1WASEDA LAW SCHOOL
TRANSNATIONALPROGRAM

7 March 2022Arbitration
vsNational Legal System
Masato Dogauchi------------------------------------

Professor, Waseda University Law School
Chief Arbitration and Mediation Officer, JCAA

2Contents

1. Basic Information
2. Merits and Demerits of Arbitration
3. Assistance to and Control over Arbitration
by National Legal System
3.1 Assistance to Arbitration
3.2 Control over Arbitration
3.2.1 Arbitrability
3.2.2 Public Policy
3.2.3 Overriding Mandatory Rules
4. Conclusion

3

 ADR: Alternative Dispute
Resolutions.
National legal systems in generalprovide for two key rules.
1. Basic
 Information

 Effect of arbitration agreement:
Courts must dismiss a lawsuit whose
subject matter is covered by anarbitration agreement.
 Effect of arbitral award: Arbitralawards have the same effect as a
final and binding court judgments.

4

 Origin of Arbitration


1. Basic
 Information

In around twelve century, merchantsof Mediterranean trade tried toescape from feudal court system andmanaged to establish their own
reasonable system of dispute
resolution, that was, arbitration.

5

1. Basic
 Information

 Historical Perspective: From
Hostility to FavorableTreatment
 In seventeen century, an English
court allowed either party toarbitration agreement to file alawsuit anytime before arbitralaward.

6

 Favorable Treatment by National
Legal System

1. Basic
 Information

 In 1923, Geneva Protocol(Protocol on Arbitration Clauses)
was adopted and in 1927 Geneva
Convention (Convention on theExecution of Foreign ArbitralAwards) was adopted.
 In 1958, New York Convention:Convention on Recognition andEnforcement of Foreign ArbitralAwards, 10 June 1958, number ofwhose contracting parties are atpresent 169.

7

 Favorable Attitude by National
Legal System (cont’d)1. Basic
 Information

 In 1985, Mitsubishi Motors Corp. v.
Soler Chrysler-Plymouth, Inc.,
473 U.S. 614 (1985) orderedparties to resolve their dispute
regarding antitrust issues byarbitration.
 In 2020, hearing rooms forarbitration proceedings were built
in Tokyo by funding taxpayers’
money.

8

 Merits of Arbitration incomparison with Court
Litigation:2.
 Merits andDemerits ofArbitration

1. Judgment by person with necessary
special knowledge regarding thedispute.
2. Flexible proceedings.
3. Expeditiousness.
4. Confidentiality.
5. Inexpensive.
6. Neutrality.
7. Cross border enforceability.

9 Demerits of Arbitration incomparison with Court
Litigation:2.
 Merits andDemerits ofArbitration

1. Wrong selection of arbitrator would
result in a wrong arbitral award.
2. No appeal is admitted to rectify awrong award.
3. Risk of delay of proceedings becauseof difficulty in adjustment ofschedules of three arbitrators.
4. Fragmentation of related disputes
because of just a part of them are to
be solved by arbitration and othersby litigation.
5. Risk of Expensiveness.

10

3.1 Assistance to Arbitration
3. Assistance toand Control over
Arbitration
byNational LegalSystem

Courts play certain roles to have arbitration
proceedings go forward when parties cannot
reach an agreement: Selection arbitrator.
 Determination on challenge of arbitrator.
 Examination of witnesses.

11

3.2 Control over Arbitration
Courts intervene in arbitration for the purposeof keep national legal order:

3. Assistance toand Control over
Arbitrationby
National LegalSystem

 Dismissal of arbitrator
 Revocation of Arbitral Awards..

Grounds for revocation are, among others:
Arbitration agreement is not valid;Respondent was unable to defense;

Arbitral award contains a decision on mattersbeyond the scope of the arbitration agreement;

Composition of the arbitral tribunal or thearbitration procedure is illegal;

Dispute was not arbitrable; orContent of the Arbitral Award is contrary to
public policy.

3.2 Control over Arbitration

12

3.2.1 Arbitrability

3. Assistance toand Control overArbitrationbyNational Legal
SystemNew York Convention:
Article II.1
1. Each Contracting State shall recognize anagreement in writing under which the parties
undertake to submit to arbitration all or any
differences which have arisen or which may arise
between them in respect of a defined legal
relationship, whether contractual or not,concerning a subject matter capable ofsettlement by arbitration.
Article V.2 (a)2. Recognition and enforcement of an arbitralaward may also be refused if the competentauthority in the country where recognition andenforcement is sought finds that:(a) The subject matter of the difference is
not capable of settlement by arbitration
under the law of that country; …

13

3.2 Control over Arbitration
3.2.1 Arbitrability
3. Assistance toand Control overArbitration
byNational LegalSystem

New York Convention allows contracting parties
to determine arbitrability respectively.
Arbitration Act of Japan:
Article 13(1)Except as otherwise provided for in laws andregulations, an Arbitration Agreement shall beeffective only when the subject thereof is acivil dispute (…) which can be settled
between the parties.

14

3.2 Control over Arbitration
3.2.1 Arbitrability
3. Assistance toand Control overArbitrationby
National LegalSystemArbitration Act of Japan:
Article 3 of Supplementary Provision• Consumer may cancel an arbitrationagreement regarding dispute over consumer
contract with a business entity.
Article 4 of Supplementary Provision• Arbitration agreement between an individual
worker and a business entity regarding
dispute over working condition and otherlabor related matters is null and void.

15

3.2 Control over Arbitration
3.2.2 Public Policy
3. Assistance toand Control overArbitration
byNational Legal
SystemNew York Convention:
Article V.2 (a)Recognition and enforcement of an arbitralaward may also be refused if the competentauthority in the country where recognition andenforcement is sought finds that:…
(b) The recognition or enforcement of the award
would be contrary to the public policy of thatcountry.

16

3.2 Control over Arbitration
3. Assistance toand Control overArbitrationby
National Legal
System

3.2.1 Public Policy
In order for each country to maintain its publicorder, arbitral award is to be set aside where it isfound that the contents and procedure thereof isagainst its own public policy.
For instance, see, Article 44.1 (viii).

17

3.2 Control over Arbitration
3.2.3 Overriding Mandatory Rules
3. Assistance toand Control overArbitrationbyNational LegalSystem

This term is found in Article 9 of the EU
Regulation on the Law Applicable toContractual Obligations (Rome I).
Article 9 (1) Overriding mandatory provisions areprovisions the respect for which is regarded as
crucial by a country for safeguarding its
public interests, such as its political, social or
economic organisation, to such an extent thatthey are applicable to any situation fallingwithin their scope, irrespective of the law
otherwise applicable to the contract under
this Regulation.

18

3.2 Control over Arbitration
3.2.3 Overriding Mandatory Rules
3. Assistance toand Control overArbitrationby
National Legal
SystemFor instance, in country A, in order tomaintain market order and to protect weaker
parties, abuse of superior bargaining poweris banned and a resulting condition ofcontract is made null and void between theparties. The aggrieved party (X) may file alawsuit against the other party (Y) to thecontract between them claiming for damages
in a court of country A and, if the claim besustained and if necessary, the judgment isenforced.

19

3.2 Control over Arbitration
3. Assistance toand Control overArbitrationby
National LegalSystem

3.2.3 Overriding Mandatory Rules
If the contract between X and Y contains anarbitration agreement in country B, is it
possible for Y to have the court of country A
dismiss the case? Or, the court, admitting X’s
assertion that the country A’s rule on abuseof superior bargaining power is an overriding
mandatory rules, may render a judgment
ordering the arbitral agreement is null andvoid?

20

3. Assistance toand Control overArbitrationby
National Legal
System

3.2 Control over Arbitration
3.2.3 Overriding Mandatory Rules
 What is the relationship among
arbitrability, public policy and overriding
mandatory rules?
 Do the overriding mandatory rules have aneffect to make arbitration agreement nulland void?

21

 Arbitration vs National Legal
SystemEven at present, there are two
fundamentally different views
regarding the position of arbitration in
relation to national legal system.
4. Conclusion
 One is that arbitration should befree from any national legal
system as far as possible.
 The other one is that arbitration
should be subject to national
legal systems.

22

4. Conclusion
 To be discussed.

23

Thankyou.
If you want to know more about
arbitration of Japan, please visit thefollowing website:
https://www.jcaa.or.jp/en/