Legislation
BackComparative Analysis of International Courts of Arbitration
Clavdia Esenzhulova, candidate for the degree of LLM University of London, former Executive Director of the NGO "College commercial lawyers" Kazakhstan Bar Association”, graduate from the Academy of Arbitration (Paris), referee of the International Court of Arbitration IUS.
For many years, the investors, including subsoil users, have reasonably taken the state courts with mistrust. There are certain presuppositions for that. After all, if the state is a party to the dispute, the decision of the Court is often not only of usual civilian nature, but rather of political one. Therefore, the objectivity, independence and impartiality of judges of state courts suffer. This not only happens in Kazakhstan but also in other countries. Therefore, an institution like the Arbitration Court emerged, functioning as a neutral platform for the settlement of disputes, being independent of the state and offering a choice of judges, which contributes to the objectivity of a dispute. However, due to the fact that the demand creates supply, at the moment in the world there are a huge number of arbitration institutions. It is important to make the right choice of an Arbitration Court, because not all arbitration courts can provide adequate protection of the parties’ interests, actual independence and impartiality in the arbitration proceedings.
From the standpoint of the international practice, the most authoritative and progressive arbitration institutions are: The International Centre for Settlement of Investment Disputes (ICSID), the International Chamber of Commerce (ICC), the London Court of International Arbitration (LCIA) and the Arbitration Institute of Stockholm Chamber of Commerce (SCC).
As any organization, the ICSID, ICC, LCIA and SCC have common and distinctive features. The similarity lies in the fact that the above courts:
-
Are a neutral platform for dispute settlement, i.e. these courts are not controlled by any state and are independent organizations;
-
settle disputes arising between the parties in the arbitration agreement or arbitration clause;
-
perform their functions on the basis of regulations approved by the Arbitration Institute or the Regulations of the UNCITRAL;
-
decisions of these courts are binding on the parties.
However, the most interesting are the distinctive features of each arbitration institute. Let’s consider it from the perspective of the subject composition. The ICC, LCIA and SCC are entitled to consider any disputes between the parties (i.e., both physical and legal entities, including the possibility of the disputes of such persons with any state). The main criterion here is the existence of an arbitration clause or an arbitration agreement between the parties to the dispute. Particular attention shall be paid to the ICSID that considers only disputes between the individual and the state, as well as disputes between the entity and the state who are members of the ICSID1. Consequently, in order that the case fell under the jurisdiction of the ICSID, a party to a dispute shall be the state. More detailed information about the cases in which certain actions /inaction can be identified as actions / inaction of the state can be found in the expanded version of this article on the journal's website (www.petroleumjournal.kz).
Despite the fact that the ICSID adjudicates disputes only in respect of certain persons referred to above and in relation to a particular matter in dispute, the ICSID is one of the most influential and powerful arbitration institutions. It is no secret that the problem of enforcement of arbitration awards is one of the most egregious and important current problems. In fact, of course, it is really pleasant when a fair solution is made for your case, but what sense does it make if it is not executed? The ICSID offers the greatest protection of the rights and interests of investors, because it provides that according to Article 4 of the ICSID Convention, each State, a member of the ICSID, shall have a representative on the Governing Body of the ICSID. The Administrative Council of ICSID takes an important position in the world community, respectively, non-enforcement of the decisions of ICSID may cause damage to the reputation that does not contribute to foreign investment, and, accordingly, is one of the levers of influence on the process of execution by the State (s) of arbitration awards.
Despite all the advantages of the ICSID, this arbitration institute is overloaded with cases, and unfortunately, cannot always give due consideration to each case. In this context, recourse to the ICC was one of the solutions to the situation. Therefore, in second place there is ICC, which is gaining more credibility in the international community, especially in the area of trade. The opinion of the ICC is hold in respect; the documents developed by the ICC become international customary rules, so the ICC earned wide trust. Moreover, this arbitration institute always "keeps abreast" and keeps track of all the trends and challenges that exist in the field of arbitration. The third place, in my subjective opinion, belongs to the LCIA, the interest in which is widely seen from the former colonies of Great Britain and the CIS countries in the contracts where one party is investor. The fourth place is occupied by the SCC, which was established to resolve disputes between CIS countries and China.
If we consider the distinctive features of the above-mentioned arbitration courts in terms of the subject matter of disputes, the ICC, LCIA and SCC are entitled to consider any disputes. The ICSID adjudicates disputes that relate exclusively to investment. According to international investment law, there is no general concept of "investment" in international law. Consequently, the understanding of what the concept of "investment" includes is defined by Bilateral Investment Treaties (BIT), Agreement on Freedom of Foreign Trade (FTA), International Investment Agreements (IIA), or in the Memorandum or the contract with the contractor. However, the actual practice of bilateral investment agreements has crucial significance2. In this regard, for the case to be heard by the ICSID one has to determine:
-
whether there is a bilateral investment agreement between the plaintiff and the defendant, and if there is, what is included in the notion of investment;
-
in the absence of a bilateral investment agreement, one shall refer to the memorandum or the agreement between the parties and to define the concept of "investment";
-
in the absence of a bilateral investment agreement and the Memorandum or agreement between the parties, the Court may determine the jurisdiction of a case on the basis of customary international law or national law determined as the applicable law.
However, it should be noted that the final decision regarding the submission of the case to the jurisdiction of the ICSID is ruled by ICSID Arbitration Court, in accordance with Article 41 Paragraph 2 of the ISCID Convention.