The Legal Nature of International Commercial Arbitration and the Effects of Conflicts between Legal Cultures

Abstract

In the course of time, several approaches to the nature and the legal basis of arbitration have evolved. These include the jurisdiction theory and then the contract, mixed and the autonomous theory. While the contract theory claims that arbitration is based exclusively on the agreement between the parties, the jurisdiction theory argues that arbitration is based on the delegation of the decision making power from the courts to the arbitrators based on the law and the legal system of the state where the arbitration takes place. Although the author does not deny the significance of agreement in arbitration, he considers the arbitration agreement to be only a condition for initiation of the arbitrators’ jurisdiction, but always only on the basis of the legal framework of the state in which the dispute takes place. Arbitration cannot be held in any abstract environment. Such a regime would seriously endanger the legal certainty of the parties who must always know under what conditions the arbitration proceedings will take place and under what conditions they can exercise their rights. This regime is determined exclusively by law as the manifestation of state sovereignty. Theories about the so-called denationalization of arbitration are, according to the author, very dangerous and reveal the lack of arguments on the part of certain authors as concerns the significance of the prescribed legal framework regulating arbitration in a particular country.

Arbitration has been undergoing a massive expansion in the countries of Eastern and Central Europe. The underlying cause is the fact that arbitration proceedings are often much more flexible, less formal and most of all cheaper than litigation in court. The development of arbitration in, for instance, the countries of Western Europe, or the so-called Western legal cultures, must be viewed rather critically. In these countries, on the contrary, arbitration is becoming extremely formal and, especially, very expensive. It is essential that the countries of Eastern and Central Europe maintain this standard of the so-called traditional advantages of arbitration. It is indeed a very interesting alternative to the finding of the law and the resolving of disputes through the mediation of courts [of law, state courts] as public authorities.

Keywords: Arbitration, Arbitration Agreement, Contractual theory, Jurisdictional Theory, Appointment of arbitrators, Flexibility, Costs, Annulment of Awards, Law applicable to arbitration, Law applicable to arbitration clause, Law Governing the Mertis of Dispute, Conflict-of-laws, Seat of arbitration

JEL Classification: K12, K33, K40