Introduction
The bitter legacies of the two world wars of the 20th century have been the subject of numerous studies. Both the First World War (WWI) and the Second World War (WWII) are usually associated with human and economic losses. What is not often mentioned is that both wars prompted cross-cultural dialogue aimed at promoting international peace and economic recovery, thereby reshaping the international dispute resolution landscape in ways that nobody could have previously envisaged.
This piece examines this landscape and offers a brief historical account of some of the initiatives that were undertaken in the Interwar period with a view to promoting international trade — which is said to be ‘the lifeblood of the [world’s] economy’ — as well as the post-war consequences of their adoption. In doing so, it will also examine the influence of those wars on the development of international commercial arbitration law and shed light on the role of international comparative law.
In this piece, the notion of international dispute resolution will only cover the resolution of disputes by means of international commercial arbitration pursuant to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), otherwise known as the New York Convention. It will neither cover the resolution of disputes under the Hague Conventions (1899 and 1907) nor the resolution of disputes in accordance with the Washington Convention (1965).
The Relics of the Interwar Period: The Geneva Treaties
WWI had a ‘dramatic impact on … international trade’. After the war, the ‘[r]estoration of commercial trade … was generally sluggish’. Europe’s resource consumption far exceeded its ‘power or inclination for production’. This gave rise to economic interdependence, and international trade appeared to be the most obvious means of supplying European (and non-European) nations with commodities they did not have.
But international trade is not risk-free. For commercial disputes arising between the nationals of different countries, arbitration was the best way to eradicate ‘many of the drawbacks associated with [court] litigation’. The absence of an international legal framework for the resolution of commercial disputes by way of arbitration called for a concerted effort to ‘improve the … conditions under which it could operate’ in an ‘internationally acceptable’ manner.
Under the auspices of the (now defunct) League of Nations, ‘an intergovernmental organization [established] with the aim [of promoting] international cooperation and [achieving] international peace and security’, two international treaties were concluded so as to facilitate the use of international commercial arbitration, namely (1) the Geneva Protocol on Arbitration Clauses (1923) and (2) the Geneva Convention on the Execution of Foreign Arbitral Awards (1927).
In essence, under the 1923 Geneva Protocol contracting states agreed to recognise the validity of arbitration agreements, whereas under the 1927 Geneva Convention contracting states agreed to recognise and enforce arbitral awards resulting from an arbitration agreement covered by the abovementioned protocol. The Geneva treaties, therefore, represented the first steps ‘in the multilateral treatment of [international commercial] arbitration’.
On that basis, it may be argued that ‘[WWI had] a significant impact on [the development of international] dispute resolution’. Alas, the Geneva treaties were ill-conceived, not least because, as Professor van den Berg has put it ‘Their field of application was limited: the parties [were] subject to the jurisdiction of different Contracting States [and] the party seeking enforcement [of an arbitral award had the] burden of proving the conditions necessary for [its] enforcement [twice]’.
Thus, the ratification of the Geneva treaties did not actually result in ‘any perceptible progress in international commercial arbitration’. Even so, the year before WWII Professor Rheinstein wrote that ‘[a]lthough no statistics were available … the major, portion of [disputes] arising out of transactions of international trade [continued to be] handled by arbitrators’.
This suggests that, notwithstanding the lack of a suitable legal framework for the resolution of international commercial disputes, the parties to those transactions had a clear preference for arbitration over court litigation. Hence the Interwar period may be seen as a catalyst for renewed cross-cultural dialogue that would eventually help to revamp the international dispute resolution system in the commercial arena.
It is worth mentioning that Professor Rheinstein’s observations on the use of arbitration were made in the context of a study aimed at examining the notion of comparative law. He argued, among other things, that ‘[c]omparative law, in the sense of systematic observation of the customs and usages of international trade [was] a topic of sufficient practical and theoretical interest’ and that all lawyers should be educated about it.
His observations were made in the first half of the 20th century. Professor Schlesinger once wrote that, during that time, ‘[l]egal scholarship [had] begun its search for the common core of legal systems, and thus [had] sought to redirect the emphasis of Comparative Law toward similarities rather than differences’, which remained the prevailing approach right up until the first half of the 20th century.
The Outbreak of WWII and Its Effects on International Commercial Arbitration
WWI and WWII had a profound impact on the world’s economy, with some studies taking ‘1929 as the benchmark date for measuring recovery from [WWI], and 1973 as the benchmark for recovery from [WWII]’. But post-war economic recovery after WWII differs considerably from that of WWI. Unlike the latter, the former was characterised by an unusually ‘rapid increase in [international] trade’, which ‘marked the beginning of a new era for the world economy’.
The rapidity with which international trade expanded, coupled with ‘the growing demand for speedy, amicable, inexpensive, private, and impartial settlement of disputes [is said to have] furnished a strong impetus for the [further] development of [international commercial] arbitration’. The inadequacies of the Geneva Treaties ‘prompted the International Chamber of Commerce (the ICC) to [draft a proposal for a new convention on international commercial arbitration]’.
In the 1950s, the ICC’s Committee on International Commercial Arbitration, under the chairmanship of Sir Edwin S. Herbert, an English solicitor and a past President of the ICC, concluded that ‘the system established under the 1927 Geneva Convention no longer corresponded to the requirements of international trade’, which only applied to ‘awards [issued under] the rules of procedure laid down in the law of the country where the arbitration took place’.
Sir Edwin S. Herbert was of the opinion that ‘“for an international award to obtain legal sanction, it should be sufficient for it to conform to the procedure laid down in the parties’ contract. [He argued that] Parties who have recourse to international arbitration are exercising rights which spring from the principle of freedom of contract.”’. The ‘ICC submitted [a] Preliminary Draft Convention to the UN in October 1953’, i.e., the Draft Convention on the Enforcement of International Arbitral Awards.
The ICC’s work was a testament to the fact that ‘International Commercial Arbitration follows international trade’, mainly because commercial disputes act as ‘barriers to international trade’. The ICC’s draft was discussed and amended during the United Nations Conference on International Commercial Arbitration, a predominantly intergovernmental conference composed of ‘45 states’, ‘which convened from May 20 to June 10, 1958, in New York’ (the June delegation).
It is important to mention, in passing, that although Sir Edwin S. Herbert — together with Ramandal G. Saraiya, Winthrop Haight, Frederic Eisemann, and Roberta Lusardi — took part in the June delegation, the ICC’s draft convention was prepared by a small sub-committee composed of eight individuals, namely Jean Robert (Chairman), René Arnaud, Ernest Barda, Charles Carabiber, Robert Marx, James Mordan, Pieter Sanders, and Max Shoop.
For reasons of space, it would be impossible to offer a detailed account of their backgrounds and their individual contributions to the ICC’s draft convention. Suffice it to say that Jean Robert was a French lawyer, and so was Charles Carabiber; René Arnaud was one of the co-founders of the ICC; Ernest Barda was an Italian lawyer; Robert Marx was a German lawyer; James Mordan was an English lawyer; Pieter Sanders was a Dutch lawyer, and Max Shoop’s background is not known.
The ‘deliberations of the Conference … resulted in [the New York Convention]’, which the late Kofi Annan, the seventh Secretary-General of the United Nations, once described as ‘one of the most successful treaties in the area of commercial law’. The Convention was conceived during the ‘“Golden Age of Capitalism”, a period of economic prosperity extending from the end of [WWII] … to the early 1970s’.
The Impact of the New York Convention on Future Arbitration Related Works
The New York Convention, which is in itself a by-product of the two world wars, has exerted a tremendous influence on the advancement of international commercial arbitration. In the second half of the 1960s, it became clear that the success of any mechanism ‘for the settlement of disputes arising from international trade … [would] largely depend on the existence of a [supranational] system of [law]’, which the Convention sought to provide.
At the time of writing, the New York Convention has been ratified by over 170 contracting states. It establishes ‘a constitutional framework for the conduct of international commercial arbitrations around the world’. Yet the establishment of such a framework was not an easy task: ‘delegates [from common and civil law countries] had to comprehend concepts familiar in one state that had no counterpart in others’ (Bergesen v. Joseph Muller Corp. 710 F.2d 928 (2d Cir. 1983)).
The New York Convention, now a sexagenarian treaty, has laid the basis for various arbitration-related initiatives. These include the European Convention on International Commercial Arbitration (1961); the Inter-American Convention on International Commercial Arbitration (1975); the UNCITRAL Arbitration Rules (1976), as revised in 2010; and the UNCITRAL Model Law on International Commercial Arbitration (1985), as amended in 2006.
The UNCITRAL Model Law, in particular, has been influential in shaping a large number of countries’ legislation on international commercial arbitration, i.e., ‘88 States in a total of 121 jurisdictions’. International commercial arbitration is a discipline which opened cross-jurisdictional dialogue between a large number of academics and arbitration practitioners who have embraced ‘a comparative mindset’, to the extent that, for some, such a discipline ‘has radically transformed the role of comparative law’.
The intersection between comparative law and international commercial arbitration is perhaps most palpable in the leading works on the subject matter, viz., (1) Gary Born’s three-volume treatise on International Commercial Arbitration; (2) Redfern and Hunter on International Arbitration; (3) Poudret and Besson’s textbook on Comparative Law of International Arbitration; and (4) Fouchard, Gaillard, Goldman on International Commercial Arbitration, all of which adopt a comparative law approach.
Whilst some ‘scholars have expressed “deep skepticism” about any relationship between comparative law and international law’, it is clear that international commercial arbitration is a good example of how comparative law has been — and may be — used not only to contribute to the uniform application of an instrument of international law, but also to find practical solutions to some of the world’s problems, whether in the field of international dispute resolution or otherwise.
The Notion of ‘Comparative International Law’ vis-à-vis International Commercial Arbitration
The New York Convention is ‘the keystone on which the entire edifice of international commercial arbitration is built’. It sets some internationally accepted standards for the harmonisation of arbitration law between contracting states. But it also allows for a certain degree of consistency as far as the judicial treatment of arbitration-related cases is concerned. This ‘has heightened the importance of knowing how other jurisdictions have dealt with similar problems’.
Such an enquiry can only be effectively carried out through the prism of ‘comparative international law’. For some, it ‘entails identifying, analyzing, and explaining similarities and differences in how … different legal systems understand, interpret, apply, and approach international law’. It is also the best tool to compare how the various different contracting states have sought to meet the objectives that the New York Convention, as an international treaty, is intended to achieve.
Thus, international commercial arbitration ‘as an institution owes much to the endeavor of comparative law technicians whose consensus-based texts have significantly [built the foundations for its success]’. However, as Professor Strong has noted: ‘the benefits of comparative law are far from universally appreciated. In some cases, judges, arbitrators, advocates and scholars need to overcome unconscious biases that lead to a preference for materials that are most akin to those used in their home legal system’.
Conclusions
History demonstrates that the world’s nations have tackled the economic calamities stemming from two devastating wars with a remarkable dexterity. This is particularly true as far as the promotion of international trade is concerned. But this should not detract from the inherently catastrophic consequences of any war. Once an armed conflict has come to an end, there are neither winners nor losers, but only casualties, unspeakable suffering, and a trail of destruction.
It is impossible to offer any meaningful observations as to what the evolution of international commercial arbitration might have been if the two world wars had not occurred. Nor is it possible to determine whether the history of such a mechanism would have taken a different course. What is clear, though, is that without recourse to comparative law, it would be rather difficult to facilitate the uniform application of international commercial arbitration’s regulatory framework.
Posted by Julio César Betancourt (Tutor in the LLM Programme in International Business and Commercial Law, BPP University’s Law School).
This piece belongs to Season 2 of the “Cross-jurisdictional dialogues in the Interwar period” series dedicated to less-known legal transfers which have had a palpable impact on the advancement of the law. The Interwar period was a time of disillusionment with well-established paradigms and legislative models, but also a time of hope in which comparative dialogue and exchange of ideas between jurisdictions thrived. The series is edited by Prof Yseult Marique (Essex University) and Dr Radosveta Vassileva (Middlesex University). To access the other pieces from this series, either select the ‘Interwar Dialogue’ category or click on the #Series_Interwar_Dialogue tag on the BACL Blog.
Suggested citation: Julio César Betancourt, ‘International Dispute Resolution During the Interwar Years — Overcoming the Evils of War Through Cross-Cultural Dialogue’, BACL Blog, available at https://british-association-comparative-law.org/2024/05/10/international-dispute-resolution-during-the-interwar-years-overcoming-the-evils-of-war-through-cross-cultural-dialogue-by-julio-cesar-betancourt/
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