International Arbitration Law Library

THE HEALTHY AWARD

CHALLENGE IN INTERNATIONALCOMMERCIAL ARBITRATION

Author

DR CHRISTOPH LIEBSCHERMBA (INSEAD) FCIArb

KLUWER LAW INTERNATIONALTHE HAGUE LONDON NEW YORK

Table of Contents

Preface xiiiAbbreviations xvi

CHAPTERI INTRODUCTION 11. Scope and Approach 12. Notion of arbitration 33. Types of arbitration 5

3.1 Ad hoc arbitration 53.2 Institutional arbitration 6

4. Domestic arbitration statutes 74.1 Austria 84.2 England 94.3 France 104.4 Germany 114.5 Switzerland 11

5. Multilateral Treaties 125.1 New York Convention 125.2 European Convention 12

6. UNCITRAL Model Law 15

CHAPTER II EUROPEAN LAW 211. Arbitration and EC Law 21

1.1 Preliminary ruling under art. 234 ECT 211.2 Brussels I and Lugano Convention 231.3 Rome Convention 251.4 European public policy 25

1.4.1 Notion of public policy 251.4.2 Primary versus secondary law 351.4.3 Horizontal effect 361.4.4 Supremacy and uniform application 371.4.5 Direct effect 391.4.6 Content 411.4.7 Internal Market 431.4.8 Examples 43

1.4.8.1 Article 81 ECT 43

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1.4.8.1.1 Types of behaviour 451.4.8.1.2 Horizontal versus vertical

restriction 461.4.8.1.3 Per se violations and rule of

reason 471.4.8.1.4 Block Exemptions 47

1.4.8.2 Harmonization Directives 481.4.8.2.1 6th VAT Directive 491.4.8.2.2 Directive on commercial

agents 491.4.8.3 Free movement of goods 51

1.4.9 Autonomy of the Member States 531.4.10 Extent of the review of the award 55

1.4.10.1 Prima facie test 551.4.10.2 Review of the facts 571.4.10.3 Equivalence test 591.4.10.4 Other tests 59

1.5 Conclusions 602. Arbitration and EHRC 61

2.1 Scope of art. 6 EHRC 612.2 Article 6 and arbitration in general 65

2.2.1 'Tribunal' 732.2.2 Direct horizontal effect 742.2.3 Court control 75

2.3 Waiver of art. 6 762.3.1 Arbitration agreement 762.3.2 Waiver by behaviour 79

2.4 Standards for the individual rights 802.4.1 Rights in court proceedings 81

2.4.1.1 Independent and impartial judges 812.4.1.1.1 General issues 822.4.1.1.2 Interest groups 822.4.1.1.3 Relationship with the parties 852.4.1.1.4 Previous involvement 862.4.1.1.5 Prejudicial opinion 882.4.1.1.6 Other situations 88

2.4.1.2 Right to be heard 902.4.1.2.1 General issues 902.4.1.2.2 Evidence issues 92

2.4.1.3 Oral hearing 962.4.1.4 Equal treatment 97

2.4.1.4.1 General issues 972.4.1.4.2 Witnesses 98

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2.4.1.4.3 Experts 992.4.1.5 Reasoned decision 992.4.1.6 Legal aid 1002.4.1.7 Assistance by the judge 1002.4.1.8 Judgement by default 101

2.4.2 Minimum standards for arbitration 1012.4.2.1 Arbitration agreement 1012.4.2.2 Arbitral tribunal 1042.4.2.3 Right to be heard 1072.4.2.4 Oral hearing 1092.4.2.5 Equal treatment 1092.4.2.6 Reasoned decision 1102.4.2.7 Assistance by the arbitral tribunal 1112.4.2.8 Default award 1112.4.2.9 Court control 111

2.5 Conclusions 1122.5.1 Arbitration agreement 1132.5.2 Arbitral tribunal 1132.5.3 Right to be heard 1132.5.4 Oral hearing 1142.5.5 Equal treatment 1142.5.6 Reasoned decision 1142.5.7 Assistance by the arbitral tribunal 1142.5.8 Default award 114

CHAPTERIII NOTION OF AWARD 1151. Austria 116

1.1 Arbitrators 1161.2 Form 1181.3 Content 119

2. England 1192.1 Arbitrators 1192.2 Form 1222.3 Content 123

3. France 1253.1 Arbitrators 1253.2 Form 1283.3 Content 129

4. Germany 1314.1 Arbitrators 1314.2 Form 1334.3 Content 133

5. Switzerland 134

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5.1 Arbitrators 1345.2 Form 1355.3 Content 135

6. Conclusions 1376.1 Arbitrators 1376.2 Form 1386.3 Content 139

CHAPTER IV CORRECTION/INTERPRETATION/AMENDMENT .1411. Austria 1412. England 1413. France 1434. Germany 1445. Switzerland 1456. Conclusions 146

CHAPTER V GROUNDS FOR CHALLENGE 1471. Introduction 147

1.1 Austria 1471.2 England 1481.3 France 1501.4 Germany 1511.5 Switzerland 152

2. Lack of an arbitration agreement 1522.1 Legal nature of the arbitration agreement 1532.2 Applicable law 154

2.2.1 The Rome Convention 1552.2.2 Austria 155

2.2.2.1 Capacity 1552.2.2.2 Arbitration agreement 155

2.2.3 England 1562.2.3.1 Capacity 1562.2.3.2 Arbitration agreement 156

2.2.4 France 1572.2.4.1 Capacity 1572.2.4.2 Arbitration agreement 158

2.2.5 Germany 1592.2.5.1 Capacity 1592.2.5.2 Arbitration agreement 159

2.2.6 Switzerland 1602.2.6.1 Capacity 1602.2.6.2 Arbitration agreement 161

2.3 Separability 161

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2.3.1 Austria 1612.3.2 England 1622.3.3 France 1632.3.4 Germany 1632.3.5 Switzerland 164

2.4 Capacity 1642.4.1 Austria 1642.4.2 England 1652.4.3 France 1662.4.4 Germany 1662.4.5 Switzerland 167

2.5 Arbitrability 1682.5.1 Austria 1682.5.2 England 1692.5.3 France 1702.5.4 Germany 1712.5.5 Switzerland 173

2.6 Form 1742.6.1 Austria 1752.6.2 England 1762.6.3 France 1772.6.4 Germany 1772.6.5 Switzerland 178

2.7 Content 1792.7.1 Austria 1792.7.2 England 1802.7.3 France 1812.7.4 Germany 1812.7.5 Switzerland 182

2.8 Incorporation by reference 1832.8.1 Austria 1832.8.2 England 1832.8.3 France 1862.8.4 Germany 1872.8.5 Switzerland 187

2.9 Interpretation 1882.9.1 Austria 1882.9.2 England 1902.9.3 France 1922.9.4 Germany 1942.9.5 Switzerland 196

2.10 Scope 1972.10.1 Austria 197

TABLE OF CONTENTS

2.10.2 England 1982.10.3 France 2002.10.4 Germany 2042.10.5 Switzerland 205

2.11 Representation 2072.11.1 Austria 2082.11.2 England 2082.11.3 France 2092.11.4 Germany 2102.11.5 Switzerland 211

2.12 Third parties 2112.12.1 Austria 216

2.12.1.1 Legal successors 2162.12.1.2 Guarantors 2162.12.1.3 Other third parties 217

2.12.2 England 2172.12.2.1 Legal successors 2172.12.2.2 Guarantors 2192.12.2.3 Other third parties 219

2.12.3 France 2212.12.3.1 Legal successors 2212.12.3.2 Guarantors 2222.12.3.3 Other third parties 223

2.12.4 Germany 2232.12.4.1 Legal successors 2232.12.4.2 Guarantors 2242.12.4.3 Other third parties 225

2.12.5 Switzerland 2262.12.5.1 Legal successors 2262.12.5.2 Guarantors 2272.12.5.3 Other third parties 227

2.13 Void and voidable agreements 2272.13.1 Austria 2282.13.2 England 2292.13.3 France 2302.13.4 Germany 2312.13.5 Switzerland 232

2.14 Termination and conditions 2322.14.1 Austria 232

2.14.1.1 Notice 2332.14.1.2 Consent 2332.14.1.3 Other reasons 235

2.14.2 England 235

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2.14.2.1 Notice 2352.14.2.2 Consent 2352.14.2.3 Other reasons 237

2.14.3 France 2372.14.3.1 Notice 2372.14.3.2 Consent 2372.14.3.3 Other reasons 238

2.14.4 Germany 2392.14.4.1 Notice 2392.14.4.2 Consent 2402.14.4.3 Other reasons 240

2.14.5 Switzerland 2412.14.5.1 Notice 2412.14.5.2 Consent 2422.14.5.3 Other reasons 242

3. Lack of due process 2433.1 Austria 243

3.1.1 Right to be heard 243.1.1 General rules 243.1.2 Evidence 245.1.3 Assistance by the arbitral tribunal 246

3.1.2 Equal treatment 246.2.1 Constitution of the arbitral tribunal 246

1.2.2 Proceedings 2473.2 England 247

3.2.1 Right to be heard 2483.2.1.1 General rules 2483.2.1.2 Evidence 2523.2.1.3 Assistance by the arbitral tribunal 253

3.2.2 Equal treatment 2543.2.2.1 Constitution of the arbitral tribunal 2543.2.2.2 Proceedings 254

3.3 France 2553.3.1 Right to be heard 256

3.3.1.1 General rules 2563.3.1.2 Evidence 2593.3.1.3 Assistance by the arbitral tribunal 260

3.3.2 Equal treatment 2603.3.2.1 Constitution of the arbitral tribunal 2613.3.2.2 Proceedings 262

3.4 Germany 2633.4.1 Right to be heard 263

3.4.1.1 General rules 263

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3.4.1.2 Evidence 2653.4.1.3 Assistance by the arbitral tribunal 266

3.4.2 Equal treatment 2673.4.2.1 Constitution of the arbitral tribunal 2673.4.2.2 Proceedings 267

3.5 Switzerland 2683.5.1 Right to be heard 268

3.5.1.1 General rules 2683.5.1.2 Evidence 2703.5.1.3 Assistance by the arbitral tribunal 272

3.5.2 Equal treatment 2723.5.2.1 Constitution of the arbitral tribunal 2723.5.2.2 Proceedings 273

4. Partiality and dependence 2734.1 Austria 2744.2 England 2764.3 France 2834.4 Germany 2874.5 Switzerland 291

5. Procedural irregularities 2955.1 Austria 2955.2 England 2965.3 France 3005.4 Germany 3035.5 Switzerland 304

6. Ultra petita 3056.1 Austria 3056.2 England 3066.3 France 3076.4 Germany 3086.5 Switzerland 309

7. Violation of public policy 3107.1 Austria 3107.2 England 3127.3 France 3157.4 Germany 3187.5 Switzerland 321

8. Criminal acts 3238.1 General issues 324

8.1.1 Austria 3248.1.2 England 3258.1.3 France 3268.1.4 Germany 328

TABLE OF CONTENTS XÜi

8.1.5 Switzerland 3308.2 Fraud by omission 331

8.2.1 Austria 3318.2.2 England 3318.2.3 France 3328.2.4 Germany 3338.2.5 Switzerland 333

9. News facts and evidence 3339.1 Austria 3339.2 England 3349.3 France 3359.4 Germany 3359.5 Switzerland 335

10. Conclusions 33610.1 General issues 33710.2 Lack of an arbitration agreement 337

10.2.1 Applicable law 33710.2.2 Separability 33810.2.3 Capacity 33810.2.4 Arbitrability 33910.2.5 Form 33910.2.6 Content 34010.2.7 Incorporation by reference 34010.2.8 Interpretation 34110.2.9 Scope 34110.2.10 Representation 34110.2.11 Third parties 34310.2.12 Void and voidable agreements 34310.2.13 Termination and conditions 343

10.3 Lack of due process 34310.3.1 Right to be heard 343

10.3.1.1 General rules 34310.3.1.2 Evidence 345

10.3.2 Equal treatment 34610.3.2.1 General rules 34610.3.2.2 Constitution of the arbitral tribunal 34610.3.2.3 Proceedings 346

10.4 Partiality and dependence 34710.4.1 Notions 34710.4.2 Standards for challenge 34810.4.3 General guidelines 34810.4.4 Party-appointed arbitrators 35010.4.5 Grounds which become known after the award .... 350

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10.5 Procedural irregularities 35010.5.1 General issues 35010.5.2 Rules applicable on the merits 351

10.6 Ultra petita 35210.7 Violation of public policy 352

10.7.1 General rules 35210.7.2 Examples 353

10.8 Criminal acts 35310.9 New facts and evidence 354

CHAPTER VI CHALLENGE PROCEDURE 3551. Austria 355

1.1 International jurisdiction 3551.2 Court organization 3561.3 Time limit 356

2. England 3572.1 International jurisdiction 3572.2 Court organization 3582.3 Time limit 359

3. France 3603.1 International jurisdiction 3603.2 Court organization 3613.3 Time limit 361

4. Germany 3624.1 International jurisdiction 3624.2 Court organization 3624.3 Time limit 363

5. Switzerland 3635.1 International jurisdiction 3635.2 Court organization 3635.3 Time limit 364

6. Conclusions 3646.1 International jurisdiction 3646.2 Court organization 3646.3 Time limit 365

CHAPTER VII WAIVER OF CHALLENGE AND CURE 367I. Austria 367

1.1 Arbitration agreement 3671.2 Proceedings 367

1.2.1 Cure of defects of the arbitration agreement 3671.2.2 Waiver 368

1.3 After the award 369

TABLE O F C O N T E N T S XV

2. England 3692.1 Arbitration agreement 3692.2 Proceedings 369

2.2.1 Cure of defects of the arbitration agreement 3692.2.2 Waiver 370

2.3 After the award 3713. France 371

3.1 Arbitration agreement 3713.2 Proceedings 372

3.2.1 Cure of defects of the arbitration agreement 3723.2.2 Waiver 372

3.3 After the award 3744. Germany 374

4.1 Arbitration agreement 3754.2 Proceedings 375

4.2.1 Cure of defects of the arbitration agreement 3754.2.2 Waiver 375

4.3 After the award 3765. Switzerland 377

5.1 Arbitration agreement 3775.2 Proceedings 377

5.2.1 Cure of defects of the arbitration agreement 3775.2.2 Waiver 378

5.3 After the award 3796. Conclusions 379

6.1 Arbitration agreement 3796.2 Proceedings 380

6.2.1 Cure of defects of the arbitration agreement 3806.2.2 Waiver 380

6.3 After the award 381

CHAPTER VIII RECOGNITION AND ENFORCEMENT 3831. General issues 383

1.1 Invalidated awards 3831.1.1 More favourable domestic rules 385

1.1.1.1 Austria 3851.1.1.2 England 3851.1.1.3 France 3851.1.1.4 Germany 3861.1.1.5 Switzerland 386

1.1.2 Discretionary power for the municipal judge 3871.1.3 Application of the European Convention 388

1.2 Domestic enforcement issues 389

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1.3 Estoppel and other limits to objections 3902. New York Convention 394

2.1 Lack of an arbitration agreement 3942.1.1 Form 394

2.1.1.1 Austria 3942.1.1.2 Germany 3942.1.1.3 Switzerland 395

2.1.2 Invalidity 3962.1.2.1 Austria 3962.1.2.2 England 3972.1.2.3 Germany 3972.1.2.4 Switzerland 398

2.1.3 Incorporation 3992.1.3.1 Austria 3992.1.3.2 England 3992.1.3.3 France 3992.1.3.4 Germany 4002.1.3.5 Switzerland 400

2.1.4 Scope 4012.1.5 Representation 4032.1.6 Waiver 404

2.2 Lack of due process 4042.2.1 General issues 404

2.2.1.1 England 4042.2.1.2 Germany 4042.2.1.3 Switzerland 407

2.2.2 Evidence 4082.2.3 Reasons 408

2.3 Irregular composition of the arbitral tribunal 4092.3.1 Germany 4092.3.2 Switzerland 410

2.4 Violation of procedural rules 4112.5 Ultra petita 412

2.5.1 England 4122.5.2 Germany 413

2.6 Award not (yet) binding 4132.6.1 England 4132.6.2 France 4142.6.3 Germany 4152.6.4 Switzerland 415

2.7 Lack of arbitrability 4162.8. Violation of public policy 417

2.8.1 Austria 417

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2.8.2 England 4172.8.3 France 4192.8.4 Germany 4202.8.5 Switzerland 422

3. European Convention 4233.1 Lack of an arbitration agreement 4233.2 Irregular composition of the arbitral tribunal 425

CHAPTER IX OUTLOOK 4271. The courts 427

1.1 Dispute requirement 4271.2 Incorporation 4281.3 Set-off 4291.4 Public policy 4321.5 International division of work 438

2. The legislator 4392.1 Applicable law 4392.2 Form 4402.3 Court organization 441

CHAPTER X ANNEX: TEXT OF STATUTES 4431. Austria 443

1.1 Statute 4431.2 Outline of the reform 4491.3 Draft text 451

2. England 4693. France 5194. Germany 5305. Switzerland 546

Table of cases 553Bibliography 587Index 615