Cameron Miranda
Arbitration is an alternative to litigation where parties to a dispute submit their evidence and legal arguments to a neutral third party for resolution. Arbitration in its common law form developed in England during the Middle Ages, as royal courts were ill-equipped to handle trade disputes. Common law arbitration differs from civil law arbitration in several ways, including how a dispute is commenced, developed, and presented. For example, common law tends to favour witness testimony under oath, whereas civil law places more emphasis on documentary evidence. International arbitration involving parties from both sides of the common law-civil law divide has traditionally required arbitrators to follow the practice of one side or the other, but in recent years, converging practices that embrace elements of both systems have emerged.
| Characteristics | Values |
|---|---|
| Arbitration type | Common law arbitration |
| Origin | England, Middle Ages |
| Reason | Royal courts were not designed for trade disputes |
| Example | Courts of the boroughs, of the fair and of the staple |
| Modern example | Interest arbitration for labour disputes |
| Parties | Participants from different countries, legal systems, and languages |
| Commencement | A short and plain statement of the claim |
| Evidence | Common law favours witness testimony, civil law favours documents |
| Weight of evidence | Common law tends to be sceptical without witness testimony |
| Costs | Average cost of international arbitration: administrative and arbitrator fees are less than 20% of the total cost |
| Legal costs | In common law and civil law, courts award legal costs against the losing party |
| Exception | The United States, except for certain extreme cases |
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What You'll Learn
Common law arbitration history
Arbitration in its common law form first developed in England during the Middle Ages. During this time, royal courts were not designed to handle trade disputes, and trade with foreigners was otherwise unenforceable. This led to the emergence of tribunals such as the courts of the boroughs, of the fair, and of the staple, which served as venues for resolving trade disputes.
In the mid-16th century, common law courts in England developed contract law, and the Admiralty Court began handling disputes with foreign merchants, further expanding the options for resolving trade disputes. Despite this development, courts became increasingly suspicious of arbitration. For example, in Kill v. Hollister (1746), an English court ruled that an arbitration agreement could 'oust' courts of law and equity of jurisdiction.
Merchants, however, retained their right to settle disputes among themselves, and the tension between arbitration proceedings and courts resulted in the Common Law Procedure Act of 1854. This act provided for the appointment of arbitrators and umpires and allowed courts to 'stay proceedings' when a disputant filed a suit despite an agreement to arbitrate. Subsequently, several Arbitration Acts were passed, including those in 1889, 1950, 1975, 1979, and 1996, which further refined the arbitration process.
In the early United States, arbitration was also common, with George Washington serving as an arbiter on one occasion. However, a key difference between the US and England was that American courts generally did not enforce executory agreements (binding predispute agreements) to arbitrate. This meant that before an award was made, a claimant could sue in court, even if they had previously agreed to settle disputes through arbitration. This lack of enforcement of predispute agreements led to the Federal Arbitration Act of 1925, which was based on a New York state law that enforced such agreements.
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Common law vs civil law arbitration
Arbitration is a system for resolving disputes among parties from different countries. The two most widespread legal systems are the common law system, used in most English-speaking countries, and the civil law system, used in Continental Europe and countries influenced by Continental Europe, from Japan to most of Africa and all of Latin America.
Common Law Arbitration
Arbitration in its common law form developed in England during the Middle Ages, when tribunals such as the courts of the boroughs, of the fair, and of the staple arose as the royal courts were not designed for trade disputes. Common law jurisdictions use an adversarial approach, with the two parties arguing a case against each other before a judge acting as an umpire and decision-maker. In the United States, a common law approach is to commence with a 'short and plain statement of the claim'. The American assumption is that 'notice pleading', an outline of the facts and the theory of the claim, is sufficient to give an adversary the information needed to begin preparing a defence. Common law tends to favour witness testimony under oath and tends to be sceptical without it.
Civil Law Arbitration
Civil law practitioners will present a neat set of documents well in advance of the hearing and will consider them self-authenticating. The civil law approach is quicker and cheaper and avoids 'fishing expeditions' that may prolong the process and increase costs. Civil law generally gives less weight to live witness testimony and treats the testimony of witnesses affiliated with or employed by a party with considerable scepticism.
Differences and Converging Practices
The common law and civil law differ significantly in how a dispute is commenced, developed, and presented. However, in recent years, converging practices have emerged that embrace elements of both systems. These practices are gaining acceptance in international arbitration as a middle ground for parties from both sides. For example, the IBA Rules provide guidelines for taking evidence to bridge the gap between parties of different legal traditions.
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Common law arbitration agreements
Arbitration agreements are generally divided into two types. The first and most common type is an agreement that contains an arbitration clause, providing that any disputes will be resolved by arbitration. The second type is an agreement signed after a dispute has arisen, agreeing that arbitration will be used to resolve the dispute (sometimes called a "submission agreement").
In the context of common law and civil law systems, arbitration refers to an alternative to litigation where parties to a dispute submit their evidence and legal arguments to a neutral third party (i.e., the arbitrator) for resolution. Arbitration in its common law form developed in England during the Middle Ages, as the royal courts were not equipped to handle trade disputes. This led to the emergence of tribunals such as the courts of the boroughs, of the fair, and of the staple.
In multiple legal systems, including both common law and civil law, it is customary for courts to award legal costs against the losing party, entitling the winner to recover their expenses. However, the United States is an exception to this rule, as the prevailing party in a legal proceeding is typically not entitled to recoup their legal fees from the losing party.
International arbitration often involves participants from different legal traditions, such as common law and civil law. In recent years, converging practices that incorporate elements of both systems have gained acceptance in international arbitration. These practices aim to bridge the divide between the two traditions, which differ in how disputes are commenced, developed, and presented.
The choice of law governing the arbitration agreement is crucial and can impact the proceedings. While standard arbitration agreements may not always specify the governing law, it is good practice to include it to avoid potential issues. The law applicable to the underlying contract does not automatically apply to the arbitration clause, as they are separable. The choice-of-law rules help determine which law should apply to different aspects of the dispute, and tribunals may need to consider multiple national systems of law.
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Common law arbitration costs
Arbitration is a form of dispute resolution that developed in England during the Middle Ages as the royal courts were not designed for trade disputes. In common law jurisdictions, the costs of arbitration are generally awarded against the losing party, with the winner becoming entitled to recover their expenses. However, this is not always the case, and arbitral tribunals have broad discretion in deciding on the allocation of costs. The costs of arbitration include administrative fees, arbitrator fees, and party costs such as lawyers' fees and expenses.
The overall costs of arbitration can be estimated on the websites of international arbitration institutions, such as the ICC, SIAC, and the International Arbitration Attorney Network. The ICC advance cost system, for example, requires a non-refundable fee of US$5,000 payable by the claimant when filing a "Request for Arbitration". This fee covers the administrative expenses of the arbitrators and the institution but does not include legal costs or expert fees. The court may also fix separate advances for a principal claim and counterclaim, which can be revised throughout the procedure. At the end of the case, the court will fix the actual costs of the arbitration, including administrative expenses and arbitrators' fees, which will be paid from the advance on costs. If there is any money left over, it will be reimbursed to the parties.
The costs of arbitration are an important factor for claimants when deciding whether to commence arbitration proceedings, especially in cases with a low amount in dispute. Arbitration is generally considered to have lower costs compared to litigation due to its flexibility in tailoring the dispute to the parties' needs and the lack of appeals. However, disputes around the interpretation of an arbitration agreement can be expensive to resolve. Additionally, the costs of investment arbitrations are typically higher than commercial arbitrations, with the mean costs incurred by respondent states in arbitration proceedings reaching USD 4.7 million, according to a 2021 report by the British Institute of International and Comparative Law Study (BIICL).
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Common law arbitration evidence
Arbitration is a form of dispute resolution that developed in England alongside the common law. In the Middle Ages, royal courts were ill-equipped to handle trade disputes, so tribunals such as the courts of the boroughs, of the fair, and of the staple emerged. In the 16th century, common law courts developed contract law, and the Admiralty Court began handling disputes with foreign merchants, expanding the avenues for trade dispute resolution.
Over time, tension arose between arbitration proceedings and courts, as exemplified in Kill v. Hollister (1746), where an English court ruled that an arbitration agreement could 'oust' courts of law and equity of jurisdiction. This led to the Common Law Procedure Act 1854, which facilitated the appointment of arbitrators and umpires and allowed courts to 'stay proceedings' when a disputant filed a suit despite agreeing to arbitrate.
In the context of common law arbitration, evidence takes on unique characteristics that differentiate it from civil law practices. Common law arbitration evidence involves the presentation of documents and witness testimony. While civil law practitioners provide a neat set of documents to the tribunal in advance, common lawyers may also expect each document to be authenticated, presented, and explained through live witness testimony. This can create a divergence in how evidence is perceived, as civil law arbitrators may view company president testimony as unconvincing, whereas common lawyers may focus on cross-examination to challenge witness credibility.
The use of witness testimony in common law arbitration is significant. Arbitrators often allow abbreviated live direct testimony, especially if prompted by common law lawyers, to avoid the tribunal's first impression of a witness being shaped by hostile questioning. The IBA Rules provide for cross-examination, stating that each witness who submits a statement shall appear for testimony at an evidentiary hearing. Additionally, common law arbitration encourages parties to submit documents in advance to the tribunal and the adverse party, intending to use them as evidence without formal introduction or authentication.
In summary, common law arbitration evidence involves the presentation of documents and witness testimony, with an emphasis on live witness examination and cross-examination. The process aims to provide a comprehensive understanding of the dispute, allowing parties to tell their stories convincingly and ensuring adequate notice is given to all involved parties.
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Frequently asked questions
Common law arbitration is a form of arbitration that developed in England during the Middle Ages. It arose as a way to settle trade disputes, as the royal courts were not equipped to handle such cases. Arbitration is a substitute for litigation, where both parties submit evidence and legal arguments to a third party for resolution.
The two traditions differ in how witness testimony is presented and the weight given to it. Common law tends to be sceptical without witness testimony, whereas civil law believes the best evidence comes from documents and is more sceptical of witnesses affiliated with either party.
Arbitration in the United States is authorised by the Federal Arbitration Act (FAA). Arbitration agreements are generally valid and enforceable unless there is fraud or unconscionability. Arbitration agreements can only bind parties that have agreed to arbitrate and cannot be forced upon non-signatories.
