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European Community Law and International Arbitration: Logics That Clash

Published online by Cambridge University Press:  17 February 2009

Natalya Shelkoplyas
Natalya Shelkoplyas
Affiliation:
LL.M., Researcher, Tilburg University.
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Extract

Eco Swiss leaves a very mixed impression. On the one hand, the factual implications of this case for arbitration might, after all, appear not so dramatic in practice. The ECJ has firmly demonstrated that it follows its precedents associated with a more self-restrained approach towards national procedural autonomy, at least as far as procedural restrictions in arbitration-related areas are concerned. Furthermore, the Court did not travel the more precarious path between the two suggested by the Advocate General. At present, one can only speculate about the repercussions for arbitration which the judgement would have inflicted, had the Court engaged in analysing the arbitrators' duties and powers to apply EC law or the extent of the supervisory functions of national courts in arbitration matters.

Type
Articles
Information
European Business Organization Law Review (EBOR) , Volume 3 , Issue 3 , September 2002 , pp. 569 - 591
Copyright
Copyright © T.M.C. Asser Press and the Authors 2002

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References

1 See, e.g., Baudenbacher, , “Enforcement of EC competition rules by arbitration tribunals outside the EU”, in: Ehlermann, and Atanasiu, (eds.), European Competition Law Annual 2001: Effective Private Enforcement of EC Antitrust Law (Oxford 2002) (forthcoming)Google Scholar. See further for a more balanced, though still Community law-biased, outlook on the functions of arbitrators Komninos, , “Case C-126/97, Eco Swiss China Time Ltd. v. Benetton International NV, Judgment 1 June 1999, Full Court”, 37 CMLRev. (2000) pp. 459–478.Google Scholar

2 It has been argued that in the present state of development of European legal systems it is difficult to follow a straightforward division between private and public. One is often confronted with “grey area” legislation pertaining to the field of the so-called government regulation of business. State measures directed to regulate in imperative terms requirements e.g., as to the quality or characteristics of products (services) in a wide sense or their marketing (safety, packaging, labelling, etc.), environmental standards that business should meet, marketing and production authorisations (licences) can be regarded as falling into the ambit of this grey area legislation. Within the European Union, certain tendency to overregulation in these areas is discernible. This is due to the fact that economic integration has been accompanied by harmonisation of the governmental regulation in the fields where nation States would otherwise be able to effectively erect normative barriers to the free flow of goods and services, thus undermining or upsetting the advantages of the single market.

3 Such as, respect of parties' choice of applicable law, or, in the absence of such choice, great freedom and flexibility in determining applicable legal standards.

4 Case 26/62 van Gend en Loos [1963] ECR 1, 12.

5 Craig, P. and de Burca, G., EU law: text, cases, and materials, 2nd ed. (1998) p. 163.Google Scholar

6 See section 2.4.

7 Case 33/76 Rewe [1976] ECR 1989, para. 5; Case 45/76, Comet [1976] ECR 2043, paras. 12-16.

8 Case 199/82 San Giorgio [1983] ECR 3595, paras. 17-18.

9 Comet, supra n. 7, para. 13.

10 Ibid., para. 16.

11 See, e.g., one of the recent judgements on availability of damages or compensation for breach of EC competition rules, Case C-453/99 Courage Ltd. v. Bernard Crehan [2001] ECR I-6297.

12 The remedies listed are not exhaustive. There is no uniformity in remedies either: various national arbitration acts provide for particular remedies in arbitration-related court proceedings. The remedies granted in the course of exercising the courts' supervisory functions over arbitration are often referred to as “means of recourse”.

13 Further on this issue see section 2.4.

14 See Commission Regulation 556/89 on the application of Art.85 (3) of the Treaty to certain categories of know-how licensing agreements, OJ [1989] L 61/1, Art. 7; Commission Regulation 2349/84 on the application of Article 85 (3) of the Treaty to certain categories of patent licensing agreements, OJ [1984] L 219, Art. 9; Council Regulation 4056/86 laying down detailed rules for the application of Articles 85 and 86 of the Treaty to maritime transport, OJ [1986] L 378, Art. 5.

15 See decisions: Campari (23.12.1977), OJ [1978] L 170; Rockwell-Iveco (13.7.1983), OJ [1983] L 224; EMO (20.12.1988), OJ [1989] L 37.

16 Weigand, , Frank-Bernd, , “Evading EC competition law by resorting to arbitration?” 9 Arbitration International (1993) 258.CrossRefGoogle Scholar

17 See Bos, P. V. F., “Mededinging in de EEG en arbitrage”, TvA (1986/1986) 231, 238Google Scholar; TvA (1987/1) 4.

18 Verbist, H., “The application of EC law in ICC arbitrations”, in: International Commercial Arbitration in Europe. Special Supplement of the ICC International Court of Arbitration Bulletin, ICC Publication No. 537 (1994) p. 33.Google Scholar

19 Case C-126/97 Eco Swiss [1999] ECR I-3055.

20 Joined cases C-430/93 and C-431/93 Jeroen van Schijndel and Johannes Nicolaas Cornelis van Veen v. Stichting Pensioenfonds voor Fysiotherapeuten [1995] ECR I-4728.

21 Hoge Raad der Nederlanden, beschikking in de Zaak van Eco Swiss tegen Benetton, 21.3.1997, para. 4.2; for an English translation of the ruling see 23 Yearbook Commercial Arbitration (1998), p. 189, para. 25.Google Scholar

22 Hoge Raad der Nederlanden, beschikking in de Zaak van Eco Swiss tegen Benetton, 21.03.1997, para. 4.2.

23 The difference can be explained by the role that courts play at the different stages of the proceedings. At the stage where the court is confronted with the application of the public policy of foreign law, the court may disregard certain applicable rules if their application would offend the forum's fundamental principles. Here the court will apply its own law instead, adjudicate the claim and give a binding decision ending the legal controversies. At the enforcement stage, the court is no longer capable of exercising its adjudicating function on the substance of the claim. Its function is either to endorse a decision reached by the foreign court or arbitral tribunal or refuse to accept it within the legal order of the forum. In the latter case, the legal controversies will remain unresolved, which is certainly highly undesirable. Thus, the basic principle of application of public policy standards at the enforcement stage is a kind of filter preventing only such violations of public policy which may result from the enforcement of the judgement or award.

24 Opinion of A.G. Jacobs in Van Schijndel Case, Joined Cases C-430/93 and C-431/93, [1995] ECR I-4707, para. 37.

25 Case C-126/97 Eco Swiss [1999] ECR I-3055, paras. 36, 37.

26 For a similar criticism, see Liebscher, C., “European public policy: a black box?”, 17(3) Journal of International Arbitration (2000) 73, at pp. 81–82.CrossRefGoogle Scholar

27 See, for a comparative survey of the treatment of public policy rules in different Member States, the opinion of A.G. Jacobs in Van Schijndel Case, Joined Cases C-430/93 and C-431/93, [1995] ECR I-4707, paras. 31-41,47-48.

28 As far as arbitration is concerned, these fundamental principles cover both procedural and substantive aspects. Despite all the differences in interpretation, these principles normally include a fair trial and non-enforcement of illegal contracts, related to criminal activities, such as drug trafficking, child pornography, money laundering, and the like.

29 It should be born in mind that the role of arbitration in EC Member States is by no means confined to intra-Community situations. It occupies far greater and a more prominent position as a dispute settlement mechanism of the controversies arising on the worldwide plane. So far, outside the EC, there have been no effective international instruments similar to Brussels Convention (now mostly superseded by EC Regulation 44/2001, OJ [2001] L 12/1-23) regulating comprehensively recognition of foreign judgements. However, such instrument exists with regard to enforcement of foreign arbitral awards. It has been in place for more then 40 years making international commercial transaction effective or in some instances – just possible.

10 Opinion of A.G. Saggio, Case 126/97, Eco Swiss [1999] ECR I-3055, para. 33.

31 Ibid., para. 38.

32 Opinion of A.G. Saggio, Case 126/97, Eco Swiss [1999] ECR I-3055, para. 38.

33 Eco Swiss, ibid., para. 39.

34 10 June 1958, 330 UNTS (1959), p. 38, No. 4739.

35 It should be noted that the Convention was infused with a pro-enforcement bias. It was conceived as an instrument for promoting worldwide enforceability of the arbitral awards. Just to illustrate this point, it should be mentioned that under the Convention enforcing courts have mere discretion and not an obligation to refuse enforcement of arbitral awards even if the ground provided by the Convention is well-founded.

36 Note that the scope of the Convention is limited, first of all, to the recognition and enforcement of foreign arbitral awards, i.e., to the type of proceedings clearly distinct from annulment of arbitral awards. Furthermore, it applies to enforcement of arbitral awards rendered in the territory of foreign States, i.e. States other then the State of enforcement.

37 Case 102/81 Nordsee [1982] ECR 1095.

38 Case 102/81 Nordsee [1982] ECR 1095, para 13.

39 Nordsee, ibid., para. 11.

40 Nordsee, ibid., para. 12.

41 Art. 1, Council Regulation No.44/2001, OJ [2001] L 12/1-23.

42 For example, according to G. Bebr, it is open to serious doubts that the controlling court “requested by a party to grant leave for the enforcement of an arbitral award, really determine the outcome of litigation as required by Article 177”, “Arbitration tribunals and Article 177 of the EEC Treaty”, 22 CMLRev. (1985) 489, at p.500.Google Scholar

43 In itself, it might appear a questionable construction since other international entities that develop a legal order of their own will probably claim their own public order (regional organisations, WTO, etc.). Although the expression of truly international or transnational public policy is sometimes used, it is usually understood that it includes common shared principles recognised by “civilised nations”.

44 For an analogous conclusion, albeit in the context of recognition of foreign judgements opposed on the public policy ground, see the opinion of A.G. Alber in Case C-38/98 Renault [2000] ECR I-02973, para. 87.

45 The conventional argument here might have been that EC law itself necessitates stricter rules ensuring a higher level of judicial protection and, therefore, imposes a requirement to remove national procedural obstacles to substantive review of arbitral awards.

46 Eco Swiss [1999] ECR I-3055, para. 40.

47 Case C-312/93 Peterbroeck, Van Campenhout & Cie SCS v. Belgian State [1995] ECR I-4599.

48 Joined cases C-430/93 and C-431/93 Jeroen van Schijndel and Johannes Nicolaas Cornelis van Veen v. Stichting Pensioenfonds voor Fysiotherapeuten [1995] ECR I-4705.

49 See subsection 1.2 above.

50 See Prechal, S., “Community law in national courts: the lesson from Van Schijndel”, 35 CMLRev. (1998) pp. 690–693.Google Scholar

51 Eco Swiss [1999] ECR I-3055, paras. 44-46.

52 It is commonly asserted that a favourable arbitration regime is maintained chiefly in the interests of the individual. However, this might have been true a few decades ego. A much more realistic picture would be that most of the states nowadays promote arbitration basically because arbitration relieves the national judiciary from the burden of adjudicating domestic and, most significantly, international cases and ensures availability of a neutral forum for local and international business operators alike.

53 Compare para. 21 of Van Schijndel Judgement, Joined Cases C-430/93 and C-431/93, [1995] ECR I-4705.

54 Opinion of A.G. Reischl in Case 102/81 Nordsee v. Reederei Mond [1982] ECR 1121.

55 European Court of Human Rights, Deweer v. Belgium, judgement of 27 February 1980, Series A No. 35, pp. 25-26, para. 49.

56 Appl. No. 1197/61, 5Yearbook of the ECHR (1962) pp. 94–96.Google Scholar

57 Due to the reserved resolution of preliminary questions (b) and (c) by the ECJ.