This mythic case, which might almost be thought the founding myth of international commercial arbitration, was first “reported” in (1987) 3 Arbitration International 79. It reveals (i) to what depths an ill-managed arbitration can descend, and (ii) the thoughts that at least one distinguished common law judge, The Right Honorable Lord Justice Michael Kerr, who prepared the 1987 report, once harbored about international commercial arbitration.The commercial facts
of the case, although extensive, are relatively straight forward, the arbitration and procedural facts grotesquely less so. Sometime in the 1950s, it seems, a long established Macao producer of sardines sold, under a long-term contract, 280,000 tins of sardines to a Taiwanese customer. Although both the Taiwanese and Macao companies were members of the North Pacific Sardine Manufacture and Marketing Association(“NPSMMA”), the tins were in fact filled with mud of the same specific gravity as sardines. For about four and a half years things went swimmingly: there were approximately 100 sales and re-sales under a standard form contract (FOB), subject to Hong Kong law and the jurisdiction of the Commercial Court in Hong Kong, the relevant bills of lading endlessly endorsed, the tins usually sold afloat and rarely unloaded. Eventually, a sudden food shortage led a Philippine (misspelled as Phillipine
in the 1987 report) Government Trading Agency to buy the 280,000 tins from the Japanese then-owner, and they were ultimately purchased by a chain of Manila supermarkets. In the words of the report, “[t]hen all hell broke loose”.
Retail sales of about 2000 tins led to discovery of the mud. This in turn led, in the words of Justice Kerr, to “not a really complex piece of litigation” in the Hong Kong Commercial Court, lasting about 18 months. Summary judgment was rendered, for the numerous claimants in each case against its respective seller, on a claim of un-merchantability that the mud was not reasonably “fit for the intended purpose, viz, human consumption”, resulting in the award of damages and costs in each case. Unfortunately, the original, Taiwanese, buyer could not join its seller the Macao company as a defendant in the litigation. This because the long-term contract between them provided for arbitration and, for reasons somewhat murky, the Hong Kong Commercial Court, and Court of Appeal, refused to join the Macao company ( and “further appeal to the Privy Council was rightly not pursued”). The Taiwanese were further advised that litigation in Macao was a non-starter “on many grounds”. Confronted with a judgment exceeding US$ 500,000 “stemming from more than 100 transactions, ...the sole hope of the Taiwanese to recoup their heavy loss lay by way of arbitration against the Macao…[company].”
The arbitration which is the subject of Lord Justice Kerr’s report, and subsequent confirmation by the Admiralty and Fisheries Court of Macao of the award dismissing the claim of the Taiwanese, with costs
of the arbitration and of the Macao company, appears to have taken between fifteen and twenty years.
What is the explanation for the grotesque outcome of this arbitration? After all it is hoped that arbitration will be rather expeditious and fair. The explanation would appear to provide some consolation to believers in arbitration,
an explanation which may have escaped Lord Justice Kerr: rather than ad hoc arbitration with proven arbitration rules, or by an experienced arbitration institution with its own established or other proven rules, the Macao Sardine arbitration was conducted by a trade association inexperienced in arbitration, and its ”rules” were ad hoc, indeed non-existent. This was a case of an infantile international commercial arbitration. The delays, the errors, the improprieties, the injustices are too numerous to do all of them justice, indeed to even recite them. For a full appreciation of these the reader is referred to Lord Justice Kerr’s already cited 1987 report.
Let us look at just a few of the howlers, which in some actual cases still represent possible difficulties, especially if one or both parties is bent on mischief of one sort or another.
The constitution of the tribunal took over two years, with much foot dragging by the respondent Macao company, with challenges and threats of challenges. What appears to have been a competent nominee of the claimants, experienced in the sardine trade, was challenged in the courts of three countries, and the Taiwanese finally resigned themselves to appointing the Deputy-Director of the National Aquarium in Taipei. Neither the NPSMMA or the South Korea Chamber of Commerce, to whom the NPSMMA had assigned the administration of the arbitration, had a rule such as Article 9 of the UNCITRAL Rules (2010) (or indeed any rules at all) setting short deadlines (i.e. 30 days) and procedures for quick constitution of the tribunal.
Possibly more serious, there was no rule for specifying the seat of the arbitration, and none was specified. Possibly this is why more than fifteen years later the losing Taiwanese sought to have the award set aside in South Korea, Taiwan, Macao and Indonesia (for several years hearings were held in Bali, the chairman of the tribunal, a former president of the NPSMMA, at that time living in Brunei). In fact the claimant’s expert, a retired law professor from the University of Oporto, had failed to advise them that their claim had been repeatedly time-barred and that no purpose would be served by setting aside the arbitral award. This expert had previously been the arbitrator designated by the respondent; for several years he failed to participate effectively, before being persuaded to resign; the notion of a truncated tribunal appears to have been unknown to any participant in the arbitration.
While Lord Justice Kerr does not dwell on the merits of the case, he has harsh words to say about the lex mercatoria : “…some lingering doubts remain about the outcome of this arbitration. There is of course no standard work on the legal principles applicable under the lex mercatoria; for the obvious reason that these do not exist; though some say they are none the worse for that.” Of course today we have the UNIDROIT Principles of International Commercial Contracts, increasingly consulted by arbitrators.
Lord Justice Kerr leaves us with a bad taste about arbitration. But I think effective counsel, effective arbitration clauses, effective arbitral institutions, and rules and their use, today conclusively render The Macao Sardine Case the fiction that it is.
My ears immediately perked up upon hearing my South African-born co-arbitrator, just returned to London from participating in the annual Cape Town Cycle Tour, explain how the crowds had cheered the riders on by singing this Afrikaans folk song (English translation):
There comes the Alabama,
The Alabama comes over the sea,
There comes the Alabama,
The Alabama comes over the sea.
Girl, girl, the reed bed is made,
The reed bed is made,
The reed bed is made
For me to sleep on.
Girl, girl, the reed bed is made,
The reed bed is made,
The reed bed is made
For me to sleep on.
Oh Alabama, the Alabama,
Oh, Alabama comes over the sea,
Oh, Alabama, the Alabama,
Oh, Alabama comes over the sea.
How could it be that dark-skinned Africans came to cheer the C.S.S. Alabama as it struck blows for the slaveholding Confederacy?
On August 5, 1863 the Alabama, in need of replenishing its coal supply, reprovisioning and some refitting after a year of capturing or destroying Federal ships in the Atlantic, was putting into Table Bay (Cape Town) at the same time the Federal barque “Sea Bride” appeared just offshore. As the news of their impending confrontation spread, Capetonians rushed up to Signal Hill and other heights below Table Mountain to watch it. The local newspaper “Argus” reported that “Business was almost, if not entirely suspended.”
The process of the Alabama taking the Sea Bride as a prize was described by the paper as like “a cat, watching and playing with a victimized mouse.” This show was occurring mid-afternoon on a Wednesday, and the paper reported that once the prize had been taken, “ladies waved their handkerchiefs, and one and all joined in the general enthusiasm.” It was truly a rare public spectacle leading to citywide festivities.
Despite the fact that South Africa, being under United Kingdom suzerainty in those days, was neutral
as between the North and the South in the American Civil War, the Alabama’s skipper, Captain Rafael Semmes,
and his crew were thoroughly feted in Cape Town. As Semmes himself wrote of the Capetonians in his memoirs, “Whatever may have been the cause, their imaginations and their hearts seem both to have been touched. I could not but be gratified at such a demonstration on the part of the entire people.” The resident British Admiral gave a dinner party in his honor, which was attended by the Governor, “his lady, and the principal officers of his squadron.” Semmes’ crew did not miss out either, Semmes noting that in Cape Town the “sailor quarter was a continuous scene of revelry for several days.”
As a somber footnote 3rd Assistant Engineer Lt. Simeon W. Cummings of the ship’s crew was accidentally killed by his own gun when returning from a hunting trip ashore at nearby Saldanha Bay, thereby becoming the only Confederate serviceman to be killed abroad. His body was repatriated 131 years later to Elm Springs, Tennessee, by the Sons of Confederate Veterans and the affiliated Military Order of the Stars and Bars.
It is curious that “Daar Kom Die Alibama” is attributed to Cape Malays, descendants of Malayan
and Indonesian slaves and political prisoners. Today it continues to be played and sung around the world by touring South African musicians and others.
Indeed, it is in today’s South African Manual of Scouting, which carries the endorsement of Nelson Mandela. South Africans generally, including my co-arbitrator, have been ignorant of the connection between the song and the Confederate warship that fought for the preservation of slavery. Certainly aficionados of the Alabama Arbitration, in which the taking of the Sea Bride figured, likewise have been unaware of the folksong. Thus does international arbitration, like history more broadly, occasionally have its inexplicable oddities.
Editor’s note: this article recounts one of the two popular origin stories of “Daar Kom Die Alibama”. The alternative story tells that the Alabama of the song was a local boat that delivered thatching reeds to Cape Town.
A Comment on Parthenia M/S vThe Executors of the Late Ralph Firbank written by: VV VEEDER
In international law, simple interest has become a generally accepted remedy. Moreover, many investment arbitration tribunals have ordered compound interest to ensure full reparation, taking a pragmatic and discretionary approach that may now represent an emerging form of jurisprudence constant.
For like developments under national laws, the position is much more complicated, raising for national judges and legislatures policy questions, given the similar (but different) functions of arbitrators and state courts applying domestic laws. Under English law, after a judicial impasse of almost 100 years, the position for arbitrators was ultimately resolved by arbitration legislation in 1996, and here history played its part with the text of a handwritten arbitration award in a shipping dispute in 1883: the so-called ‘Scrutton Award’.
The Scrutton Award was made on 27 October 1883 in conjoined arbitrations between the owners of the vessel ‘Parthenia’, in a dispute concerning a damaged cargo of cement and freight. The sole arbitrator, T Scrutton, was a commercial man and not a lawyer. The one-page, hand-written award concluded that the losing party pay ‘the sum of £260 with Interest at 5% per annum from 5th December 1882 to date of payment’. This was clearly an arbitral order for pre- and post- award simple interest, and it would not have come as a surprise to the commercial parties to these arbitration proceedings.
This was so because, much earlier, in Re Badger (1819), the English court had refused to set aside an award on the ground that the arbitrator had awarded interest when it would not have been so ordered by the English court. This case was assumed by certain commentators to mean that a commercial arbitrator could award interest under the law merchant, and it was so understood by Lord Bramwell in his draft legislative code of arbitration (1883–89), which was rejected by Parliament for political reasons unrelated to interest and then completely forgotten.
In 1978, however, Lord Denning attempted to revive legal history in his judgment as the presiding member of the Court of Appeal in The Finix (1978), citing In re Badger for the proposition that arbitrators ‘have a complete discretion as to the amount of interest and as to the period of time [. . . , a practice that] goes back at least to the year 1819.’ Unfortunately, Lord Denning was the dissenting judge in The Finix,and therefore his views did not prevail.
What did prevail subsequently was the strong expression of business common sense by commercial users of London arbitration at a time of high interest rates for sterling and other currencies. In particular, it was unacceptable for foreign users to forgo a significant part of their claims because of judicial deficiencies in English arbitration law. After some debate, the reaction from the UK Government was, first, the enactment of a general arbitral power to order pre-award simple interest in 1982 (the new Section 19A of the Arbitration Act 1950) and, second, Section 49 of the Arbitration Act 1996 with its extensive powers to order pre- and post-award simple or compound interest on any sum for any period at any rate the tribunal considers just, subject to the parties’ agreement otherwise.
In this debate, the Scrutton Award played a small but significant part by providing positive historical proof that an English arbitral practice, judicially recognised in 1819, had remained in actual existence up to the Arbitration Act 1889, and that its subsequent demise in the twentieth century was an unnecessary and accidental interlude.
[Editor’s Note: this extract was made by Robert James, Assistant Legal Counsel at the Permanent Court of Arbitration, from V.V.Veeder, The Practice of Arbitration - Essays in Honour of Hansvan Houtte (eds P Wautelet and others, OUP 2012)]
Written by Professor William (Rusty) Park, Professor of Law, Boston University and President, London Court of International Arbitration
One of the earliest international arbitrations in the Americas arose from rival claims to hayfields contested between two groups of religious dissidents. The dispute resolution process takes special significance as an epochal step toward the robust cross-border cooperation that ultimately united thirteen disparate colonies into a single nation.
The story begins in 1620 when a small band of exiles, later known as the Pilgrims, landed at what is today Plymouth on the south shore of Massachusetts Bay. The core of this group had earlier left England for Holland in order to separate from the established church. Now they sought greater autonomy in a land three thousand miles to the west. The dissidents referred to themselves as Saints, in distinction to the so-called Strangers who accompanied them in emigrating, but for economic opportunity rather than spiritual community. Saints and Strangers alike entered into a self-governance pledge known as the Mayflower Compact (named for the ship that carried them across the ocean), which bound all in mutual covenant “to frame such just and equal laws [as] …meet and convenient for the general good of the colony.”
A decade later, another set of religious dissenters founded Boston, about forty miles up the coast. Chartered as the Massachusetts Bay Colony, these English Puritans sought not to separate from the official church, but to purify worship by removing residual “papist” elements. Like the Plymouth dissidents, the Bostonians were Calvinists seeking freedom of conscience, at least for themselves even if not for those of other faiths, notably the harshly persecuted Quakers.
Each colony prospered. The Bostonians expanded southward, while the Plymouth colony spread to the north. They met at Cohasset, a coastal area whose name derives from a phrase meaning “Long Rocky Place” in the indigenous Algonquian dialect.
Rich marshlands in Cohasset provided salt hay prized by farmers as food for cattle. Not surprisingly, friction arose. The village of Hingham, in Boston’s jurisdiction, staked its marshes only to find markers uprooted by men from Scituate, a village under the protection of Plymouth. Scituate farmers found their stakes pulled by neighbors in Hingham.
What was to be done? Each territory was sovereign. The same King was recognized at both Plymouth and Boston, but in different capacities, much as Queen Elizabeth now serves Canada and New Zealand. Short of armed conflict, how could the controversy be resolved?
Four “Commissioners” were appointed, two by each colony, with full authority to end the strife once and for all. Plymouth named William Bradford and Edward Winslow. Boston designated John Endecott and Israel Stoughton. Within a year, these men reached a unanimous decision memorialized in what today would be styled as an arbitral award.
Marshland rights were allocated by reference to local brooks, ponds, rivers and sea. The award ends with an injunction that the colonies shall “contain themselves within the said lines before expressed.” Dated the ninth day of the fourth month of the sixteenth year of the King Charles (9 June 1640), the decision fixed rights which were generally respected on both sides.
One matter remained vague: a grant to Hingham of “threescore acres of marsh” described as at the mouth of a river and next to the sea. Precisely which sixty acres were allotted? Uncertainty bred acrimony. So in 1667 another tribunal was convened, with three new arbitrators named jointly by both colonies. A split decision (2-1) returned land to Plymouth’s jurisdiction, much to the chagrin of the Cohasset farmers who were part of Hingham before seceding to form a town of their own.
What of the women and men roaming the marshes before the English arrived, whom the settlers crowded away? A quarter century after the first arbitration, Native Americans ceded the land for “valuable consideration” through a document bearing the mark of paramount chief Wompatuck, Grand Sachem of the Massachusetts tribe. And therein we have a story for another day.
(This article was first published in ICCA Newsletter # 7, December 2014)
Written by Professor Derek Roebuck (Senior Associate Research Fellow, Institute of Advanced Legal Studies, University of London and Editor Emeritus, Arbitration: the Journal of the Chartered Institute of Arbitrators)
The earliest surviving manuscript recording an award of any kind in England since Roman times arose from a
private arbitration between two Jewish brothers.
Isaac and Hayim needed help in physically dividing the land in Norwich that they inherited equally from their father Meshullam. Two unnamed arbitrators declared their award in Hebrew in July 1249.
The badly damaged manuscript is one part of a chirograph [Westminster Abbey Muniment WAM6816]. The text is fragmentary and these extracts are partly reconstructions:
Memorandum of the Testimony before us, the undersigned, on Sunday the 8th day of Tammuz, five thousand and three from the creation of the world … to apportion the land and houses which have descended to them in Saddlegate Street, to clarify to each his portion in the land and houses and those bordering them on the east side … from the boundary of Eliav son of Jacob, that descended to him, the said Hayim, as his portion, and he is entitled to extend the same building to the north for up to four feet … on the boundary of Eliav, all that descended to him, the said Hayim, as his portion, and he is entitled to build, to demolish, to dig ditches and pits and to do in it whatever he wishes … between the boundary of Hayim … and … the land of the charitable Samuel aforesaid amounting to the width of the house on the public road fourteen feet … the same house …that descended to him, Isaac, as his said share, up to the north edge of the aforesaid garden that descended to his brother Hayim in his portion … the aforesaid Isaac or Hayim, each one of them held … complete, firm and binding …
from the creation of the world until its end [to sell, to transfer] to exchange and to bequeath … between them, the brothers aforesaid … [in token of friendship?] to … selling to whomever, and not … any deceit or evasion … this apportionment written in the market [is witnessed by] … this deed … and announcement to be issued accordingly….
Then there would have been the arbitrators’ signatures and perhaps seals.
The award appears to follow a common form. That may mean that arbitration was commonplace among the Jews of Norwich (and probably more widely). It also shows that Jews could at that time own land for their own occupation and transfer it freely.
There is some evidence that the parties were required to accept the award in friendship. It would not be unusual for brothers to fall out over their inheritance but the difference could as easily have been amicable, the family preferring impartial friends to make the allocation to avoid the difference becoming a dispute. It was common then in England for each party to appoint an ‘arbitrator’ to try to mediate and, if they failed, at least to arrange for an adjudication, appointing a third arbitrator if thought necessary.
Image: Copyright: Dean and Chapter of Westminster, London
(This article was first published in ICCA Newsletter # 5, April 2014.)
Written by Niuscha Bassiri (Partner, Hanotiau & van den Berg)
As the Peace Palace in The Hague is celebrating its centenary this year, it is timely to celebrate the first PCA award, which was rendered 111 years ago, on 14 October 1902.
The “Pious Fund of the Californias” award (“The Pious Fund Award”) deserves to be recalled not only for the legal thinking behind it, but also for its concise format and its speedy issuance by five eminent jurists: the Right Hon. Sir Edward Fry, His Excellency M. De Martens, Mr. T.M.C. Asser, Jonkheer A.F. de Savorin Lohman and Mr. Henning Matzen (chosen as president by the other four arbitrators at their first meeting on 1 September 1902).
The dispute between the United States of America and the United States of Mexico, instead of being fought in battle physically, or in the courts of either state, was wisely submitted to arbitration under the Hague Convention of 1899. This was the first test for the arbitration provisions of the Hague Convention. A test that was passed with great success.
The case resolved a long-standing issue between the United States of America and the United States of Mexico. The factual and procedural history is comprehensively described in the arbitration agreement, referred to in the English translation of the original French award in George Grafton Wilson’s The Hague Arbitration Cases (1915) as the compromis. The compromis was signed on 22 May 1902 in Washington in the English and Spanish languages.
The Pious Fund of the Californias was a fund for religious works in California. It had become part of the Mexican treasury, and the dispute about the entitlement to interest accruing on the fund arose with the transfer of part of California to the United States of America in 1848.
Pursuant to a convention of 4 July 1868, entered into by the parties to the compromis, the dispute between the parties was submitted to a “Mixed Commission”. Specifically, the dispute concerned “a certain claim advanced by and on behalf of the prelates of the Roman Catholic Church of California against the Republic of Mexico for an annual interest upon a certain fund known as ‘The Pious Fund of the Californias,’ which interest was said to have accrued between February 2, 1848, the date of the signature of the Treaty of Guadalupe Hidalgo, and February 1, 1869, the date of the exchange of the ratifications of said  Convention above referred to” (compromis, p. 1).”
The Mixed Commission decided by award against Mexico and ordered it to pay 904,700.99 Mexican gold dollars. Mexico honoured the award.
The dispute before the PCA tribunal concerned the question of whether the United States of America was entitled to claim further instalments for interest payments from Mexico as of February 1869 on the basis of the award rendered by the Mixed Commission. As recorded in the compromis, the issues at stake were: “1. If said claim, as a consequence of the former decision, is within the governing principle of res judicata, and, 2. If not, whether the same be just.”
As to the first issue, the PCA tribunal established its – still valid – understanding of the res judicata principle: “all the parts of a judgment of a decree concerning the points debated in the dispute enlighten and mutually supplement each other” and that “these parts all serve to render precise the meaning and the bearing of the dispositif”.
The tribunal also considered that this principle applies “equally to arbitral awards rendered within the limits of the jurisdiction by the compromis” and that “for a stronger reason” it should be applied to international arbitration. Accordingly, the tribunal ordered Mexico to pay further instalments as of February 1869 until 2 February 1902. In a second step, the tribunal ordered Mexico to pay on 2 February 1903 and each following year the yearly annuity.
Interestingly, as to the currency, the tribunal distinguished between the basis of the right in dispute and the execution of the award. It considered that the mode of payment, i.e., the currency, related to the latter. Thus, based on its understanding of the res judicata principle, the tribunal considered that with respect to the outstanding payments, i.e, those as of 1869, Mexico could pay in silver dollars as opposed to gold dollars.
This award surely set the standard for further balanced and considered PCA awards to come. Together with the compromis it is based on, it gives plenty of inspiration for cost and time efficiency in international arbitration badly needed these days. Hence, go back to basics!
(This article was first published in ICCA Newsletter # 4, December 2013.)
Written by Dr. Maxi Scherer, Special Counsel at WilmerHale and Senior Lecturer at Queen Mary, University of
London, and Dr. Daniel Greineder, Associate at Python & Peter.
The conduct of litigation and the art of the trial lawyer in particular have not always fared well in great novels. The near-interminable case of Jarndyce v Jarndyce in Charles Dickens’s Bleak House is experienced by the characters more as a persistent chronic illness than a process leading to the equitable resolution of a dispute. The overbearing advocate Dr. Huld in Franz Kafka’s Der Prozess terrifies his clients but proves ineffectual in his dealings with Kafka’s elusive court. The celebrated advocate Dr. Breslauer in Thomas Mann’s Die Buddenbrooks shows scant appreciation of the first rule of advocacy, namely that eloquence is worthless if it is not effective, and duly fails to obtain an acquittal for his client. Given their disillusionment, one might have expected more of the great novelists to have explored the most obvious alternative to the courts – arbitration.
Thomas Mann’s lengthy novel Der Zauberberg or The Magic Mountain contains a rare vignette on the subject. In a usually overlooked passage, the Italian Ludovico Settembrini, purporting to speak as the voice of progress, and the conservative Jesuit Leo Naphta cross swords over the merits of arbitration over afternoon tea in the company of the main character Hans Castorp and his cousin Joachim Ziemßen.
Mann began The Magic Mountain in 1912 only to interrupt its composition during the First World War. The novel, which first appeared in 1924, recounts the adventures of Hans Castorp, a largely prosaic young German of heightened sensibilities, in the fictional Berghof sanatorium in Davos during the seven years immediately before the First World War. The routine of sanatorium life, the minutiae of early twentieth-century treatments of tuberculosis and its motley sufferers become the vehicle for the hero’s coming of age and an exploration of pre-First World War culture. The novel is not rich in external action and reflections on the arbitral process and much else remain confined to the drawing-room.
Safe yet powerless on their mountain top, Settembrini and Naphta debate illness, the nation state, education, penal reform, free trade and the progress of human history in a series of virtuoso rhetorical exchanges. Settembrini sees mankind as not only capable of progress but also as having achieved great progress during the previous century already, while Naphta sees the human condition as unrelievedly miserable and dependent on divine grace for salvation.
Unsurprisingly, it is Settembrini who favours arbitration and Naphta who condemns it as a vain hope of a deluded bourgeoisie. Settembrini looks to arbitration to resolve disputes, in particular those which will inevitably arise between nation states, rationally and peacefully. To Settembrini, arbitral jurisprudence transcends the constraints of national, positive law and can be derived from natural law or international law, which he conflates in a speech to Naphta:
“What I venerate as natural law or the law of nations, you are free to call ius divinum. The main thing is that there is a higher general law that transcends the positive rights of nation states and that allows for the resolution of disputed interests through arbitral tribunals.”
Naphta’s reaction is skittishly dismissive:
“Arbitral tribunals, indeed! The very idea of them! A bourgeois arbitral tribunal that rules on questions of life and death, divines God’s will and determines the course of history!”
Writing just after the First World War, Mann had an easy time showing up the hopelessness of Settembrini’s beliefs. Europe’s nation states had succumbed to war and carnage rather than appointing tribunals to resolve their disputes. This will not have been lost on Mann’s readers.
Almost a century later, controversy still surrounds the powers that Settembrini attributes to arbitral tribunals: questions remain over the suitability of arbitration for solving political disputes and the authority of arbitral tribunals over sovereign states. Settembrini’s jurisprudence founded purely in reason and transcending national legal traditions might seem a bold demand even to supporters of a transnational lex mercatoria.
Sadly, Settembrini emerges as the loser from this debate. At the end of the novel, after a succession of heated arguments, he and Naphta submit archaically to divine, providential jurisdiction only to subvert it: Naphta challenges Settembrini to a duel, but Settembrini then deliberately shoots past him. Infuriated Naphta thereupon turns his gun on himself. Surely, arbitration would have led to a better outcome.
(This article was first published in ICCA Newsletter #3, August 2013.)
Written by Professor Derek Roebuck (Senior Associate Research Fellow, Institute of Advanced Legal Studies, University of London and Editor Emeritus, Arbitration: the Journal of the Chartered Institute of Arbitrators)
In 1281 the king’s court in London summoned 28 Italian merchants to answer how they intended to pay Hugh la Pape 600 marks they owed him:
After much discussion they came to the following agreement: each party would submit to the arbitration of Francesco d’Accorso, Hugelin de Wik’ and Rikemann Salvaterre, who awarded they pay Hugh 400 marks…, so that good peace should prevail between them, in which award and arbitration each party acquiesced.
The merchants agreed, for themselves and other members of their societies, to pay 40 marks down and that Hugelin and Rikemann should assess the amounts payable by each of the merchants’ “societies”, including Rikemann’s own, and by every other Florentine merchant then in England or to come.
The Florentine merchants challenged the English court’s jurisdiction to make them answer for something done in Florence. They denied the agreement and the arbitration. Francesco testified that the merchants never agreed to the arbitration and that he never arbitrated. Hugelin said the opposite.
The court annulled the award on three grounds: one of the judges being absent when the award was enforced, the remaining judge had no authority to act; as a matter of law, no one need answer in England for a wrong committed abroad; and the arbitrators had disagreed.
Gettus Honesti of Lucca vs. Pelegrin of Chartres in 1291
In 1291, the Exchequer of Pleas heard a claim by Gettus Honesti of Lucca against his agent Pelegrin of Chartres, for 50,000 marks received on Gettus’s behalf. The Sheriff of London swore in as juratores inquisicionis “twelve merchants of the greater societies”. Hugelin de Wik’ was one. They found that Pelegrin was Gettus’s agent. Auditores were appointed: Iterus de Angoulême, Robert of Tadcaster, Barouncin of Lucca and James Betolli. Pelegrin said Gettus’s accounts showed he and Gettus were members of the same society. The court needed further information; it would proceed not under the common law but the lex mercatoria and the custom of the Exchequer. It sent the auditores to inspect the books of Gettus and Pelegrin, declaring it could not understand the language of the accounts or customs of the foreign merchants. There is a hint that the parties’ Lombard attorneys were arguing the distinction between dominus negotiorum rei gestae and negotiorum gestor – not everyday concepts for most common law lawyers.
The auditores, Barouncin dissenting, found that Pelegrin was Gettus’s servant and bound to render him accounts. Pelegrin refused and was imprisoned. The king ordered the court to release him and review its decision, co-opting judges from the Bench next door. The court allowed the parties to appoint arbitrators, Henry of Chartres, Gerard Sabolin and Brache Geraud.
Henry and Gerard reported that the accounts were too difficult, so the court appointed three more arbitrators, one chosen by each party, the third by their agreement. The arbitrators swore to act in good faith. Pelegrin was released.
The arbitrators said they needed more time, which the court allowed. They agreed a schedule of accounts on the last day of term, when the court was literally packing up. The schedule was put in the registrar’s box and a date was set for the award. On that day the parties told the court the arbitrators had heard all their arguments. The schedule was taken out and read. It showed a balance due to Gettus. Pelegrin said he could not pay and was sent back to prison.
The last we hear of the matter is a writ instructing the Exchequer to release Pelegrin to the Duke of Brabant, who assured the king that, when he and Pelegrin got back home, the parties would come to a friendly agreement in the cause of concord and peace.
When the arbitrators in the earlier matter flatly contradicted one another, who should the court have believed? Francesco d’Accorso was professor of law in the University of Bologna and had lectured in Oxford c1275. He was the son of the great Accursius, glossator of Justinian’s Corpus Juris. But Dante placed him in the second zone of the third ring of the seventh circle of Hell among the Sodomites:
Vecchia fama nel mondo li chiama orbi; Their reputation’s of a folk bereft
Gent’ è avara, invidiosa e superba… And mean and spiteful, contumelious…
Priscian sen va con quella turba grama Priscian’s among that wretched multitude
E Francesco d’Accorso anche Francesco, too, d’Accorso.
(This article was first published in ICCA Newsletter # 2, April 2013.)
Written by Klaus Peter Berger (Professor of Law, University of Cologne and Chairman of the Board, German Institution of Arbitration (DIS))
George Washington’s (1732-1799) Last Will & Testament, which he signed on 9 July 1799, only five months prior to his death, is a remarkable document for a number of reasons. It is very long (44 pages in iron gall ink, including property schedule and notes), very detailed, and it contains a carefully drafted arbitration clause which provides:
“But having endeavored to be plain, and explicit in all the Devises, even at the expence of prolixity, perhaps of tautology, I hope, and trust, that no disputes will arise concerning them; but if, contrary to expectation, the case should be otherwise, from the want of legal expression, or the usual technical terms, or because too much or too little has been said on any of the Devises to be consonant with law, My Will and direction expressly is, that all disputes (if unhappily any should arise) shall be decided by three impartial and intelligent men, known for their probity and good understanding; two to be chosen by the disputants, each having the choice of one, and the third by those two. Which three men thus chosen, shall, unfettered by Law, or legal constructions, declare their Sense of the Testator’s intention; and such decision is, to all intents and purposes to be as binding on the parties as if it had been given in the Supreme Court of the United States.”
Click on the image above to view the complete PDF of the original will.
Click here to read the full text of the Will.
The reason both for the explicitness of the document and the inclusion of an arbitration clause was that, even though he never received a legal education and wrote the will without advice or counsel, George Washington possessed legal experience as a Fairfax County court justice and legislator. That experience allowed him to draft an extremely detailed document, dividing his various holdings among many beneficiaries, establishing life estates, etc.
The fact that George Washington included an arbitration clause in his last will was not as unusual as it may seem from today’s perspective. Arbitration had already been a popular means of dispute resolution during George Washington’s lifetime. As early as 1632, Massachusetts became the first English colony to adopt laws supporting arbitration as a means of dispute resolution. Pennsylvania followed in 1705, and in 1768, the New York Chamber of Commerce appointed the first known American tribunal for the resolution of commercial disputes. In the aftermath of the Civil War, claims of people and nations came to be resolved by arbitration. Disputes between former slaves and former slave-owners were quite common following the war, and three-arbitrator panels were often used to settle such disputes. Despite this long history, however, American courts viewed arbitration with judicial hostility prior to the enactment of the Federal Arbitration Act in 1925, a carryover from English courts’ tradition refusing to recognize and enforce arbitration agreements.
Even though the arbitration clause was drafted more than 200 years ago, the main features of modern arbitration practice are clearly visible in the words used by the famous testator: the hope of the drafter that no disputes would arise (which today often results in negligent drafting and “pathological” arbitration clauses), a three-member tribunal with two party-appointed arbitrators, the requirement of expertise and common sense of the arbitrators, the need to determine the will of the contracting parties (or, in this case, of the testator), the notion of the amiable compositeur who is not bound by the law but shall decide what is just and fair (“ex aequo et bono”), and – most important – the equation of dispute resolution by arbitration with adjudication by state courts. In fact, the last words in the arbitration clause resemble Section 1055 of the German Arbitration Law, which provides that an arbitral award “has the same
effect between the parties as a final and binding court judgment”. The clause therefore stands for an early recognition of arbitral tribunals as genuine private courts.
We do not know whether the arbitration clause in George Washington’s Last Will & Testament served its purpose
because it was never invoked. What we do know is that George Washington was not the only US President with a favorable attitude towards dispute resolution by arbitration. Abraham Lincoln, for instance, advised lawyers to keep their clients out of court. He also acted as arbitrator in a number of private controversies, including a boundary dispute between two farmers.
(This article was first published in ICCA Newsletter # 1, December 2012.)