Originally from Arbitration Law of Canada: Practice and Procedure, 3rd Edition

Chapter 1

Introduction to Commercial Arbitration

1.1       HISTORICAL BACKGROUND

Arbitration as a means of settling commercial disputes is as old as trade itself.  Evidence of commercial dispute resolution exists from Egyptian, Greek and Roman times.  References to trade disputes being referred to a third party for resolution are recorded on stone inscriptions and Egyptian papyri.

Concurrent with the development of modern legal systems and the rule of law, merchants developed the lex mercatoria, a body of transnational rules, general customs, principles and practices recognized by merchants and enforced by third parties, whether within national boundaries or without.  The lex mercatoria developed separate and apart from national law, but eventually, the dominance of the rule of law and the imposition of State law resulted in courts assuming an oversight role with respect to these so called “lesser” tribunals.

All States have an interest in maintaining control over the dispute resolution process within their jurisdiction.  Traditionally, this control has been exercised through the courts, which have had the full coercive power of the State to enforce decisions.  Historically, it was felt that to permit a private system of dispute resolution to develop would enable groups to operate outside of State control, and thereby reduce the access of citizens to the full body of rights available through the courts. As with any organization, courts came to jealously guard, and where possible, expand their jurisdiction.

Though States maintained the view that arbitration was not necessarily appropriate for its citizens at large, there was a willingness to recognize that minor disputes in specialized areas, particularly those involving merchants, were capable of resolution outside the court system, so long as the disputes were factual in nature and did not involve serious questions of law.  Legal disputes were solely for the courts to decide. Thus a separate, but not independent system of commercial justice was permitted to develop and evolve.  The first Arbitration Act in England was proclaimed in 1698.