Arbitration Is Without Borders, But Can It Be Without Courts? A Brief Insight into the Role of National Courts During Arbitral Proceedings (#1182)
Imagine this, two international companies signing a contract worth millions. One from Europe, the other from Asia. They do not want their future disputes to be decided by the national courts of either country. So, they agree on arbitration. They include a clause in their contract saying that any dispute between them will be settled through international arbitration.
Everything seems clear. They have chosen their own way to resolve disputes, away from national courts.
Years later, a dispute actually happens. Arbitration begins, but one party refuses to cooperate in appointing an arbitrator. At the same time, the other party discovers that its contractual partner is moving its assets somewhere else. It starts to worry that, by the time the arbitral tribunal issues its award, there may be nothing left to recover. And as if this is not enough, an important witness refuses to appear before the tribunal.
Now, something interesting happens. The parties who once agreed to stay away from national courts suddenly find themselves asking those very courts for help.
One needs the court to assist in appointing an arbitrator. Another needs urgent measures to protect its rights and assets. And the tribunal may need judicial assistance to obtain evidence that it cannot get by itself.
So, what happened to the idea of arbitration as an alternative to national courts? Did the parties not choose arbitration precisely to avoid going before national judges?
Well, perhaps this is not a contradiction at all.
We often speak about arbitration as an independent system, one that gives parties freedom, flexibility and the ability to resolve disputes across borders. But sometimes, I feel that we forget one important thing: arbitration does not exist on its own. It needs the support of national courts, even if it is designed to operate outside their ordinary jurisdiction.
This is where things become interesting. National courts can play a very important role in keeping arbitration on the right track. They may assist in the appointment of arbitrators, grant interim measures, help obtain evidence and even intervene when certain procedural problems arise.
But there is a difficult question here. How much assistance is enough? And when does assistance become interference?
After all, courts should help arbitration work, not take it over. They should protect the process without destroying the independence that made the parties choose arbitration in the first place.
Perhaps arbitration is indeed without borders, but can it really be without courts?
International arbitration is often seen as a system of justice that can stand on its own, away from the national courts. But is that really true? I do not think so. Its independence does not mean that it can work completely without the help of national courts.
This idea can be seen in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334[1]. The case shows how important it is to find the right balance between the courts and arbitral tribunals. Courts may be needed to support the arbitration and protect the process, but this does not mean that they should take over the role of the arbitrators. Each has its own job to do, and perhaps their relationship is a little like a relay race, where one takes the lead at a certain stage and then passes it to the other.
We can see this relationship more clearly when a party tries to frustrate the arbitration. Imagine a company transferring its assets to avoid paying a future award, or a witness refusing to provide important evidence. In such situations, the tribunal may not have all the powers needed to deal with the problem. This is where national courts can step in.
In Cetelem SA v Roust Holdings Ltd [2005] EWCA Civ 618, we saw that the judicial intervention can be necessary to protect the parties, and at the same time make sure that arbitration remains effective. This intervention should help the arbitral process, not replace it.
And this brings us to the real issue. It is not simply about whether arbitration needs national courts. Sometimes, it clearly does. The more difficult question is knowing when a court should step in, and when it should leave the matter to the arbitral tribunal. Where does legitimate assistance end and interference begin?
The Role of National Courts at the Beginning of Arbitration
An interesting thing about arbitration is that national courts may become involved even before the arbitral tribunal is formed. We might think about courts when there is a problem in the arbitration during the proceedings or during the enforcement of the award, but actually sometimes their role starts much earlier than that.
Imagine that two companies have agreed to settle their disputes through arbitration. A dispute arises but one of them decides to take the matter to a national court instead perhaps the party found that arbitration might be too expensive for him or his chances aren’t that good and thought if he can evade the whole arbitration process and go to national courts instead. What happens to the arbitration clause they both agreed to? Can one party simply ignore it because it no longer finds arbitration convenient?
This is when Article II(3) of the New York Convention 1958 comes to play. It explicitly require national courts, to refer the parties to arbitration if one of them requests it, unless the agreement is null and void, inoperative or incapable of being performed. In other words, the court should respect the parties agreement and not allow one of them to escape it simply by starting court proceedings.
I find this particularly important because an arbitration clause should not be treated as just another paragraph in a long commercial contract. It represents a choice made by the parties, and that choice should mean something when the dispute actually happens.
The role of courts is seen clearly in the landmark case of Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40[2]. where The court has emphasized the importance of respecting the parties intention to arbitrate and recognized the separability of the arbitration agreement from the main contract. This mean that if one party challenges the validity of the main contract this does not automatically mean that the arbitration agreement will fall with it. Otherwise, it would be very easy to avoid arbitration just by challenging the contract itself.
As respecting the arbitration agreement is not the only problem courts may face at this stage. Sometimes, the parties agree to arbitration, but one of them does everything possible to prevent it from starting.
So what happens if one party refused to appoint his arbitrator? Or what if the appointment procedure agreed upon by the parties simply fails? Shall the other party remain helpless and wait forever I do not think this would make much sense. An agreement to arbitrate should not give one party the power to stop arbitration whenever it wants.
Article 11 of the UNCITRAL Model Law recognises the possibility of court assistance in appointing arbitrators when the agreed procedure breaks down. Here, the court is not taking the place of the arbitral tribunal. It is simply helping to create the conditions necessary for arbitration to begin.
Now, there is another question that arises. Who decides whether the arbitral tribunal actually has jurisdiction over the dispute?
The answer can be found in Article 16[3] of the UNCITRAL Model Law which gives the arbitral tribunal the power to rule on its own jurisdiction. what we call competence-competence. This might seem quite straightforward: if the parties have chosen arbitration, then the arbitrators should be able to decide whether they have the authority to hear the dispute. But it is actually not that simple.
Because this power to decide on its own jurisdiction does not cancel the courts ability to examine the issue. A good example is Dallah Real Estate and Tourism Holding Company v Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46. We can see that although the award was brought before the English courts for recognition and enforcement but the Supreme Court examined whether Pakistan was actually bound by the arbitration agreement. It is clear that the Court was not simply expected to accept the tribunal’s conclusion on this matter.
And this raises a question that I find particularly interesting: if arbitrators can decide whether they have jurisdiction, but national courts can later examine the same issue, how do we draw the line between the two?
Perhaps this is exactly how the relationship should work. Arbitrators must be free to decide the disputes entrusted to them, but this freedom cannot mean that their authority has no legal limits.
What all these examples tell us is that national courts are not necessarily an obstacle to arbitration. Sometimes, they protect the parties’ agreement, sometimes they help the tribunal come into existence, and sometimes they make sure that the tribunal is exercising a jurisdiction that it actually has.
In fact, before arbitration can even take its first step, national courts may already have helped make that step possible.
National Courts During the Arbitral Proceedings:
Interim Measures: Can Arbitration Protect Itself?
Now, imagine that the arbitral tribunal has finally been formed. Does this mean that national courts can step aside and leave everything to the arbitrators? I wish it was that simple.
Imagine that one party starts moving its assets to another country, or even destroying important documents while the arbitration is still taking place. Should the other party just wait until the final award is issued? I do not think so. By that time, it might be too late, and even winning the arbitration may no longer mean very much.
Of course, arbitrators are not completely helpless in such situations. Article 17 of the UNCITRAL Model Law gives the tribunal the power to grant interim measures. These measures can be used to preserve assets, maintain the existing situation or prevent actions that may harm the arbitration. The 2006 amendments went even further by introducing preliminary orders under Article 17B, which may be issued without giving the other party prior notice, provided that certain conditions are met.
But there is something we should not forget. Having the power to issue an order is not the same as having the power to force someone to obey it. An arbitral tribunal is not a national court. It does not have the same authority to enforce its decisions, especially when the matter involves third parties or property that needs immediate protection.
So, what happens when a tribunal issues an interim measure and one party simply refuses to respect it? This is where we begin to see that arbitration, despite its independence, sometimes needs the help of national courts.
National Courts and Interim Relief: [4]
This brings us back to the role of national courts. What I find interesting is that the UNCITRAL Model Law does not consider asking a national court for interim relief as a rejection of arbitration. Article 9 makes this clear, and Article 17J also gives national courts the power to grant interim measures in support of arbitration.
But this raises another question: if both the tribunal and the national court can grant interim measures, which one should the parties approach?
I believe that it depends on the situation. Sometimes, the arbitral tribunal is the better choice because it already knows the dispute, has heard the parties’ arguments and understands what kind of protection may be needed. But in other situations, going to a national court may be the only effective option, especially when the matter requires powers that arbitrators simply do not have.
For me, the important point is that these two roles should complete each other, not compete with each other. A party should not use the possibility of going to court as an excuse to turn the arbitration into another court case. The purpose of judicial assistance is to protect the arbitration and help it continue, not to take its place.
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When Witnesses Refuse to Cooperate[5]
There is another issue that I find very interesting, and that is the taking of evidence.
So if an arbitral tribunal need to hear a witness but this witness refuses to attend the hearings what can the arbitral tribunal do especially it is only binding to its parties not any other third parties. same thing applies to documents held by a person or company that has nothing to do with the arbitration and refuses to provide them.
Arbitrators can ask parties to produce documents or request evidence. But arbitrators do not have the authority a national courts may have especially when it comes to forcing people outside the arbitration to cooperate.
This is why Article 27 of the UNCITRAL Model Law is important. It allows the arbitral tribunal, or a party with the tribunal’s approval, to ask a competent court for assistance in taking evidence. Depending on the applicable national law, the court may help summon witnesses, obtain documents or take other necessary steps.
I think this is one of the best examples of how national courts should support arbitration. The court does not decide what the evidence means or which party should win because of it. These matters remain within the tribunal’s responsibility. The court simply gives the tribunal the assistance and legal authority that it may not have by itself.
In simple words, the court helps the arbitrators get the evidence, but it does not tell them how to decide the case.
Documentary Disclosure and the Problem of Missing Evidence
The situation becomes even more complicated when we deal with documents. In many commercial disputes, the most important documents are not always in the hands of the parties. They may be held by a bank, a government authority or another company that has no direct connection with the arbitration.
Let us imagine that one party believes that a bank has certain documents that could help prove its case. The tribunal may agree that these documents are important, but can it simply order the bank to hand them over? In many situations, the answer is no, or at least not without the assistance of a national court.
This is where national courts may become necessary. They can help obtain or preserve documents according to their own procedural laws. However, I do not think that this means courts should become involved in every request for documentary disclosure. Their intervention should be limited to situations where their legal powers are actually needed.
I believe there is an important difference between helping a tribunal obtain evidence and taking control of the whole process of examining evidence. The first helps arbitration move forward, while the second may affect its independence.
Preserving the Status Quo: Preventing Arbitration from Becoming Meaningless[6]
Perhaps one of the worst things that could happen to a party is to win an arbitration and then discover that the award has become useless in practice.
Imagine a dispute about the ownership of a valuable property. While the arbitration is still taking place, one party sells that property to someone else. Or imagine a company moving all its assets to another country before the tribunal has even finished examining the dispute.
What is the benefit of winning the case if the situation has already changed and it is now very difficult to enforce the award?
This answers the question of why preserving status quo is important, as arbitral tribunals and national courts have a role in preventing actions that could cause serious harm before the final award is issued.
Although I personally do not believe that every request for interim relief should be accepted automatically. There must be a real reason for granting protection and the measures should be suitable and proportionate to the situation on hand. Because otherwise, this interim measures may put unfair pressure on the parties or obtain something that it has not yet proved to be deserved.
At the end of the day, interim measures should protect the result of arbitration, not decide or control the dispute before the arbitrators have had their chance to do so.
Parallel Proceedings: Can Courts Stop Litigation Against Arbitration?
parallel proceeding can be the most difficult situation and it rises when one party decides to start court proceedings in another country, even though it has already agreed to resolve the dispute through arbitration.
We have already discussed how national courts may refer parties to arbitration under the New York Convention. But what happens when one party starts proceedings before a foreign court and refuses to respect its arbitration agreement?
Should another national court be allowed to issue an anti-suit injunction and prevent that party from continuing the foreign proceedings? Or would this be too much interference with the authority of another country’s courts?
Honestly, I find this question difficult as there is a big difference between protecting someone’s right to arbitrate and interfering with the proceedings before a foreign court.
A great example is the case of AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2013] UKSC 35[7] In this case, the Supreme Court recognized that a court could grant an anti-suit injunction to protect a contractual right to arbitrate, even though no arbitration had actually started at that time.
This case is interesting because it shows how the right to arbitration may be protected even before the arbitral proceedings begin.
But this does not mean that anti-suit injunctions are accepted in every legal system. Their use remains a sensitive issue, especially in international arbitration, where different countries may have different views about the limits of their courts’ authority.
And here we return to the same question that has followed us throughout this discussion: when should national courts stop interfering?
I believe that national courts have an important role during arbitration. Sometimes, their assistance is not just useful but necessary. However, we must always remember that there is a difference between protecting arbitration and controlling it.
For me, the real purpose of judicial intervention should be to help arbitration achieve its purpose, not to make it dependent on national courts. If courts start replacing the tribunal’s decisions instead of supporting them, then we should seriously ask ourselves whether they are still helping arbitration or slowly taking its place.
To conclude, perhaps the idea of arbitration existing completely without national courts sounds very attractive. After all, one of the main reasons why parties choose arbitration is to escape traditional litigation and enjoy a more flexible, independent and private way of resolving their disputes. But can arbitration really exist in complete isolation from national courts? Or is this independence nothing more than an illusion?
Throughout this article, we have seen that national courts are not necessarily the enemies of arbitration. They can enforce arbitration agreements, help in establishing arbitral tribunals, examine jurisdictional questions, grant interim measures, preserve evidence and prevent parties from destroying the arbitral process. Sometimes, without such assistance, arbitration may become nothing more than an expensive journey ending with an award that nobody can effectively enforce.
However, there is another side to this story. The same judicial assistance that protects arbitration may also become a threat to it. A court that intervenes too aggressively may destroy the very autonomy that makes arbitration attractive in the first place. Interim measures, for example, should not become an easy way to obtain relief that a party has not yet proved it deserves. Nor should judicial examination of jurisdiction become an opportunity to question every decision taken by the arbitral tribunal.
So the real questions here are whether national courts are allowed to intervene?, and if so Are the arbitrators really independent? and what are the limitations of their powers?. And if the courts can not intervene then who will protect arbitration when one party deliberately tries to hinder?
I believe the real problem is not the judicial intervention itself, but the failure to understand where its proper limits should lie. Arbitration does not need courts competing with arbitrators, but neither does it need courts that simply disappear. What it needs is judicial assistance that knows when to act and, perhaps more importantly, when to step back. After all arbitration is just a mere contract between two parties giving powers to normal people to rule over them, arbitrators themselves has no real authorities or powers and that’s why the courts role is essential for the arbitral process.
In the end, arbitration may be without borders, but it cannot be without courts. Its independence does not necessarily mean freedom from judicial involvement; it means freedom from unnecessary judicial interference.
And perhaps this is the real question we should ask when examining the role of national courts: Did their intervention make arbitration stronger, or did it slowly turn arbitration into another form of litigation?
Because the real success of judicial assistance is not measured by how often courts intervene, but by whether their intervention protects the arbitral process without taking away its soul.MEEESS
[1] Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 (HL), particularly 357–358 (Lord Mustill)
[2] In Fiona Trust v Privalov [2007] UKHL 40, the dispute concerned allegations that contracts had been obtained through bribery, raising the question whether the arbitration clauses could still be relied upon.
The House of Lords held that arbitration agreements are separable from the main contract, meaning that allegations of invalidity of the contract do not automatically invalidate its arbitration clause.
The Court also stressed that commercial parties are generally presumed to intend one-stop arbitration for disputes arising from their relationship, unless they clearly indicate otherwise.
[3] UNCITRAL Model Law on International Commercial Arbitration 1985 (as amended in 2006), art 16(1).
[4] Nigel Blackaby, Constantine Partasides, Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration (5th edn, Oxford University), ch 7, “The Role of National Courts During the Proceedings”.
[5] Nigel Blackaby, Constantine Partasides, Alan Redfern and Martin Hunter, Redfern and Hunter on International Arbitration (5th edn, Oxford University), ch 7, p.451–453
[6] See UNCITRAL Model Law Article 17(2)
[7] The case concerned a London-seated ICC arbitration clause in a concession agreement relating to a hydroelectric power plant in Kazakhstan. The Supreme Court upheld the English court’s power to restrain foreign proceedings brought in breach of the arbitration agreement, even though no arbitration had commenced.
