20 Nov 2012

The impact of international arbitration on the rule of law

Doug Jones, the head of Clayton Utz's International Arbitration group, and David W. Rivkin, Co-Chair of the International Dispute Resolution Group of Debevoise & Plimpton and Secretary-General of the International Bar Association, discuss the impact of international arbitration on the rule of law.
The impact of international arbitration on the rule of law
Doug Jones, Head of International Arbitration Group, Clayton Utz
David W. Rivkin, Co-Chair of the International Dispute Resolution Group of Debevoise & Plimpton and Secretary-General of the International Bar Association
Kate Ritchie, BRR Media

Kate Ritchie

Today BRR Media speaks with Doug Jones who is the head of International Arbitration at Clayton Utz and David W. Rivkin who is the Co-Chair of International Dispute Resolution Group of Debevoise and Plimpton and also the Secretary General of the International Bar Association. Gentleman, thank you so much for joining me today.

David you are speaking at the 11th Internatioanl Arbitration Lecture and your theme is that States and businesses have long depended on international arbitration to solve disputes and this has helped create the rule of law. Can you tell us how and why this has occurred?

David W. Rivkin

Sure and first of all it's an honour to be asked to give this lecture and I am grateful to be asked to do it. There is evidence of international arbitration being used as far back as the Greeks and ever since them international arbitration has provided some predictability and certainty for business and also for States. In ancient Greece, for example, there is even an example of arbitration in The Iliad.

In the middle ages King Edward I in the early 14th century required that arbitration be available to foreign traders so that they could have a quick and effective means of dispute resolution in medieval England. The States have also used arbitration to resolve disputes between them and solve and avoid wars. Again, going back to ancient Greece there are treaties between city States that submitted their disputes to arbitration. 
In more modern days the trend was set by the Jay Treaty which is the treaty between the US and Great Britain that solved the revolutionary war and that treaty set up arbitration committees to deal with both disputes between the States over border disputes and also disputes between Great Britain and American citizens who demanded certain claims. Both of those ended in effective dispute resolution and moved the relationships between the countries forward.

Kate Ritchie

David, many States, including Australia, have complained that international arbitration under bilateral investment treaties improperly restricts on their sovereignty. Would you agree with this statement?

David W. Rivkin

All treaties by definition infringe on international sovereignty to some extent because in any treaty a nation agrees to undertake certain obligations towards the other one. Investment treaties are a bargain between States to promote investment in those States. So part of the bargain is that the States give up part of that sovereignty in order to promote investment in their country and also to make it easier for their own citizens to invest in other countries.

For example, investment treaties protect investors from being treated differently from nationals. We know that it is easier for Governments to for example, put taxes or greater burdens on foreigners than on their own citizens and investment treaties protect them in that way.

So yes to a certain extent it does restrict sovereignty but it is usually for in an effective way. And there is always a difference between a domestic law and what might be legal under domestic law and what would be legal under international law for that particular country.

Kate Ritchie

And David how can the system of arbitration under bilateral investment treaties be improved?

David W. Rivkin

I think one key factor would be to increase the transparency and availability of third parties to participate in the process where national interests are at stake. The UNCITRAL working group has developed some very good rules that will increase transparency that will make filings public and that will allow proper interest groups to be able to participate and give their point of view to the tribunal. I think that will help tribunals balance the national needs with the particular rights of the investor under the treaties.

I also think that arbitrators in investment treaty disputes need to work on their timeliness. I understand the governments sometimes need longer to prepare in order to consult within the government, but still I think the timeframes given are too long and certainly it is taking arbitrators too long to issue their awards once the hearings are complete.

And I think in order for the treaty mechanism to work well it is important that in particular if there is a violation that the consequences follow much more quickly because it is easy for governments to take action and to believe that the next government will have to deal with the consequences.

Kate Ritchie, BRR Media

Doug, international commercial arbitration has also been criticised lately for not reflecting the needs of business. Would you agree with this criticism?

Doug Jones

To a degree I would. I think international commercial arbitration has tendered to become over-lawyered, and as a consequence fails sometimes to deliver speedy economical resolution dispute which is what business people expect from arbitration, distinguishing it from domestic court processes.

Kate Ritchie

Finally, how can the process of international arbitration be improved?

Doug Jones

Arbitration is a process that’s infinitely flexible. It can and should be designed to meet the needs of each dispute. Because every dispute is different in its character, methods of dispute resolution can be designed to suit the particular dispute. Too often unfortunately we see the same process applied to disputes of varying character and that is a great pity. I think that arbitrators and parties need to concentrate on what it is that’s in dispute and do only what is necessary to solve that dispute in the arbitration process.

Kate Ritchie

Well David and Doug thank you for some interesting insights. Thank you for joining me today.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.