Arbitration

ARBITRATION. - 1. NOTION. - By a. is meant the procedure by which a legal dispute is resolved in a binding manner by one or more persons to whom the interested parties have conferred the power to resolve it.

In the modern conception of the State, every dispute concerning rights or interests (whether they belong to natural persons, to moral entities, or to de facto associations) is devolved to the jurisdiction of the ordinary courts or of the administrative jurisdictions (e.g. the Council of State), which issue decisions in accordance with the rules of law contained in the codes or in other laws.

The interested parties may nevertheless agree to entrust to one or more private individuals, who take the name of arbitrators, the decision of their dispute, which by effect of such an agreement remains withdrawn from the cognizance of the magistrate.

Arbitration allows the parties to resolve the dispute in an agile, rapid and economical manner with the aid of arbitrators particularly expert in the subject matter of the dispute and with the advantage of the confidentiality of the proceedings. This explains how it is often resorted to in commercial, industrial, labor disputes, etc., and how it lends itself particularly to the resolution of disputes arising in international relations.

In statutory law there are various forms of arbitration that must be briefly indicated: a) ritual arbitration; b) free arbitration; c) compulsory arbitration.

Ritual arbitration, that is, carried out in observance of the rules of the code of civil procedure, must be constituted by the parties through the stipulation of an act having special requirements of form and substance which is called a "compromise"; the procedural rules must then be observed in order to reach the pronouncement of the "arbitral sentence, called the award." This brings the arbitration to an end, but it cannot produce its effects unless it is homologated by the judicial authority. Compromise, award, homologation thus constitute the three phases of this form of arbitration provided for by the code.

Free arbitration. Alongside the aforementioned strictly ritual form of arbitration, another is recognized in which the arbitrators have the power to decide the dispute without observance of the rules of the Code of Civil Procedure and without the need for homologation of the award by the judicial authority. This form of arbitration is often carried out by delivering to the arbitrator a blank sheet signed by the parties on which the third party will write his pronouncement. In the event that the free award is not executed by one party, the other may turn to the ordinary judge.

As is easy to intuit, this form of arbitration, untied from the procedural forms provided by law, has greatly developed in recent times and vast social categories resort to it. In substance, free arbitration constitutes, according to the most accredited doctrine, a judgment of equity.

Compulsory arbitration. In certain cases the law makes it obligatory to entrust the decision of a dispute to arbitrators, thereby withdrawing it from the normal jurisdiction of the magistrate.

These are generally disputes in which it is necessary to reach a rapid solution in order to settle questions of an urgent character. And indeed wartime legislation has provided in many cases for this form of arbitration, to the point of often making it appear almost as a form of special jurisdiction.

In labor disputes, as well as in those concerning compulsory social security and assistance, it often happens that the law establishes a prior attempt at conciliation or defers the decision to arbitrators chosen from persons of particular competence: this can be very appropriate, given the technical knowledge necessary to decide such disputes.

It is known in particular that even the use of the right to strike is not infrequently connected to the possibility of resolving labor disputes through appropriate arbitration procedures. The political currents adhering to Catholic social doctrine hold that such procedures should be provided for by law and that the parties may resort to them for the resolution of collective disputes. They also require that arbitration procedures be made compulsory when the dispute has as its object the interpretation and application of legal or contractual norms in force. This is so that workers may be certain that once a labor contract is stipulated, its exact interpretation will be given by an impartial body.

The custom of resorting to arbitration in disputes among Christians is found, derived from the Jews, in the apostolic writings (I Cor., 6, 1-9). The Christian emperors sanctioned the right to resort to the arbitration of bishops in civil cases (1,7, Cod. I, 4; Nov. 123, c. 21); moreover, strictly ecclesiastical cases were very often decided also by arbitration rather than by formal judgment (cc. 33, 34, C. II, q. 6, etc.). The Church, accepting this institution from Roman law, also adopted the prescriptions that regulated it, sometimes correcting them and adapting them to its own spirit (cf. c. 2 de arbitris, I, 21, in 6°; c. 2 de appell., II, 15 in 6°). The canonical legislation on arbitrators remained unchanged from Boniface VIII onward, and has been in substance reproduced in the Code of Canon Law; so that the law of the Decretals constitutes the best part of the interpretation of the norms in force (can. 6, 2°, 3°).

Arbitration, except in cases imposed by law, takes place only when the persons interested in a question defer its decision by common agreement to one or more persons other than the judge; compromissio or compromissum in arbitros. Since, however, the compromise is an act that often entails alienation, only those who have free power over the things that are the object of the dispute may compromise (c. 5, X, de arbitris, I, 43).

According to the legislation in force before the Code, the arbitrators could be one or more, preferably an odd number (c. 1, X, de arbitris, I, 43); but not all causes could be compromised, nor could anyone act as arbitrator. Excluded from arbitration, besides criminal causes, were: those of matrimonial nullity, and of separation of spouses; disputes over the title of a benefice without the license of the superior; those of restitution in integrum, except in the case of an incidental matter; causes on which a judgment had already been formed; and finally those reserved to the Pope or to other superiors. Furthermore, those unable to exercise the office of arbitrators were the insane, the furious, the mute, the deaf, wards, minors under twenty years of age, women, and laypersons in spiritual causes (except in the case of privilege or papal mandate), religious if not for the benefit of their own monastery and with the permission of their superiors, the excommunicated vitandi and, naturally, anyone who had an interest in the case. The nature of the power belonging to compromissary arbitrators does not appear perfectly clear. Some liken it to the power of delegated judges, but without a true jurisdictional character; it should be noted, in any case, that it is always limited by the terms of the compromise. Unless otherwise provided, arbitrators are bound by the rules of judicial procedure in hearing and deciding the case; but, once the sentence has been pronounced, they can neither correct nor execute it, since correction and execution belong to the Ordinary (c. 7, X, de arbitris, I, 43). The arbitral decision was called arbitrium, arbitratum, rarely sententia, commonly laudum. The acceptance of the compromise on the part of the arbitrators imposed on them the obligation to decide the controversy within the term established by the compromise itself or by the common law, while the parties were, for their part, generally bound to respect the award issued. If a special pact or oath had been interposed on the matter, acceptance was always obligatory; if instead a penalty had been stipulated for the case of non-acceptance, the obligation became alternative, so that, once the penalty was paid, the party was no longer bound to accept the award. In any case, however, the mere compromise meant that the refusing party was bound ad interesse, that is, to reimburse the other for the expenses incurred or to be incurred by reason of the compromise. Against the sentence of necessary arbitrators (that is, imposed by law) an appeal was admitted (c. 11, diff. ind., I, 14, in 6ᵒ); not so against the award of compromissary arbitrators (cc. 33, 34 C. II, q. 6). If, however, the decision had not been expressly or tacitly accepted by the parties within ten days, and appeared gravely injurious to one of them, that party could ask the ordinary judge for its reform according to the judgment of a prudent man. Likewise, in the case of enormous injury or nullity, nothing prevented the parties from asking the Ordinary for the relative declaration (c. 2, X, de arbitris, I, 43; c. 9, X, de rev. perm., III, 19).

Alongside arbitrators there appear in the law of the Decretals the arbitratores, that is, honest persons freely chosen by the parties to resolve questions that were more than anything else contractual, and who pronounce their sentence (arbitramentum) according to the dictates of equity, ex bono et aequo, without being bound to any formality of procedure. And precisely in this consists the difference between arbitrators and arbitratori.

The CIC has preserved the institution of arbitration, counting it among the means suited to avoiding contentious judgment (1. IV, t. XVIII, c. II). Although its substance remains unchanged, notable changes are nevertheless not lacking. First of all there is no trace of necessary arbitrators; the Codex knows only compromissary arbitrators, who settle the question put to them according to law (c. 1929), and arbitratori who handle the dispute de bono et aequo (ibid.). Incapable of exercising a compromise are the laity in ecclesiastical matters (not precisely in spiritual matters as the ancient law held), the excommunicated and the infamous following a sentence. Religious cannot accept a compromise without the license of their superior (c. 1931). The object of a compromise, as of a transaction, cannot be, besides criminal cases, those regarding the marriage bond, those concerning the title of a benefice without the consent of the legitimate authority, as well as spiritual things to be compensated by the payment of temporal things (cc. 1930, 1927 § 1). Saving the formalities required for alienation, temporal ecclesiastical things can instead be compromised, even if annexed to spiritual things provided they are separable from them (c. 1930, 1927, § 2). For everything that is not expressly contemplated by the Code, the respective norms of civil law not contrary to divine or ecclesiastical law apply in the different places (c. 1930, 1926).

5. INTERNATIONAL LAW

It consists in the settlement of an international dispute by means of a decision issued by one or more persons chosen by the parties themselves. Arbitration is distinguished from the other modes of peaceful settlement of international disputes (negotiation, inquiry, good offices, mediation, conciliation) in that, more than all the others, it approaches the judicial procedure proper to state legal systems. It is distinguished from this procedure, however, by the fact that, given the structure of the international community, the establishment of the arbitral procedure and the validity of the award rest on the will of both parties and not on the will of an entity superior to them. Arbitration differs from negotiation, in that it introduces into the procedure the neutral element constituted by the arbitrator or the arbitral tribunal; from inquiry, in that it also includes examination of the merits of the dispute rather than only the ascertainment of fact; from good offices and mediation, in that to the mere purpose of urging and assisting the parties in reaching a peaceful settlement it adds that of issuing a true and proper decisive award; and from conciliation, in that the arbitral award, unlike the pronouncement of the conciliatory body, has binding force. The agreement between the parties to have recourse to arbitration assumes in practice the form of the simple compromise, of the compromissory clause, or of the general treaty of arbitration. The first procedure finds application when two states submit directly to arbitration a dispute that has arisen between them, independently of any prior commitment to have recourse to arbitrators. The second is implemented when two States undertake to submit to arbitration all the disputes that may arise between them in the execution of a treaty; an undertaking which is then followed, for each dispute, by the specific agreement (compromise) of referral to arbitration, in which, and not in the compromissory clause, the arbitrators' award will find its legal basis. The third procedure consists instead in the general undertaking reciprocally assumed by two States to submit to arbitration all or part of the disputes that might arise between them. Here too, as in the preceding case, the initial agreement brings into being only a generic obligation of referral to arbitration, and the arbitral procedure will be instituted case by case by means of a specific agreement (compromise). The conflict between the need that induces States to stipulate general treaties of arbitration and the opposite need felt by the same States to reserve for themselves the widest freedom to submit or not to submit a given dispute to arbitration gives rise to the problem of the limits of the general obligation to arbitrate. The need to ensure in the greatest possible number of cases the peaceful settlement of international disputes would require the extension of the obligation to all or to the majority of the questions that may arise between States. This result, however, has so far been achieved only in relation to general treaties of arbitration between small States or States whose respective situation is such as in practice to exclude the possibility of profound conflicts of interest; whereas treaties of arbitration between States whose relations are susceptible of leading to grave disputes are always accompanied by excepting clauses: which in less recent times excluded from-

the obligation to arbitrate disputes that touched upon the honour, the vital interests or the territorial integrity of the same States or the interests of third States; and in more recent treaties they exclude from arbitration matters pertaining to the "reserved domain" (domestic jurisdiction) of the contracting States. Clauses whose meaning and scope are not easy to determine and whose interpretation remains entrusted expressly or implicitly, save in the rare case that it is itself submitted to the obligation of arbitration, to the same parties to the dispute. Even more serious is the other problem of the extension of the obligation to arbitrate to those disputes which, rather than concerning the ascertainment of existing law (legal disputes), pertain — as is frequent within the international community — to the modification or the maintenance of existing law (political disputes): a problem complicated by the difficulty of placing the very distinction between the two types of dispute on an objective basis, given the possibility that would always remain for every State of moving any dispute of the first type from the legal plane to the political plane by the simple fact of framing its claim on one basis rather than the other. The general tendency of practice is to exclude political disputes from commitments to arbitrate and to use for the latter peaceful procedures of settlement other than arbitration (mediation, conciliation, inquiry) that are better suited to resolving questions of a political character and to adapting the law in force to the requirements that prove worthy of protection. Not infrequently, however, recourse is had, for disputes of this kind, to arbitral judgment in equity (ex aequo et bono), which is provided for, for example, by the second paragraph of art. 38 of the International Court of Justice. Practice knows various systems for the formation of the arbitral body; one distinguishes precisely arbitration by mixed commissions, arbitration by heads of State and arbitration by a tribunal composed of one or more arbitrators. In the first case (Anglo-Saxon system) the arbitrators are usually chosen from among the subjects of the interested States themselves, but the inclusion in the commission of a citizen of a third State in the role of superarbiter is frequent; and there is also the case of a decisive recourse to a head of State in the event of failure to agree among the members of the mixed commission. This is the system followed by the first important arbitration treaty stipulated in 1794 between the United States and Great Britain. Arbitration entrusted to a head of State approaches, by the political character of the body, mediation and presents the advantage of giving the decision greater prestige. They are used mostly in territorial and boundary questions. But the most frequent system is recourse to a tribunal composed of one or more jurists or diplomats (generally 3 or 5), not all subjects of the two States in dispute and chosen in part by the same States separately or by agreement, in part by a third State. The system of having a third arbitrator with the functions of president (superarbiter) designated by the two members respectively appointed by the parties is often used. For the purpose of obviating the drawbacks arising from the difficulty of agreeing on the choice of arbitrators, relatively more recent practice has resorted to the system of pre-establishing permanent procedures for the constitution of arbitral panels or even permanent arbitral tribunals (so-called institutional arbitration). An example of the first system is the Permanent Court of Arbitration established by the Hague Conventions of 29 July 1899 and 18 Oct. 1907 and consisting of a list of persons designated every six years, in a number of at most four, by each of the contracting States and from among whom the parties choose, from time to time, by a pre-established procedure, the arbitral panel that is to resolve the dispute. An example of the second system is the Permanent Court of International Justice of The Hague established within the framework of the League of Nations system in 1921 and reconstituted with slight variations after the Second World War under the name of International Court of Justice, as an integral part of the system of the new international organization of the United Nations (chapter XIV of the Statute stipulated at San Francisco on 26 June 1945). The body consists of 11 judges, elected for 9 years by the Assembly and the Council of the United Nations, drawn from a list composed in a manner analogous to that of the judges of the Permanent Court of Arbitration of The Hague. Both the old and the new Court substantially maintain, despite their name, the same character as the Permanent Court of Arbitration, from which they differ only in the fact of being constituted on a permanent basis and of eliminating the problem of the choice of the panel from time to time by the interested States. The activity displayed by the body indeed always rests on the agreement of the parties and is not referable, unlike that of the bodies jurisdictional state authorities, to an authority superior to the parties. The normal task of arbitrators is to settle disputes on the basis of general and particular international law in force, unless the parties themselves indicate the rules to which they must adhere or request, as happens in political disputes, a decision based on equity (decision ex aequo et bono). In addition to the norms of substantive law, the parties also establish the rules of procedure (adversarial hearing, oral debate, representation of the parties, publicity, time limits), the requirements of the decision (voting, reasoning), etc. It is not rare for the validity of the award to be contested. This happens mostly when the arbitrators have exceeded the limits of the mandate received or have not judged according to the substantive and procedural rules established by the parties (excess of power). The possibility of review of the award is frequently provided for in arbitration agreements.

Gaetano Arangio Ruiz