Niki K. Kerameus November 17, 2014 Cyprus Arbitration and Mediation Centre Is there a Role for Arbitration in the Development of the Rule of Law? A Comparison with Judicial Resolution of Disputes.

INTRODUCTION 2  Meaning of “development of the rule of law” or “judicial regulation”: recourse to the judge or arbitrator may provide a means to adjust the existing legal framework, to confine it, to further interpret it, even to dictate new law  Judicial regulation reflects a certain rise in the powers and authority of judges/arbitrators  Question asked: can judges and arbitrators become a source of law?

I) JUDICIAL RESOLUTION OF DISPUTES 3  Can a judge become source of law? -Obvious answer in common law jurisdictions – Yes. -Answer may also be “Yes”, under circumstances, in civil law jurisdictions.

I) JUDICIAL RESOLUTION OF DISPUTES 4  Ιn certain cases even in civil law jurisdictions, the judge has more extended powers than just to rule on a dispute.  E.g. Art. 4 French Civil Code “A judge who will refuse to render judgment on the pretext of legislation being silent, obscure or insufficient, may be prosecuted for being guilty of a denial of justice.”  The most fertile ground for “creation of law” is provided in the context of supreme courts, constitutional courts and the ECJ. -Dictation of legal principles -Issuance of opinions -Obiter dicta -Press releases, communications, annual reports

II) ARBITRAL RESOLUTION OF DISPUTES 5  Power of arbitrators to contribute to the development of law is more limited than that of judges.  Main reasons: -The power of the arbitrators derives from the Parties (private source) -The arbitrators’ powers are limited by the mandate accorded to them by the Parties -Lack of imperium -Private arbitral proceedings -Awards are not published -Debatable whether arbitrators can raise new rules of law and issues of law -Arbitrators cannot ask the ECJ preliminary questions -Arbitration has strictly inter partes effect

II) ARBITRAL RESOLUTION OF DISPUTES 6  In principle, arbitration cannot contribute to the development of law.  BUT existence of at least 3 categories of exceptions: -Exceptional cases where, given the nature of the contract, the arbitrator has to dictate law; -The increasing use of precedent in international arbitration despite the principle of non-publication of arbitral awards; -Most importantly, in the case of investment arbitration involving disputes between states and foreign investors.

II) ARBITRAL RESOLUTION OF DISPUTES 7 1)Exceptional cases where, given the nature of the contract, the arbitrator has to dictate law (e.g. adaptation of long term contracts); 2)The increasing use of precedent in international arbitration despite the principle of non-publication of arbitral awards.  Existence of principles in international arbitration born and developed through precedents (e.g. extension of arbitration agreement within a group of companies).  1982 Dow Chemical Award: “[t]he decisions of these [commercial arbitral] tribunals progressively create caselaw which should be taken into account, because it draws conclusions from economic reality and conforms to the needs of international commerce”

II) ARBITRAL RESOLUTION OF DISPUTES 8 2) The increasing use of precedent in international arbitration despite the principle of non-publication of arbitral awards.  2010 Anderson v. Int’l Olympic Comm. Award: “[CAS Tribunals ] form a valuable body of case law and can contribute to strengthen legal predictability in international sports law. Therefore, although not binding, previous CAS decisions can, and should, be taken into attentive consideration by subsequent CAS panels, in order to help developing legitimate expectations among sport bodies and athletes.”  BUT 2009 Romak v. Uzbekistan Award: “the Arbitral Tribunal has not been entrusted, by the Parties or otherwise, with a mission to ensure the coherence or development of ‘arbitral jurisprudence’” Therefore, competing views as to the use of precedent in international arbitration.

II) ARBITRAL RESOLUTION OF DISPUTES 9 3) Investment arbitration involving disputes between states and foreign investors More room for arbitrators to contribute to the development of law -Investment awards are most often public -Precedent has a greater importance in investment than in commercial arbitration -Possibility to file amici curiae briefs in ICSID procedures -Articles 42 and 44 of the ICSID Convention grant the arbitrators powers to fill in gaps and decide on issues that may not be covered by the ICSID Convention, the applicable rules, or the parties’ agreement Notion of “investment” Notion of “full protection” to be accorded to investors

CONCLUSION 10  Overall arbitration has a limited role in the development of the rule of law, at least when compared to the role judges have in the development of law in the judicial system.  Arbitrators cannot create law per se BUT may develop precedents which may influence future awards Softer degree of lawmaking.  What really interests us in arbitration is that a dispute be resolved under the best circumstances by qualified jurists, and not necessarily that in addition law be created.

CONCLUSION 11

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