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Do?aç ÖZEN11451240Essay Topic: (5)LAW465 Introduction Merits of international arbitration are many, but one of the main reasons why people authorize it is it’s rapidity and thus, efficiency.
Parties who choose to partake in these proceedings generally want to solve their disputes without going through unfavorable circumstances, which is why most countries in the world classify arbitration awards as unchallengeable and therefore they are not subject to appeal. In many cases, this is considered an advantage but this article aims to expand upon the idea by discussing both merits and disadvantages of a hypothetical situation; what if arbitration awards were subject to domestic appeal? 1958 New York Convention and It’s Effects on Awards from International Arbitration Awards of domestic lower courts are generally subject to appeal in many countries since ancient Roman times. Generally speaking, appellate courts are special, higher, courts that try to resolve questions that were raised by the lower courts. Most judicial systems have provided appeal as a right to it’s litigants, and generally these proceedings are final, meaning appeal courts are “courts of last resort”.
However since this article aims to discuss international arbitration, delving more into this system will not provide an useful insight since appeal is now harshly and justly limited by an historic convention.Adopted in June7 of 1958, Convention on the Recognition and Enforcement of Foreign International Awards (NYC 1958) is considered a milestone in International Arbitration. Currently standing strong with 157 members, it aims to boost parties’ confidence in the system and therefore making arbitration a viable choice for disputes of international characteristic. Along with it’s many conformities, such as easy enforcement of arbitration awards in signatory countries, it also ensures one simple idea; awards from international arbitrations are not subject to appeal and they are final.
After receiving an award from the dispute settlement body of their choice, the party can just go to their local court and get a verdict and their proceedings will now be legally enforceable if the other party is not cooperating. That aforementioned court can not challenge the award, meaning every award is final and binding under normal circumstances. Some abnormal circumstances do exist for other party to take the award to appellate court but they are far fetched and generally do not impose an obstruction. Nevertheless, they can be listed as procedural irregularities, lack of jurisdiction, lack of arbitrability or violation of public policy. It can be confidently said that international awards are not subject to appeal as of today but is this a favorable situation? To state that it is an undisputable advantage would be an overstatement, on the other hand it is generally accepted that this blockage is one of the system’s strong points. Understanding more about the pros and cons of this decision is tremendously important to give a final verdict about the situation. Understanding the Advantages of Arbitration The world of business and finance is a tricky one and, not surprisingly, their disputes are like that as well.
International arbitration is riddled with commercial disputes at corporate levels and they tend to be more complex than the ones at a, let’s say, small claims court. Understandingly, parties of these disputes want to have faster proceedings than usual since a single day of uncertainty means a lot to them and possibly to their investors. Thus, we can safely state that one of the main advantages of international arbitration is it’s pace compared to other means of proceedings. To prevent any loss of time, international arbitration courts try to be as efficient as possible but if their awards were subject to appeal, this whole merit would fall apart since the party which got the unfavorable end of the award would just challenge it via a domestic court, thus rendering the speed factor useless. According to the State’s recordings, the time from the notice of appeal in a civil case to the filing of the Court of Appeal’s opinion in California, United States is 846 days, and it should be noted that this is after the regular proceedings, so it could easily take more than 3 years to get a final resolution if international awards were subject to appeal. For corporations and any other businesses alike, this is a substantial loss over time and therefore, money. While the cost of arbitration was also generally considered an important advantage of international arbitration over litigation, nowadays that idea is up to debate. International arbitration proceedings have grown more and more complex and, therefore, they now cost more.
However, international arbitral awards are not subject to appeal and this does make a significant difference in costs. Also, the enforcement of an arbitral award in a foreign country will mostly be simpler and thus more inexpensive than enforcement of a foreign court judgment. If we were to uphold the idea that one of international arbitration’s major advantages is it’s cost because the parties will pay less than litigation, we have to concur that blocking the parties from appeal proceedings has a large role in it.Parties of a contract with international characteristic are usually halfhearted to submit to the jurisdiction of the other party’s domestic courts. The mutual unwillingness to risk having a dispute decided by a court that is believed to be more sympathetic to the other party’s interest since they both are from the same country is usually one of the main reasons contracting parties agree to authorize a unbiased third party organization, an international arbitration court. Also, it is believed that arbitrators generally spend more time with the dispute at hand than judges, since latter usually have a lot more on their plate. It is also possible to choose a person to act on your behalf as an neutral arbitrator, making the proceedings faster and more accurate as most judges won’t know the scope of some complex disputes. This aspect, however, can be frustrating if executed poorly.
1958 NY Convention strictly enables appeal proceedings for very distinct cases. If the arbitrator, or some of them if there several, let his feelings towards the case influence himself, didn’t quite understand key points of the dispute, held unsuccessful hearings or maybe just made a mistake, there might not be a second chance since the Convention instantly enables parties to enforce their awards. Now we’ve discussed three of the main advantages of international arbitration, it should be stated that having their awards not subject to appeal seems like an important advantage over litigation when we are talking about cost and time since having the parties go through such a lengthy and expensive process would cripple those two aforementioned merits. However, appeal process could be beneficial if the arbitrators themselves do not fulfill their part by being unjust or careless. Still when we take everything into consideration, it is quite obvious that making international arbitration awards subject to arbitration would be harmful to the system as most arbitration courts rely on their speed and cost effective proceedings.
Some international arbitration organizations have noticed the fact that individuals can make mistakes, so they installed some mechanisms to cope with the situation at hand. One of the most favored institutions for arbitration in the world is WTO and after its formation in 1995, it immediately created an appellate body for this reason. Having said that international arbitration awards can not be subject to appeal and this structure is generally an advantage, it is now crucial to expand upon the idea of in-house appeals by inspecting appeal systems and appellate bodies of international arbitration organizations.
WTO and It’s Appeal SystemThe World Trade Organization (WTO) is an international organization that tries to enhance efficiency of international trade. It got assembled on January 1st 1995 with a convention called Marrakesh Agreement. It is the successor of GATT, an international agreement which regulates international tariffs and trade. It is most influential economic organization in the world. WTO now has widened its influence over services (GATS agreement), intellectual property (TRIPS agreement) and of course GATT (Trade agreement) as it regulates disputes coming from these sectors.
It’s dispute resolution system is an important and unique example regarding the usage of an in-house appeal system and should be discussed thoroughly in order to understand why a second thought would not be the worst possible thought, since most countries who are in WTO have already signed 1958 NY Convention and this system is possibly their only shot if they want to take their disputes to a body of higher degree.As stated before, WTO now operates on intergovernmental level and has many areas covered via specific agreements parties have to sign in order to get in to the organization. Disputes conserning those areas are solvable through WTO’s dispute settlement system.
Quoting directly from it’s website; Dispute settlement is the central pillar of the multilateral trading system, and the WTO’s unique contribution to the stability of the global economy. Without a means of settling disputes, the rules-based system would be less effective because the rules could not be enforced. The WTO’s procedure underscores the rule of law, and it makes the trading system more secure and predictable. The system is based on clearly-defined rules, with timetables for completing a case. First rulings are made by a panel and endorsed (or rejected) by the WTO’s full membership.
Appeals based on points of law are possible. As of this moment, the system works in a certain order; after consultations, a standing dispute resolution body organizes a panel and that panel hands out a ruling. That ruling is subject to appeal by both sides, which enables the appellate body.
Either side can appeal a panel’s ruling. Sometimes both sides do so. Appeals have to be based on points of law such as legal interpretation — they cannot reexamine existing evidence or examine new issues.Each appeal is heard by three members of a permanent seven-member Appellate Body set up by the Dispute Settlement Body and broadly representing the range of WTO membership. Members of the Appellate Body have four-year terms.
They have to be individuals with recognized standing in the field of law and international trade, not affiliated with any government. The appeal can uphold, modify or reverse the panel’s legal findings and conclusions. Normally appeals should not last more than 60 days, with an absolute maximum of 90 days. The Dispute Settlement Body has to accept or reject the appeals report within 30 days — and rejection is only possible by consensus.