Originally from Behind the Scenes in International Arbitration

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CHAPTER ONE -- THE PARTIES

I. THE "COURAGE NOT TO ARBITRATE"

It is an experience common to many arbitrators that there are some arbitrations that should never have been started. This can be seen, for instance, where the amount in dispute is derisory in relation to the value of the underlying contract, where the claimant’s case is manifestly unfounded, where the contract on which it is based is patently contrary to public policy, or where the reasons for arbitrating are emotional, irrational or divorced from any objective assessment of the merits of the actual claim. In such cases, one might legitimately ask how the parties could not have understood this, and dismissed the idea of filing a request for arbitration in favor of reaching a settlement with their opponent. To give one example, I was once involved in an arbitration where the amount at stake was 2 million euros, in a dispute arising out of a contract with an overall value of almost 400 million euros which had in every other respect been performed to the satisfaction of the parties.

On other occasions, the request for arbitration was, on the face of it, groundless. I can give as an example another case in which I was involved, in which the amount the claimant sought was significantly below the level of the cap on liability binding on the respondent under the contract. The arbitrators were left wondering if the claimant had actually read the contract before filing the request for arbitration.

Lastly, it is not at all uncommon for an agent to start arbitration proceedings to obtain payment of commissions which, quite evidently, are intended to fund kickbacks to be paid to corrupt public officials. Obviously, in such cases, arbitration is not the ideal forum in which to enforce an agreement to bribe. Turpitudo omnia corrumpit: contracts like this cannot be entered into in the expectation that they are legally valid and can be enforced by legal process. The parties already know the attendant risks from the moment they sign the contract, the sole prupose of which is often to secure tax deductibility of the illicit payment.1