State court

As mentioned, there is an inevitable interaction between arbitration and the state, which is typically represented by its state courts. As stated by Lew: “[n]ational court involvement in international arbitration is a fact of life, as prevalent as the weather”.²³⁷ In short, the role of state court in arbitration can be regarded as exercising supervision over and providing support to arbitration.

As to the aspect of supervision, the control is exercised on a territorial basis: first, over arbitration conducted in the territory of the state concerned, and second – over arbitral awards brought into the territory of the state for the purpose of their recognition and enforcement.²³⁸ The state retains a level of control over issues, such as whether there was a valid agreement to arbitrate, whether a dispute is arbitrable, whether arbitration was conducted in a fair manner and in accordance with the agreement of the parties. The supervision of the court is usually exercised after an arbitral award is rendered. It can happen in a setting aside procedure – before the court of the seat of arbitration, or before the court of the state, where the enforcement of the award is sought. Yet, as argued more extensively in Chapter 4, certain control can be also exercised at the outset of arbitration.²³⁹

As to the aspect of providing the assistance to arbitration, as stated, arbitration depends on the support of state courts, since only the courts are equipped with the coercive powers that can help to

“rescue the system when one party seeks to sabotage it”.²⁴⁰ Generally, arbitrators have limited options as to consequences, which can be imposed on the party not complying with their orders. An important tool available to the tribunal in case of the non-compliance is a possibility of drawing an adverse inference from the party’s behavior. This, indeed, can be a powerful tool, since the adverse inference

237 Julian Lew, "Does National Court Involvement Undermine the International Arbitration Processes?,"

American University International Law Review 24, no. 3 (2006), 489.

238 Redfern and Hunter, 58-59.

239 See Chapter 4 p. 71-74.

240 Redfern and Hunter, 415.

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can be then reflected in a final award.²⁴¹ Yet, at the end of the day, the tribunal cannot coercively force the party to do or to refrain from doing something. This is of particular relevance when a losing party does not comply with the award, since in this instance, drawing of an adverse inference by the tribunal, which actually just finished its mission when rendering the award, is of no use. A winning party will then need to turn to a court if it seeks to coercively enforce the award.

In addition, also in the pre-award stage of arbitration, the assistance of the court can be important to the arbitration proceeding. This is because also in the pre-award stage, the arbitral tribunal’s range of actions is limited. For instance, the tribunal cannot compel the party to refrain from disposing assets of a JV company in dispute. Even more importantly, due to a consensual character of arbitration, the tribunal does not exercise powers over third persons – non-parties to arbitration. If, for example, a piece of evidence, which needs to be preserved, is in a possession of such a non-party, the arbitrators’

influence over this non-party will be very limited. Hence, also in such scenarios, arbitration may need to be assisted by the courts equipped with coercive powers.

Therefore, although by choosing arbitration, the parties substantially free themselves from the involvement of state courts in resolving their disputes, there still exists an important relationship between arbitration and the courts, where the court’s general role is to supervise arbitration and offer its assistance in order to ensure the proper conduct of it. Over the years, the attitude of the states toward arbitration and the participation of the courts in the arbitration proceeding has significantly changed. It has moved from the considerable skepticism toward arbitration, which in the past resulted in an extensive intervention of the state court in arbitration, toward recognizing arbitration as a viable dispute resolution method and a more limited interference by the court.²⁴² This trend of limiting the courts’ interference is reflected in Art. 5 of the UNCITRAL Model Law, which stipulates that “no court shall intervene except where so provided in this Law”.²⁴³ Also, Art II(3) of the New York Convention stipulates that the court seized with a matter embraced by the arbitration agreement should refer the parties to arbitration, unless it finds that the arbitration agreement is null and void, inoperative or incapable of being performed.

241 See more on the tool of an adverse inference in arbitration in Born, 2391-2393.; Redfern and Hunter, 387-388.; Jeffrey Waincymer, Procedure and Evidence in International Arbitration (Kluwer Law International, 2012), 775-778.; Ali Yesilirmak, Provisional Measures in International Commercial Arbitration, vol. 12, International Arbitration Law Library (Kluwer Law International, 2005), 241-243.

242 See Redfern and Hunter, 416.; Lew, Mistelis, and Kröll, 356.; Born, 2189-2197. See also the Explanatory Note by the UNCITRAL Secretariat on the 1985 Model Law on International Commercial Arbitration as amended in 2006 – B. Salient features of the Model Law 1. Special procedural regime for international commercial arbitration b) Delimitation of court assistance and supervision.

243 See more Holtzmann and Neuhaus, 216-219.; Binder, 64-68.

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Generally, modern arbitration laws while limiting the intervention of the court on the one hand, on the other hand, provide for the court’s assistance to the arbitration proceeding. By way of example, the UNCITRAL Model Law provides for a possibility of the court’s assistance, if it is needed for obtaining interim measures in aid of arbitration, taking of evidence, and enforcement of arbitral awards (and also for forming an arbitral tribunal in ad hoc arbitration, if the court was designated to perform this task).²⁴⁴ It is worth mentioning that in the pre-award stage of arbitration, the assistance of the court is typically needed only if the coercive enforcement of relevant orders granted by the arbitral tribunal is requested. Therefore, a risk of doubling costs and time due to the involvement of the court in such instances is limited. Indeed, in contrast, the court in the courts proceeding is able to offer its comprehensive services, without any need to turn to other bodies for help, which is an advantage of litigation. Yet, as mentioned in Chapter 1, there can be a variety of reasons as to why the parties may prefer arbitration over litigation in the context of cross-border transactions.²⁴⁵

When discussing the relationship between arbitration and the state court, it is noteworthy that although by choosing arbitration, the parties, generally, want to free themselves from the involvement of the courts, yet, some resort to the courts seems to be, in fact, desired by the parties. A Belgian experiment from 1985 can serve as an illustration of it. In 1985, the Belgian legislator, with hopes to attract more of arbitration cases to Belgium, provided for no court review of arbitral awards in case of the disputes between foreign parties. However, contrary to the legislator’s expectations, business seemed not to be attracted by such a bold solution to deny the review of the awards by the courts. In 1998, Belgium revised its law to again permit the parties to have recourse to the court, unless the parties opted it out.²⁴⁶

The coexistence between arbitration and the state court is compared to a relay race, in which the state court and the arbitration pass each other a relay baton. At the beginning, before the arbitral tribunal is constituted, the baton is in the hands of the court, whose role is primarily to help enforce an arbitration agreement. Additionally, the court can also assist with obtaining interim measures pending resolution of a dispute. This is especially important when there is nobody else to turn to with such a request, because the arbitral tribunal has not been yet constituted and an emergency arbitrator relief is not available. Next, during the arbitration proceeding, the baton is primarily in the hands of the

244 See Art. 8, 9, 11(3), 13, 14(1), 16(3), 17, 27, 34, and 36 of the UNCITRAL Model Law.

245 See Chapter 1 p. 1-2.

246 See Albert Jan Van den Berg, "Belgium," in Yearbook Commercial Arbitration 1999 - Volume XXIVA, Yearbook Commercial Arbitration (Kluwer Law International, 1999), 551-553.; see also Redfern and Hunter, 592.; William Park, "Amending the Federal Arbitration Act," American Review of International Arbitration 13, no. 75 (2002), www.williamwpark.com/documents/Amending%20the%20FAA.doc., 27 (last accessed: 20 November 2018).

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arbitrators conducting the proceeding and deciding a dispute. Finally, after the arbitral award is rendered, in order to secure the award’s effectiveness, the baton is again with the courts, which can assist with the enforcement. Nonetheless, as observed by Lord Mustill, it is impossible to talk about the clear-cuts in this relay, and the state court may play an occasional role when the baton is principally in the hands of the arbitral tribunal. ²⁴⁷

Accordingly, the role of the state court in particular stages of arbitration can be described in the following way: (1) before the arbitration proceeding starts, the court helps to enforce an arbitration agreement, can assist the parties with interim measures in aid of arbitration, as well as with forming an arbitral tribunal; (2) during the arbitration proceeding, the court can assist with interim measures in aid of arbitration and with obtaining evidence; (3) after the arbitral award is rendered, the court deals with setting aside of the award, as well as the recognition and enforcement of it.²⁴⁸ As noted, the role played by the court in arbitration can be described as supervisory and supportive to the arbitration proceeding. Yet, it should have nothing to do with the over-interference by the court. As noted by Moses, “there is a wavering line between helpful assistance and unhelpful interference”.²⁴⁹ Therefore, the key issue is to draw lines, where the reliance of arbitration on the court should start and where it should end.