A New Lex Mercatoria - KLRCA Conference 2014, PaulJHayes ...€¦ · •Lex( mercatoria,# or,# the#...

A New Lex Mercatoria?

Resolving The Tension Between Confiden3ality and Transparency in Interna3onal Commercial Arbitra3on

•  In our anarchical world, peaceful co-‐existence and rela6ons between states and other actors in the interna6onal space depends upon ‘order’ (informed by natural expecta6on and predictability), achieved either through mutual co-‐opera6on amongst a society of states (ie. conven6ons), or the use of force (ie. war) [Bull, ‘Anarchical Society’, 1977, 13, 19-‐20]. Such can be illustrated by the symbio6c rela6onship between trade and security in interna6onal poli6cs.

•  Within a state, governments: make and adapt rules (reflec6ng prevailing social norms); communicate the rules to those bound by them; facilitate the interpreta6on of rules (through the judiciary); and, enforce such rules. [Bull, ‘Anarchical Society’, 1977, 55-‐56]. In the anarchical interna6onal space, there is no overarching system of global governance – interna6onal commercial norms are peacefully upheld via interna6onal conven6ons, which facilitate orderly commercial rela6ons between individual and corporate cons6tuents of states.

•  The New York Conven3on 1958, plays a crucial role in maintaining ‘order’ amongst the mul6tude of (commercial) actors, in a anarchical world.

PAUL J. HAYES BARRISTER & ARBITRATOR

I. Interna7onal Commercial Arbitra7on in an Anarchical World

•  Lex mercatoria, or, the ‘law of merchant’ (ie. transna6onal commercial norms informed by custom, rather than state law) has evolved considerably since the middle ages, (when cross-‐border trade disputes were determined by merchant courts ex aequo et bono), to the point where: interna6onal commercial norms are now recognised in the form of interna6onal conven6ons and voluntary codes (ie. Conven6on on Contracts for the Interna6onal Sale of Goods 1980; UNIDROIT Principles of Interna6onal and Commercial Law 2010); interna6onal commercial disputes are increasingly being determined by private arbitra6on (New York Conven6on 1958); and, a new interna6onal procedural law is emerging for the determina6on of commercial disputes (ie. UNCITRAL Model Rules 2010; IBA Rules on the Taking of Evidence in Interna6onal Arbitra6on 2010; UNCITRAL Rules on Transparency in Treaty-‐based Investor-‐State Arbitra6ons, 2014).

•  Recent ICC a]empts to encourage par6es to interna6onal commercial contracts to subscribe to modern lex mercatoria as governing law (rather than state law) have so far not been embraced by the interna6onal business community [Cuniber6, (2014) 52 Colum J Transnat’l L 370, 425-‐434]. Cf. Hillas v Arcos implied terms [(1932) 147 LT 503].


II. The Evolu7on of ‘Lex Mercatoria’

•  It is a well se]led proposi6on of both common law and civil law jurisprudence that society is be]er served where its rules are consistent, in that they can be iden6fied with certainty and their applica6on is capable of being predicted. [Bowring (Bentham), ‘The Works of Jeremy Bentham’ (Principles of the Civil Code), 1843, Pt 1, Ch17].

•  Func6onal and beneficial interna6onal commerce is facilitated by a consistent legal regime. Interna6onal sports law provides a valuable compara6ve insight: The ra6onale for requiring clarity of rules extends beyond enabling athletes in given cases to determine their conduct in such cases by reference to understandable rules. As argued by the Appellants at the hearing, clarity and predictability are required so that the en6re sport community are informed of the norma6ve system in which they live, work and compete, which requires at the very least that they be able to understand the meaning of rules and the circumstances in which those rules apply. [United States Olympic CommiRee and Others v Interna6onal Olympic CommiRee and Another CAS 2004/A/725, Award 20 July 2005, [73]]

•  In an anarchical world, interna6onal commercial legal consistency serves not only the economic interests of the global community, but also socly contributes to its security.


III. Consistency of Interna7onal Commercial Law: A ‘Good Thing’!

•  For many par6es, the principal reason for choosing arbitra6on as a preferred means of dispute resolu6on, is the confiden6al nature of the process.

•  No absolute uniform rule on confiden6ality. Different na6onal laws, arbitra6on rules, and contractual terms = different confiden6ality posi6ons for each arbitra6on.

•  England: Arbitra6on confiden6al due to an implied obliga6on arising from the nature of the arbitra6on itself, unless par6es agree, or court orders otherwise. [EmmoR v Michael Wilson & Partners Ltd [2008] EWCA Civ 184, [81]. Cf. Home Office v Harman [1983] AC 280].

•  Australia: Although arbitra6on is private (in camera), in the absence of any express contractual term as to confiden6ality, the arbitra6on process itself does not automa6cally impose upon the par6es any duty of confidence (with respect to what transpires in the arbitra6on). [Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10, 26-‐27, 41-‐42. Cf. Rinehart v Welker [2011] NSWCA 403, [41], [47]].

•  Despite the private or confiden6al nature of arbitra6on, details of the arbitral proceedings can s6ll leak into the public arena via: enforcement or supervision applica6ons to the court; the proper use of subpoenas in collateral proceedings; ‘market’ informa6on (public companies); etc.


IV. Arbitral Confiden7ality: A Legal Fic7on?

•  The ques6on to what extent should interna6onal commercial arbitra6on proceedings be kept confiden6al remains a vexed one.

•  The formula6on of an appropriate answer depends on balancing the interests of party autonomy (confiden6ality) and public interest (transparency).

•  The private character of arbitra6on was observed by Mason CJ in Plowman, to be ‘something that inheres the subject ma]er of the agreement to submit disputes to arbitra6on’ and that ‘the efficacy of a private arbitra6on will be .. defeated, if proceedings in arbitra6on are made public by the disclosure of documents ..’.

•  However, the private interests of those en66es in the global business community (ocen aided in their interna6onal business undertakings through the agency of their respec6ve host states), exercising their liberal choice to resolve their disputes through ‘confiden6al’ arbitra6on as a consequence of party autonomy, ought be considered in comparison to the public interest of the global community as a whole and whether or not such broader interest, when viewed through the lens of interna6onal ‘order’, is be]er served by a more transparent corpus, and process, of interna6onal commercial law (ie. predictability and consistency), that that which presently exists.


V. The Tension Between Confiden7ality and Transparency

•  Publica6on of interna6onal arbitral awards is not a new idea. As early as 1982, Julian Lew QC iden6fied the advantages of legal certainty and predictability, which are encouraged by publica6on of arbitral awards: The publica6on of arbitra6on awards would […] iden6fy the real advantages of arbitra6on: specialist and expert arbitrators opera6ng on the interna6onal level. The development of an arbitral case law would give to arbitra6on a greater certainty than that presently exis6ng with respect to the probable aZtude of the arbitrators, and would facilitate the commercial world’s knowledge and acceptance of lex mercatoria. This would almost certainly obviate many recurring problems presented to arbitrators, and would influence the nego6a6ng aZtudes and commercial decisions of businessmen. Above all, the systema6c publica6on of arbitra6on awards would show that not only is arbitra6on an alterna6ve to na6onal courts as a system of dispute seRlement, but it would prove conclusively that arbitra6on is the most appropriate forum in which to resolve disputes arising out of interna6onal commerce.

[Sanders (Lew), ‘The Art of Arbitra6on’, 1982, 232, referred to in Malatesta and Sali (Mourre), ‘The Rise of Transparency in Interna6onal Arbitra6on’, 2013, 53-‐54].


VI. The Case for Publica7on of Interna7onal Arbitral Awards

•  ‘Semi-‐Private Arbitra7on’ •  The Court of Arbitra6on for Sport (CAS) (determina6on of interna6onal spor6ng

disputes; jurisdic6on founded in contract; Awards enforceable under the New York Conven6on). Private Hearing, public award, unless the par6es specifically agree otherwise. [CAS Code of Sports-‐related Arbitra6on, r43]. 2014, 30th anniversary of CAS – CAS jurisprudence has achieved greater consistency of applica6on of ‘sports laws’, or lex spor6va (ie. doping, integrity, eligibility, selec6on, ‘game rule’, conduct, etc) and assisted all par6cipants in interna6onal sport to be be]er ‘informed of the norma6ve system in which they live, work and compete’.

•  The Family Court of Australia (FamCA). Public hearings, however statutory restric6on prevents iden6fica6on of par6es or witnesses. [Family Law Act 1975, s121]. Decisions of the FamCA are reported publicly, using an ‘alias’ protocol to protect the names of par6es and witnesses. Poten6al also exists for redac6on of sensi6ve details.

•  ICSID / WIPO: Publica6on of Awards. •  Cf. Rules of the Milan Chamber of Commerce (Arbitra6on award confiden6al, except

where award has to be used to protect one’s rights).


VII. Releasing the Tension: A Solu7on?

•  The advantages of greater transparency through ‘semi-‐private arbitra6on’ not only promotes legal consistency, but also encourages greater propriety and accountability amongst arbitrators, thereby enhancing confidence in ‘interna6onal commercial jus6ce’ throughout the global community.

•  UNCITRAL: An interna6onal conven6on to accommodate ‘semi-‐private arbitra6on’? Possible amendment of the UNCITRAL Model Law (or Model Rules), with an ‘opt out’ provision?

•  Interna6onal commerce does not exist in a vacuum. Nor does its rules. To a large degree, for most actors, par6cipa6on in the interna6onal commercial world depends upon the agency of state. Therefore, individual freedoms (including the right to exercise party autonomy in interna6onal arbitra6on), ought always be considered in conjunc6on with those other broader prevailing interests in the global community (ie. state interest and the interests of the ‘society of states’), in which such actors conduct their commercial undertakings.

•  Rather than being seen as a call for a new world order, by more transparently communica6ng, interpre6ng and enforcing the new lex mercatoria, ‘semi-‐private arbitra6on’ could be but one catalyst for ‘order’ in a new world.


VIII. A New ‘Lex Mercatoria’

PAUL J. HAYES

BARRISTER & ARBITRATOR

LLB (QUT), MSt (Cantab), DipICArb (CIArb, London), FCIArb

Barrister-at-Law, The Honourable Society of Lincoln’s Inn, High Court of Australia, Federal Court of Australia,

and the Supreme Courts of Queensland, New South Wales and Victoria.

39 Essex Street, London, WC2R 3AT UNITED KINGDOM

Chambers: +44 (0)20 7832 1111 Mobile: +61 (0)411 194 842

Email: [email protected]

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