We may thus see here a substitution of arbitration by commercial courts, which are specialised courts, evincing a passing over from self-regulation to state power of the judicial system. Nowadays, it would be worthwhile to explore how such a substitutive transition has taken place or can take place from state courts to arbitration, especially in those areas where there are no properly functioning commercial courts or where the truly international character of an affair or other reasons call for arbitration.
In any case, the process of substitution, both historical and functional, seems to be worth considering.
At this juncture, I would like to elaborate on some thoughts involving the quality of the judges, the proceedings, the participation of the parties, the speed of the proceedings, the quality of the judgement and its finality. With these thoughts, I will now focus on the core of the theme entrusted to me today.
I might say that this subject is also a matter of personal concern for me as I have been serving not only as an arbitrator, but also as a judge at the commercial court of Zurich for more than 20 years, and I dare to speak partly out of my own experience and observations.
a) Selection of judges
It is my opinion that having a mixture of professional judges (experienced lawyers) and experts in the field of a case present in the court is not only very useful but also something that improves the quality of proceedings. We find this in the distinction made in the Anglo-Saxon world between "public" and "industry"
arbitrators.5 In order to avoid conflicts of interest, for example, the NYSE and the NASD rules provide that in an arbitration panel, the industry arbitrators, i.e., finance
4 Cf. H. Krause, Die geschichtliche Entwicklung des Schiedsgerichtswesens in Deutschland, Berlin 1930, p.
70 et seq.
5 See, e.g., L. Jaeger/D. Dupuis, Arbitration in the Financial Marketplace, in: Arbitration, Finance and Insurance - Special Supplement 2000, ICC International Court of Arbitration Bulletin, Paris 2000, p. 28.
1 fides est primum
practitioners and practical experts, are always the minority compared to public arbitrators, i.e., arbitration practitioners. 6
My employment of the term "expert" does not merely signify what an American judge has stated: "An expert is a man from another town." I believe that an expert must be a person who is knowledgeable in the technicalities of the dispute which has arisen. Such eo-judges are helpful in many ways. They can hold a dialogue with the parties and within the court and allow, in many cases, for a shortening of the evidentiary proceedings. They can also easily evaluate the value or the bias of the expert opinions of the parties. (Here I would not dare to repeat what another American judge said: "There are liars, bloody liars and experts.")
I think that lawyers are very useful people but they have, as do other people, their limits, and if they engage in arbitration as a means to learn about new things, they also need their time; this is an obstacle for the requirement of speed.
On the other hand, to entrust a non-lawyer with the management of the conduct of a case is not recommended.
For fmancial arbitration, the panel composition from both sides, i.e. trained lawyers and practitioners, seems to me essential.
b) Proceedings
Proceedings in commercial courts are, on one side, usually more open and less formal than proceedings in ~ormal state courts. On the other side, they are nevertheless shaped along rules of a procedural code, something which introduces a certain firm conduct into the going of the case. 7
To find the balance is not easy, and it might sometimes tip to one side or the other.
All in all, I think that such a mixture of firm rules and flexibility is desirable, also in financial arbitration.
6 Rule 10308 of the NASD Uniform Code of Arbitration; Rule 634 of the NYSE Rules.
7 Cf., e.g., P. Nobel, Zur Institution der Handelsgerichte, ZSR 102 (1983) Bd. I, S. 149.
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In arbitration proceedings, I sometimes miss the clear procedural points of reference and the attitude of "anything goes"; this might lead to lengthy and cumbersome discussions (which do not improve in quality when they are conducted under the heading of the right to be heard).
Looking at the statistics of the commercial court of Zurich, it is noteworthy that in 2002, around 60% of the cases were settled, and judgements on the merits comprised only 10% of the cases. Settlement discussions, at an early stage, seem to be something useful.
I sometimes wonder why there is a reluctance in arbitration to foster a settlement with the more or less active help of the court.
I must confess that my memory of hearing witnesses in commercial cases is bleak. I only remember one bank director loosing his nerves in lying and thus turning a case around. In another matter, an investment adviser turned out to be a jobless actress revealing to the court by her appearance why the plaintiff had invested against the will of his wife. (The whole story was a leading Federal Court case under the heading of responsibility for bad organisation of investments in derivatives. The German text speaks about "Miss-organisation", deliberately written without a hyphen).
The possibilities of settling very much depend, in my opinion, not only on the intentions and the role of the court, but also on the persons present. The commercial court of Zurich there[ore requires the presence of responsible persons from the litigating firms. They not only hear legal reasoning, but also take business·
considerations into account. The managers of a firm might be impressed by the unfiltered hearing of the considerations of the court and see the implications and risks of the continuation of the proceedings. The worst is the mere presence of persons, not seldom in-house lawyers, whose destiny is linked, one way or the other, to the origin or the outcome of the case.
All such experiences must be considered when talking about arbitration, and especially about arbitration in the field of finance, where knowledgeable handling of a dispute and the speed of ending it are, in my view, essential.
>rocedural points of
If we take the requirement of a selection of professionals as ( arbitral) judges seriously, there are clear advantages to the so-called institutional arbitration: the designation of the arbiters and also the development and the outcome of the proceedings are somewhat controlled.
Finance is, to a large extent, a highly specialised field requiring professional knowledge and experience. There could be a model case for the development of institutional arbitration out of a necessity; however, as I see it, a strong Finance Arbitration Court does not yet exist. Also, the institution of "EuroArbitrage", which we will hear a:bout, is a necessary recent set up worthy of development and increased attention. 8