D. Calif. 1977).
9) ICC Rules Article 20(4).
10) The arbitral tribunal's authority to order provisional measures is often related to its power
to grant injunctive relief. See supra pp. 813-14.

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 11) As discussed in detail below, some U.S. courts have interpreted Article II of the New York
Convention as forbidding the courts of signatory states from ordering prejudgment
attachment. See infra pp. 936-38. Those courts have not expressly held that the Convention
addresses the availability of provisional relief from arbitrators, although a likely premise
of their analysis is that arbitral tribunals generally do enjoy the authority to order
preliminary relief. An alternative result would produce the unattractive situation in which
provisional relief was available neither from a court nor an arbitrator.
12) See Article VI(4).
13) Where provisional measures take effect at places outside the arbitral situs, arbitrators will
often also inquire whether they are permitted to issue and enforce provisional measures in
such places.
14) National Code of Civil and Commercial Procedure Article 753 (Argentina); Italian Code of
Civil Procedure Article 818.
15) Swiss Law on Private International Law Articles 183 and 184 (superseding former Swiss
Intercantonal Arbitration Convention of 1969, Article 26); UNCITRAL Model Law on
International Commercial Arbitration Article 17.
16) See infra p. 957.
17) The enforceability and effect of such agreements of course depends on national law,
although, as described above, most developed national arbitration statutes give effect to
agreements authorizing tribunal-ordered provisional measures. See supra pp. 924-25.
18) 586 N.E.2d 992 (Mass. 1997).
19) ... Compare Rodman, Commercial Arbitration §26.1 (West 1984 & Supp. 1989) (“Generally,
with the exception of maritime cases, provisional remedies such as attachments or
compulsory bonds are not available in arbitration”) with 4 Business Law Monographs 5-6
(M. Bender 1989) (“Once the parties agree to submit their dispute to arbitration, the power
of the arbitrator to govern the proceedings before him includes the power to grant
provisional remedies”).
20) Previously §34, in effect on January 1, 1986 (and perhaps earlier), was headed “Conservation
of Property” instead of “Interim Measures,” but it was substantially the same as the rule
quoted above. The prior rule did not have the words “for interim relief” after the word
“orders.” The parties do not argue which rules are applicable, and we need not decide.
21) The conclusion of the court in Pacific Reinsurance Management Corp. v. Ohio Reinsurance
Corp., 935 F.2d. 1019, 1022-1023 & n.1 (9th Cir. 1991), that the rule identical to §34 in the AAA
commercial arbitration rules “contemplates interim equitable relief in appropriate
circumstances” is correct, but that rule does not justify an interim order that a party
provide security pending the arbitrator's decision.
22) The statement in Island Creek Coal Sales Co. v. Gainesville, 729 F.2d 1046, 1049 (6th Cir.
1984), that §43 authorizes an arbitrator to order specific performance to preserve the
status quo during arbitration may be correct (unless the contract expressly prevents such
relief), especially as to the party who commenced the proceeding in order to discover
whether he could depart from the status quo. That opinion does not, however, say that §43
supports an order of the sort entered in the case before us.
23) Tribunal-ordered provisional measures are not common. The Secretary General of the ICC
International Court of Arbitration reported in 1994 that in the past 15 years, only 25 ICC
cases had addressed the subject of provisional relief. For published examples of such
awards, see ICC Case No. 2444, 1977 Clunet 932; ICC Case No. 3540, VII Y.B. Comm. Arb. 124
(1982); ICC Case No. 2896, X Y.B. Comm. Arb. 47; ICC Case No. 4126, 1984 Clunet 934; ICC Case
No. 4156, 1984 Clunet 937; ICC Case No. 4415, 1984 Clunet 530; ICC Case No. 4998, 1986 Clunet
1139; ICC Case No. 5103, 1988 Clunet 1206; ICC Case No. 5650, XVI Y.B. Comm. Arb. 855 (1991).
24) Southern Seas Navigation Ltd v. Petroleos Mexicanos of Mexico City, 606 F.Supp. 692, 693
(S.D.N.Y. 1985) (quoting arbitrators' interim award “This tribunal has anguished over the
wisdom of granting interim relief.... Case law, however, supports our authority as arbitrators
to engage in equitable type relief.”); Partial Award of December 23, 1982 in ICC Case No.
3896, X Y.B. Comm. Arb. 47 (1985) (“In conclusion, the Arbitral Tribunal considers that there
exists, undeniably, the risk of the dispute before it becoming aggravated or magnified, and
that the parties should, in the same spirit of goodwill that they have already demonstrated
in signing the Terms of Reference, refrain from any action likely to widen or aggravate the
dispute, or to complicate the task of the Tribunal or even to make more difficult, one way
or another, the observance of the final arbitral award.”).
25) Challenges to arbitrators can delay the process even longer.
26) For a description of one such occurrence, and the issues of enforceability that a sua sponte
order raises, see Hoellering, The Practices and Experience of the American Arbitration
Association in ICC, Conservatory and Provisional Measures in International Arbitration 33-34
(1993). Most arbitral rules appear to contemplate that provisional measures will be
granted at the request of a party. See UNCITRAL Rules 26; AAA International Rules Article 22;
LCIA Rules Article 25.
27) See ICC Rules Article 21; ICC Rules for a Pre-Arbitral Referee Procedure Article 3(2) (no ex
parte proceedings).
28) Compare Schwartz, The Practices and Experience of the ICC Court in ICC, Conservatory and
Provisional Measures in International Arbitration 59 n.48 (1993).
29) See W. Craig, W. Park & J. Paulsson, International Chamber of Commerce Arbitration §26.05
(2d ed. 1990).

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 30) For commentary, see Becker, Attachments in Aid of International Arbitration – The American
Position, 1 Arb. Int'l 40 (1985); Brody, An Argument for Pre-Award Attachment in International
Arbitration Under the New York Convention, 18 Cornell Int'l L. J. 99 (1985); Brower & Tupman,
Court-Ordered Provisional Measures Under the New York Convention, 80 Am. J. Int'l L. 24
(1986); Hoellering, Interim Measures and Arbitration: The Situation in the United States, Arb.
J. 22 (June 1991); Jarvin, Is Exclusion of Concurrent Courts' Jurisdiction Over Conservatory
Measures to be Introduced by a Revision of the Convention?, 6 J. Int'l Arb. 171 (1989);
McDonnell, The Availability of Provisional Relief in International Commercial Arbitration, 22
Colum. J. Transn. L. 273 (1984); Reichert, Provisional Remedies in the Context of International
Commercial Arbitration, 3 Int'l Tax & Bus. Law. 373 (1986).
31) E.g., Jarvin, Is Exclusion of Concurrent Courts' Jurisdiction Over Conservatory Measures to be
Introduced by a Revision of the Convention?, 6 J. Int'l Arb. 171 (1989) (“Intervention by state
courts offers the only effective means for implementing conservatory measures during an
arbitration.”).
32) See infra pp. 945-46; I.A.T.D. Assoc. Inc. v. Podar Bros., 636 F.2d 75 (4th Cir. 1981); McCreary
Tire & Rubber Co. v. CEAT SpA, 501 F.2d 1032 (3d Cir. 1974); Cooper v. Ateliers de la
Motobecane, SA, 442 N.E.2d 1239 (N.Y. Ct. App. 1982).
33) See infra pp. 945-46; Carolina Power & Light Co. v. Uranex, 451 F.Supp. 1044 (N.D. Cal. 1977);
Rhone Mediterranee etc. v. Lauro, 555 F.Supp. 481 (D.V.I. 1982).
34) See authorities cited at infra pp. 946-47.
35) 501 F.2d 1032 (3d Cir. 1974).
36) 501 F.2d at 1038.
37) See infra pp. 945-46.
38) 456 N.Y.S.2d 728 (Ct. App. 1982).
39) See infra pp. 947-48; Drexel Burnham Lambert Inc. v. Ruebsamen, 139 A.D.2d 323 (1st Dept.
1988).
40) See infra pp. 946-47; Carolina Power & Light Co. v. Uranex, 451 F.Supp. 1044 (N.D. Calif. 1977).
41) Borden, Inc. v. Meiji Milk Products Co., 919 F.2d 822 (2d Cir. 1990).
42) If the courts of some other jurisdiction were able to obtain in personam jurisdiction over
both Uranex and Homestake, then it would be appropriate for this court to dismiss the
instant action and leave CP&L to its remedies in that jurisdiction. There appears to be
little question that a federal district court with in personam jurisdiction over both the
alleged debtor and the stakeholder could issue orders for security purposes that would
have extraterritorial effect. United States v. First Nat'l City Bank, 379 U.S. 378 (1965); Fleming
v. Gray Mfg. Co., 352 F.Supp. 724 (D. Conn. 1973). Neither party, however, has suggested that
there is any state where in personam jurisdiction could be obtained over both Homestake
and Uranex. If the courts of another jurisdiction could obtain in personam jurisdiction only
over Uranex, it is possible that an order running against Uranex would also bind
Homestake in the sense that Homestake could be an “aider and abettor” in the violation of
the injunction if after notice of the injunction it simply transferred the funds to France.
South Cent. Bell Tel. Co. v. Constant Inc., 304 F.Supp. 732 (E.D. La. 1969), aff'd, 437 F.2d 1207
(5th Cir. 1971); Fed.R.Civ.P. 65. Such courts, however, would be unable to undertake civil
contempt proceedings as to Homestake without personal jurisdiction, and after removal of
the assets contempt procedures against Uranex would be an empty formality. The court is
unwilling to send CP&L on this more hazardous procedural route.
43) Uranex also argues that a prejudgment attachment is inconsistent with the agreement of
the parties. Article 11 of the contract between Uranex and CP&L, however, provides only
that:
Arbitration. Any controversy or claim arising out of this Agreement, or the breach thereof,
which the parties are unable to settle by mutual consultation, shall be settled by
arbitration by three impartial Arbitrators, all of whom shall be attorneys, in accordance
with the Rules of the American Arbitration Association, and judgment upon the award
rendered by the Arbitrators may be entered in any court having jurisdiction thereof. The
arbitration shall take place in New York, New York.
Hence, prejudgment attachment can be considered inconsistent with the agreement only if
one decides that such attachment is inherently inconsistent with any agreement to
arbitrate. In that sense defendant's argument premised on the contract is actually
identical with defendant's argument premised on the Convention. Insofar as defendant's
contractual argument might be considered separately, the court finds it to be without
basis.
44) For commentary, see Karmel, Injunctions Pending Arbitration and the Federal Arbitration Act:
A Perspective From Contract Law, 54 U. Chi. L. Rev. 1373 (1987); Note, The United States
Arbitration Act and Preliminary Injunctions: A New Interpretation of an Old Statute, 66 B.U. L.
Rev. 1041 (1986); Pike, The Federal Arbitration Act: A Threat to Injunctive Relief, 21 Willamette
L. Rev. 674 (1985); Note, Availability of Provisional Remedies in Arbitration Proceedings, 17
N.Y.U.L.Q. Rev. 638 (1940).
45) See infra p. 956.
46) See infra pp. 957-58.
47) See infra pp. 960-71.
48) Rogers, Burgan, Shahine & Deschler, Inc. v. Dongsan Construction Co., 598 F.Supp. 754
(S.D.N.Y. 1984).
49) Borden, Inc. v. Meiji Milk Products Co., 919 F.2d 822 (2d Cir. 1990).

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 50) Article XVI of the subcontract provides as follows: “If at any time either party considers that
any question, dispute or difference whatsoever has arisen between the parties herein in
relation to or in conjunction with this Agreement then that party may give to the other
party notice in writing of the existence of such question, dispute or difference and, unless
it shall have been amicably resolved within one month from the date of such notice, the
same shall be referred to arbitration to be finally settled under the Rules of Conciliation
and Arbitration of the International Chamber of Commerce, unless otherwise agreed, in
Paris, France.”
51) Dongsan also argues that the status quo will be upset if it “is unable to maintain its security
in the form of the Letter of Guarantee” (emphasis added), presumably because the Letter
might expire by its own terms and Dongsan would be left with nothing. RBSD has, however,
agreed to secure an extension of the Letter for the duration of the arbitration. RBSD is
directed to do so and to file proof of such extension with the Court by December 15, 1984.
Thus, the status quo will be maintained.
52) The underlying dispute involves nearly one million dollars, RBSD has not attempted to
restrain Dongsan from doing anything with assets valued near that amount to secure any
potential judgment. Rather it has merely sought to avoid increasing the amounts
potentially unrecoverable from Dongsan.
53) The Court notes that there is some question about the availability of prejudgment
attachment under the Convention. Compare Carolina Power & Light v. Uranex, 451 F.Supp.
1044 (N.D.Cal. 1977) (yes) with Metropolitan World Tanker Corp. v. P.N. Pertambangan
Minjakdangas Bumi Nasional, 427 F.Supp. 2 (S.D.N.Y. 1975) (no). However, the relief sought
here is not an attachment. Dongsan is in no way restricted in its use or possession of its
assets, but only in its power to gather more assets from RBSD leaving RBSD with only the
recourse of recovery in Korea.
54) Subsection 7502(a) provides that:
A special proceeding shall be used to bring before a court the first application arising out
of an arbitrable controversy which is not made by motion in a pending action. The
proceeding shall be brought in the court and county specified in the agreement; or, if none
be specified, in a court in the county in which one of the parties resides or is doing
business, or if there is no such county, in a court in any county; or in a court in the county in
which the arbitration was held....
55) Schwartz, The Practices and Experience of the ICC Court, in ICC, Conservatory and Provisional
Measures in International Arbitration 59 (1993).
56) Some national laws expressly permit arbitrators to impose enforceable sanctions.
Netherlands Arbitration Act of 1986 Article 1056.
57) A. Redfern & M. Hunter, International Commercial Arbitration 361-63 (2d ed. 1991).
58) See supra p. 489.
59) E.g., Sperry Int'l Trade, Inc. v. Israel, 689 F.2d 301 (2d Cir. 1982); Island Creek Coal Sales Co. v.
Gainesville, 729 F.2d 1046 (6th Cir. 1984). See infra pp. 978-79.
60) See supra pp. 704-11.
61) See supra pp. 927-30.

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 62) The Award provided, in relevant part, as follows:
Upon the motion of [Sperry], in an arbitration before this Tribunal commenced by a
Demand for Arbitration dated August 3, 1981 (as amended), for injunctive relief with respect
to a Letter of Credit (no. WCG-150297) purchased by [Sperry] from Citibank, N.A., or the
proceeds thereof, and for other relief, and upon hearing and considering the arguments
presented and the large number of documents submitted (directly or, during the month
prior to the hearing, through the American Arbitration Association) on behalf of [Sperry]
and [Israel] in favor of and in opposition to such injunctive and other relief;
Now, upon due consideration, the arbitrators order as follows:
1. The proceeds of said Letter of Credit shall be paid into an escrow account (“Escrow
Account”) in the joint names of [Sperry] and [Israel] with such bank or other entity in the
United States of America as shall be agreed upon in writing by [Sperry] and [Israel] prior to
the release of such proceeds by Citibank, N.A. or, in default of such agreement, with
Citibank, N.A.
2. [Sperry] and [Israel] shall maintain the Escrow Account in their joint names as aforesaid
and the moneys or other investments standing to the credit thereof, including all interest
or other income which may be earned thereon, shall not be withdrawn or transferred until
(and then only in such manner, on such terms and in such amount, whether as to the whole
or in part, as) [Sperry] and [Israel] shall so agree in writing or, in default of such agreement,
this Tribunal or a Court in the State of New York or Federal Court in the United States of
America shall finally so determine.
3. [Sperry] and [Israel] shall not permit the Escrow Account to become subject to any lien or
incumbrance without the leave of this Tribunal or of a Court in the State of New York or
Federal Court in the United States of America....
6. Any dispute or difference with respect to the terms of this order shall be promptly
referred to this Tribunal for decision by the arbitrators.
7. This Tribunal reserves for further consideration upon the application of either party all
other claims and issues arising under or in connection with [Sperry's] motion.
8. This order shall constitute an Award of the arbitrators and either party is at liberty to
apply forthwith to the United States District Court for the Southern District of New York for
confirmation and/or enforcement thereof.
63) Israel also contended that the Award was an interim decision not ripe for confirmation,
Michaels v. Mariforum Shipping, SA, 624 F.2d 411, 413-15 (2d Cir. 1980).... On this appeal
Israel has abandoned its prematurity argument, which had been rejected by Judge Pollack
because (a) the Award itself stated that either party could seek confirmation, indicating
that it was a final decision as to the severable issues regarding the letter of credit, see
Moyer v. Van-Dye-Way Corp., 126 F.2d 339, 341 (3d Cir. 1942); Puerto Rico Maritime Shipping
Authority v. Star Lines Ltd, 454 F.Supp. 368, 372-73 (S.D.N.Y. 1978), and (b) the Contract
provides that any arbitration award “shall be deemed final and may be enforced.” ...
64) Paragraph 45 of the Contract requires the arbitrators to “interpret the contract in
accordance with the substantive laws of the State of New York,” and paragraph 62 provides
that the Contract “shall be interpreted, and the legal rights of the parties ... shall be
determined, in accordance with the laws [of the State of New York].” Under New York law
the power of a court to vacate an arbitrator's award is no greater than the power of a
federal court under 9 U.S.C. §§9 and 10....

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