Protecting International Commercial Arbitration in Europe

by Chris Wilford, Chartered Institute of Arbitrators*

The current highly politicised debate surrounding the inclusion of investor-to-state dispute settlement (ISDS) in the Transatlantic Trade and Investment Partnership (TTIP), which allows investors to bring claims against a State before an international arbitral tribunal, has brought arbitration into the spotlight.

While ISDS is a special form of arbitration and the circulation of myths about the investment protection regime, such as the characterisation of arbitration tribunals as “secret courts” and that they are somehow biased towards investors continue to be spread, this development threatens to bring other forms of arbitration into disrepute: including international commercial arbitration.

In light of this threat of mixing ISDS with international commercial arbitration, it is important to recall the basic notions of arbitration and emphasise the advantages of international commercial arbitration.

Arbitration is a formal and private dispute resolution process where arbitrators imposes an impartial and independent judgement on the parties, with their authority derived from private agreement. Its strengths are that it provides a final and binding award, it is confidential and that those in dispute can choose an independent neutral who usually has significant expertise in the relevant field.

More specifically, international commercial arbitration plays a key role in supporting global commerce and gives businesses confidence that they will have access to redress across the world.

International commercial arbitration is a tool that is regularly used to resolve complex contractual disputes across every sector of the economy. This includes the confidential resolution of disputes associated with construction and infrastructure projects, high value technology solutions, and the pharmaceutical industry.

Europe is the leading centre for international commercial arbitration. It is estimated that over a third of arbitrations in the world that take place annually are seated in Europe, which is home to leading centres such as London, Paris and The Hague. The value of legal exports to the UK economy alone is estimated to be worth some £3.1 billion per annum by TheCityUK.

It is important to highlight that international commercial arbitration is operating within a well functioning legal framework, such as the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the “New York Convention”). This Convention ensures that the over 150 States that are party to it respect arbitration agreements and enforce them by their court systems. In addition, numerous arbitration institutions, such as the ICC and the LCIA, provide the necessary institutional and administrative support for allowing international commercial arbitration to take place effectively and efficiently.

CIArb, which celebrates its 100th anniversary, is itself an important institution that ensures and the high level quality of arbitrators through its training and development programme. It is mandated by its Royal Charter to promote all forms of private dispute resolution worldwide. As well as delivering education, training and qualifications, CIArb works through its international network of members to develop the learned society within alternative dispute resolution (ADR).

With the unprecedented scrutiny of private dispute resolution as a result the inclusion of ISDS in TTIP and the Trans-Pacific Partnership (TPP) negotiations, CIArb has been playing a leading role in engaging politicians, policymakers and wider civil society to tackle the myths being circulated about ADR and promote its benefits. This has included the launch of the CIArb London Centenary Principles for an effective, efficient and ‘safe’ seat in international arbitration at our London Centenary Conference.

The CIArb London Centenary Principles are not another set of model rules for an arbitral institution. They are principles which recognise that the importance of international arbitration today and the loosening of ties between international arbitration and national law requires a number of key characteristics to make a particular place an appropriate and effective arena in which to conduct international arbitration; including professional bodies helping to provide a framework for the ethical conduct of international arbitration at work.

Investors frequently use arbitration to settle disputes between themselves. If arbitration was indeed biased, businesses would not have the confidence to use it international commercial arbitration as a dispute settlement mechanism in commercial contracts.

Indeed, a recent study of the European Parliament came to the conclusion that commercial arbitration may facilitate the EU’s goals of ensuring access to efficiently-delivered justice and dispute resolution.

At a time when Europe is emerging from a deep economic crisis, the EU should recognise that international commercial arbitration supports international investment, jobs and economic growth. Europe also faces increasing competition in international commercial arbitration from emergent centres in the Americas and the Far East. It is therefore critical that any action taken in relation to ISDS does not jeopardise Europe’s leading position in international commercial arbitration.

These are just some of the reasons why international commercial arbitration must be protected in Europe. For the same reasons, international commercial arbitration and ISDS need to be clearly distinguished in the public debate. If not, Europe’s reputation as a neutral and independent destination for commercial arbitration, where the rule and law and right to property as expressed in the Charter of Fundamental Rights of the European Union are respected and upheld, could be tarnished for a generation.

Chris Wilford, Head of Policy & Public Affairs, Chartered Institute of Arbitrators (CIArb), London,