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Judicial respect for international commercial arbitration agreements in Canadian courts under the New… Barbour, Alan Norman 1996

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JUDICIAL RESPECT FOR INTERNATIONAL COMMERCIAL ARBITRATION AGREEMENTS IN CANADIAN COURTS UNDER THE NEW YORK CONVENTION AND UNCITRAL MODEL LAW by ALAN NORMAN BARBOUR B.A.Sc. (1973), University of B r i t i s h Columbia LL.B. (1976), University of B r i t i s h Columbia A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF THE DEGREE OF MASTER OF LAWS in THE FACULTY OF GRADUATE STUDIES (Faculty of Law) We accept t h i s thesis as conforming to the required standard THE UNIVERSITY OF BRITISH COLUMBIA March 1996 @ Alan Norman Barbour, 1996 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study. I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the head of my department or by his or her representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission. • Department -of FCLCCiljy 0~f L# The University of British Columbia Vancouver, Canada Date DE-6 (2/88) ABSTRACT In Europe of the Middle Ages, there existed an autonomous regime of t r u l y private international business law based upon the customs and usages of merchants, the Law Merchant, administered i n lay t r i b u n a l s . The courts and l e g i s l a t o r s usurped the j u r i s d i c t i o n of the lay tr i b u n a l s , and subverted the Law Merchant to municipal law. A r b i t r a t i o n was s i m i l a r l y subverted to municipal courts and s t r i c t l e g a l controls. The courts continued to guard t h e i r j u r i s d i c t i o n jealously into the 20th century, when nations came to r e a l i z e the inadequacy of national l e g a l systems for international business problems, and the desire of business to escape parochial l e g a l concerns and municipal courts. Canada adopted the New York Convention and UNCITRAL Model Law i n 1986, which maximize party and a r b i t r a l autonomy and r e s t r i c t court interference with a r b i t r a t i o n . These new laws would permit the resurrection of an autonomous regime of international commercial dispute settlement l a r g e l y divorced from national law and court controls, i f the courts cooperate. This thesis i s the f i r s t comprehensive, up-to-date study (of which I am aware) of Canadian case law on a r b i t r a t i o n i n the context of the history of autonomous commercial dispute resolution from the i t s zenith i n the Middle Ages through i t s nadir, to i t s present attempted resurrection. This thesis shows that the courts of Canada continue to guard t h e i r j u r i s d i c t i o n jealously, finding the means i n old notions and precedents to j u s t i f y t h e i r r e f u s a l to cede j u r i s d i c t i o n to a r b i t r a t o r s . The courts have ignored the p o l i c i e s underlying the new laws, have f a i l e d to apply international precedents and standards, and have continued to apply notions and precedents from an era h o s t i l e to a r b i t r a t i o n . i i TABLE OF CONTENTS. ABSTRACT i i TABLE OF CONTENTS i i i ACKNOWLEDGMENT v i i I. INTRODUCTION 1 II. SOURCES OF UNIFORMITY IN INTERNATIONAL COMMERCIAL ARBITRATION LAW 24 1. THE NEW YORK CONVENTION 24 2. ENFORCEABILITY OF AN ARBITRATION AGREEMENT UNDER THE NEW YORK CONVENTION 26 3. THE LAW APPLICABLE TO "NULL AND VOID, INOPERATIVE, OR INCAPABLE OF BEING PERFORMED" 27 4. STAYING LITIGATION UNDER THE NEW YORK CONVENTION 29 5. PARTY AUTONOMY UNDER THE NEW YORK CONVENTION 29 6. REVIEW OF AWARDS 31 7. THE UNCITRAL MODEL LAW 32 8. CHOICE OF LAW UNDER THE MODEL LAW 35 II I . INTERNATIONAL LAW TO DOMESTIC LAW, FROM LAY TRIBUNAL TO LITIGATION, THE TRIUMPH OF THE COMMON LAW OVER ARBITRATION AND THE LAW MERCHANT 40 1. INTRODUCTION 40 2. THE ORIGINS OF ENGLISH MARITIME AND MERCHANT LAW 41 3. THE LAWS OF OLERON 41 4. THE ORIGIN AND A BRIEF HISTORY OF THE COURTS OF ADMIRALTY 43 5. MERCHANT FAIRS, PIEPOWDER COURTS, AND THE LAW MERCHANT 46 i i i 6. THE DECLINE AND FALL OF THE LAW MERCHANT AND FAIR COURTS IN ENGLAND 51 7. THE DEFEAT OF THE COURTS OF ADMIRALTY BY THE COMMON LAW COURTS 58 8. EFFECTS OF THE VICTORY OF THE COURTS OF COMMON LAW ON COMMERCIAL AND ADMIRALTY LAW 63 9. THE LEGACY OF SIR EDWARD COKE 64 IV. THE TROUBLED HISTORY OF ARBITRATION IN ENGLAND 66 1. THE EARLY HISTORY OF ARBITRATION 69 2. THE PUBLIC POLICY PROHIBITION OF CONTRACTS PURPORTING TO OUST THE JURISDICTION OF THE COURTS 88 3. RESTRICTIONS ON AWARDS 89 V. STATUTORY REFORM BEGINS 92 1. THE COMMON LAW PROCEDURE ACT, 1854 96 2. THE ARBITRATION ACT, 1889 98 3. THE ARBITRATION ACT, 1979 109 4. THE UNCITRAL MODEL LAW IN ENGLAND 116 VI. A SHORT HISTORY OF ARBITRATION IN FRANCE 119 1. THE COMMON FATE OF THE LAW MERCHANT IN CIVIL AND COMMON LAW SYSTEMS 123 VII. RESPECT FOR ARBITRATION AGREEMENTS IN CANADIAN COURTS 124 1. THE GOOD OLD DAYS (PRE-1986) 124 2. THE EXCHEQUER COURT OF CANADA AND FEDERAL COURT OF CANADA, BEFORE 1986 128 3. ADOPTION OF THE UNCITRAL MODEL LAW AND NEW YORK CONVENTION IN CANADA 135 4. ARTICLE 8 AND MANDATORY REFERRALS TO ARBITRATION 144 i v 5 . THE INTERPLAY OF A R T I C L E S 5 , 8 , 1 6 , 3 4 , AND 36 - HOW SHOULD COURTS APPROACH A P P L I C A T I O N S TO S T A Y ? 147 6 . THE C R U C I A L IMPORTANCE OF J U D I C I A L A T T I T U D E 152 7 . THE P O S I T E D IDEAL 153 8 . KOMPETENZ-KOMPETENZ AND S E P A R A B I L I T Y 157 9 . GUIDANCE A V A I L A B L E FROM INTERNATIONAL A U T H O R I T I E S 166 1 0 . THE MANDATORY NATURE OF THE R E F E R R A L OR STAY REQUIREMENT 170 1 1 . NULL AND V O I D , I N P E R A T I V E , AND I N C A P A B L E OF B E I N G PERFORMED AS DEFINED IN ENGLISH LAW UNDER THE NEW YORK CONVENTION 170 1 2 . E X I S T E N C E OF D I S P U T E S 174 1 3 . L E A D E R S H I P FROM THE SUPREME COURT OF THE UNITED S T A T E S 175 14 . OTHER INTERNATIONAL PRECEDENTS 185 V I I I . THE MODEL LAW AS A P P L I E D BY THE COURTS OF CANADA 192 1. THE MANDATORY NATURE OF A R T I C L E 8 , AND CONFUSION OVER " R E F E R " AND " S T A Y " 192 EARLY LOTUSLAND E X P E R I E N C E 208 O N T A R I O ' S F I R S T A P P L I C A T I O N UNDER A R T I C L E 8 210 2 . SUPPORT FOR A R B I T R A L AUTONOMY FROM THE B R I T I S H COLUMBIA COURT OF A P P E A L 212 G U L F CANADA RESOURCES V . AROCHEM INTERNATIONAL 214 APPOINTMENT OF ARBITRATORS AND D E F I N I T I O N OF D I S P U T E S AS P R E R E Q U I S I T E S TO A R T I C L E 8 222 D E F I N I T I O N OF D I S P U T E S 226 3 . THE I N T E R - R E L A T I O N OF THE MODEL LAW AND THE NEW YORK CONVENTION, AND THE TIME L I M I T A T I O N IN A R T I C L E 8 ( 1 ) OF THE MODEL LAW 231 THE A P P L I C A T I O N OF THE TIME L I M I T A T I O N IN A R T I C L E 8 (1 ) OF THE A R T I C L E 8 ( 1 ) 236 4 . A R T I C L E 1 (2 ) OF THE MODEL LAW 245 5 . T O R T S , A R B I T R A B I L I T Y , AND THE SCOPE OF A R B I T R A T I O N AGREEMENTS 259 6 . THE SUBSTANTIVE E F F E C T S OF CHOICE OF LAW 270 7 . THE A R B I T R A B I L I T Y OF STATUTORY CLAIMS 272 8 . INCONSISTENT TREATMENT OF L I M I T A T I O N S I S S U E S 274 9 . SCOPE OF ARBITRAT ION C L A U S E S AND FRAUD A L L E G A T I O N S 276 INTERNATIONAL PRECEDENTS 276 CANADIAN COURT DECIS IONS 278 1 0 . A R T I C L E 7: IN WRITING SIGNED BY THE P A R T I E S , AND INCORPORATION OF ARBITRAT ION C L A U S E S BY R E F E R E N C E 282 INCOPORATION BY REFERENCE 285 L E G I S L A T I V E REFORM OF A R T I C L E 7? 295 1 1 . IMPROPER MOTIVE FOR INVOKING A R B I T R A T I O N AGREEMENT 295 1 2 . THE RESURRECTION OF OLD COMMON LAW DOCTRINES 299 1 3 . THE REFOCUSSED ATTENTION OF THE COURTS 304 1 4 . CAN THE MODEL LAW OVERCOME J U D I C I A L CONSERVATISM? 306 1 5 . KUDOS AMONG THE BRICKBATS 309 I X . THE QUEBEC RESPONSE 312 X . CONCLUSIONS 315 X I . SUGGESTIONS FOR REFORM 319 B IBL IOGRAPHY 323 v i ACKNOWLEDGEMENT I w i s h t o t h a n k t h e F a c u l t y a n d S t a f f o f t h e F a c u l t y o f Law who h a v e made b y " e d u c a t i o n a l s a b b a t i c a l " s o p l e a s a n t a n d s t i m u l a t i n g . I n p a r t i c u l a r , I w i s h t o t h a n k my t h e s i s s u p e r v i s o r , P r o f e s s o r R o b e r t K. P a t e r s o n , a n d t h e h e a d o f t h e G r a d u a t e S t u d i e s P r o g r a m , P r o f e s s o r P i t m a n B. P o t t e r , f o r t h e i r g u i d a n c e a n d p a t i e n c e . S p e c i a l t h a n k s go t o P r o f e s s o r J o o s t B l o m , who s o k i n d l y t o o k o n t h e t a s k o f s e c o n d a r y r e a d e r , o n v e r y s h o r t n o t i c e , w i t h i n a v e r y s h o r t number o f d a y s b e f o r e t h e d e a d l i n e f o r s u b m i s s i o n o f t h e t h e s i s i n f i n a l f o r m . O f t h e F a c u l t y s t a f f , I w i s h t o g i v e p a r t i c u l a r t h a n k s t o G i l l i a n B r y a n t , P e g g y M i c h e l l , M i c h e l l e H o p k i n s , a n d L i l l i a n O n g , f o r t h e i r c h e e r f u l h e l p i n c o p i n g w i t h t h e a d m i n i s t r a t i v e r e q u i r e m e n t s o f t h e p r o g r a m . I a l s o w i s h t o t h a n k t h e L i b r a r y s t a f f , p a r t i c u l a r l y F r a n c i s Wong, M a r y M i t c h e l l , a n d A l a n S o r o k a , f o r t h e i r h e l p i n my r e s e a r c h . v i i I . INTRODUCTION I n t e r n a t i o n a l c o m m e r c i a l a r b i t r a t i o n h a s become t h e d i s p u t e -r e s o l u t i o n means o f c h o i c e f o r i n t e r n a t i o n a l b u s i n e s s p e r s o n s 1 . I n t e r n a t i o n a l c o m m e r c i a l a r b i t r a t i o n may b e d e f i n e d a s t h e p r o c e s s b y w h i c h a d i s p u t e o r d i f f e r e n c e , b e t w e e n two o r more p a r t i e s e n g a g e d i n i n t e r n a t i o n a l c o m m e r c e , a s t o t h e i r m u t u a l l e g a l r i g h t s a n d l i a b i l i t i e s , i s r e f e r r e d t o a n d d e t e r m i n e d j u d i c i a l l y a n d w i t h b i n d i n g e f f e c t b y o n e o r more p e r s o n s ( t h e a r b i t r a l t r i b u n a l ) i n s t e a d o f b y a c o u r t o f l a w , p u r s u a n t t o a n a g r e e m e n t e n t e r e d i n t o b y t h e p a r t i e s . 2 T h e t r i b u n a l d e r i v e s i t s j u r i s d i c t i o n a n d p o w e r s f r o m t h e a g r e e m e n t o f t h e p a r t i e s a n d t h e l a w o f t h e p l a c e w h e r e t h e a r b i t r a t i o n i s h e l d . 3 T h e e x t e n t t o w h i c h t h e p a r t i e s may c h o o s e t h e l a w s w h i c h g o v e r n t h e i r l e g a l r e l a t i o n s h i p , a n d w h e t h e r t h e t r i b u n a l m u s t a p p l y t h e l a w s o f a n y S t a t e o r S t a t e , v a r y f r o m S t a t e t o S t a t e . 4 1 Many a u t h o r s h a v e e x p r e s s e d t h i s , e . g . , T h e H o n . J u s t i c e K e r r , " I n t e r n a t i o n a l A r b i t r a t i o n v . L i t i g a t i o n " ( 1 9 8 0 ) J o . B u s . L . 1 6 4 ; R e d f e r n & H u n t e r 1 9 ; M. G a r a v a g l i a , " I n S e a r c h o f t h e P r o p e r Law i n T r a n s n a t i o n a l C o m m e r c i a l D i s p u t e s " [ 1 9 9 1 ] 12 N . Y . S . S c h . J . I n t ' l & Comp. L . 2 9 , 30 ( h e r e i n a f t e r c i t e d a s " G a r a v a g l i a " ) ; W. H a n c o c k , " C o r p o r a t e C o u n s e l ' s G u i d e t o C o m m e r c i a l A r b i t r a t i o n " A l t e r n a t i v e D i s p u t e R e s o l u t i o n 2 . 0 0 1 ( 1 9 8 9 ) ; Rene D a v i d , A r b i t r a t i o n i n I n t e r n a t i o n a l T r a d e 10 ( 1 9 8 5 ) ; T . C a r b o n n e a u , " A r b i t r a l A d j u d i c a t i o n : A C o m p a r a t i v e A s s e s s m e n t o f I t s R e m e d i a l a n d S u b s t a n t i v e S t a t u s i n T r a n s n a t i o n a l Commerce" ( 1 9 8 4 ) V o l . 1 9 N o . 3 T e x a s I n t ' l L . J . 3 3 , 34 ( h e r e i n a f t e r c i t e d a s " C a r b o n n e a u 1 9 8 4 " ) . 2 S e e , g e n e r a l l y , M u s t i l l & B o y d , T h e Law a n d P r a c t i c e o f C o m m e r c i a l A r b i t r a t i o n i n E n g l a n d , ( 1 9 8 2 ) ; R e d f e r n & H u n t e r , Law a n d P r a c t i c e o f I n t e r n a t i o n a l C o m m e r c i a l A r b i t r a t i o n , ( 1 9 8 6 ) ; R e n e D a v i d , A r b i t r a t i o n i n I n t e r n a t i o n a l T r a d e , 1 9 8 5 . 3 I d . 4 I d . 1 I n t e r n a t i o n a l c o m m e r c i a l a r b i t r a t i o n h o l d s t h e p r o s p e c t o f a l l o w i n g t h e p a r t i e s t o a n i n t e r n a t i o n a l c o n t r a c t t o c h o o s e t h e i r d i s p u t e -r e s o l u t i o n f o r u m , i t s s t r u c t u r e , t h e i r a r b i t r a t o r s , t h e p l a c e o f a r b i t r a t i o n , t h e r u l e s o f p r o c e d u r e , a n d t h e l a w t o be a p p l i e d t o t h e i r r e l a t i o n s , t o t h e e x c l u s i o n o f c o u r t s a n d d o m e s t i c s y s t e m s o f l a w w h i c h o t h e r w i s e w o u l d be a p p l i e d b y c o u r t s p u r s u a n t t o t h e i r c o n f l i c t o f l a w s r u l e s 5 . S u c h u n b r i d l e d p a r t y c h o i c e i s n o t u n i v e r s a l l y w e l c o m e d . I t r a i s e s a s e r i o u s p r o b l e m o f p o l i t i c a l a n d l e g a l p h i l o s o p h y : t o what e x t e n t s h o u l d a S t a t e a l l o w p e r s o n s , b y t h e i r p r i v a t e a g r e e m e n t , t o c o n s t i t u t e a p r i v a t e t r i b u n a l t o i s s u e l e g a l l y - b i n d i n g d e c i s i o n s a s t o t h e i r l e g a l r i g h t s , a n d t h u s t o d i v e s t t h e c o u r t s o f t h e S t a t e o f t h e i r j u r i s d i c t i o n o v e r l e g a l r e l a t i o n s h i p s o f i n d i v i d u a l s e n g a g e d i n c o m m e r c i a l a c t i v i t i e s w i t h i n t h e S t a t e ? 6 W i t h t h e g r o w t h o f t h e w e l f a r e s t a t e , t h e i n c r e a s i n g r e g u l a t o r y r o l e o f t h e s t a t e i n e n s u r i n g t h e p r o t e c t i o n o f t h o s e w i t h weak b a r g a i n i n g p o w e r , a n d t h e g r o w t h o f e c o n o m i c n a t i o n a l i s m , s t a t e s h a v e moved away f r o m l a i s s e z - f a i r e n o t i o n s o f f r e e d o m o f c o n t r a c t 7 i n t h e i r d o m e s t i c l a w s , a n d h a v e c r e a t e d a 5 R e d f e r n a n d H u n t e r , c h . 2 ( 1 9 8 6 ) ; M o r r i s , C o n f l i c t o f Laws 133 ( 4 t h e d . , 1 9 9 3 , D. M c C l e a n , E d . ) ; G . D e l a u m e , T r a n s n a t i o n a l C o n t r a c t s - A p p l i c a b l e Law a n d S e t t l e m e n t o f D i s p u t e s c h . l ( 1 9 8 9 ) ; 0 . L a n d o , " T h e Law A p p l i c a b l e t o t h e M e r i t s o f t h e D i s p u t e " [ 1 9 8 6 ] 2 A r b . I n t ' l 1 0 4 , 1 0 5 ; C a r b o n n e a u 1 9 8 4 , 3 5 - 6 . 6 Rene D a v i d , A r b i t r a t i o n i n I n t e r n a t i o n a l T r a d e , p . 5 5 p a r a . 5 9 ( 1 9 8 5 ) , ( c i t e d h e r e i n a s " D a v i d " ) . 7 L a i s s e z - f a i r e i s a d o c t r i n e t h a t t h e e c o n o m i c a f f a i r s o f s o c i e t y a r e b e s t g u i d e d b y t h e d e c i s i o n s o f i n d i v i d u a l s t o t h e v i r t u a l e x c l u s i o n o f c o l l e c t i v e a u t h o r i t y . T h e i d e a h a s i t s b a s i s i n t h e w r i t i n g s o f t h e P h y s i o c r a t s ( a n 1 8 t h - c e n t u r y F r e n c h s c h o o l c r i t i c a l o f m e r c a n t i l i s m a n d o f i n d i r e c t t a x a t i o n o f l a n d ) a n d i n t h e w o r k s o f Adam S m i t h a n d t h e C l a s s i c a l s c h o o l . - T h e MIT D i c t i o n a r y o f M o d e r n E c o n o m i c s , 3 r d . e d . ; T r e i t e l , T h e Law o f 2 maze o f r u l e s g o v e r n i n g d o m e s t i c a n d i n t e r n a t i o n a l c o m m e r c i a l b e h a v i o u r . 8 T h e l a w s o f e a c h n a t i o n a r e u n i q u e , s o t h e w o r l d s t a g e p r e s e n t s a c o n f u s i n g m o r a s s o f p o t e n t i a l l e g a l e n t a n g l e m e n t s f o r t h e u n w a r y o r u n s o p h i s t i c a t e d . 9 I n t e r n a t i o n a l b u s i n e s s i n t e r e s t s s e e k a n e u t r a l , s u p r a n a t i o n a l a d j u d i c a t i v e p r o c e s s w i t h a common b o d y o f r u l e s t o a v o i d s u c h e n t a n g l e m e n t s , a n d t o p r o v i d e p r e d i c t a b i l i t y , c e r t a i n t y , a n d s t a b i l i t y t o i n t e r n a t i o n a l b u s i n e s s C o n t r a c t 3 - 5 , ( 3 r d e d . , 1 9 7 0 ) ; I n t h e l a i s s e z - f a i r e m o d e l o f i n t e r n a t i o n a l t r a d e , t h e r e w o u l d b e no g o v e r n m e n t a l c o n t r o l o r r e g u l a t i o n o f t r a d e , t h e r o l e o f n a t i o n s w o u l d b e l i m i t e d t o t h e d e v e l o p m e n t o f a l e g a l a n d e c o n o m i c i n f r a s t r u c t u r e f o r a w o r l d m a r k e t i n t e n d e d t o f a c i l i t a t e t r a d e b y p r i v a t e p a r t i e s . M e r c h a n t s w o u l d b e a b l e t o do b u s i n e s s a c r o s s i n t e r n a t i o n a l b o r d e r s w i t h i n a n o p e n c o m p e t i t i v e f r a m e w o r k , f r e e o f g o v e r n m e n t i n t e r f e r e n c e w i t h t h e i r c o n t r a c t u a l a r r a n g e m e n t s . - C h a c h i o l i a d e s , I n t e r n a t i o n a l E c o n o m i c s c . 8 , ( 1 9 9 0 ) ; V a g t s , T r a n s n a t i o n a l B u s i n e s s P r o b l e m s 3 , ( 1 9 8 6 ) . 8 S o r n a r a j a h , I n t e r n a t i o n a l C o m m e r c i a l A r b i t r a t i o n , 1 0 6 - 1 1 6 ( 1 9 9 0 ) ( h e r e i n a f t e r c i t e d a s " S o r n a r a j a h . " ) ; V a g t s , T r a n s n a t i o n a l B u s i n e s s P r o b l e m s ( 1 9 8 6 ) ; R a w o r t h , L e g a l G u i d e t o I n t e r n a t i o n a l B u s i n e s s T r a n s a c t i o n s ( 1 9 9 1 ) ; L o o k o f s k y T r a n s n a t i o n a l L i t i g a t i o n a n d C o m m e r c i a l A r b i t r a t i o n ( 1 9 9 2 ) . I t i s a n e s s e n t i a l t r i b u t e o f s o v e r e i g n t y t h a t S t a t e s h a v e c o m p e t e n c e t o p r e s c r i b e t h e l a w s t h a t a p p l y t o r e s o u r c e s , e v e n t s , a n d p e r s o n s w i t h i n t h e i r own t e r r i t o r y . N o t c o n t e n t t o r e s t r i c t t h e a p p l i c a t i o n o f r e g u l a t o r y r e g i m e s t o t h e d o m e s t i c s p h e r e , n a t i o n s h a v e s o u g h t r e p e a t e d l y t o g i v e t h e i r l a w s e x t r a - t e r r i t o r i a l r e a c h . O t h e r n a t i o n s , a l a r m e d a t s u c h e x t r a - t e r r i t o r i a l l a w s , h a v e e n a c t e d " b l o c k i n g s t a t u t e s " d e s i g n e d t o c o u n t e r - a c t s u c h e x t r a - t e r r i t o r i a l l a w s . S e e E x t r a - T e r r i t o r i a l A p p l i c a t i o n o f Laws a n d R e s p o n s e s T h e r e t o , C . O l m s t e a d , E d . , ( 1 9 8 4 ) . 9 T . C a r b o n n e a u , " A m e r i c a n a n d O t h e r N a t i o n a l V a r i a t i o n s o n t h e Theme o f I n t e r n a t i o n a l C o m m e r c i a l A r b i t r a t i o n " ( 1 9 8 8 ) 1 8 : 2 Ga J . I n t ' l & Comp. L . 1 4 3 , 1 4 3 - 1 5 1 . ( c i t e d h e r e i n a s " C a r b o n n e a u 1 9 8 8 " ) ; L o o k o f s k y , T r a n s n a t i o n a l L i t i g a t i o n a n d C o m m e r c i a l A r b i t r a t i o n ( 1 9 9 2 ) ; R a w o r t h , L e g a l G u i d e t o I n t e r n a t i o n a l B u s i n e s s T r a n s a c t i o n s ( 1 9 9 1 ) ; V a g t s , T r a n s n a t i o n a l B u s i n e s s P r o b l e m s (1986 ) . 3 r e l a t i o n s . 1 0 H o w e v e r , i n t e r n a t i o n a l commerce o p e r a t e s i n t h e c o n t e x t o f n a t i o n - s t a t e s , a n d s t a t e s t e n d t o b e w a r y o f t h e e v o l u t i o n o f l e g a l s y s t e m s o v e r w h i c h t h e y h a v e no c o n t r o l . 1 1 T h e t e n s i o n b e t w e e n t h e l a i s s e z - f a i r e d r e a m s o f b u s i n e s s p e r s o n s a n d t h e p o s i t i v i s t v i e w s ( o n e t h e one h a n d ) a n d e c o n o m i c v i e w s ( o n t h e o t h e r h a n d ) o f n a t i o n a l l e g i s l a t u r e s , h a s b e e n p l a y e d o u t d o m e s t i c a l l y a n d i n t e r n a t i o n a l l y , a n d c o n t i n u e s t o d a y . 1 2 H o w e v e r , l a i s s e z - f a i r e i s a s c e n d a n t a t p r e s e n t i n t h e a r e n a o f p r i v a t e i n t e r n a t i o n a l c o m m e r c i a l r e l a t i o n s , w h e r e t h e i n c r e a s i n g r e s p e c t f o r p a r t y a u t o n o m y a n d a r b i t r a l a u t o n o m y i n i n t e r n a t i o n a l c o m m e r c i a l a r b i t r a t i o n l a w i s a l l o w i n g s u c h a r b i t r a t i o n t o a s s u m e t h e s t a t u s o f a n a u t o n o m o u s r e g i m e o f l a w a n d p r o c e d u r e , d i s t i n c t f r o m a n d l a r g e l y r e l e a s e d f r o m c o n t r o l o f n a t i o n a l l a w - m a k e r s ; a s u p r a n a t i o n a l l e g a l s y s t e m 1 3 . T h e p r e s e n t s i t u a t i o n i s 1 0 C a r b o n n e a u 1 9 8 8 , 2 1 4 ; G a r a v a g l i a , 3 0 - 3 3 , 4 0 - 4 2 , I n t e r n a t i o n a l C o u n c i l f o r C o m m e r c i a l A r b i t r a t i o n , U N C I T R A L ' s P r o j e c t f o r a M o d e l Law o n I n t e r n a t i o n a l C o m m e r c i a l A r b i t r a t i o n 3 3 , 35 ( 1 9 8 4 ) ; F o u c h a r d , L ' A r b i t r a g e C o m m e r c i a l I n t e r n a t i o n a l 1 - 4 8 . 1 1 S o r n a r a j a h , 1 0 6 - 1 1 6 ; R e d f e r n & H u n t e r 4 2 : " A n u n d e r s t a n d i n g o f t h e i n t e r - c h a n g e b e t w e e n t h e a r b i t r a l p r o c e s s a n d n a t i o n a l s y s t e m s o f l a w i s f u n d a m e n t a l t o a p r o p e r a p p r e c i a t i o n o f i n t e r n a t i o n a l c o m m e r c i a l a r b i t r a t i o n . " S t a t e s , when a s k e d t o a s s i s t t h e i n t e r n a t i o n a l c o m m e r c i a l a r b i t r a t i o n p r o c e s s a n d t o r e c o g n i z e a n d e n f o r c e a w a r d s , r e q u i r e some c o n t r o l o v e r t h e a r b i t r a t i o n p r o c e s s , t o e n s u r e t h a t d o m e s t i c n o t i o n s o f m in imum s t a n d a r d s o f j u s t i c e a r e m e t . - I d . , 4 2 - 4 3 . 1 2 S e e P a r t V , " T h e M u l t i n a t i o n a l C o r p o r a t i o n a n d W o r l d T r a d e " i n I n t e r n a t i o n a l E c o n o m i c s a n d I n t e r n a t i o n a l E c o n o m i c P o l i c y : A R e a d e r , 219 ( P . K i n g , E d . , 1 9 9 0 ) ; C h a c h i o l i a d e s , I n t e r n a t i o n a l E c o n o m i c s , 1 4 , 1 6 8 - 2 4 4 ; 1 3 UNCITRAL M o d e l Law A r t . 2 8 e n s h r i n e s p a r t y a n d a r b i t r a l a u t o n o m y i n c h o i c e o f l a w , g e n e r a l l y s u b j e c t o n l y t o b a s i c n o t i o n s o f a r b i t r a b i l i t y a n d p u b l i c p o l i c y i n A r t s . 34 & 3 5 . A r g u a b l y , i t s 4 r e m i n i s c e n t o f m e d i e v a l t i m e s i n E u r o p e , i n w h i c h a l a w m e r c h a n t o r l e x m e r c a t o r i a , a t r u l y i n t e r n a t i o n a l a n d a n a t i o n a l l a w o f commerce b a s e d u p o n t h e c u s t o m a n d u s a g e o f m e r c h a n t s a n d m a r i n e r s , was a p p l i e d b y m a r k e t t r i b u n a l s i n w h i c h m e r c h a n t s a n d m a r i n e r s r e n d e r e d t h e d e c i s i o n s . T h e s e m a r k e t t r i b u n a l s o p e r a t e d i n E n g l a n d u n d e r R o y a l c h a r t e r s , o u t s i d e o f a n d l a r g e l y b e y o n d t h e c o n t r o l o f , u s e o f t h e t e r m " r u l e s o f l a w " i n d i c a t e s t h a t t h e c h o i c e o f l a w i n c l u d e s l e x m e r c a t o r i a - De L y , I n t e r n a t i o n a l B u s i n e s s Law a n d L e x M e r c a t o r i a , 2 5 3 , a n d Y . D e r a i n s , " P o s s i b l e C o n f l i c t o f Laws R u l e s a n d t h e R u l e s A p p l i c a b l e t o t h e D i s p u t e " i n U N C I T R A L ' s P r o j e c t f o r a M o d e l Law i n I n t e r n a t i o n a l C o m m e r c i a l A r b i t r a t i o n , 1 6 9 , 1 9 1 - 2 ; L e x M e r c a t o r i a a n d A r b i t r a t i o n 3 3 , 3 4 ( T . C a r b o n n e a u , E d . , 1 9 9 0 ) ; R u b i n o - S a m m a r t a n o , I n t e r n a t i o n a l A r b i t r a t i o n Law C h . 1 3 ( 1 9 9 0 ) ; S . 3 o f t h e E n g l i s h A r b i t r a t i o n A c t , 1979 p r o v i d e s t h a t p a r t i e s t o a r b i t r a t i o n a g r e e m e n t s may e x c l u d e j u d i c i a l r e v i e w o f a r b i t r a t i o n a w a r d s i n c e r t a i n i n s t a n c e s i f n e i t h e r p a r t y i s a n a t i o n a l o r a r e s i d e n t o f E n g l a n d ; T h e S w i s s A c t o f D e c . 1 8 , 1987 o n C o n f l i c t o f Laws p r o v i d e s t h a t t h e p a r t i e s may e x c l u d e j u d i c i a l r e v i e w i f a t l e a s t o n e p a r t y i s n e i t h e r a r e s i d e n t n o r a n a t i o n a l ; t h e B e l g i a n A c t o f M a r c h 2 7 , 1985 e x c l u d e s s e t t i n g a s i d e o f i n t e r n a t i o n a l a r b i t r a l a w a r d s i n B e l g i a n c o u r t s i f no p a r t y i s a B e l g i a n r e s i d e n t o r n a t i o n a l . - D e L y , I n t e r n a t i o n a l B u s i n e s s Law a n d L e x M e r c a t o r i a 26 ( 1 9 9 2 ) ; P o r t u g u e s e Law n o . 31/86 o f A u g . 2 9 , 1986 e x c l u d e s j u d i c i a l r e v i e w o f i n t e r n a t i o n a l a w a r d s , b u t t h e p a r t i e s may a g r e e o t h e r w i s e . - U . D r o b n i g , " A s s e s s i n g A r b i t r a l A u t o n o m y i n E u r o p e a n S t a t u t o r y L a w , " i n L e x M e r c a t o r i a a n d A r b i t r a t i o n 164 ( T . C a r b o n n e a u , E d . , 1 9 9 0 ) . C a s e l a w i n F r a n c e a n d t h e U n i t e d S t a t e s shows e x a m p l e s o f c o u r t s e x e m p t i n g i n t e r n a t i o n a l t r a n s a c t i o n s f r o m d o m e s t i c l a w i m p e r a t i v e s , c r e a t i n g " t r a n s n a t i o n a l s u b s t a n t i v e r u l e s . " - I d . , 2 9 3 - 2 9 7 . F r a n c e : G o s s e t , F r e n c h S u p r e m e C o u r t , May 7 , 1 9 6 3 , J . C . P . , 1 9 6 3 , 1 3 4 0 5 ; G a l a k i s , F r e n c h S u p r e m e c o u r t , May 2, 1 9 6 6 , R . C . D . I . P . , 1 9 6 7 , 5 3 3 . U n i t e d S t a t e s : T h e B r e m e n v . Z a p a t a O f f s h o r e C o . . 407 U . S . I ( 1 9 7 2 ) ; S c h e r k v . A l b e r t o - C u l v e r C o . , 417 U . S . 506 ( 1 9 7 4 ) ; M i t s u b i s h i M o t o r s C o r p . v . S o l e r C h r y s l e r - P l y m o u t h I n c . , 105 S . C t . 3346 ( 1 9 8 5 ) ; " ( T ) h e i n t e r n a t i o n a l i s t t e n o r o f t h e r u l i n g s [ o f t h e U . S . S u p r e m e C o u r t ] i n S c h e r k a n d M i t s u b i s h i g i v e [ s i c ] a d d i t i o n a l j u d i c i a l s u p p o r t t o t h e c o n c e p t o f a n a u t o n o m o u s a n d " a n a t i o n a l " i n t e r n a t i o n a l c o m m e r c i a l a r b i t r a t i o n p r o c e s s , a p r o c e s s t h a t i s d i s t a n c i n g i t s e l f f r o m a n y r e f e r e n c e t o m u n i c i p a l l e g a l a u t h o r i t y a n d o p e r a t e s f r e e o f a l l n a t i o n a l l e g a l p r o v i s i o n s b u t t h o s e t h a t s p e c i f i c a l l y r e g u l a t e p r i v a t e i n t e r n a t i o n a l l a w m a t t e r s . " C a r b o n n e a u 1 9 8 8 , 2 1 4 . 5 R o y a l c o u r t s 1 4 . P h i l l i p p e F o u c h a r d a n d o t h e r ( m o s t l y C o n t i n e n t a l ) c o m m e n t a t o r s h a v e a r g u e d t h a t t h e c o m p l e t e d e t a c h m e n t o f i n t e r n a t i o n a l c o m m e r c i a l a r b i t r a t i o n f r o m a n y s y s t e m o f m u n i c i p a l l a w a n d f r o m a l l s t a t e a u t h o r i t i e s i s now n o t o n l y t h e o r e t i c a l l y p o s s i b l e b u t i s i n f a c t a n d i n p o s i t i v e l a w l a r g e l y a c c o m p l i s h e d . T h e s e a u t h o r s f u r t h e r a r g u e t h a t " d e l o c a l i z e d " a r b i t r a t i o n s a n d a w a r d s , d i v o r c e d f r o m d e p e n d e n c e u p o n a n y s p e c i f i e d p l a c e o f a r b i t r a t i o n a n d h a v i n g no " n a t i o n a l i t y , " a r e t a k i n g p l a c e a n d a r e g a i n i n g r e c o g n i t i o n i n d o m e s t i c c o u r t s . 1 5 T h i s p o s i t i o n i s i n c o n t r a d i s t i n c t i o n t o t h e 1 4 T h e s e m e r c h a n t t r i b u n a l s w e r e g e n e r a l l y c a l l e d " p i e p o w d e r c o u r t s . " - 1 H o l d s w o r t h , A H i s t o r y o f E n g l i s h L a w , c h . 7 ( h e r e i n a f t e r c i t e d a s " H o l d s w o r t h " ) , ( 7 t h e d . , 1 9 5 6 ) ; K i r a l f y , P o t t e r ' s H i s t o r i c a l I n t r o d u c t i o n t o E n g l i s h Law a n d I t s I n s t i t u t i o n s , c h . 7 ( 4 t h e d . 1 9 5 8 , h e r e i n a f t e r c i t e d a s " P o t t e r ' s " ) ; T e t l e y , M a r i t i m e L i e n s a n d C l a i m s ( h e r e i n a f t e r c i t e d a s " T e t l e y " ) ; G a r a v a g l i a ; S e l d e n S o c , 1 S e l e c t P l e a s i n M a n o r i a l a n d S e i g n i o r i a l C o u r t s i - x x v i ( 1 8 8 9 , F .W. M a i t l a n d , E d . ) . 1 5 F o u c h a r d , I I L ' A r b i t r a g e C o m m e r c i a l I n t e r n a t i o n a l S n s . 3 8 -5 0 ; B. G o l d m a n , " T h e A p p l i c a b l e Law: G e n e r a l P r i n c i p l e s o f Law -t h e L e x M e r c a t o r i a " i n C o n t e m p o r a r y P r o b l e m s i n I n t e r n a t i o n a l A r b i t r a t i o n 1 1 3 , 116 ( J . L e w , E d . 1 9 8 6 ) ; B. G o l d m a n , " L ' A r b i t r e , L e s C o n f l i t s de L o i s e t l a L e x M e r c a t o r i a " a n d A . K a s s i s , " L ' A r b i t r e , L e s C o n f l i t s d e L o i s e t l a L e x M e r c a t o r i a " i n P r o c e e d i n g s o f t h e 1 s t I n t e r n a t i o n a l C o m m e r c i a l A r b i t r a t i o n C o n f e r e n c e , 13 a n d 1 3 4 , r e s p e c t i v e l y ( N . A n t a k i . a n d A . P r u j i n e r , E d s . , 1 9 8 5 ) ; R e d f e r n & H u n t e r , 5 5 - 6 4 . P r o f e s s o r G o l d m a n r e l i e s o n t h r e e p r i n c i p a l s o u r c e s f o r t h e p r i n c i p l e s o f t h e l e x m e r c a t o r i a : g e n e r a l p r i n c i p l e s o f l a w , t r a d e u s a g e s , a n d a r b i t r a l a w a r d s w h i c h a r e b a s e d u p o n s u c h p r i n c i p l e s a n d u s a g e s . He a l s o r e l i e s u p o n t h e i n s t a n c e s i n w h i c h n a t i o n a l c o u r t s h a v e u p h e l d s u c h a w a r d s , i n p a r t i c u l a r t h e c a s e o f N o r s o l o r (1982) 109 J . D . I . 231 i n w h i c h t h e A u s t r i a n S u p r e m e C o u r t u p h e l d a n a w a r d b a s e d u p o n l e x m e r c a t o r i a . -S o r n a r a j a h , 1 4 5 - 6 . S e e a l s o t h e d i s c u s s i o n o f t h e T e x a c o , A r a m c o , S a p p h i r e a n d BP a r b i t r a t i o n s i n R e d f e r n & H u n t e r 5 8 - 6 2 . T h e s e a l l i n v o l v e d i n v e s t m e n t d i s p u t e s b e t w e e n a s o v e r e i g n a n d a p r i v a t e i n v e s t o r , t y p i c a l l y i n v o l v i n g a c o n t r a c t made i n t h e t e r r i t o r y o f t h e s o v e r e i g n u n d e r w h o s e l a w t h e i n v e s t o r h a d b e e n d i v e s t e d o f i t s p r o p e r t y . T h u s t h e s e a r e h a r d l y t y p i c a l o f p r i v a t e i n t e r n a t i o n a l 6 " s e a t " t h e o r y o f a r b i t r a t i o n b y w h i c h t h e l a w g o v e r n i n g t h e a r b i t r a t i o n ( t h e " c u r i a l l a w 1 6 " ) , a n d t h e n a t i o n a l i t y o f t h e a w a r d , a r e d e t e r m i n e d b y t h e p l a c e o f t h e a r b i t r a t i o n . 1 7 T h e c o n c e p t o f n a t i o n a l i t y o f a w a r d s i s c r u c i a l t o t h e i r r e c o g n i t i o n a n d e n f o r c e m e n t u n d e r t h e New Y o r k C o n v e n t i o n . 1 8 T h e UNCITRAL c o m m e r c i a l c o n t r a c t s . - I d . T h e f i r s t t h r e e o f t h e s e a r b i t r a t i o n s p r o v i d e e x a m p l e s o f a w a r d s n o t b a s e d u p o n a n y s y s t e m o f n a t i o n a l l a w s , a n d i n p a r t i c u l a r n o t b a s e d u p o n t h e l e x l o c i a r b i t r i , i n o t h e r w o r d s t h e y w e r e d e c i d e d i n d e p e n d e n t f r o m t h e l a w o f t h e p l a c e o f t h e a r b i t r a t i o n , i . e . t h e y w e r e " d e l o c a l i z e d . " H o w e v e r , t h e e n f o r c e a b i l i t y o f a " d e l o c a l i z e d " a w a r d i s s u s p e c t , - t h e New Y o r k C o n v e n t i o n a p p l i e s t o a w a r d s u p o n t h e b a s i s o f t h e i r l o c a l i t y - t h e d e l o c a l i s a t i o n o f t h e T e x a c o a n d A r a m c o a w a r d s d i d n o t m a t t e r s i n c e t h e y w e r e n o t a w a r d s i n t h e u s u a l s e n s e o f b i n d i n g a w a r d s e n f o r c e a b l e i n c o u r t s , b u t w e r e a d v i s o r y o p i n i o n s o n l y - R e d f e r n & H u n t e r , 5 8 - 6 2 . T h e t r i b u n a l i n BP r e f u s e d t o a p p l y l a w o t h e r t h a n n a t i o n a l l a w o u t o f c o n c e r n t h a t a n a w a r d b a s e d u p o n i n t e r n a t i o n a l l a w a n d t h u s l a c k i n g n a t i o n a l i t y w o u l d l a c k e n f o r c e a b i l i t y . - L a g e r g r e n , J . , i n B r i t i s h P e t r o l e u m C o . ( L i b y a ) L t d . v . T h e G o v e r n m e n t o f t h e L i b y a n A r a b R e p u b l i c ( 1 9 8 0 ) V Y . C . A . 1 4 3 , 1 4 7 ; a n d s e e , g e n e r a l l y , L e x M e r c a t o r i a a n d A r b i t r a t i o n , ( T . C a r b o n n e a u E d . , 1 9 9 0 . ) . 1 6 T h e " c u r i a l l a w , " o r " l a w g o v e r n i n g t h e a r b i t r a t i o n , " i s t o b e d i s t i n g u i s h e d f r o m t h e " p r o p e r l a w o f t h e c o n t r a c t " o r " l a w a p p l i c a b l e t o t h e m e r i t s o f t h e d i s p u t e " ( a l s o r e f e r r e d t o a s t h e l e x c a u s a e ) a n d f r o m t h e " p r o p e r l a w o f t h e a r b i t r a t i o n a g r e e m e n t . " - p e r L o r d D i p l o c k i n C o m p a q n i e d ' A r m e m e n t M a r i t i m e S . A . v . C o m p a q n i e T u n i s i e n n e d e N a v i g a t i o n S . A . [ 1 9 7 1 ] A . C . 5 7 2 , 6 0 4 ; J a m e s M i l l e r & P a r t n e r s L t d . v . W h i t w o r t h S t r e e t E s t a t e s ( M a n c h e s t e r ) L t d . [ 1 9 7 0 ] A . C . 5 8 3 . 6 0 8 ; R u s s e l l o n A r b i t r a t i o n 60 ( 2 0 t h e d . , 1982) . 1 7 R e d f e r n & H u n t e r , 6 2 . 1 8 U n i t e d N a t i o n s C o n v e n t i o n o n t h e R e c o g n i t i o n a n d E n f o r c e m e n t o f F o r e i g n A r b i t r a t i o n A w a r d s , d o n e a t New Y o r k J u n e , 1 0 , 1 9 5 8 , 330 U . N . T . S . 38 21 U . S . T . 2 5 1 7 , T . I . A . S . N o . 6 9 9 7 . T h e C o n v e n t i o n a p p l i e s t o " f o r e i g n " a w a r d s , i . e . a w a r d s made i n a S t a t e o t h e r t h a n t h a t i n w h i c h e n f o r c e m e n t i s s o u g h t , o r a w a r d s w h i c h a r e " n o t c o n s i d e r e d a s d o m e s t i c . " - A r t . 1 ( 1 ) . T h u s , u n d e r t h e C o n v e n t i o n , a n a w a r d h a s a n a t i o n a l i t y , d e r i v e d f r o m t h e p l a c e o f a r b i t r a t i o n o r f r o m some o t h e r e l e m e n t w h i c h d i s t i n g u i s h e s i t f r o m d o m e s t i c a w a r d s . - R e d f e r n & H u n t e r 6 4 . T h e e n t i t l e m e n t o f a n a w a r d t o e n f o r c e m e n t i s t e s t e d o n t h e b a s i s o f : ( i ) t h e l a w c h o s e n b y t h e p a r t i e s a s t h e l a w a p p l i c a b l e t o t h e a r b i t r a t i o n a g r e e m e n t ; 7 M o d e l Law a d o p t e d a " s t r i c t t e r r i t o r i a l d o c t r i n e " r e f l e c t i n g t h e " s e a t " t h e o r y . 1 9 N o t w i t h s t a n d i n g t h e " d e r e a l i z a t i o n t h e o r y , a r b i t r a t i o n c a n n o t o p e r a t e w i t h o u t t h e t o l e r a n c e o f n a t i o n a l l e g a l s y s t e m s , n o r w i t h o u t t h e i r s u p p o r t - t h e c o e r c i v e f o r c e o f d o m e s t i c l a w a n d d o m e s t i c c o u r t s i s n e c e s s a r y t o e n f o r c e a r b i t r a t i o n a g r e e m e n t s a n d a r b i t r a l a w a r d s 2 0 . T h e e l e v a t i o n o f i n t e r n a t i o n a l c o m m e r c i a l a n d ( i i ) t h e c o m p o s i t i o n o f t h e t r i b u n a l b e i n g i n a c c o r d w i t h t h e a g r e e m e n t o f t h e p a r t i e s , b u t i n t h e a b s e n c e o f p a r t y c h o i c e o f t h e s e , t h e l a w o f t h e p l a c e o f . a r b i t r a t i o n i s c o n t r o l l i n g . -A r t . V ( l ) ( a ) & ( d ) . T h e C o n v e n t i o n r e c o g n i z e s t h a t a n a w a r d may b e s e t a s i d e b y " a c o m p e t e n t a u t h o r i t y o f t h e c o u n t r y i n w h i c h , o r u n d e r t h e l a w o f w h i c h , t h a t a w a r d was m a d e . " - A r t . V ( i ) ( e ) . 1 9 R e p o r t o f t h e U n i t e d N a t i o n s C o m m i s s i o n o n I n t e r n a t i o n a l T r a d e Law o n t h e w o r k o f i t s e i g h t e e n t h s e s s i o n , 3 - 2 1 J u n e , 1 9 8 5 , G e n e r a l A s s e m b l y O f f i c i a l R e c o r d s : F o r t i e t h S e s s i o n , S u p p . N o . 17 ( A / 4 0 / 1 7 ) ( c i t e d h e r e i n a s " C o m m i s s i o n R e p o r t " ) , p a r a s . 7 0 - 8 1 . 2 0 R e d f e r n & H u n t e r 5 2 - 6 4 ; &quo