Diversity and Uniformity in International Arbitration Law

• Citation: Vol. 31 No. 3
• Publication year: 2017

Diversity and Uniformity in International Arbitration Law

Christopher R. Drahozal

DIVERSITY AND UNIFORMITY IN INTERNATIONAL ARBITRATION LAW

Christopher R. Drahozal^*

Introduction

The benefits of diversity (defined broadly as variety or variation)¹ are widely recognized. Diversity of team members is associated with increased creativity (albeit also with increased conflict).² As stated by Katherine W. Phillips of the Columbia Business School: "Diversity . . . encourages the search for novel information and perspectives, leading to better decision making and problem solving."³ The Supreme Court has held that "diversity is a compelling state interest that can justify the use of race in university admissions," finding that "numerous studies show that student body diversity promotes learning outcomes, and better prepares students for an increasingly diverse workforce and society."⁴ Scientists emphasize the value of diversity for biological systems. "The diversity of life forms . . . is the greatest wonder of this planet," says E.O. Wilson,⁵ and "must be treated more seriously as a global resource, to be indexed, used, and above all, preserved."⁶ And "[d]iversity is

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the staff of economic life."⁷ Product differentiation (i.e., diversity) not only satisfies varied consumer preferences⁸ but "brings with it improvements in products that generate economic progress."⁹

But when it comes to legal rules, diversity is not so highly valued. Instead, uniformity is the favored goal.¹⁰ American lawyers study the Uniform Commercial Code and numerous other uniform statutes promulgated by the Uniform Law Commissioners (with occasional help from the American Law Institute).¹¹ Internationally, the U.N. Commission on International Trade Law (UNCITRAL) and the International Institute for the Unification of Private Law (UNIDROIT) likewise support the uniformity of legal rules.¹² The leading instruments of international arbitration law—the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) and the UNCITRAL Model Law on International Commercial Arbitration—both are widely touted for the uniformity they have brought to

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arbitration law.¹³ And, as I will discuss later, commentators continue to urge more uniformity rather than less when proposing reforms to international arbitration law.¹⁴

Uniformity of legal rules clearly has benefits, and widespread adherence to the New York Convention and adoption of the UNCITRAL Model Law have been beneficial to individual States and the international community as a whole.¹⁵ But in this Essay, I argue for greater openness to the benefits of diversity (rather than uniformity) in the legal rules that govern international arbitration. The easy benefits of uniformity have already been obtained, meaning that the marginal benefits of greater uniformity are more limited. At the same time, the costs of uniformity (or, stated otherwise, the benefits of diversity) are at their greatest when national arbitration laws remain diverse. Rather than simply seeking more uniformity, the goal should be to aim for the optimal degree of uniformity, recognizing that some diversity in international arbitration laws is beneficial.

Part I provides an overview of uniformity in international arbitration law. Part II examines the extent to which the New York Convention, the UNCITRAL Model Law, and the Federal Arbitration Act each preserve some degree of diversity in international arbitration law, while Part III discusses the benefits of diversity in legal rules. Part IV concludes, arguing in favor of the optimal uniformity (or optimal diversity, as the case may be) of international arbitration law.

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I. SEEKING UNIFORMITY IN INTERNATIONAL ARBITRATION LAW

International efforts to unify private law date back to the start of the 20th century (if not earlier). As described by Gralf-Peter Calliess and Insa Buchmann:

At the beginning of the 20th century the success of the monumental 19th century codifications was still vivid in the academic class and their enthusiasm pressed the idea of international unification of private law readily ahead . . . . Although the early efforts were clearly confined to Europe, over the years the focus was broadened and wide-reaching international unification projects were fostered, ringing in a period of rising universalism.¹⁶

Calliess and Buchmann explain that while international conventions were the original choice of instrument for unification, the costs of the treaty process led to "the development of more flexible instruments" like "[m]odel laws and other soft law instruments."¹⁷ The terminology of choice became harmonization rather than unification (although I usually will speak more generically of uniformity).¹⁸

In the early days of unification efforts, the benefits from uniformity were taken as given. As Lord Justice Kennedy stated at the time: "The certainty of enormous gain to civilised mankind from the unification of law needs no exposition."¹⁹ Thus, "[i]nternational legal harmonization became more or less an end in itself in the sense that the question was not whether international unification should be strived for, but only how this was to be achieved."²⁰

Today, there is a recognition that the benefits of uniformity need to be identified, if not quantified. The primary benefit of uniformity is that it reduces

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transaction costs, thereby facilitating deals.²¹ If national laws are uniform, parties do not need to spend time and money investigating how laws of countries differ and how those differences might affect their relationship. With uniform national laws, parties also do not need to bargain over applicable law. The resulting reduction in the costs of transacting should result in parties entering into more deals, although the magnitude of those benefits is uncertain and quantifying them is not easy.

Efforts to unify the law continue, both domestically and internationally. Domestically, the stated purpose of the Uniform Law Commission (ULC)²² is "to promote uniformity in the law among the several States on subjects as to which uniformity is desirable and practicable."²³ The ULC's web page lists 167 uniform or model laws it has promulgated,²⁴ some of which (such as the Uniform Commercial Code) have been adopted by almost every American jurisdiction.²⁵ Thirty-nine states and the District of Columbia adopted the original Uniform Arbitration Act (promulgated in 1955),²⁶ while eighteen states plus D.C. (with substantial overlap) have adopted the revised Uniform Arbitration Act (promulgated in 2000).²⁷

Internationally, UNCITRAL was established in 1966 with a "mandate to further the progressive harmonization and unification of the law of international trade."²⁸ UNCITRAL's uniformity efforts—both unification and

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harmonization—have been wide-ranging,²⁹ with arbitration law among its biggest successes. UNCITRAL promulgated its Model Law on International Commercial Arbitration in 1985 (and issued an amended version in 2006).³⁰ Drafters of the Model Law asserted that "the main purpose of the work on the present topic was to achieve the highest possible uniformity in commercial arbitration throughout the world."³¹ In recommending that States "give due consideration to the Model Law," the U.N. General Assembly emphasized the "desirability of uniformity of the law of arbitral procedures."³² The U.N. General Assembly reiterated that language when recommending adoption of the 2006 amendments to the Model Law, asserting that adoption "would contribute significantly to the establishment of a harmonized legal framework for a fair and efficient settlement of international commercial disputes."³³ Over 102 jurisdictions in seventy-two countries have adopted arbitration laws based on the UNCITRAL Model Law.³⁴ Commentators have described the Model Law as being "highly successful in establishing 'uniform standards of arbitral procedure.'"³⁵

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Even before the UNCITRAL Model Law, the New York Convention³⁶ likewise was intended to increase the uniformity of the law governing international commercial arbitration. As stated by Gary Born:

An essential objective of the Convention was uniformity: like the drafters of other international treaties, the Convention's drafters sought to establish a single uniform set of international legal standards for the enforcement of arbitration agreements and arbitral awards.³⁷

The New York Convention has over 156 state parties,³⁸ and "is generally acclaimed to have been the most successful treaty in the field of international private law."³⁹

II. Continued Diversity in International Arbitration Law

While the New York Convention and the UNCITRAL Model Law have both significantly increased the uniformity of international arbitration law, commentators continue to call for further unification (or harmonization).⁴⁰ For example, Fernando Mantilla-Serrano and John Adam contend that "UNCITRAL missed opportunities to enhance 'uniform standards of arbitral procedure,'" citing in particular the lack of uniformity of arbitrability standards

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and rules governing confidentiality of arbitration proceedings.⁴¹ Maria Pilar Perales Viscasillas likewise argues for uniform arbitrability standards, stating that "work by UNCITRAL in the area of arbitrability of commercial disputes would help to fill an important gap in the [Model Law] and to achieve desired uniformity, international consensus, and legal certainty in the arbitration world."⁴² Hamid G. Gharavi has urged that the standards for set-aside or annulment proceedings be unified (and, indeed, that an international court be created to apply the standards).⁴³

That commentators continue to argue for more uniformity highlights that diversity remains in international arbitration law. The next three sections describe the extent of that diversity—under the New York Convention, the UNCITRAL Model Law, and, in the United States, the Federal...