INTERNATIONAL COMMERCIAL ARBITRATION AND MULTI-NATIONAL CORPORATIONS PRACTICAL APPROACHES TO ARBITRATION THE HEARING: THE ROLES OF ARBITRAL PANEL AND COUNSEL
| Jurisdiction | United States |
(Feb 2002)
INTERNATIONAL COMMERCIAL ARBITRATION AND MULTI-NATIONAL CORPORATIONS PRACTICAL APPROACHES TO ARBITRATION THE HEARING: THE ROLES OF ARBITRAL PANEL AND COUNSEL
Akinjide & Co
Lagos, Nigeria
1. INTRODUCTION
This subject on which I am to speak is part of the two-day seminar on "Dispute Resolution for Sustainable Development and the Environment" organised in Abuja by the "Institute of Construction Industry Arbitrators".
2. OIL AND GAS
About ninety per cent of our foreign currency earnings are from oil and gas. While about eighty per cent of our total income from all sources is from oil and gas. These involve major international commercial contracts and multi-national corporations. Because of our historical circumstances and gross underdevelopment in many things, it is very rare, if not unthinkable, that international commercial contracts with international corporations will not contain international commercial arbitration provisions carefully crafted by first class lawyers with the necessary experience and expertise.
3. INTERNATIONAL AND COMMERCIAL
The words "international" and "commercial" are used to qualify arbitration in this lecture. Here, they involve multi-national corporations.
The problem with international commercial arbitration is that you cannot put it neatly into the pigeon — hole of any one single country legal system. It is also often conducted under the rules of an arbitration institution. No two sets of rules are the same. Moreover, the parties to the arbitration may decide to add their own individual twist to their arbitration by agreeing on special procedures to apply. This has the effect that for someone coming to international commercial arbitration for the first time, it is difficult to know where to start, what the important issues are going to be and how the arbitration proceeding should be approached and conducted. This was the situation I found myself over thirty years ago when I was involved as Counsel to a United States of American Claimant in my first major international engineering contract in an international commercial arbitration involving the construction of Asejire Dam in Ibadan. Ibadan was the seat of the International Arbitration but the contractors were from California (Los Angeles), USA. It was extremely interesting. The United States Government provided the money for the Dam and the international contractor was my client. The Federal Government and the Western Nigeria Regional Government were involved on the Nigerian side.
4. ARBITRATION? WHEN? HOW?
Arbitration may arise at two separate stages in an international commercial contractual transaction.
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(i) Firstly, during the course of the negotiation of a contract when it could be proposed as a means of resolving dispute, or
(ii) Secondly, when disputes have arisen, and the parties have a provision in their contract that such disputes are to be submitted to arbitration.
5. The following questions should occupy the mind of those having to advise at any stage of the transactions:
(a) Is it appropriate or even necessary, to have a dispute dealt with by arbitration rather than in the Court?
(b) What are the principles for establishing which laws will be applicable to the various aspects of the arbitration?
(c) Are there any fundamental principles or aspects of arbitration which should always be borne in mind if an arbitration is to be brought to a conclusion with an enforceable award made within a reasonable time?
(d) The decision to submit disputes to arbitration having been made, what is required for an effective arbitration agreement?
(e) When considering the question in (d) from the other side of the fence, and when disputes have arisen, how does one know whether the arbitration agreement upon which the other side is relying is effective?
6. When there is a dispute, questions relating to the conduct of the arbitration proceedings themselves will be central, e.g.:
(a) How, and when, is the arbitration commenced?
(b) How are the arbitrators appointed?
(c) Once appointed, what is it that the arbitrators may, must, or must not do?
(d) What happens if an arbitrator is in breach of an obligation?
(e) What can be claimed or awarded?
(f) How are the proceedings conducted?
(g) What is required by way of written submissions and evidence?
(h) What is required for the purposes of a valid and enforceable award?
7. RECOGNITION AND ENFORCEMENT
The final stage of an arbitration is the recognition or enforcement of an award. For the loser, the next question is whether enforcement of the award can be avoided by mounting a challenge against the award. In an international commercial arbitration, recognition or enforcement may take place in a country, which is different from that in which the arbitration took place. In such a case three questions will arise:
(i) What are the conditions required for recognition or enforcement?
(ii) What procedure should be expected?
(iii) What defence might be available?
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8. INTERNATIONAL CHARACTER
The central legal significance of the "International" character of an arbitration is that a number of countries, such as Nigeria, Egypt, Sudan, England, South Africa, Gabon, China, Japan, Switzerland or France apply different legal regimes to "International" arbitration than they do to those which are "domestic". Domestic arbitration involves a state's own domiciliaries and nationals.
9. FORCE MAJEURE
Various legal experts in many countries of the world have produced copious literature on the legal doctrine of force majeure in commercial contracts. So also have judges and authors distinguished in commercial arbitration. Among them are English, Nigerian, United States, Swiss, French and German legal scholars. I borrow heavily from these sources on what now follows on the doctrine of force majeure in commercial contracts.
The world's legal systems developed principles recognising common factual circumstances that would serve to excuse contractual non-performance due to unforeseen changes of circumstances and conditions. Those recognised circumstances evolved into the French doctrine of force majeure and imprevision: Vide Nicholas: French Law of Contract (2nd Edition). The British doctrines of mutual mistake and frustration are scholarly explained by Professor G. H. Treitel in his comprehensive book entitled: Frustration and Force Majeure (1994) Sweet & Maxwell when he explained the law as follows:
The principle of sanctity of contract, sometimes expressed in Latin maxim pacta sunt servanda...insists on the literal performance of contracts in spite of the fact that events occurring after the contract was made have interfered with performance of one party, or reduced its value to the others; it is based on the view that one of the principal purposes of contract as a legal and commercial institution is precisely to allocate the risks of such events. It takes the position that these risks, having been so allocated by the parties, should, as a general rule, not be re-allocated in a different manner by the courts. On the other hand, the principle of sanctity of contract, like many legal principles, is not considered to express an absolute value. It is qualified by a counter-principle that parties who enter into contracts often do so on the basis of certain shared, but unexpressed assumptions. This counter-principle is also sometimes expressed in a Latin phrase, rebus sic stantibus. Its effect is in certain cases to discharge contractual obligations because circumstances have changed since the conclusion of the contract so as to destroy a basic assumption which the parties had made when they entered into the contract.
10. In the United States, it is known as the doctrines of impossibility and impracticability, frustration and mutual mistake. In the case of Aluminum Co. of America V. Essex Group Inc, 499 F. Supp 53, 93 (WD Pa 1980) in which German, Japan, Israel, Italy, Sweden and Switzerland laws were surveyed, the Court concluded:
The Court has studied various remedies utilized by courts in foreign countries, when beset with contracts that are no longer deemed "fair" in light of changed circumstances: that is, when it is determined that fairness requires a change in a contract because events occurring subsequent to the execution of the contract have made its performance unfair. These approaches (1) try to establish
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the original economic position in intent of the party; (2) try to distribute the consequences of the unforeseen burden equally between the parties; (3) try to determine what the parties would have agreed to had they been aware of what was going to happen; and (4) or determination unless the party against whom relief is sought makes an equitable offer to modify the contract.
11. In Germany the doctrines is known as: "Wegfall der Geschaftsgrundlege and Unmoglichkeit" after legal traditions addressing "changed circumstances". The common thread running through these doctrines is that contractual non-performance will be excused due to unforeseen conditions or events materials different from the basic assumptions of the parties when the contract was entered into. In particular, see Philip L. Bruner: "Allocation of Risks in International Construction: Revisiting Murphy's Law, the FIDIC Conditions and the Doctrine of Force Majeure" (1986) 1 CCR 259, 264 and see also Smit in (1958) 58 Column L. Rev 287: "Frustration of Contract: A Comparative Attempt at Consolidation".
12. FORCE MAJEURE DEFINED
In the common understanding of the world's contractors, owners and designers, unaccustomed to the fine legal distinctions of comparative international law and not desirous of burdening their contracts with excessive verbiage, legal excuses for non-performance due to causes beyond their control have come to be...
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