MEANS OF INTERFERENCE INTO ARBITRATION BY STATE COURTS: COMPARATIVE ANALYSIS OF THE UNCITRAL MODEL LAW, GERMAN AND HUNGARIAN LAW

Abstract

Nowadays, international commercial arbitration is widely considered as an effective alternative of state court jurisdiction, it has become an essential feature of today’s globalized economy. The more popular and widespread international commercial arbitration gets, the more urgently the question rises: what kind of relationship is there between arbitration and the activity of state courts? Has arbitration been acknowledged as a totally separate institution with is own methods and devices or is it subsidiary to state courts in the meaning of the word that the latter might have some effect on it? Before answering these questions, let us examine the theoretical basis and necessity of arbitration. The first factor is that the legal culture of a certain country affects the possibility of institutionalizing arbitration. Furthermore, it is also one of the logical consequences of party autonomy and freedom of contracting, i.e. if a party obliges himself through private law contracts, he also has the right to enforce performance of the contract by arbitration and not being obliged to turn to state courts. This is required by the idea of constitutional state, too, which implies that in the 21st century, exclusivity of state court jurisdiction is not appropriate because special needs of special sectors must be taken into account as well. The interests of the parties are best fulfilled if there are several ways of dispute resolution besides just state courts. The necessity of arbitration lies in the following factors. First, inflexible and not easily modifiable procedural rules of state court jurisdiction do not harmonize with the interests of the parties who would prefer freer, quicker and more effective procedure and a decision serving their interests at the most. Another factor deriving from strict procedural rules of state court jurisdiction is that the procedure is public which might be disadvantageous and awkward for the parties who would prefer not to ‘publicize’ their confidential business-related affairs. Similarly disadvantageous may be the course of judicial control of court decisions. On one hand it might be preferable because it allows of avoiding incorrect decisions but on the other hand, it can unreasonably prolong the procedure and raises its costs. This is not very useful in a dynamically changing economy. Turning to a broader aspect, in international legal disputes, a party may be afraid of foreign procedural rules, i.e. those of the state court making the decision2. Institutionalization of arbitration has several consequences. Firstly, obligations of the constitutional state will not be shared between state jurisdiction and arbitration: safeguarding legality of dispute resolution and excluding arbitrariness will be a common and mutual obligation of the two institutions. Therefore, state jurisdiction and arbitration are becoming equal and co-operative entities. State jurisdiction stands by arbitration without interfering into it unnecessarily. Requesting the help of state courts is not compulsory but a possibility. Arbitration is a separate legal institution with its own advantages which are the following: - The procedure is quicker, therefore, it does not interfere into the normal course of business for a longer time which might reduce the costs as well. - The procedure is not public, thus, the concerned companies etc. do not have to fear for being forced ‘to wash their dirty linen in public’. - Arbitrators have special skills and knowledge possession of which could not be expected from state court judges dealing with so many different cases and issues. Thus the parties may feel the procedure more convenient and favourable, being aware of the fact that the judges making the decision are experts of the field concerned. - Coming to the closing point of a procedure, another advantage of arbitration is that the decision is utter and it can be enforced immediately (with special exceptions of course) by related international conventions. The issue of the relationship between arbitration and state court jurisdiction arises at this point of the analysis. Regarding the status of the two institutions within the system of dispute resolution, state jurisdiction is situated at one end of an imaginary line of process, while arbitration, as an alternative of state jurisdiction, can be placed somewhere in the middle between state jurisdiction and ‘self-help’ which is situated at the other end of the imaginary line. The ideal relationship between arbitration and state jurisdiction would be a complementary one where both institutions would add something to the other one according to the interests and requests of the parties. State courts have two main functions concerning arbitration: firstly, they ‘roll over’ the arbitration process if it is stuck (e.g. they nominate an arbitrator if one of the parties failed to do it, or play an important role in determining the scope of arbitral jurisdiction); secondly, they have control over arbitration to some extent (e.g. when setting aside an award by the arbitral tribunal). This article will examine the relationship between state court jurisdiction and arbitration according to the UNCITRAL Model Law (hereinafter: MAL), German and Hungarian law. Before the thorough analysis, these sources of law will be introduced briefly. The MAL, accepted on 21 June 19853 and adopted by 42 countries so far4, creates the foundations for the unification of the rules of arbitration by consolidating advantageous characteristics of regulations and international experience so far and by comprehending requirements in order to make arbitration more effective. Therefore, the MAL is eligible for implementation into domestic laws and for winding up ‘double regulation’ by national and international provisions. The MAL is being revised continuously by UNCITRAL Working Group II. (International arbitration and conciliation) which plays an important part in specification, actualization and unification of international commercial arbitration regulations. Both examined countries have adopted the MAL with slight individual differences which will be introduced in this study. The German regulation can be found in Book 10 (Zehntes Buch) of the ZPO (German Code of Civil Procedure) from Art. 1025 to 1048. Hungary, on the contrary, has a separate source of law on arbitration, i.e. ‘Act of the Parliament No. 71 of 1994 on Arbitration’ (‘1994. évi LXXI. törvény a választottbíráskodásról’).