Comments on: The Regulation of International Arbitration by European Law: What Does the Future Hold? http://kluwerarbitrationblog.com/blog/2009/05/04/the-regulation-of-international-arbitration-by-european-law-what-does-the-future-hold/ Thu, 17 May 2012 14:52:42 +0000 hourly 1 http://wordpress.org/?v=3.2.1 By: Ben Steinbrueck http://kluwerarbitrationblog.com/blog/2009/05/04/the-regulation-of-international-arbitration-by-european-law-what-does-the-future-hold/comment-page-1/#comment-3777 Ben Steinbrueck Tue, 05 May 2009 14:29:04 +0000 http://kluwerarbitrationblog.com/?p=660#comment-3777 1. The Heidelberg Report is a very valuable contribution to the discussion on how to improve the relationship between the Judgment Regulation and national arbitration laws. While many proposals deserve unfettered approval, some points need further reflection. One example is the suggestion to grant exclusive jurisdiction for court proceedings in support of arbitration to the courts of the place (or seat) of the arbitration. This rule is only appropriate for a limited number of court measures, such as the appointment of an arbitrator. In this case, the support of one single court is sufficient in order to get the arbitration going. Indeed, any other jurisdictional rule might lead to parallel ancillary proceedings that lead to further problems. The courts at the arbitral seat are well suited to grant this kind of support at the beginning of the arbitral process, since the applicable law of the arbitral seat will, in most cases, be the lex arbitri that governs the arbitral proceedings. Thus, the appointment procedure will usually fulfil the requirements set out by Art V (1) lit. d of the New York Convention, so that, at least in this respect, the future enforcement of the arbitral award is guaranteed. 2. As regards other supportive measures, however, an exclusive jurisdiction rule will lead to major problems. State-court support in the taking of evidence, for example, has to be granted in the state where the evidence is located. In international disputes this state is usually not the state where the place of the arbitration is located, since the parties tend to choose a neutral place in a third state as the arbitral seat. In these cases crucial evidence is often located in the home states of the parties. Therefore, national arbitration laws have to provide for cross-border court assistance in the taking of evidence. English, German and Austrian arbitration laws, to mention a few, do explicitly enable their national courts to grant this kind of support. Other states should adopt similar rules. Under an exclusive jurisdiction rule, however, the applicant would have to ask the court at the arbitral seat to issue an official request for judicial assistance (e.g. according to the Evidence Regulation) to the courts of the state where the evidence is located. Such a burdensome and time-consuming procedure does not meet the interests of the international arbitration community. 3. A more complex issue is the allocation of jurisdiction for proceedings as to the validity of the arbitration agreement. Exclusive proceedings before the courts of one Member State are supposed to solve the problem of contradicting decisions in this respect. In order to achieve this goal, the Regulation will have to ensure that the court’s decision is recognised in other Member States as well. Under national law, such decisions are sometimes recognised (as seems to be the case in England), sometimes not (see, e.g., German or Swiss law). But even under a uniform European regime, states might still be able to refuse recognition for public policy reasons (e.g. non-arbitrability of the dispute). If in such a case the future arbitral award is likely to be enforced in a state that would not recognise a declaratory judgment, the party disputing the validity of the arbitration agreement has a legitimate interest to obtain an early decision of the prospective foreign enforcement court on the validity of the arbitration agreement. Whether this interest supersedes the advantages of a clear-cut jurisdictional regime might be open to debate. But it should not be ignored in the discussion. 4. My last point concerns the lis pendens issue when parallel proceedings are underway. It would appear that under the proposed new regime the problem of lis pendens does not arise where the validity of the arbitration agreement is merely raised as a defence in proceedings that deal with other subject matters. Thus, in the Marc Rich scenario, the main issue at stake (in the sense of Art. 27) is the appointment of an arbitrator. As long as the claimant does not apply for an explicit declaration on the validity of the arbitration agreement in these proceedings as well, Art. 27 of the Judgment Regulation should not apply. 1. The Heidelberg Report is a very valuable contribution to the discussion on how to improve the relationship between the Judgment Regulation and national arbitration laws. While many proposals deserve unfettered approval, some points need further reflection. One example is the suggestion to grant exclusive jurisdiction for court proceedings in support of arbitration to the courts of the place (or seat) of the arbitration.
This rule is only appropriate for a limited number of court measures, such as the appointment of an arbitrator. In this case, the support of one single court is sufficient in order to get the arbitration going. Indeed, any other jurisdictional rule might lead to parallel ancillary proceedings that lead to further problems. The courts at the arbitral seat are well suited to grant this kind of support at the beginning of the arbitral process, since the applicable law of the arbitral seat will, in most cases, be the lex arbitri that governs the arbitral proceedings. Thus, the appointment procedure will usually fulfil the requirements set out by Art V (1) lit. d of the New York Convention, so that, at least in this respect, the future enforcement of the arbitral award is guaranteed.

2. As regards other supportive measures, however, an exclusive jurisdiction rule will lead to major problems. State-court support in the taking of evidence, for example, has to be granted in the state where the evidence is located. In international disputes this state is usually not the state where the place of the arbitration is located, since the parties tend to choose a neutral place in a third state as the arbitral seat. In these cases crucial evidence is often located in the home states of the parties. Therefore, national arbitration laws have to provide for cross-border court assistance in the taking of evidence. English, German and Austrian arbitration laws, to mention a few, do explicitly enable their national courts to grant this kind of support. Other states should adopt similar rules. Under an exclusive jurisdiction rule, however, the applicant would have to ask the court at the arbitral seat to issue an official request for judicial assistance (e.g. according to the Evidence Regulation) to the courts of the state where the evidence is located. Such a burdensome and time-consuming procedure does not meet the interests of the international arbitration community.

3. A more complex issue is the allocation of jurisdiction for proceedings as to the validity of the arbitration agreement. Exclusive proceedings before the courts of one Member State are supposed to solve the problem of contradicting decisions in this respect. In order to achieve this goal, the Regulation will have to ensure that the court’s decision is recognised in other Member States as well. Under national law, such decisions are sometimes recognised (as seems to be the case in England), sometimes not (see, e.g., German or Swiss law). But even under a uniform European regime, states might still be able to refuse recognition for public policy reasons (e.g. non-arbitrability of the dispute). If in such a case the future arbitral award is likely to be enforced in a state that would not recognise a declaratory judgment, the party disputing the validity of the arbitration agreement has a legitimate interest to obtain an early decision of the prospective foreign enforcement court on the validity of the arbitration agreement. Whether this interest supersedes the advantages of a clear-cut jurisdictional regime might be open to debate. But it should not be ignored in the discussion.

4. My last point concerns the lis pendens issue when parallel proceedings are underway. It would appear that under the proposed new regime the problem of lis pendens does not arise where the validity of the arbitration agreement is merely raised as a defence in proceedings that deal with other subject matters. Thus, in the Marc Rich scenario, the main issue at stake (in the sense of Art. 27) is the appointment of an arbitrator. As long as the claimant does not apply for an explicit declaration on the validity of the arbitration agreement in these proceedings as well, Art. 27 of the Judgment Regulation should not apply.

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