The delocalization of arbitration

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The Delocalization Theory in International Commercial Arbitrations
Introduction
International commercial arbitrations are common in most global business due to the contractual relations that have extended to the international economic platforms. As such, disputes arise among sovereign states and private corporations from different foreign companies. The international business interactions result from the increase in international competitions, globalization, the galloping trends in the technological innovations, and the economic growth of the developing countries globally. International commercial arbitrations are characterized by being governed by either national laws in the State or those in the seat of arbitration (Barry 299). The delocalization of international commercial arbitrations begins when the involved parties agree to forgo the conventional court system. The delocalization of international commercial arbitrations is based on the idea that the arbitration process is independent of barriers that are set by laws (Bhatia, Christopher, and Maurizio 45). The delocalization of international commercial arbitrations gives party autonomy more leverage as the basic principle for arbitration processes. The arbitration agreement, therefore, gives the warring parties the freedom to choose the entities to adjudicate over their case.
International arbitrations entail different jurisdictions such as different residences for the parties, different places where the contracts were performed, and arbitrators.

Delocalization, as such, was launched from the pad that exposes the highly entrenched national laws that result in the prejudicing of different parties. The parties that participate in ICAs give more predominance to their convenience during the hearing as compared to the national laws where the arbitrations take place. As such, the advocates of delocalized arbitration accept that arbitrations, even if delocalized, can never be totally autonomous.
International arbitrations are unique forms of resolving disputes. However, traditionalists have over the years failed to understand that those who advocate for delocalization neither condemn nor alienate the country’s laws in totality. Rather, delocalizationists campaign for a wider spectrum for discretion that can only exist in the power of arbitrators instead of being sticking to the seat applied for a given arbitration procedure. Delocalizationists call for the arbitration separation from the seat of the local legal system and consequently attaching it to the global community that has distinct norms and policies. In that manner, delocalization is floated in a transnational firmament.
Delocalizing arbitration gets approval through the sense of having independent arbitration in all the restrictions that have been put in place by the laws of the arbitration seat, although the argument does not apply entirely. The concept effectively reduces the avenues in which the national courts are involved. Delocalized arbitration has been misinterpreted giving an implication that it is a way to escape from the seat of the national courts. In the real sense, delocalized arbitration brings out the essence of not having to apply any restrictions and as a result liberating the arbitration process from the lex loci arbitri constraints.
The different national laws and international laws that are related to ICA have continually provided recognition and made it possible for the implementation of the lex mercatoria based awards. Notably, this is one of the trends that has continually gained momentum. Between the year 1941 and 1949, the theory of localization was accepted in different settings. The theory posited that there should be a comprehensive application of the law by all arbitrators on laws regarding the arbitration seat. Moreover, the theory highly favored the different state territories giving them the ultimate jurisdiction over different commercial issues.
The delocalization of ICAs involves the release from the constraints of the procedural laws instituted in the place of arbitration. Delocalization of ICAs, therefore, ensures freedom from the national jurisdiction despite location of arbitration. Despite many traditionalists rejecting the delocalization efforts for arbitration branding it as dangerous, many commentators have channeled in their support. Even though not many judicial decisions have been made for the delocalization phenomenon, many judgments have been made with the aim of equipping the delocalization efforts with enough power to progress its debate. Different jurisdictions have fully embraced delocalization and enforced the creation of annulled awards.
The Delocalization Theory
Background
There have been numerous efforts to harmonize the law and effect the practice of international commercial arbitration. Some of the instruments that have been used include the New York Convention on Arbitral Awards Enforcement and Recognition and the Geneva Treaties. All the members of the global community have accepted that ICAs are regulated by state laws where the enforcement is to be implemented. Arbitrations only begin when the involved parties come to an agreement to use them as alternatives to the conventional courts in settling disputes. The burdens that the national laws imposed on ICAs resulted in the uprising of the delocalization. Moreover, the aims of each party taking part in the arbitration to have minimized approaches that have a court structure are hastened if some parties involves the court system. When this happens during the arbitration process, it hinders the smooth arbitration processes.
Delocalized arbitration is born as a private justice when two warring parties are willing to settle their disputes out of court. The disputes are usually limited the commercial nature. Delocalized arbitration terms allow the involved parties to freely agree to arbitration, choose the place for the arbitration process, design the procedures to be followed, choose the people to conduct the arbitrations as well as select the laws that are substantive to merit their case. Delocalized arbitration also allows that the parties be given an award to decide the resolution to their disputes. Delocalized arbitration is an alternative of the dispute resolutions that existed in the national and domestic arbitrations for a long time. Domestic arbitration was conducted under the jurisdiction of a given nation with the municipal laws governing and overseeing the arbitration process. However, because of the continued growth of the global trading patterns, the international commercial disputes became complicated. As such, the differences in the international dimensions as well as the conflicts of the laws of the state became a barrier to arbitrations resulting in the need to conduct delocalized arbitrations.
Delocalization theory, in essence, ensures that international commercial arbitrations are free from the limitations and confines of the national laws. It calls for the elimination of the governmental influences apart from when the arbitral awards are being enforced. However, delocalization of international commercial arbitrations is criticized for being totally unrealistic in its attempts to place the international commercial arbitration processes in a legal vacuum.
Delocalized arbitrations are usually consensual, and as such, the form and type of the arbitration agreement govern the entire arbitration process. On the other hand, arbitrators do not act in the capacity of judges or agents of any governments. In any case, they are agreed upon by the two parties. Arbitration processes, unlike the court systems, are autonomous, flexible, and totally flexible making it more preferred by foreign parties who have not identified with the judicial system of the other country (Lecuyer-Thieffry and Patrick 603).
Delocalization results in the harmonization of the international and domestic laws creating theoretically based foundations and distinct arbitration approaches. Some parties may insist that all national laws where the arbitration is to be conducted be used in governing the commercial arbitrations as explained in the seat theory. Other parties may insist that the international commercial arbitration is totally detached from the national laws in which the proceedings take place as explained in the delocalization theory. However, for the delocalized arbitrations to take place, it is important that there be an autonomous approach that creates a single control point. This calls for the arbitral awarding instead of dual system of control. Consequently, any of the parties from any part of the world would be available for the international commercial arbitration process since the process would be delocalized, expatriate, transnational, supra-national, or even a-national. Moreover, the process of a floating arbitration would result in a floating award.
There have been delocalization trends that seek to apply the national law ultimately. Delocalized arbitration has different permutations that include:
Utilizing the state conflict laws that could have resulted in the jurisdiction of a given case.
Utilizing the comparative and cumulative differences in the law system that looks into all the systems that are connected to the dispute.
Implements the international rules of conflict or the international law general principles.
Directly incorporates the applicable law without having to consider the conflicting laws.
Despite the available permutations in the delocalization trends, the delocalization issue remains unsettled due to people holding on to the views on traditional conflict regulation laws arguing that the arbitrators must have a point of references such as particular legal systems. Nevertheless, the delocalization efforts for ICA are continually being accepted. For instance, the New York Convention dealing with the enforcement and recognition of the foreign arbitral highly recommended the use of municipal laws while contracting parties, validating the arbitral awards, as well as using the procedural law while moderating arbitration efforts (Bělohlávek 273). The delocalization theory has attractive perspectives for both the parties involved in a conflict as well as the arbitrators. It often offers an arbitration place that is fairly selected to allow neutrality for both parties.
All the arbitrations are subjected to the state laws limiting private individuals from participating and acting on other levels apart from the set municipal laws. As such, private practitioners must confer all their power and rights from the laws in the municipal system that could result in lex fori depending on preset conveniences. The supporters for delocalization of the processes of arbitration aim at benefiting from the conveniences attached to choosing platforms for arbitration or be governed by the local laws of the place chosen for arbitration. Other supporters of delocalized arbitration are motivated by the use of seat theory that is archaic and outdated regarding international commercialization of arbitrations. However, the opponents to delocalization of arbitration claim that the use of arbitration within any country must be aligned with the national laws (Frick 39). Other critics of delocalized arbitration claim that the lack of lex arbitral would result in voids such as the possible requirements to freeze orders resulting in an interplay with lex arbitri.
Characteristics of the Delocalization
Delocalization of international commercial arbitration has become the new language in the commercial society. Some of the elements that characterize delocalization include speed and flexibility, neutrality, confidentiality, expertise, and enforcement.
Flexibility and Speed
ICA delocalization is considered to be a quicker, less formal, and more flexible process compared to litigation. Delocalization offers more freedom for the parties involved in the tribunal due to the provisions in the arbitration agreements, the rules involved in taking testimonies, evidential matters, as well as control of the employed procedures. The parties are also allowed to choose the preferred arbitrators, the language that will be used in the proceedings, as well as the degree of procedural formality. As such, the delocalization laws can regulate the intervention by the local courts to avail more flexibility to the parties involved in the arbitration. Delocalization respects flexibility and perceives the conciliation opportunities as paramount. The resolution procedures ensure that all processes are handled informally to ensure that business relationship continues.
Neutrality
Neutrality also characterizes delocalization. International commercial disputes are driven by the international revolution development that calls for the procedural and substantive fairness of the foreign legal system. Parties always prefer to have a neutral environment due to the minefield uncertainties in the laws of the foreign land as well as the bias that rises in the foreign courts. The neutral alternative is effectively provided by the delocalization of international arbitration since the parties involved are never willing to litigate the jurisdiction of their counterparts.
Confidentiality and Expertise
Delocalization is also characterized by privacy since confidential protection is needed in the resolution of most disputes that arise in businesses. The parties involved always wish to maintain confidentiality in the chemical formulas, marketing strategies, financial data, technologies, new product information, and trade computations. Most lawyers involved in arbitration are always concerned with fairness both procedurally and substantively as they approach foreign jurisdiction when handling matters on arbitration. As such, all the hearings that are handled in closed tribunals and the procedures that appreciate evidence confidentiality are more preferred. On the other hand, expertise is one of the characteristics that is valued in the ICA delocalization. Delocalization emphasizes that the arbitrators are chosen on the basis of their technical experience as preferred by the arbitral institutions and the parties involved in the arbitral process. With experts handling the arbitration procedures, the quality of decision-making processes in the arbitration cases is enhanced.
Types of Delocalization
There is a notion that the parties involved in arbitration are the owners of the arbitration. Type of party’s dispute decides the type of arbitration to be used. Depending on the dispute, parties have the moral right to choose the type of delocalized arbitration and arbitrators they want. There are four types of delocalized arbitrations which include; Statutory Delocalized Arbitration, Institutional Delocalized Arbitration, Contractual Delocalized Arbitrations, and Ad-hoc Delocalized Arbitrations.
Ad-hoc Delocalized Arbitration
Ad-hoc delocalized arbitration is where the parties taking part choose the procedures to follow during the arbitration process. The choices to be made include; language to be used during the arbitration process, the arbitration seat, how many arbitrators are needed for that arbitration process. If the parties are involved not reach an agreement on the arbitrators, the Chief Justice of the High Court can appoint the arbitrators for domestic arbitration or the Hon’ble Apex Court for international arbitration. Arbitrators’ fees are agreed upon between the arbitrators and the parties. For Ad-hoc, parties are not held to follow the rules of arbitral institutions rather have the opportunity to change or have their arbitral clauses and be bound to them. Parties to the dispute have the chance to adopt other institutions arbitral rules without referring to the arbitral institution.
There are several advantages of Ad-hoc. For instance, should the parties involved in the dispute be cooperative, Ad-hoc is considered very flexible? This is because the parties involved get to decide the procedure and rules to be followed during the conflict resolution. For Ad-hoc, the arbitral awards are not reviewed by arbitral institutions. Additionally, Ad-hoc arbitration is the most cost effective. Administrative costs are low, parties involved in the dispute only need to pay for attorneys and arbitrators. Ad-hoc is quite good for parties who are not economically sound. Also, Ad-hoc is the best for small or big disputes for it is meant to cater to the party’s needs.
Institutional Delocalized Arbitration
Institutional arbitration involves an arbitral institute being formed to address the arbitration dispute. The parties present their dispute to the institution where they are governed by the Institutes’ procedures and rules. Each arbitration institute has its set of procedures and rules which they provide to the disputing parties. Some of the arbitral institutes include DIFC, ICC, and much more (Wood 402). Most contracts between parties contain clauses which obligate a certain institution as the administrator.
There are several advantages of institutional arbitration. For instance, time wastage is minimized since parties don’t formulate rules and procedures since the arbitration institutes have established procedures and rules. Additionally, arbitral awards are delivered in an effective way since most arbitrators are expertise in required fields. Through this, it’s quite hard for cases to be thrown out by courts due to incompetence. Also, if the arbitrators are not able to solve the case, substitute arbitrators take over to continue with the arbitration.
Contractual Delocalized Arbitration
Contractual arbitration is enforcement of the award arbitration between parties to an agreement. Contractual Arbitrations are not automatically enforceable particularly to parties who don’t comply with the arbitration requirements. In such cases, the other party may challenge the petition in court to grant the award or better still dismiss the award. An attorney is important since he would fully advise the party involved in the dispute thereby making them understand their responsibilities and rights
Statutory Delocalized Arbitration
Statutory arbitration orders in less detail by a statute commonly referred to as an arbitration statute. Most laws follow the same steps to get along with the statute. Most sections of the statute are integrated and as such don’t work as different provisions. Statutory arbitration has more formalities than other arbitral processes (Wood 402). For authenticity, the agreements used in the process of arbitration must be written for it to qualify under statutes whereas, in other jurisdictions, provision of further formalities is mandatory. Under other statutes, the award and agreement must be filed in court. Petitions in court, correction, or modifications make the statutory award impeachable or enforceable. Statutory arbitration is based on the voluntary decision of the parties’ participation in arbitration.
Controversy Around the Delocalization
Advocates or Proponents for the Delocalization
International commercialized arbitrations have taken up a greater significance in most corporations both nationally and internationally. Most law organizations, international institutions, and communities have turned to arbitration. The advocates who favor delocalization base their arguments on the claim that the process is stateless. Their arguments also posit that the theory of international arbitration is exempted from the local laws in the platforms of arbitration occurrence. As such, both parties are getting the opportunity to choose the country in which they have no business interests making it convenient for all the parties involved in the arbitration. The proponents for delocalization feel that delocalization removes all the peculiarities that result from the legal system. With the peculiarities of the court system removed, the effectiveness of the arbitration system enhanced and the parties involved get justified results. The advocates for the delocalization of arbitration also support it because the state is absolved from any concern about the dispute between any parties who have no connection to the state. They also support delocalization of international commercial arbitration because it is self-regulating with no court interferences in the arbitration process.
The supporters of delocalization also state that domestic laws are inflexible and inadequate to harbor arbitration processes between parties from different nations. Surveys show that there exist disparities in the arbitration laws regarding both individual solutions and provisions to the parties and refinement and development of arbitration. Without the ICA delocalization, the arbitration processes based on the seat theory would be founded on outdated laws most of which date back to the nineteenth century. Such outdated laws equate the court litigation with the arbitration processes (Chukwumerije 132). Proponents for delocalization also argue that it provides a solution to the fragmented laws of a nation that do not entirely address the international conflict issues in the commercial platforms. Furthermore, parties that choose to resolve their issues through delocalized international commercial arbitration processes are spared from the unexpected and often undesired restrictions that are embedded in the national laws. Moreover, relying on the seat theory instead of delocalization for resolving disputes results in frustrations that ensure from the mandatory requirements and regulations the in the national law.
Disparities in the national laws are also one of the main reasons that the proponents for delocalized arbitration base their arguments. Federal laws that define arbitration procedures differ widely resulting in undesired consequences and challenges due to the non-mandatory provisions and the lack of relevant provisions. Such differences result in parties involved in international arbitration to be concerned since some of the parties may be unfamiliar with the foreign procedures and provisions. To cover for the differences, the alienated parties would have to undergo expensive costs to overcome the impossible and often impractical procedures to obtain precisely and full accounts of the applicable law in the arbitration process.
The proponents of delocalization also emphasize that the inherent risks and uncertainties presented in the seat theory could affect the both the functionality of delocalization processes and the selection of the platforms for the arbitration progresses to take place (Curtin 271). As a result, either of the involved parties could end up hesitating to adopt arbitration for particular reasons. As such, delocalization comes in and addresses such differences by widening the smooth running of the arbitration processes.
Advocates against the Delocalization
Many opponents to delocalization have several reasons for their stand. The advocates who are against delocalization are grouped into four classes as discussed below.
Arbitration Atheists
The ICA delocalization also faces opposition from the conscientious objectors who are mainly the local lawyers that do not wish to fight foreign lawyers before tribunals. Even though their aim is not to sabotage the delocalization of arbitration, they believe that their clients would have a better deal in the local courts than before the foreign tribunals (Wood 402). They oppose delocalization because they are inexperienced in international commercial arbitrations and feel that their clients will bear a greater liability risk due to the unpredictable outcomes. Moreover, they have a perception that it is more probable for their clients to be believed by the local courts compared to the tribunal that has foreigners as the majority. They oppose the delocalization by applying for anti-arbitration injunctions despite the seat of arbitration in place and challenge the tribunal when it gets its hearing halfway.
Arbitration Agnostics
Arbitration agnostics are skeptics who, in the past, have had an experience with the international arbitration and did not like it. They oppose delocalization of international commercial arbitration by giving the arbitration process a three out of ten evaluation thereby dissuading clients from agreeing to the use of delocalized international arbitration as the best method of resolving the disputes facing their contracts. Arbitration agnostics also oppose the delocalization of arbitration not just because the clients will not be satisfied with the results, but also due to the way in which they lose the case (Frick 39). Furthermore, agreeing to use the delocalized international commercial arbitration is perceived to follow the letter of the law that is not sufficient to have a commercial relationship maintained between the related parties.
Terrorists
Terrorist and arbitration guerrillas are against delocalization in commercial arbitration because they are never interested in playing by any set rules. They always try to exploit all the set rules to their selfish interests and advantage. For instance, they seek to delay hearings with the aim of derailing the arbitration process to make it ineffective or abortive. They begin by objecting the tribunal jurisdiction so that they can have the tribunal declare that it has no jurisdiction over the disputes and hence it self-destructs. If objecting the jurisdiction fails, they apply for anti-arbitration injunctions such as prayers against further arbitration prosecution from the claimants. Failure of the two strategies results in the adoption of guerilla warfare campaigns that delay the arbitration hearings indefinitely. As such, the delocalization of commercial arbitration fails to go through, and the issues with the opponents remain unresolved for a long time.
Neophytes
Neophytes are the arbitration wannabes who oppose delocalization of international commercial arbitration due to their open-mindedness. However, they need persuasion and guidance. As such, they end up opposing the delocalization of arbitration due to objections in matters of style (Gu 13). Matters of style put off the neophytes due to the arrogance and aggressive behavior by the legal parties from the western countries during the cross-examination exercises. In cases where the neophytes and the witnesses are not fluent in the language used in the arbitration, they feel disadvantaged than their counterparts and as a result, oppose the ICA delocalization. As such, there is the need for tribunals to make all the parties feel at ease during the tribunals to have all the parties believe the playing field is level despite the language and cultural differences.
The Alternative to the Delocalization
The Seat Theory
The Seat theory is an important concept when it comes to arbitration law. Seat arbitration applies the domestic statute where the arbitration is situated. The tie to a specific location is important since it will help with knowing the rules to govern the specific arbitration (Lee 88). The procedures also help determine which national court may intervene in case it gets to that point. The seat theory doesn’t refer to the venue the arbitration takes place; rather it is a legal concept in which the parties have come to a consensus on the arbitration seat.
Importance of Seat of Arbitration
In International Arbitration, seat of arbitration shows the weakened connection between the arbitration process as well as seat of arbitration itself. Courts always apply their traditional and recognized principles of its procedural rules (lex fori). However, courts don’t apply procedures which could contravene with laws of a particular country. States make their laws so they could regulate the application of the court’s proceedings or proceedings of any other participant or party within its territory. Only the given state has the right to this rule. Seat Arbitration states that if it, seat of arbitration, occurs it shall assume command whether it was decided by the warring parties, court, or the arbitrators. The seat of Arbitration does not require all affairs held in one place. Seat arbitration is held in different states or even more than one state. Seat arbitration law determines issues classified under lex arbitri which include; validity of arbitration agreement, dispute arbitrability, procedural guarantees, arbitral agreement composition, court and judge supervisory role, and arbitral awards judicial review (Bělohlávek 273).
Seat arbitration changes from one jurisdiction to another, this is brought about when the state has to determine arbitration-related issues in their country and how to be regulated. International and domestic arbitration differ since international arbitration lays a stronger insistence on the party autonomy. Seat arbitration exists and has to be applied in situations which require the action of state power for instances such as freezing property or goods temporary seizure. Delocalization arbitration is only possible after it has been allowed by lex arbitri. Parties to the arbitration have the right to choose the procedure in the collection of evidence and where it will be examined. Though it is best to leave such detail as to where the evidence will be examined from to the arbitrator’s discretion. Arbitrators are also required to conduct the proceedings and to equally offer opportunities to both parties to present their facts concerning the case (Bělohlávek 274). Seat arbitration is supposed to be the unifying factor. The place of hearing the case does not affect the relevance of the case not unless it affects either of the parties rightful will in the case. It is impossible to hold accountable the parties in the case if arbitrators do not determine the seat of arbitration or do not deal with it sufficiently.
Making an Arbitral Award
Seat of arbitration influences the place of award presentation, and as such it is considered as the place the award is made. The awarding place makes the award either foreign or domestic. If the parties choose a particular location as seat of arbitration, it must be in the same state as where the awarding take place. The reason is that since the warring parties could have chosen seat of arbitration as well as the presentation of the arbitral award in a different territory it may affect the expectations of their potential future such as bilateral international treaties or reciprocation of the states where the awards were made and the state enforcing the award.
Place of Arbitral Signing
Where the awards are signed and made should never be confused. Where the arbitral is signed is deemed critical. About this, a Slovakian law states that should a seat of arbitration take place in Slovakia and there is no agreement, the agreement is believed to have been reached in Slovakia irrespective of where it was signed or delivered from. There is also a different argument which states that a seat of arbitration is made where it is signed. Such was portrayed by Outhwaite vs. Hiscox an English court which held its arbitration in London but later signed in Paris (Lecuyer-Thieffry and Patrick 604). Through this, where an award is signed would mostly if not always prevail over where the arbitration was made.
Choice of International Arbitration in Seat of Arbitration
It is quite important for International arbitration than for the domestic arbitrations. About the parties are choosing where the arbitration happens, availing them for the arbitration international arbitration follows that. In case either party goes contrary to those procedural laws the arbitration may be decided against their expectations which may also affect the enforcement and recognition of the award. In most countries in Europe, the autonomy of the parties’ stops before or on the day the award is delivered and thus it is impossible to change it after it has already been delivered. Should the parties be absent and the rules for determination are absent, the arbitrators determine the seat of arbitration. International disputes require consideration in several factors. They include a neutral ground which acts as a guarantee of a fair arbitration award for both of them; the seat of arbitration should not be held in a country where either party has an interest. However, in case the seat of arbitration happens in a country where either party has interests in they could resolve and agree to hold the seat in that country the award would be valid.
Accessibility of where the seat of arbitration should be chosen wisely such that both parties can access it easily on short notice and with minimal expenses. Moreover, the considerations should also include the possibility of the parties being able to pay for services required such as advisors and professionals like lawyers. Premises good enough for hearings, accommodation for both the arbitrators and the parties involved should also be considered. Most important aspect to consider would be the laws of the individual country. The laws of the different countries respond differently to arbitrations (Habib 23). An award which is not enforceable is useless, and as such it is very important to have an award which is enforceable.
Legitimate Reasons for the Parties to Determine Seat of Arbitration
Assessment of practical reasons for seat of arbitration choices depending on how they could be acted on simply is quite necessary. If the seat of arbitration happens in a country where either of the parties does not gain accessibility for his counsel, it would be unfair to the said party as it would not represent its facts for the case thoroughly (Carbone 217). Courts could nullify the arbitration award reached in such scenarios. Moreover, the enforceability of the said award would not be possible under the same conditions. In most cases, it is advisable to get a central location so that none of the parties will complain of being discriminated. Parties are allowed to change the location of seat of arbitration even where they had agreed on the fixed arbitral institution jurisdiction.
Changing Seat of Arbitration
Though it is very rare, arbitration can be changed in case the parties related to the seat arbitration reach a new agreement during the proceedings. Though the arbotration seat could be changed, both sides should come to an understanding. To alter seat of arbitration either party has to have a concrete reason to do so either in consent with either the arbitrators or understanding between parties (Lelutiu 492). The permanent arbitral institution should also authorize change. Domestic arbitration also allows for the change of seat arbitration only that it does not entail all the strict regulations. Should the seat of arbitration be changed, it is important to note the local laws in the new country will help and allow for the application of the procedural steps attained that far.
Annulment of Arbitral Award by Court
Fundamental Rule
The court in the place in which the seat of arbitration has the authority to nullify an award for arbitration. Only the most competent court of the state can handle such a challenge.
Exception
Parties involved in seat of arbitration could decide not to use or follow procedural rules of the hosting country but rather use another country’s laws. However, this only complicates the situation should there ever arise a conflict with seat of the arbitration.
National Provisions
When it is about lex arbitri most countries, regulate annulment of arbitral awards. However, these laws are only applicable to international arbitration and not to domestic arbitration.
Nationalization Vs. Delocalization
The reorganization of the traditional models that were used to handle the roles of the State’s economy under nationalization resulted in the call for delocalization. Moreover, different governments are still willing to come up with the initiative that attracts investors to invest resources in their countries. As such, the governments must review whether to advocate for delocalization or nationalization since they have to create an environment that would be suitable for arbitration processes in case disputes arose between them and the investors. However, private corporations that choose to invest in countries that have not adopted delocalization of international commercial arbitrations must foresee that they will be exposed to exotic legal and regulatory systems as well as foreign cultural platforms.
Nationalization subjects the private corporations from foreign countries to social groups that they have little connections with during the arbitration processes. The most important element in the process of international commercial arbitration is independence and impartiality of the established tribunals. The aspects, therefore, bring up the differences between nationalization and delocalization. The differences between nationalization and delocalization question whether the international arbitration must be attached to the legal system (Moses 26). The differences also result in heated debates between the proponents and opponents of delocalizing international commercial arbitrations. Some countries, such as France, have continually detached arbitration from their law system in a bid to achieve legal delocalization.
While delocalization results in the combat between lawyers from different jurisdictions, nationalization emphasizes on the settling of disputes in the court systems of the parties making the claims. As such, nationalization predisposes lawyers of a different nationality to the unfair balance since one party has lawyers operating in the legal system they have familiarized. Nationalization, unlike delocalization, creates an unfair field where some lawyers are more experienced than the others (Gutteridge 64). Nationalization also creates an imbalance with some clients having to undergo the predictability of their cases as well as the bias from the judges in the legal system. Delocalization, on the other hand, creates a sense of unpredictability resulting in both parties deal with their cases with no injected bias. Nationalization also ensures that the State is not absolved from the proceeding of the arbitrations.
Nationalization results in countries were looking at the foreign corporations with hostility and distrust. For instance, if a private corporation is from a country that is young and in its development stages, it is affiliated to unresolved national unity problems. Such corporations are also zealous in national sovereignty and are subjected to forces from social and economic imbalances leading them to look up to foreigners with concern. Foreign private corporations are also subject to being used as scapegoats when governments in the countries they invest in fail. As such, having arbitrations performed in the states that have embraced nationalization and do not advocate for delocalization results in unfair dispute resolutions.
For a private corporation to avoid the effects of nationalization on the future of their business, they should analyze the international laws for the country they plan to set up their investment. In most cases, the countries that have not embraced delocalization of international commercial arbitration have neither international bilateral nor multilateral treaties (Lemaire 36). As such, the formation of tribunals to conduct arbitrations would be hard. Moreover, the private corporations should investigate if the countries have records of illegal activities such as causing damage to foreign investments and dismissing them without compensation. Unlike delocalization, nationalization does not allow international arbitrations to be conducted outside of the court legal system. Nationalization does not also allow for the use of non-national language, the use of foreign arbitrators, as well as national contract laws. Nationalization also does not allow the submission of disputes courts handling arbitration cases since it would demand subordination to the existent national courts (Petsche 453). Nationalization also makes it impossible to have the arbitral decisions enforced against the State.
Conclusion
I advocate for a partial delocalization of arbitration but also reject the idea of total detachment of laws of the territory where the arbitration process is being conducted. Despite party, autonomy being the main pillar of international commercial arbitrations, delocalization of the same has many limitations and is never absolute. Delocalization of international commercial arbitrations cannot be absolute since the party autonomy is extended to the points where the mechanisms of justice and private law have immediate effects (Olatawura 49). I do not support the complete detachment of laws of the territory where the arbitration process is being conducted since the sovereignty concept from which the court and state powers are derived limits its jurisdiction. It subsequently presents conflicts among the theories of legal jurisprudence. Additionally, the complete detachment of laws of the territory where the arbitration process is being conducted leaves no entity to observe the conditions that are implied to implement the contract freedom (Sandrock 384). As such, unresolvable issues between the parties cannot be justly settled without the assistance by a court system present.
However, I advocate for a partial delocalization of an arbitration since some case laws exhibit division in decision making in some courts such as those in England and France. While French courts prefer delocalized arbitration, the English courts prefer sticking to the seat theory that calls for nationalization. I also advocate for a partial delocalization since the confusion created in the commerciality arguments is ignored despite it being the cornerstone of the arbitration processes. If an arbitration agreement is not created, the delocalization of the international commercial arbitrations would not exist. Partial delocalization ensures that the business relationships between warring corporations, despite being broken, has the claimant receive an equitable award that is just and fitting for the grievance made.
Furthermore, I partially advocate for delocalized arbitration since it is a fair ground for resolving disputes. Unlike in the seat theory, the parties can choose and agree on the arbitrators they need to convene their arbitration process. The lack of delocalized arbitration brings in an arbitration atmosphere that is not conducive for one of the parties since they did not participate in the constitution of the legal processions (Read 293). The parties also get fair results since the arbitrators they choose have experience and specialization in the relevant field being disputed. However, the international arbitration processes should not be fully detached from the national laws since when the arbitral awards are made, they are binding and final. Either party is left with no room for adjustment or asking for an appeal as would have been the case if the dispute was resolved in the national court system where the arbitration process is taking place.
I also support partial delocalization due to the options it offers for arbitration. For instance, the institutional arbitration allows choices to the parties on arbitration organization that can handle the dispute while the ad hoc arbitration allows freedom to the parties to settle the dispute without any institutions independently. Rather, the ad hoc arbitration process ensures that the parties receive specified rules from their attorneys and conduct their mediation processes. With such choices, delocalized arbitration gives the parties a choice to go for the more flexible and less expensive methods of arbitration or the one with more neutral and independent sets of already established rules. For instance, institutional arbitration offers both of the parties access to the organizations that welcome any disputes as well as those that specialize in particular disputes such as the ones entailing intellectual property (Lew 19).
From the above analysis of international commercial arbitrations the seat theory that is advocated for by nationalization, is the system that is more likely to produce coherent and enforceable awards to the parties in a dispute compared to the delocalized theory. However, the inconsistency and confusion levels that come with the arbitral proceedings and awards remain undecided by major countries that have adopted either of the theories. There is the need, however, to create a point of contention to harbor a hybrid theory that will allow for an autonomous approach by all the involved parties. The hybrid theory, nevertheless, should limit the court assistance to the arbitral award enforcement. As such, it will rightly offer all the components that are presented by both the seat and delocalization theory.
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