Chapter 2 emphasizes the importance of arbitration agreements, their separability from the main contract, and the need for clarity and validity to ensure enforceability of an arbitration award. It also highlights ongoing efforts to modernize and harmonize the interpretation and enforcement of arbitration agreements through international conventions and model laws. First, it discusses the general characteristics of the arbitration clause. Second, it discusses the concept of separability which allows the arbitration clause to remain valid and enforceable even if the main contract is potentially invalid. Third, it discusses the issue of validity of the arbitration agreement and the fact that different courts interpret the requirements for valid arbitration agreement differently, leading to a non-uniform application of the New York Convention. To address this, UNCITRAL has made recommendation for more flexible interpretationd and has revised provisions of the UNCITRAL Model Law on Arbitration to promote harmonization in the interpretation and enforcement of arbitration agreements.

Despite the critical importance of applicable law in international arbitration, the concept remains misunderstood and often ignored. In the field of international investment law, whether the arbitration proceedings arise from an investment treaty or from a contract, the cornerstone principle of party autonomy applies when it comes to the choice of applicable law, as provided, for example, in article 42 of the ICSID Convention. Even that principle, however, is subject to debate, for example with respect to whether initiating arbitration proceedings under an investment treaty amounts to an implicit choice of applicable law. In an attempt to clarify the notion of applicable law, this contribution first distinguishes the rules of decision, i.e. the law applicable to the specific claims submitted by an investor against a state, from incidentally applicable law, i.e. the other laws which may be relevant for the resolution of the dispute but that do not form a basis for the decision on the merits. In a second part, this contribution analyses several questions arising from the application of choice-of-law provisions in practice, with an emphasis on article 42 of the ICSID Convention. Finally, the consequences of erring in the application of the correct applicable law are examined.

The negative effect doctrine discussed in this chapter deals with when, if ever, a state court will stay proceedings before it and refer disputants to the arbitrators for them to decide, in the first instance, whether an arbitration agreement between the parties (i) exists, (ii) is valid, and (iii) has a scope that covers the dispute in question. An affirmative answer on each of these points would mean that the dispute’s merits must be decided in arbitration. Thus, the negative effect issue concerns whether a decision on these three jurisdiction sub-issues should be decided with finality by the court itself at the outset, or, in the first instance, by the arbitrators themselves, with possible court review on jurisdiction delayed until later.The chapter discusses the dramatically different approaches to the negative effect issue followed in several leading arbitral jurisdictions: France, Germany, the U.S., Switzerland, the U.K., and Canada (Quebec).It also discusses the underlying policy issues at stake in the different national approaches to the doctrine.In conclusion the chapter offer’s the author’s view of a preferred approach to the negative effect issue.

Chapter 2 traces the emergence and approach of ‘global’ recognition and enforcement. These approaches are now instrumentally bifurcated, premised upon whether a decision that is to be recognised or enforced is a product of a particular dispute resolution mechanism (arbitration or litigation), and whether an exclusive choice of court has been made (or, failing such a choice, the ‘default’ operation of jurisdictional rules). The reasons for doing so are explored in the context of the modern negotiations at the Hague Conference towards a harmonised private international law approach to the recognition and enforcement and judgments. The end product of these negotiations are, of course, the 2005 Choice of Court Convention and the 2019 Judgments Convention. In terms of their international reach and acceptance, these conventions are in an embryonic form compared to widely implemented “backbone” of arbitration recognition and enforcement (in the 1958 New York Convention).

A number of questions arise when disputes occur between corporations in two different countries to be settled by arbitration in a third country. First, if a dispute arises, and one of the parties refuses to arbitrate, where is such an arbitration agreement to be enforced? Second, which court will have such jurisdiction? Third, if there is an arbitration that leads to an award of damages and costs, how is that award to be enforced against the losing party if the losing party refuses to voluntarily implement the award? Fourth, again, which court has such jurisdiction? It was in these circumstances that various international rules, treaties and conventions were enacted. Hwang traces the success of two remarkable uniform law instruments – the New York Convention and the UNCITRAL Model Law on International Commercial Arbitration – the cornerstones of international commercial arbitration. He notes the reasons for their relative success and widespread adoption, and while highlighting shortcomings, reflects whether these are fundamental enough to require revision of the instruments. Hwang concludes that while not perfect, nothing ever is: both instruments are exemplary in their goal to harmonise and improve arbitration laws.

This chapter ponders the apparent neglect of the history of the International Chamber of Commerce (ICC) by jurists and historians alike and ventures to offer some explanations. It also provides an overview of the Age of Institutionalization, from approximately the 1920s to the 1950s. This period witnessed the creation of arbitral institutions, such as the Court of Arbitration of the International Chamber of Commerce in 1923 and the American Arbitration Association in 1926. These institutions not only administered cases but also established rules and principles, such as the ICC Rules of Arbitration. Through such codification efforts, they also developed international commercial arbitration from within. The Age of Institutionalization was marked by a much more internationalist spirit or legal consciousness. It lasted until the 1950s, when the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) ushered international commercial arbitration into a new era.

Arbitration is widely used in the international commercial arena. When contracting parties come from different countries, arbitration is often selected to adjust contractual disputes. One of the reasons for this preference has to do with the adoption in 1958 of the New York Convention, which effectively secures the enforcement of arbitral agreements and awards. Another reason is that arbitration enables the parties to create a neutral forum, detached from local courts, for transborder controversies to get adjudicated in an impartial manner. The argument that courts may be biased against ousiders raises interesting issues about the best ways to guarantee impartiality in a world where nationality seems to matter. International commercial arbitration also poses questions concerning the role of arbitrators in the lawmaking process. Are arbitrators generating a body of transnational law that is autonomous from democratically-enacted national legislation?

It examines the dispute solution options the contracting parties have when their cross-border transaction turns sour. The traditional answer is that international arbitration is the best option to govern cross-border disputes. Yet recent trends have improved the enforceability of foreign judgments. This chapter argues that the foreign judgment is catching up with the foreign arbitral award in terms of enforceability. After introducing the consistent enforceability of foreign judgments in common law countries, it highlights a number of contemporary trends that are gradually improving the enforceability of foreign judgments in civil law countries. In the end, it discusses the fledgling potential of the 2005 Hague Convention on Choice of Court Agreements to standardise the law and practice of enforcement of judgments made by designated courts in exclusive choice of court agreements.

An arbitration agreement is an agreement between parties to a legal relationship to submit an existing or any future disputes to arbitration. It follows that an agreement of the parties to arbitrate is the cornerstone of arbitration, as it contains the consent of the parties to submit their dispute to arbitration. There are two basic types of arbitration agreements. The first one is a submission agreement, which consists in an agreement to submit an existing dispute to arbitration. The second is an arbitration clause, which consists in an agreement to submit a future dispute to arbitration.1

Since antiquity, arbitration has been well known in the Italian peninsula.1 Basic rules of arbitration are today spelled out in the Italian civil procedure code (hereinafter CCP). The code was enacted in 1940, but has, since then, undergone radical changes, including a comprehensive reform in 2006.2 Despite the fact that current rules are largely in line with those of other countries and with international legal standards, Italy is generally perceived, by insiders and outsiders alike, as a nonfriendly arbitration country.3

Arbitration is a form of administration of justice that is distinguished from that administered by state courts fundamentally in that the basis of the arbitrators’ jurisdiction – at least in the case of voluntary arbitration – is the consent of the parties in dispute.

This chapter broadly reviews the relationship between the arbitration and judicial systems as well as substantive national laws that restrict the use of the arbitration process. The relationship is inherently in tension because two core principles are in conflict: independence of commercial arbitration and judicial intervention to ensure the fairness of the arbitration process. This chapter reviews and suggests how best to balance these two competing interests. This will include an analysis of the principle of separability (contract arbitration clauses are independent of the contract) and kompetenz–kompetenz (whether the arbitration panel or the courts are empowered to determine the jurisdiction of the arbitration panel and the scope of the arbitration clause). The chapter concludes by describing the structure and content of the chapters to follow and providing some final remarks. The editors would like to note that the scholarly contributors include some of the very best minds in legal scholarship. The list of contributors includes a diverse mix of scholars and practitioners from fifteen countries.

Bulgaria has traditionally been an arbitration-friendly jurisdiction, both for domestic and international disputes.1 Arbitration as a means of dispute resolution was first implemented in Bulgaria at the end of the nineteenth century with the first Civil Procedure Act (1892). At this time arbitration was used mainly to solve commercial disputes between merchants with the assistance of local and national chambers of commerce. In the first half of the twentieth century, arbitration was widely used to resolve both civil and commercial cases, and the arbitrators had extensive powers, including resolving disputes ex aequo et bono. Also during this period, the first reported international commercial arbitration proceedings involving Bulgarian parties occurred, mainly in the international trade and infrastructure construction sectors. Throughout the socialist period (1944–1989), arbitration was allowed only in respect of legal disputes between Bulgarian socialist organisations (i.e., state-owned entities engaged in industry and trade, such as industrial plants, foreign trade enterprises, tourist companies, state-owned banks, etc.) and foreign enterprises or entities, and it was the privileged dispute resolution mechanism for such disputes. The existence of this sort of arbitration allowed Bulgarian practitioners to conserve and develop their knowledge in the field during the socialist period. In particular, the Arbitration Court at the Bulgarian Chamber of Commerce and Industry allowed some prominent scholars and practitioners to regularly engage in domestic and international arbitration proceedings and to develop, as a follow up, domestic legislation and academic materials on the topic.

Upon the dissolution of the Soviet Union in 1991, Ukraine as a young independent state faced many challenges including the proper administration of trade disputes with foreign parties. For a certain period there were no such institutions that could resolve these disputes. To prevent the creation of a legal vacuum, the Parliament of Ukraine, along with the establishing of the foreign trade legal framework for Ukrainian nationals and adopting the Law on Foreign Economic Activity,1 recommended that the Ukrainian Chamber of Commerce and Industry (UCCI) establish a permanent arbitration body for prompt and efficient consideration of “foreign economic disputes.” For this purpose, on August 11, 1992, the International Commercial Arbitration Court (ICAC) and the Maritime Arbitration Commission (MAC)2 were created. However, almost from the very inception both institutions could hardly operate because of lack of legal basis for their functioning. To improve this complicated situation, the Law on International Commercial Arbitration3 (the International Arbitration Statute; ICA Law) was adopted on February 24, 1994 (effective April 20, 1994).4

The popular image of the American legal system is that it is run amok with litigation-happy disputants. Whether this is true from an empirical perspective is debatable, but in fact American federal law and policy favors arbitration as the country’s preferred means of dispute resolution. This is a longstanding position dating back to the enactment of the 1925 Federal Arbitration Act (FAA). However, the history of this Act and its implementation has been inconsistent. It was forgotten at one point as individual American states enacted statutes to limit the use of mandatory arbitration in consumer contracts. Eventually, the US Supreme Court recognized the FAA as prevailing law and voided state laws limiting the use of arbitration under the federal preemption doctrine.1 In more recent times, the US Supreme Court expanded the scope of private arbitration clauses to include statutory claims, such as in the areas of antitrust, collective bargaining, and civil rights. Even more recently, it has begun to limit the availability of arbitration by placing restrictions on class action arbitration.

Switzerland has long been a New York Convention (NY Convention)1 state. Although Switzerland’s arbitration law is not based on the UNCITRAL Model Law (Model Law), it does by and large conform to the fundamental principles of the Model Law as amended in 2006, in particular in relation to the interpretation of arbitration agreements, and the vacation and enforcement of international arbitration awards.

Swiss law distinguishes between international arbitration and domestic arbitration. This proceeds from article 176 of Switzerland’s arbitration statute,of the Swiss Private International Law Act2 (PIL), which defines the scope of international arbitration as arbitrations with their seat in Switzerland and in which, at the time of the conclusion of the arbitration agreement,3 at least one of the parties had neither its domicile nor its habitual residence in Switzerland. Domicile for registered corporate entities is treated as the place of formal registration.4 For registered corporate entities, habitual residence does not apply. No other provision in Swiss international arbitration law is more stringent than those under the NY Convention.5

Arbitration is routinely said to be based on consent. Indeed, the consensual nature of arbitration is perhaps its most influential feature, operating both to restrict domestic court involvement in arbitral proceedings as well as limit the review of awards by national courts of law. It is also the consensual nature of arbitration, however, that justifies a domestic court’s power to review an arbitral agreement, especially when a party against whom arbitration is brought denies that it agreed to arbitrate a dispute. In essence, the argument has long been that because arbitration is based on consent, parties that have not agreed to arbitrate should not be required to do so. However, as long as only parties who have agreed to arbitrate are required to do so, there are few legitimate reasons for court involvement in the arbitral process or court review of arbitral awards. The parties agreed to arbitrate and thus should live with the consequences of that agreement.