Arbitration has been plagued by the age-old debate of finality versus fairness. In private arbitration, the balance has been struck with the help of the supervisory role adopted by national courts in narrow, exceptional circumstances. Public arbitration, however, lacks a similar supervisory authority, for there is no integrated hierarchy among international courts and tribunals. The costs to public international arbitration have been tangible, for a State party to an improperly obtained arbitral award cannot appeal to a superior authority.
Hence it is faced with two unpalatable options. The first involves repudiating the award unilaterally, with significant costs in its bilateral relations with the award-creditor and to its reputation as a law abider with all other States and with a reduced possibility of being able to use arbitration as a modality of dispute resolution in the future. The second option involves accepting the flawed award. But that, too, has costs to the party concerned and to the arbitral system.
Hope arose with the establishment of the Permanent Court of International Justice (‘PCIJ’) in 1922, which led to numerous scholarly proposals for turning the PCIJ into an appeal authority for inter-State arbitral awards.