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Mourre calls for institutions to join forces

Alison Ross

09 March 2018

Mourre calls for institutions to join forces

Atlanta (Credit: iStock.com/Sean Pavone)

In a speech in Atlanta, ICC International Court of Arbitration president Alexis Mourre has argued that trust in arbitration “rests on the reliability and legitimacy of arbitral institutions” and that they need to cooperate more effectively.

Giving the Atlanta International Arbitration Society’s Hendrix Lecture after the first GAR Live Atlanta, Mourre said that soft law-making bodies like the IBA and ICCA have an important role to play in ensuring the integrity of arbitration but “only robust and legitimate arbitral institutions can enforce these rules and give transparency and predictability to the global system”.

They are the "backbone of arbitration as a global system of justice," requiring only limited self-regulation, he argued. 

With respect to the way they work together, he said: “The road to hell is paved with good intentions, and so far any attempt to create a framework for cross-institutional cooperation has failed, and may fail in the future, because they have been too ambitious, or insufficiently respectful of party autonomy.”

He therefore called for "a more realistic path towards better institutional cooperation", through an existing body  the International Federation of Commercial Arbitration Institutions (IFCAI).

In passing, Mourre commented on past cooperation attempts  such as the Swiss Arbitration Association’s proposal for a transnational council to govern counsel misconduct and Sundaresh Menon’s similar proposal for a body to which ethical breaches by arbitrators would be referred.

He also spoke about Gary Born's recent proposal for the cross-institutional consolidation of related arbitrations pending under different rules. All these proposals, he said, had failed or were likely to fail.

A competitive market

Mourre described in his lecture how “the history of modern arbitration and its establishment as the normal way to resolve international business disputes goes hand in hand with its institutionalisation”.

Until the 1970s, he said the ICC was “more or less alone in a market that was largely dominated by ad hoc arbitration” but he said more and more players are emerging and institutional arbitration is increasingly the preferred option, with even India, with its strong tradition of ad hoc cases, on a drive to embrace it.

In the latest Queen Mary survey, 79% of respondents arbitrations were institutional rather than ad hoc.

He also spoke about the diversity of the scene – with full service global institutions and more “locally focused” players.

Some national institutions “are embarking on ambitious programmes of internationalisation, as shown by the change of name of the Kuala Lumpur Regional Arbitration Centre to become the Asian International Arbitration Centre”.

“Others are in crisis, such as BANI in Indonesia, which has split into two competing organisations that are currently engaged in litigation for the use of their brand.”

He also noted the number of specialist institutions for investment, sport, IP, maritime, insurance and commodity arbitration.

In this “competitive market”, Mourre noted a parallel trend of institutions converging to become more alike – hurrying to implement innovations introduced by others – and also constantly seeking to differentiate themselves. 

He also noted a trend of “consolidation” of arbitral institutions to make them more competitive internationally. This has been seen in Switzerland, where bodies attached to individual chambers of commerce combined to form the Swiss Chambers Arbitration Institution, with joint rules and a single court, and in Spain, where the three main arbitral institutions have recently merged.

This runs counter to another trend of institutions splitting  like BANI and CIETAC in China, he said.

Why state regulation doesn't work

Despite the convergence he described, Mourre suggested that with respect to institutions' reliability and legitimacy, the picture is “uneven”. 

He quoted Jan Paulsson in his famous article on Moral Hazard in International Arbitration: “Only a few arbitral institutions can make credible claims to legitimacy. Many arbitration institutions are empty edifices waiting for someone to bother to dismantle them. Others cannot get away from features of cronyism which were their raison d’être in the first place.”

In an unregulated market, you still see flawed institutions which taint the legitimacy of the system as a whole, he said – noting how the president of the Arbitral Chamber of the Romanian Chamber of Commerce was sentenced to five years in prison for taking bribes in exchange for appointments that would favour one of the parties.

This is partly because in many jurisdictions "any person can establish an arbitration institution, with no requirement of registration or public control."

Mourre noted a trend of states introducing controls  such as China making it mandatory to arbitrate at an approved commission. 

More recently, he said Russia has introduced a licensing system to combat the "peculiar... mushrooming of hundreds of so-called 'pocket institutions,' which were specially created by powerful industrial groups owned by so-called oligarchs in order to deal with their own disputes".

The "radical" result is that now only a handful of institutions can operate in Russia to the detriment of healthy competition.

Mourre also noted Peru's recent attempt to regulate institutions – supposedly in response to the Odebrecht scandal and suspicions that certain arbitrators may have received bribes. It has proposed a statute preventing institutions from exercising their power to select arbitrators and instead making them appoint randomly from lists. 

"I have personally reacted to that...by writing to the Congress of Peru to alert it to the risks that s‎uch a statute would pose for the development of Peru as an arbitration venue," Mourre said. "Hopefully, it will never be passed."

Such attempts by states to control arbitral institutions are "dangerous and undesirable" and risk politicising and de-neutralising the system of arbitration, Mourre said. 

While he said you could rely entirely on "free competition" to weed out institutions that do not deserve the trust of users, he preferred institutional self-regulation through a common framework such as IFCAI, established in 1985 to consider best practices and international standards. 

“IFCAI is still active today; it could surely do more,” he said.

The way forward

Mourre gave examples of proposed cooperation by institutions in the past which he found unrealistic, for example the Swiss Arbitration Association's proposal for the creation of a global ethics council to regulate counsel conduct. He said that did not attract international consensus because important institutions including the ICC, the LCIA and ACICA in Australia took the view that counsel misconduct is for arbitrators to deal with support from institutions.

The ICC would also not adhere to Menon’s proposal of an body to consider arbitrators ethical breaches, he said, arguing that the difficulty of distinguishing such breaches from other misconduct that institutions regularly address, such as failure to disclose conflicts, would result in “complex conflicts of competence.”

Born's recent proposal for a framework for the consolidation of related arbitrations pending under different rules would require all institutions involved to amend their rules consistently, Mourre said.

He argued the proposal is flawed because, if parties to different but related contracts have chosen to adopt different arbitral institutions, it must be because they wanted to keep their cases separate and it would be wrong to force consolidation on an opt-out basis. 

If they chose different institutions inadvertently, they would likely agree to consolidation, he said.

He also noted the added costs and delay of having a joint committee from the concerned arbitral institutions to decide on the consolidation  and the possibility that courts would have to intervene to resolve disagreements. 

For Mourre, IFCAI is the "ideal tool" for better institutional cooperation, with no need to create new bodies. And he suggested four ways institutions could cooperate effectively under its auspices.

First, through a protocol whereby they committed not to administer cases under the rules of another institution and the establishment of a procedure for agreeing where cases with pathological arbitration agreements should be heard.

Second, through a protocol under which institutions would agree to exchange, confidentially, feedback on arbitrators – including both positive and negative feedback and instances of ethical breaches.

Third, through the building of a common institutional platform for the publication of awards – offering free of charge access.

And fourth, he said it may be worth thinking about the provision of a common insurance policy for arbitrators, which – because it would be jointly negotiated and cover many practitioners – would be likely to be advantageous for those insured.‎

Such cooperation would be targeted, limited and consistent with the fundamental principle of arbitration that party consent is needed, he said. 

Mourre’s lecture came after the first GAR Live Atlanta, held at the Atlanta Centre for Mediation and Arbitration based at Georgia State University College of Law.

Chaired by Miller & Martin partner Shelby Grubbs and Helsinki-based arbitrator Carita Wallgren-Lindholm, the event was sponsored by Arnall Golden Gregory, Alston & Bird, Kilpatrick Townsend, King & Spalding, Miller & Martin and Orrick.

GAR Live was preceded by an ICC training event, "When the ICC met Atlanta", which provided guidance on international arbitration and the ICC arbitration rules and procedure. 

More coverage of GAR Live Atlanta will follow.

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Hogwash - Humpty Dumpty words! Alexis Mourre, like many of his compatriots, see arbitration as a warped commercial proposition [note the term "competitive"] - providing an easier alternative living income. One never hears about any success of their purported professional practices! A sad outlook.

Posted by: Bader Sulaiman, 04 Jan 2019, 09 : 22 AM