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The ‘Judicialization’ of International Commercial Arbitration: Pitfall or Virtue?

  • LEON TRAKMAN and HUGH MONTGOMERY

Abstract

This article critiques the global concern that international commercial arbitration (ICA) is becoming increasingly ‘judicialized’, addressing the growing sentiment in ICA that arbitral proceedings are too lengthy, expensive, and complex. Assuming a contrarian perspective, it argues that attempts to address the cost and length of arbitration proceedings ought not to undermine the value of finely reasoned arbitral decisions grounded in law and justice. It also argues for a contextual assessment of ICA that extends beyond the debate over ‘judicialization’.

Using global illustrations and ICA developments in Australia as an initial guide, this article suggests that balancing party autonomy, accountability, efficiency, and fairness in ICA can help resolve these growing criticisms of ‘judicialization’. Ultimately, the reform of international arbitration should take place within a framework of ‘international best practice’ that is both analytical in nature and functional in operation. As such, ICA should not only be affordable and expeditious, it should serve as a legitimate and effective method of resolving international commercial disputes. In addition, it should balance the virtue of transparent proceedings against the need to respect the confidences of the parties.

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1 L. Nottage, ‘A Weathermap for International Arbitration: Mainly Sunny, Some Cloud, Possible Thunderstorms’, (2015) Sydney Law School Research Paper 15/62, at 1, available at ssrn.com/abstract=2630401.

2 See Justice C. Croft, ‘Commercial Arbitration in Australia: The Past, The Present and the Future’, (2011) Research Discussion Paper: Chartered Institute of Arbitrators, at 28, available at www.austlii.edu.au/au/journals/vicjschol/2011/59.pdf. See also L. Trakman, ‘International Commercial Arbitration: An Australian Perspective’, in A. Rayes and W. Gu (eds.), International Commercial Arbitration in Asia (2016); see R. Ge, ‘Australia and International Arbitration: Rising to the Challenge of Improving Regional Competitiveness’, (2014) CIArb Australia Essay Competition, at 1, available at www.ciarb.net.au/wp-content/uploads/resources/essay.pdf.

3 Drahozal, C.R., ‘Disenchanted? Business Satisfaction with International Arbitration’, (2008) 2 (5) World Arbitration & Mediation Review 1, at 15.

4 Gerbay, R., ‘Is the End Nigh Again? An Empirical Assessment of the “Judicialization” of International Arbitration’, (2014) 25 (2) The American Review of International Arbitration 223 , at 223.

5 Ibid., at 226–7.

6 Ibid., at 247.

7 Ibid., at 247.

8 T. Stipanowich, ‘Reflections on the State and Future of Commercial Arbitration: Challenges, Opportunities, Proposals’, (2014) Legal Studies Research Paper Series No 2014/29.

9 W. Matti and T. Dietz, International Arbitration and Global Governance: Contending Theories and Evidence (2014), 12.

10 Stipanowich, T., ‘Arbitration: The “New Litigation”’, (2010) 1 University of Illinois Law Review, at 12 .

11 L. Trakman, ‘“Legal Traditions” and International Commercial Arbitration’, (2007) 17 American Review of International Arbitration 1, available at works.bepress.com/leon_trakman/1/. See generally for a discussion of the historical underpinnings and ideological structures of international commercial arbitration: Sweet, A. Stone, ‘Arbitration and Judicialization’, (2011) 1 (9) Oñati Socio-Legal Series . See also Franck, S., ‘The Role of International Arbitrators’, (2006) 12 ILSA Journal of International & Comparative Law 499 .

12 See Trakman, L., ‘Ex Aequo et Bono: De-mystifying An Ancient Concept’, (2008) 8 (2) Chicago Journal of International Law 621–42. See generally www.out-law.com/en/topics/projects-construction/international-arbitration/institutional-vs-ad-hoc-arbitration/.

14 Ibid.

16 See generally www.hkiac.org/arbitration. Art. 13.5 of the HKIAC Administered Arbitration Rules 2013 likewise stipulates that the, ‘arbitral tribunal and the parties shall do everything necessary to ensure the fair and efficient conduct of the arbitration’; see also www.hkiac.org/images/stories/arbitration/2013_hkiac_rules.pdf. The Singapore International Arbitration Centre stipulates, in rule 16.3, that arbitration will involve a preliminary case management meeting so as to ensure what procedures ‘will be most appropriate and efficient for the case’, see also www.siac.org.sg/our-rules/rules/siac-rules-2013.

17 International Arbitration Act 1974 (Cth) s. 39(2), see also Garnett, R. and Nottage, L., ‘The 2010 Amendments to the International Arbitration Act: A New Dawn for Australia?’, (2011) 7 (1) Asian International Journal 1 , at 2.

18 Traxys Europ SA v. Balaji Coke Industry Pvt Ltd (No 2) [2012] FCA 276 [90].

19 Justice Croft likewise invokes the ‘goal of efficient, effective and appropriate dispute resolution’. See Justice C. Croft, ‘Arbitration Law Reform and the Arbitration List of the Supreme Court of Victoria’, (2010) Discussion Paper: Building Dispute Practitioners’ Society and Business Law Section of the Law Council of Australia, at 25.

20 International Chamber of Commerce, ‘Techniques for Controlling Time and Costs in Arbitration’, (2015) ICC Publication No 861-1: International Chamber of Commerce, at 4.

22 Whilst Australia was quick in adopting the UNCITRAL Model Law, there still remain concerns that continued, ongoing legislative and policy reforms are needed. For example, Justice Croft recommends frequent, rolling reviews of the ‘UNCITRAL Rules’ governing ICA. See Croft, Justice C., ‘The Revised UNCITRAL Arbitration Rules of 2010: A Commentary’ (2010) 29 (1) The Arbitrator & Mediator 17 , at 28. Importantly, Nottage likewise urges rolling reviews of the International Arbitration Act and all related legislations that could influence ICA in Australia. See Nottage, L., ‘International Commercial Arbitration in Australia: What's New and What's Next?’ in Perram, N. (ed.), International Commercial Law and Arbitration: Perspectives (2013), 287 at 313. This view can be contrasted to the perspective of Solicitor-General Justin Gleeson, who focuses further on the power of case law to incrementally improve the effectiveness of ICA.

23 Supra, note 21.

24 C. Tang et al., ‘HKIAC and ICC Take Steps to Tackle Costs and Delay in Arbitration’, Global Arbitration News, 14 March 2016, available at globalarbitrationnews.com/hkiac-and-icc-take-steps-to-tackle-costs-and-delay-in-international-arbitration-2016-03-14/.

25 See Croft, supra note 2, at 4

26 A. Maher and A. Price, ‘Past and Future of International Arbitration in Australia’, Lawyers Weekly, 16 March 2015, available at www.lawyersweekly.com.au/opinion/16275-past-and-future-of-international-arbitration-in-australia.

27 Ibid.

28 See also Garnett and Nottage, supra note 17, at 2.

29 Ibid., at 8.

30 Ibid., at 5.

31 Ibid., at 3–4.

32 Ibid., at 2–3.

33 Garnett and Nottage, supra note 17, at 288.

34 Croft, Justice C., ‘Defining “Best Practices of International Arbitration”: Perspectives from Australia (Part 1)’, (2009) 11 (5) ADR Bulletin 1 , at 2.

35 Nottage, L., ‘In/formalisation and Glocalisation of International Commercial Arbitration and Investment Treaty Arbitration in Asia’, in Zekoll, J., Bälz, M., and Amelung, I. (eds.), Formalisation and Flexibilisation in Dispute Resolution (2014), 211 at 214.

36 Ibid.

37 Justice C. Croft and Chief Justice J. Allsop, ‘Judicial Support of Arbitration’ (Paper presented at the APRAG Tenth Anniversary Conference, Melbourne, 28 March 2014) at 1.

38 Nottage, L., ‘Addressing International Arbitration's Ambivalence: Hard Lessons from Australia’, in Candling, C.N., Gotti, M. and Bhatia, V.K. (eds.), Discourse and Practice in International Commercial Arbitration (2012), 11 at 20.

39 See generally P.S. Atiyah and R. Summers, Form and Substance in Anglo-American Law: A Comparative Study of Legal Reasoning, Legal Theory and Legal Institutions (1987). This work, distinguishing between English ‘formal’ common law and American ‘substantive’ common law reasoning, is continued in the work of Nottage, as well, see Nottage, L., ‘Form and Substance in US, English, New Zealand and Japanese Law: A Framework For Better Comparisons of Developments in the Law of Unfair Contracts’, (1996) 26 Victoria University of Wellington Law Review 247 ; Nottage, L., ‘Changing Contract Lenses: Unexpected Supervening Events in English, New Zealand, US, Japanese and International Sales Law and Practice’, (2007) 14 Indiana Journal of Global Legal Studies 375 ; Nottage, supra note 1, at 2.

40 International Chamber of Commerce, supra note 20, at 6.

41 A. Bilbow, ‘The Hottest of Topics in International Arbitration’, Commercial Dispute Resolution, 17 February 2016, available at www.cdr-news.com/categories/third-party-funding/6169-the-hottest-of-topics-in-international-arbitration.

42 Ibid.

43 M. Gotti, ‘The Judicialization of Arbitration Discourse in the Italian Context’, in Candling, Gotti and Bhatia, supra note 38, 129–44.

44 Carbonneau, T., ‘The Rise in Judicial Hostility to Arbitration: revising Hall Street Associates’, (2013) 14 Cardozo Journal of Conflict Resolution 593 , at 618–19; see generally, T. Tucker, ‘Judicialization Without Tenure: Principal and Regime Complexes in Investment Arbitration’, (2015) University of Cambridge: Centre of Development Studies, available at papers.ssrn.com/sol3/papers.cfm?abstract_id=2663778.

45 Nottage, L., ‘International Arbitration and Commercial Law Education for an International World’, in Deguchi, M. and Strome, M. (eds.), The Reception and Transmission of Civil Procedural Law in the Global Society (2008), 1 at 14, available at ssrn.com/abstract=838030. See also Garnett and Nottage, supra note 17, at 215.

46 Nottage, supra note 1, at 9.

47 Flannery, L. and Garel, B., ‘Arbitration Costs Compared: The Sequel’, (2013) 8 (1) Global Arbitration Review 4.

48 Ibid.

49 Ibid., at 14; see also Garnett and Nottage, supra note 17, at 215.

50 Garnett and Nottage, supra note 17, at 234.

51 L. Nottage and R. Garnett, ‘The Top Twenty Things to Change in or Around Australia's International Arbitration Act’, in L. Nottage and R. Garnett (eds.), International Arbitration in Australia (2010) 32, available at papers.ssrn.com/sol3/papers.cfm?abstract_id=1378722.

52 Nottage, supra note 38, at 12.

53 Rise, J., ‘Ten Drastic Proposals for Saving Time and Costs in Arbitral Proceedings’, (2013) 29 (3) Arbitration International 453 , at 454.

54 Maher and Price, supra note 26.

55 Ibid.

56 Monichino, A., ‘Arbitration Reform in Australia: Striving for International Best Practice’, (2010) 29 (1) The Arbitrator & Mediator 29 , at 31.

57 Ibid., at 46.

58 Monichino, A., ‘International Arbitration in Australia: The Need to Centralise Judicial Power’, (2012) 86 Australian Law Journal 118 ; Monichino, A., Nottage, L. and Hu, D., ‘International Arbitration in Australia: Selected Case Notes and Trends’, (2012) 19 Australian International Law Journal 118 .

61 Ibid. See generally M. Nathan, ‘Important Arbitration Centre Open for Business’, Government of Western Australia, 12 March 2015, available at www.mediastatements.wa.gov.au/Pages/Barnett/2015/03/Important-arbitration-centre-open-for-business.aspx.

62 Welser, I. and Berti, G. De, ‘Best Practices in Arbitration: A Selection of Established and Possible Future Best Practices’, in Klausegger, C. et al. (eds.), Austrian Arbitration Yearbook 2010 (2010) 79 , at 79.

63 M. Mcilwrath, ‘Survey Says: Institutions Could Do A Lot To Improve’, Mediate, October 2015, available at www.mediate.com/articles/McIlwrathMbl20151012.cfm.

64 Ibid.; Queen Mary University of London and School of International Arbitration, 2015 International Arbitration Survey: Improvements and Innovations in International Arbitration (2015) www.arbitration.qmul.ac.uk/docs/164761.pdf.

65 Lord P. Goldsmith, ‘CIArb Centenary Celebrations: 3rd International Arbitration Conference Keynote Address’, CIARB Australia News: December 2015 (2015), at 17.

67 K. Tan, ‘Rate Your Experience – HKIAC Launches Arbitration Evaluation System’, HKIAC, 23 July 2014, available at globalarbitrationnews.com/hkiac-and-icc-take-steps-to-tackle-costs-and-delay-in-international-arbitration-2016-03-14/.

68 Ibid.

69 Welser and De Berti, supra note 62.

70 Schultz, T. and Kovacs, R., ‘The Rise of a Third Generation of Arbitrators? Fifteen Years After Dezalay and Garth’, (2012) 28 (2) Arbitration International 171 , at 172. Case management is also important in the work of Fortese and Hemmi, who likewise see case management as an increasingly important aspect of offering effective ICA, see Fortese, F. and Hemmi, L., ‘Procedural Fairness and Efficiency in International Arbitration’, (2015) 3 (1) International Arbitration and Procedure 110 , at 118.

71 Ibid., at 166, 169.

72 L. Trakman and D. Musaleyan, ‘The Repudiation of Investor-State Arbitration and Subsequent Treaty Practice: The Resurgence of Qualified Investor-State Arbitration’, ISCID Law Review (2015); L. Trakman, ‘Deciding Investor States Disputes: Australia's Distinctive Approach’, Journal of World Investment and Trade (2013) 15(1) 1, available at papers.ssrn.com/sol3/papers.cfm?abstract_id=2331790. See also Trakman, L., ‘Rejecting Investor-State Arbitration in Favor of Domestic Courts: The Australian Example’, (2011) 46 (1) Journal of World Trade 83 .

73 Allison, S. and Dharmananda, K., ‘Incorporating Arbitration Clauses: The Sacrifice of Consistency at the Alter of Experience’, (2014) 30 (2) Arbitration International 265 .

74 Ibid., at 278.

75 www.iccwbo.org/News/Articles/2016/ICC-report-confirms-Singapore-as-a-leading-Asia-arbitration-hub/. See also spiegeler.com/new-singapore-international-arbitration-centre-siac-arbitration-rules-2016-comparative-view/. See also S. Greenberg, C. Kee and J. Romesh Weeramantry, International Commercial Arbitration: An Asia-Pacfific Perspective (2011) and Pryles, M.C. (ed.), Dispute Resolution in Asia (1997).

76 J. Grierson, ‘Commercial Arbitration 2016: China’ (26 May 2015) Global Arbitration Review, available at globalarbitrationreview.com/jurisdiction/1000181/china. For a consideration of the institutional differences between arbitration and litigation in China, suggesting how civil law jurisdictions encompass international commercial arbitration into their system of law, see generally Pisacane, G., Murphy, L. and Zhang, C. (eds.), Arbitration in China: Rules and Perspectives (2016), at 55. See also A.J. van den Berg, New Horizins in International Commercial Arbitration and Beyond (2005), at 34.

77 Ibid.

78 International Arbitration Act 1974 (Cth); Croft, supra note 34, at 3.

80 Kim, J., ‘International Arbitration in East Asia: From Emulation to Innovation’, (2014) 4 (1) The Arbitration Brief 1 , at 15.

82 K.C. Lye and D. Chan, ‘Launch of the Singapore International Commercial Court’, Norton Rose Fulbright, April 2015, available at www.nortonrosefulbright.com/knowledge/publications/127746/launch-of-the-singapore-international-commercial-court.

83 Justice C. Croft, ‘How to Minimise Disruption and Delay in Arbitral Proceedings’ (speech delivered at the Arbitrators’ and Mediators’ Institute of New Zealand, Auckland, 16 November 2009), available at www.austlii.edu.au/au/journals/VicJSchol/2009/34.pdf.

84 Fortese and Hemmi, supra note 70, at 122.

85 Kirby, J., ‘Efficiency in International Arbitration: Whose Duty Is It?’, (2015) 32 (6) Journal of International Arbitration 689 , at 690.

86 Ibid., at 689.

87 Ibid., at 695.

88 C. Simson, ‘Arbitrator Deadlines May Tip Balance, Kaufmann-Kohler Warns’, Law360, 3 March 2016, available at www.law360.com/articles/766535/.

89 Ibid.

90 ICC, ‘ICC Court Announces New Policies to Foster Transparency and Ensure Greater Efficiency’, 5 January 2016, available at www.iccwbo.org/News/Articles/2016/ICC-Court-announces-new-policies-to-foster-transparency-and-ensure-greater-efficiency/.

91 Simson, supra note 88.

92 Justice Croft, for example, warns of the UNCITRAL ‘Arbitration Rules’ becoming overly prescriptive. See Croft, supra note 19, at 27.

93 Stephen Ware notes the possible problems associated with the emergence of privatized law, but notes above all that, as an alternative method of dispute resolution, ‘arbitration deserve[s] to flourish’. See Ware, S.J., ‘Arbitration and Assimilation’, (1999) 77 (4) Washington University Law Review 1053 , at 1063.

94 See generally L. Trakman, The Law Merchant: The Evolution of Commercial Law (1983).

95 See Trakman, L., ‘From the Medieval to the Twenty First Century Law Merchant’, (2011) 28 (4) American Business Law Journal 775834 .

96 See Trakman, L., ‘A Plural Account of the Law Merchant’, (2011) 2 (3) Transnational Legal Theory 309 –45; Croft, supra note 34, at 1.

97 Croft, supra note 2, at 18. See also J. Allsop, ‘International Commercial Arbitration: the Courts and the Rule of Law in the Asia Pacific Region’ (2014) 22 Federal Judicial Scholarship, available at www.austlii.edu.au/au/journals/FedJSchol/2014/22.html. See generally M. Warren, ‘Australia: A Vital Commercial Hub in the Asia Pacific Region; Victoria: A Commercial Hub’ (2015), available at www.supremecourt.vic.gov.au/home/contact+us/speeches/australia+a+vital+commercial+hub+in+the+asia+pacific+region+victoria+a+commercial+hub.

98 Welser and De Berti, supra note 62.

99 Ibid., at 95.

100 L. Trakman, supra note 12.

101 Justice Croft suggests ‘Australian courts, broadly, recognize the necessity for arbitration, particularly in the context of the desirability of increased prospects for global enforcement under the New York Convention’, see Croft, supra note 2, at 5

102 Croft, supra note 34, at 1

103 K. Sanger and Y. Shek, ‘Hong Kong’, [2016] The Asia-Pacific Arbitration Review 38, at 42.

104 Yong, H. and Xiaowen, X., ‘Incorporation of UNICTRAL Model Law on International Commercial Arbitration: In Perspective of China’, (2014) 9 (1) Frontiers of Law in China 82 , at 90.

105 Ibid., at 83.

110 Ibid. See specifically Art. 9.15(5).

111 Supra, note 109, Annex 9-A.

112 The agreement is ambiguous as to who constitutes the standing panel. According to it, the Joint Committee on Investment establishes and maintains a roster. However, it appears that the words ‘establish’ and ‘maintain’ do not include appointment of arbitrators to the roster. Art. 9.15(6) provides that the state parties to the Treaty select five arbitrators each, while 10 additional arbitrators who are not nationals of either party are chosen jointly. Thus, while the Joint Committee has oversight over the standing panel, China and Australia each intend to retain a high degree of control over the appointment of arbitrators. See L. Trakman, ‘Standing Panels in Investor-State Arbitration: A Step Forward’, in J. Chaisse (ed.), China's Three-Prong Investment Strategy: Bilateral, Regional, and Global Tracks (forthcoming 2018).

113 See Trakman, L. and Musayelyan, D., ‘The Repudiation of Investor–State Arbitration and Subsequent Treaty Practice: The Resurgence of Qualified Investor–State Arbitration’, (2016) 43 (1) ICSID Review Foreign Investment Law Journal 194 .

114 Monichino, supra note 56, at 46.

115 D. McKimmie, ‘Western Australia: The Case for an Arbitration Centre in Perth’, Norton Rose Fulbright, November 2013, available at www.nortonrosefulbright.com/knowledge/publications/108982/western-australia-the-case-for-an-arbitration-centre-in-perth.

116 A. Walt, P. Wiese and D. Jasmat, ‘Clayton Utz Insights: Will Australia's First Dedicated Energy and Resources Arbitration Centre Meet the Needs of Industry?’, Clayton Utz, 19 March 2015, available at www.claytonutz.com/publications/edition/19_march_2015/20150319/will_australias_first_dedicated_energy_and_resources_arbitration_centre_meet_the_needs_of_industry.page.

117 pcera.org/; Nathan, supra note 61.

118 ACICA rules, supra note 79.

119 Monichino, supra note 56, at 46.

120 Ibid., at 118.

121 Ibid.

122 Croft, supra note 2, at 2.

123 M. Shaw and C. Yap, ‘Singapore launches International Commercial Court’, DLA Piper, 30 March 2015, available at www.dlapiper.com/en/hongkong/insights/publications/2015/03/international-arbitration-newsletter-q1-2015/singapore-launches-international-commercial-court/.

124 Ibid.

125 B. Giaretta, K. McMenamin, ‘Singapore: A Global Dispute Resolution Centre?’, Ashurst, June 2014, available at www.ashurst.com/doc.aspx?id_Content=10506.

126 Southwell, R., ‘A Specialist Commercial Court in Singapore’, (1990) 2 (2) Singapore Academy of Law Journal 274 , at 275.

127 Ibid.

128 For an Australian perspective on International Commercial Courts, see A. Stephenson, L. Hogan and J. Smith, ‘Is an International Commercial Court for Australia a Viable Option’, 21 June 2016, available at www.corrs.com.au/thinking/insights/is-an-international-commercial-court-for-australia-a-viable-option/.

131 Ibid.

136 Ibid.

137 Strong, S.I., ‘Reasoned Awards in International Commercial Arbitration: Embracing and Exceeding the Common Law-Civil Law Dichotomy’ (2015) 37 (1) Michigan International Law Journal 1 , at 3.

138 See generally, ibid.

139 Ibid., at 110.

140 Fortese and Hemmi, supra note 70, at 116.

141 Croft, supra note 2, at 7.

142 Ibid., at 4.

* B.Com, LLB, (Cape Town); LLM, SJD (Harvard); Professor of Law and Former Dean, University of New South Wales, Sydney, and international commercial arbitrator. See www.trakmanassociates.com, []. The author thanks Doug Jones, Past President of the Chartered Institute of Arbitration and Professor Luke Nottage for their valuable comments. This study was supported by a Discovery Grant from the Australian Research Council.

** Scientia Scholar undertaking B.A. (Hons), LLB degree at the University of New South Wales, Sydney. Former student editor at the Australian Indigenous Law Review and research assistant at the Law Faculty, University of New South Wales [].

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