Views
The U.S. Arbitration-Litigation Paradox
The U.S. Supreme Court is well-known for its liberal pro-arbitration policy. In The Arbitration-Litigation Paradox, forthcoming in the Vanderbilt Law Review, I argue that the U.S. Supreme Court’s supposedly pro-arbitration stance isn’t as pro-arbitration as it seems. This is because the Court’s hostility to litigation gets in the way of courts’ ability to support arbitration—especially international commercial arbitration.
This is the arbitration-litigation paradox in the United States: On one hand, the U.S. Supreme Court’s hostility to litigation seems to complement its pro-arbitration policy. Rising barriers to U.S. court access in general, and in particular in transnational cases (as I have explored elsewhere), seems consistent with a U.S. Supreme Court that embraces arbitration as an efficient method for enforcing disputes. Often, enforcement of arbitration clauses in these cases leads to closing off access to courts, as Myriam Gilles and others have documented.
But there’s a problem. As is perhaps obvious to experts, arbitration relies on courts—for enforcing arbitration agreements and awards, and for helping pending arbitration do what it needs to do. So closing off access to courts can close access to the litigation that supports arbitration. And indeed, recent Supreme Court cases narrowing U.S. courts’ personal jurisdiction over foreign defendants have been applied to bar arbitral award enforcement actions. Courts have also relied on forum non conveniens to dismiss award-enforcement actions.
That’s one way in which trends that limit litigation can have negative effects on the system of arbitration. But there’s another way that the Court’s hostility to litigation interacts with its pro-arbitration stance, and that’s in the arbitration cases themselves.
The Supreme Court has a busy arbitration docket, but rarely hears international commercial arbitration cases. Instead, it hears domestic arbitration cases in which it often states that the “essence” of arbitration is that it is speedy, inexpensive, individualized, and efficient—everything that litigation is not.
(As an aside, this description of the stark distinction between arbitration and litigation is widely stated, but it’s a caricature. The increasingly judicialized example of international commercial arbitration shows this is demonstrably false. As practiced today, international commercial arbitration can be neither fast, nor cheap, nor informal.)
But in the United States, arbitration law is mostly trans-substantive. That means that decisions involving consumer or employment contracts often apply equally to the next case involving insurance contracts or international commercial contracts.
In the paper, I argue that the Court’s tendency to focus on arbitration’s “essential” characteristics, and to enforce these artificial distinctions between arbitration and litigation, can be harmful for the next case involving international commercial arbitration. It could undermine the likelihood of enforcement of arbitration awards where the arbitral procedure resembled litigation or deviated from the Court’s vision of the “essential virtues” of arbitration.
To prevent this result, I argue that any revisions of the U.S. Federal Arbitration Act should pay special attention not only to fixing the rules about consumer and employment arbitration, but also to making sure that international commercial arbitration is properly supported. In the meantime, lower federal courts should pay no heed to the Supreme Court’s seeming devotion to enforcing false distinctions between arbitration and litigation, particularly in the international commercial context.
In 2018, the Dutch Supreme Court found a Spanish judgment applicable in the Netherlands, based on the Hague Convention on the International Protection of Adults. Minor detail: neither the Netherlands nor Spain is a party to this Convention.
Written by Dr. Anneloes Kuiper, Assistant Professor at Utrecht University, the Netherlands
In 2018, the Dutch Supreme Court found a Spanish judgment applicable in the Netherlands, based on the Hague Convention on the International Protection of Adults. Minor detail: neither the Netherlands nor Spain is a party to this Convention.
Applicant in this case filed legal claims before a Dutch court of first instance in 2012. In 2013, a Spanish Court put Applicant under ‘tutela’ and appointed her son (and applicant in appeal) as her ‘tutor’. Defendants claimed that, from that moment on, Applicant was incompetent to (further) appeal the case and that the tutor was not (timely) authorized by the Dutch courts to act on Applicant’s behalf. One of the questions before the Supreme Court was whether the decision by the Spanish Court must be acknowledged in the Netherlands.
In its judgment, the Dutch Supreme Court points out that the Convention was signed, but not ratified by the Netherlands. Nevertheless, article 10:115 in the Dutch Civil Code is (already) reserved for the application of the Convention. Furthermore, the Secretary of the Department of Justice has explained that the reasons for not ratifying the Convention are of a financial nature: execution of the Convention requires time and resources, while encouraging the ‘anticipatory application’ of the HCIPA seems to be working just as well. Because legislator and government seem to support the (anticipatory) application of the Convention, the Supreme Court does as well and, for the same reasons, has no objection to applying the Convention when the State whose ruling is under discussion is not a party to the treaty either (i.e. Spain).
This ‘anticipatory application’ was – although as such unknown in the Vienna Convention on the Law of Treaties – used before in the Netherlands. While in 1986 the Rome Convention was not yet into force, the Dutch Supreme Court applied article 4 Rome Convention in an anticipatory way to determine the applicable law in a French-Dutch purchase-agreement. In this case, the Supreme Court established two criteria for anticipatory application, presuming it concerns a multilateral treaty with the purpose of establishing uniform rules of international private law:
- No essential difference exists between the international treaty rule and the customary law that has been developed under Dutch law;
- the treaty is to be expected to come into force in the near future.
In 2018, the Supreme Court seems to follow these criteria. These criteria have pro’s and con’s, I’ll name one of each. The application of a signed international treaty is off course to be encouraged, and the Vienna Convention states that after signature, no actions should be taken that go against the subject and purpose of the treaty. Problem is, if every State applies a treaty ‘anticipatory’ in a way that is not too much different from its own national law – criterion 1 – the treaty will be applied in as many different ways as there are States party to it. Should it take some time before the treaty comes into force, there won’t be much ‘uniform rules’ left.
The decision ECLI:NL:HR:2018:147 (in Dutch) is available here.
The Netherlands Commercial Court holds its first hearing!
Written by Georgia Antonopoulou and Xandra Kramer, Erasmus University Rotterdam (PhD candidate and PI ERC consolidator project Building EU Civil Justice)
Only six weeks after its establishment, the Netherlands Commercial Court (NCC) held its first hearing today, 18 February 2019 (see our previous post on the creation of the NCC). The NCC’s maiden case Elavon Financial Services DAC v. IPS Holding B.V. and others was heard in summary proceedings and concerned an application for court permission to sell pledged shares (see here). The application was filed on 11 February and the NCC set the hearing date one week later, thereby demonstrating its commitment to offer a fast and efficient forum for international commercial disputes.
The parties’ contract entailed a choice of forum clause in favour of the court in Amsterdam. However, according to the new Article 30r (1) of the Dutch Code of Civil Procedure and Article 1.3.1. of the NCC Rules an action may be initiated in the NCC if the Amsterdam District Court has jurisdiction to hear the action and the parties have expressly agreed in writing to litigate in English before the NCC. Lacking an agreement in the initial contract, the parties in Elavon Financial Services DAC v. IPS Holding B.V. subsequently agreed by separate agreement to bring their case before the newly established chamber and thus to litigate in English, bearing the NCC’s much higher, when compared to the regular Dutch courts, fees. Unlike other international commercial courts which during their first years of functioning were ‘fed’ with cases transferred from other domestic courts or chambers, the fact that the parties in the present case directly chose the NCC is a positive sign for the court’s future case flow.
As we have reported on this blog before, the NCC is a specialized chamber of the Amsterdam District Court, established on 1 January 2019. It has jurisdiction in international civil and commercial disputes, on the basis of a choice of court agreement. The entire proceedings are in English, including the pronouncement of the judgment. Judges have been selected from the Netherlands on the basis of their extensive experience with international commercial cases and English language skills. The Netherlands Commercial Court of Appeal (NCCA) complements the NCC on appeal. Information on the NCC, a presentation of the court and the Rules of Procedure are available on the website of the Dutch judiciary. It advertises the court well, referring to “the reputation of the Dutch judiciary, which is ranked among the most efficient, reliable and transparent worldwide. And the Netherlands – and Amsterdam in particular – are a prime location for business, and a gateway to Europe.” Since a number of years, the Dutch civil justice system has been ranked no. 1 in the WJP Rule of Law Index.
In part triggered by the uncertainties of Brexit and the impact this may have on the enforcement of English judgments in Europe in particular, more and more EU Member States have established or are about to establish international commercial courts with a view to accommodating and attracting high-value commercial disputes (see also our previous posts here and here). Notable similar initiatives in Europe are the ‘Frankfurt Justice Initiative’ (for previous posts see here and here) and the Brussels International Business Court (see here). While international commercial courts are mushrooming in Europe, a proposal for a European Commercial Court has also come to the fore so as to effectively compete with similar courts outside Europe (see here and here).
News
Foreign law in the Draft Code of French Private International Law: New volume in French
Gustavo Cerqueira and Hugues Fulchiron have recently edited a new volume (in French) on the appliation of foreign law in the draft code of French private international law (Le droit étranger dans le projet de code de droit international privé – Connaissance et applicationdroit). They have kindly provided us with the following English summary:
On the occasion of the public consultation on the draft code of French private international law launched by the Ministry of Justice on 8 June 2022, the Société de législation comparée organized a debate in Paris on 13 September of the same year on the provisions relating to the knowledge and application of foreign law – Articles 13 and 14 of the draft.
Between consolidation of case law, methodological clarification, new procedural perspectives and recourse to institutional cooperation, the choices made by the drafters of the proposed Code offered a great opportunity for collective reflection, bringing together the key players in the field. This reflection was all the timelier given that these provisions were not given particular attention either in the explanatory memorandum to the draft code or in the commentaries on the draft code by academic writers.
The purpose of this book is therefore to bring to public debate the most salient issues relating to this often-neglected chapter of conflict of laws, while at the same time putting forward singular proposals to ensure that the content of foreign law in France is established as accurate as possible.
In recent years, the Société de législation comparée has taken an interest in the issue of understanding and applying foreign law. Through this new initiative, the Société works to enhance French private international law, in line with the goals set out in Article 1 of its Articles of Association.
Certificat de coutume: New volume in French
Gustavo Cerqueira, Nicolas Nord, and Cyril Nourissat have recently edited a new volume on the “Certificat de coutume – Pratiques en droit des affaires internationales” (in French). The editors have kindly provided us with an English translation of the blurb available on the publisher’s website:
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Seminar series Crossroads in Private International Law
The Centre for Private international Law of the University of Aberdeen’s Law School is continuing this year its series on Crossroads in Private International Law.
The aim of the series is to explore the intersection between Private International Law and substantive areas of law, with the outcome of featuring cutting edge interdisciplinary research carried out by the Centre members.
The format is hybrid, with presentations and room for discussion. Find out more and register for the individual events here; and sign up for selected seminars of for the entire series here.