Arbitration can broadly be categorised into the following categories:
I. International Commercial Arbitration
This type of arbitration is consensual and binding on the parties. That is to say, the parties choose to subject their disputes to arbitration by consent in the form of a written arbitration agreement. The Indian Arbitration Act defines “international commercial arbitration” as an arbitration relating to disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India and where at least one of the parties meets the conditions mentioned in the following sub-section. To understand International Commercial Arbitration, it is important to breakdown the term into:
The beauty of international arbitration is that no one is a foreigner or an outsider to it because of its ‘international’ nature. Many countries follow the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration that provides uniformity and therefore, most of the provisions in the national legislations on arbitration of different countries are similar.
Typically, arbitration is international if:
i. the parties have their places of business in different States; or
ii. the place of arbitration is situated outside the State in which the parties have their places of business; or
iii. the place where a substantial part of the obligation of the commercial relationship is to be performed or the place with which the subject matter of the dispute is most closely connected is situated outside the State in which the parties have their places of business; or
iv. the parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country.
The UAE Arbitration Law is similar to the UNCITRAL Model Law. However, under the Qatar Arbitration Law, it could be ‘international’ even if the subject matter of the dispute relates to international trade or if the arbitration is referred to a permanent arbitration institution the main office of which is located inside or outside of Qatar.
Similarly, the Delhi High Court held that where at least one of the parties is an individual having the nationality of another country or a body corporate which is incorporated in any other country other than India or an association or a body of individuals whose central management and control are exercised in any country other than India or the government of a foreign country, such case would be a case of international commercial arbitration.
However, the Paris Court of Appeal held that the ‘international’ nature of an arbitration must be determined according to the economic reality of the process during which it arises. In this respect, all that is required is that the economic transaction should entail a transfer of goods, services or funds across national boundaries, while the nationality of the parties, the law applicable to the contract or the arbitration, and the place of arbitration are irrelevant.
As the name suggests, the term ‘commercial’ derives from the term ‘commerce’. ‘Commercial’ is defined in the Black’s Law Dictionary as related to or connected with trade and traffic or commerce in general; is occupied with business and commerce.
The term ‘commercial’ has been interpreted differently by courts in different countries. The Indian courts have held that neither the construction of a factory accompanied by the transfer of technology nor a contract of technical know-how is of a commercial nature. The Tunisian Cour de cassation refused to consider as commercial a contract concerning a town-planning programme drawn by architects. International employment contracts have been considered to be a commercial legal relationship by a United States Court.
II. International Investment Arbitration
Foreign direct investment is a major component of the world economy. Foreign investment takes a wide variety of forms, ranging from major infrastructure and industrial projects (e.g., power stations or mines) to financial investments (e.g., equity and debt) to purchases of agricultural or other property; in many instances, these investments play a central role in the development of national economies. When there will be investments, investment-related disputes are bound to arise. However, the national courts in a state, in most of the cases, might not be the best forum for these kinds of disputes because of the lack of judicial independence and ability to act as a neutral forum.
Thus, investment arbitrations provide an excellent alternative to bringing claims against a host State in the national courts. Investment arbitrations are between a host State and investor(s). This is also sometimes referred to as “investor-state” arbitration. Its source is typically bilateral/multilateral investment treaties, free trade agreements or mega-regionals between nations. For instance, if there is a treaty between the United Kingdom (UK) and the State of Qatar which provides for arbitration as a means to resolve disputes then an investor from either UK or Qatar can bring an arbitration claim against Qatar or the UK, respectively under the treaty. Typically, these kinds of disputes involve claims of expropriation without full compensation, unfair or inequitable treatment, or discriminatory treatment of a foreign investor by a State. Sometimes, the arbitrations are also conducted pursuant to the arbitration clauses in state contracts. The International Centre for Settlement of Investment Disputes is one of the preferred forums for these types of disputes. This type of arbitration is without privity.
III. State to State Arbitration
As the name suggests, it is between two nations. It is also known as “inter-state” arbitrations. It often involves issues of public international law like boundary disputes (involving either land or maritime boundaries). The Permanent Court of Arbitration often administers these types of arbitrations either under the UNCITRAL Arbitration Rules or its own arbitration rules while many state-to-state arbitrations are ad hoc and are conducted pursuant to specially-negotiated procedural rules. The arbitration between the two States can also take place under the World Trade Organisation’s dispute settlement mechanism.
Many inter-state arbitrations and awards are not subject to the New York Convention (NYC) due to the reservations limiting the NYC to “commercial” matters or national arbitration legislation. However, where the states arbitrate commercial or financial disputes, the arbitral award is in principle subject to recognition and enforcement under the NYC.
IV. Other Forms of Specialised Arbitrations
Arbitrations can further be divided, inter alia, into the following categories which may also overlap sometimes with one another:
- Sports Arbitration
As the name suggests, sports arbitrations take place in relation to the disputes arising out of a sport. The Court of Arbitration for Sport is one of the preferred forums for the resolution of these kinds of disputes. Broadly speaking, sports disputes tend to fall into two categories: commercial disputes; and disputes of a disciplinary nature. The former covers disputes relating to the execution of commercial contracts, such as those relating to player transfers, broadcasting rights, sponsorship rights or the staging of sporting events. The latter covers alleged breaches of a particular governing body’s regulations designed to protect, amongst other things, the integrity of its sport, such as doping and match-fixing.
- Construction Arbitration
Any arbitration in which the subject matter of the disputes is construction-related can be classified into this category. An arbitration arising from any dispute be it in relation to building an expressway or a Football stadium can fall under this category. In many countries in the Middle East such as Saudi Arabia or Qatar where construction is on the rise, most of the arbitrations are of this type. While the use of other dispute settlement methods such as dispute adjudication boards are relatively new, arbitration has traditionally been used as a method for disputes arising from international construction contracts.
- Shipping Arbitration
In shipping arbitrations, the subject matter of the dispute is related to shipping as the name suggests. It is also known as “maritime arbitration”. All disputes arising out of the shipping of goods, damage to the goods in transit through sea or related insurance claims, amongst others, can fall into this category. Historically, London and New York have been the dominant traditional centres of maritime arbitration. In recent years, Singapore and China have gone to significant lengths to develop arbitral systems and to encourage the maritime community to use their venues for the resolution of maritime disputes.
- Energy Arbitration
In this type of arbitration, disputes arise in the energy sector. A key source for energy arbitrations is the Energy Charter Treaty. The international energy industry is the single largest user of international arbitration. Arbitration in the energy sector can be in the form of an investor-state dispute or a commercial dispute. These types of disputes form a major part of the arbitrations in oil and gas producing nations like Qatar and Saudi Arabia.