In a previous article we have reviewed a decision of a Romanian Court of second instance – namely the Timiș County Tribunal - by which the application of an arbitration clause to interim measures was denied by court, for reason of a previous tacit waiver by the respondent and separately, based on the pathology (hence, inoperability) of the same arbitration clause.
The court did not offer detailed arguments or reasons for its ruling regarding inoperability of the arbitration clause. Based on the comments of the parties, this article is now meant to offer information on the arguments of the parties and to draw a brief (yet informed) hypothesis on the main reasons behind the Timiș County Tribunal ruling.
Arguments of the parties
The claimant requesting the interim measure appealed the decision of the lower court which had granted the respondent’s jurisdictional objection and had hence declined its own jurisdiction. As grounds for the appeal, claimant invoked that the wording rendered the arbitration clause impossible to apply, and therefore inoperative simply because one cannot determine which is the arbitral institution having jurisdiction over the matter, as established by the common will of the parties.
In summary, claimant argued as follows:
- the Romanian wording included in the arbitral clause (i.e. Regulile de Conciliere și Arbitraj ale Curții de Arbitraj a Camerei de Comerț Internaționale - in English: The Rules of Conciliation and Arbitration of the Court of Arbitration of the International Chamber of Commerce) used a full formal name of some institutional arbitration rules that that did not actually exist, neither at the date of the conclusion of the relevant contract, and neither at the rise of the dispute.
- in Romanian the expression Camera de Comerț Internațională (in English – The Chamber of Commerce International) is completely uncommon while the usual wording for designating the ICC as an arbitral forum would be Camera Internațională de Comerț (in English – The International Chamber of Commerce).
- there is no actual Court of Arbitration [of the ICC] as the wording stipulated, but an International Court of Arbitration of the ICC.
- on the date when the relevant contract was concluded, the Rules of Conciliation and Arbitration of the International Court of Arbitration of the ICC had already been abolished and disputes deferred to ICC jurisdiction were subject to a set of arbitration rules that were not joined with any conciliation rules.
- the arbitration clause established Bucharest as seat of arbitration while if they intended to arbitrate under the ICC, parties should have clearly established Paris as place of arbitration, since Paris is the place where the ICC has its European headquarters.
In summary, Respondent submitted that:
- in spite of its lack of precision, the wording used in the arbitral clause is doubtlessly referring, by common will of the parties, to the most reputed and widely known institution International Court of Arbitration of the International Chamber of Commerce.
- when agreeing on ICC jurisdiction over the matter, parties did not have to establish Paris as the place of Arbitration, since it is widely known that an ICC arbitration may have the seat anywhere in the world, as long as the arbitration is administrated under the rules of that chamber of commerce.
- the wording of the arbitration clause is clear enough to draw the conclusion that the ICC is the institution that was referred to in the arbitral clause, albeit the reference to a Court of Arbitration instead of an International Court of Arbitration and also in spite of the fact that in Romanian two of the words that were contained in the official name of the ICC were inverted within the sentence.
- there was excusable negligence from the part of both sides, namely the fact that back in 1999 when the contract was signed neither of the parties were accustomed with correctly wording an arbitral clause, as the contract subject to arbitration had not been part of their core business; in the oral debate, claimant counter-argued that such defence cannot weigh much because it is assumed according to local legal customs that business professionals such as the parties are diligent in all their activity and cannot be excused for such mistakes.
Short analysis and conclusion
Considering the laconic wording of the written ruling, it appears that that the Timiș County Tribunal chose a formalistic approach of the matter and a strict interpretation of the wording of the arbitration clause. The Tribunal agreed that the wording of the arbitral clause (featuring the errors exposed by claimant) made it impossible to determine the arbitral forum that was truly chosen by the parties at the time of signing the contract containing the arbitral clause.
This ruling (which was final for the case) may appear as highly debatable given the general orientation to the contrary, of Romanian civil courts. Such courts are generally known to uphold arbitration clauses where the wording pathology is not profound enough to totally discourage any reasoned demarche in determining the true common intent of the parties when it comes to deferring their dispute to arbitration.
In spite of such general current favouring arbitration, it is now clear that at least one Romanian court of second instance is not willing to enforce arbitration clauses that are formally inaccurate enough to cast a shadow of a doubt over the applicable arbitration rules and over the arbitral institution having jurisdiction over a dispute.
It is needless to say that this situation would have been avoided, had the parties been advised on how to properly establish an arbitration clause.