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Arbitration procedure : identifying and applying the law governing the arbitration procedure

KAUFMANN-KOHLER, Gabrielle

KAUFMANN-KOHLER, Gabrielle. Arbitration procedure : identifying and applying the law

governing the arbitration procedure. In: van den Berg, Albert Jan. Improving the efficiency of arbitration agreements and awards : 40 years of application of the New York

Convention . The Hague : Kluwer Law International, 1999. p. 356-365

Available at:

http://archive-ouverte.unige.ch/unige:44075

Disclaimer: layout of this document may differ from the published version.

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Identifying and Applying the Law Goveming the Arbitration Procedure - The Role of the Law of the Place of Arbitration

*

Gabrielle Kaufmann-Kohler

I. ISSUES AND SCOPE OF REPORT

In order to assess the role of the law of the place of arbitration, this Report wi11 address two main issues. First, how does one idcntify the law goveming the arbitration procedure (II). Second, how docs one apply the law so identified, or, in other words, what are the contents of such law (Ill).

To answer the identification issue, we will need to consider the following aspects.

First, what are the relevant connecting factors betwcen a given arbitration and a certain law (ILI). Tuen, which one of these factors prevails (II.2). The answer- it is nota secret - will point to the law of the place of arbitration; it wi11 favor the territorial connection as opposed to the one derived from the parties' choice of an arbitration 1aw. But what is the place of arbitration? A legal connection or a physical location? And how is it selected? In a legal system relying on the territorial connection, is it acceptable that the legal and physical places do not coincide (II.3)? Before we corne to a conclusion on the identification issue, we will look into two ne\v types of arbitration, i.e., sports arbitration (11.4) and arbitration conducted online (!1.5), bccause they shed some light on the evolution of the rolc of the place of arbitration. We wilJ then summarize our results (II.6), which will necessarily lead us to answer the question \Vhether the parties can delocalize their arbitration, i.e., opt into a national lex arbitri (including rules on court control) of a country other than the place of arbitration. Sirnilarly, we will briefly touch on de- nationalization, i.e., whether parties can opt out of any national law.

To answer our second issue of the application of the law of the place of arbitration, we \Vill review the contents of a number of representative laws on arbitration legislations (III.J to 111.3). It is no surprise that an overriding uniform principle will emerge from such review, which is the principle of party autonomy (or, alternatively, arbitrator autonomy) in proccdural matters. But any autonorny, any freedom, bas its limits. What are the limits here? Again, although the tenninology differs, the limits appear largely unifonn: due process constitutes the hmit. Does this limit derivc from the human rights entitlement to a fair hearing (ITI.4), and how are due process and procedural autonomy irnplemented un der national law (IIT .5)?

When reviewing these topics, we will focus on the proceedings before the arbitrators.

This focus provides a well-defincd framework for our investigations and more than sufficient materials and issues. Hence, we will dellberately disregard the formation of the

* Professor; attorney; Geneva, Switzerland; Member of JCCA.

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THE LAW GOVERNîNG THE ARBJTRATION PROCEDURE: G. KAUFMANN-KOHLER

tribunal, the qualifications of the arbltrators and the problems of bias and removal.

lndeed, all of these aspects are closely linked to the intervention of state courts into the arbitral process, a subject outside the scope of our Report.

We will also !cave aside provisiona! remcdies ordered by the arbitrators, which is a topic in and of itself. Finally, \Ve will not dwell on setting aside and cnforcemcnt pro- ceedings in order to avoid overlapping with other Reports. However, sometimes these issues will be unavoidab!e. Indeed, in order to assess whether a given procedura1 rule is part of due process and is, thus, a mandatory requlrement imposed by the applicable arbitration law, it may be necessary to revicw whether a court will sanction non- comphance \Vith such a rule by setting aslde or rcfusing to enforce the award.

Lastly, we will approach this topic by deliberately focusing on rccent developments and on features common to a large number of !egal systems, rather than on differences.

This is because recent common features rcveal general tendencies and allo\v an assess- ment of the overall evolution.

II. IDENTIFYING THE LAW GOVERNING THE ARBITRAL PROCEEDINGS

1. The Alternatives: The Law of the Place of Arbitration or the Law Chosen by the Parties?

What law govems the proceedings beforc the arbitrators? An easy answer, and in practicc often a sufficient one, would be: the ru1es chosen by the parties, for instance, instltutional arbitration rulcs, or the rules set by the arbitrators. But this is not the answer we are looking for. We are looking for the national law,1 sornetimes called !ex arbitri, which grants the parties or the arbitrators the freedorn to set the rules, which may also impose some restrictions on them, and which - even more importantly - will control the use of that freedom and sanction any abuses by setting aside the award.

To find the law goveming the arbitration proceedings we must first identify the possible connecting factors painting to that Iaw. Conceptually, there are two primary connecting factors available: the place of arbitration and the parties' intent. The first factor emphasizes the procedural nature of arbitration (hke a court, the arbitration has its closest connection to the State of its location), while the second factor reflects the consensual or contractual aspect of arbitration (like a contract, the arbitration is govemcd by the law ch os en by the parties).

Even when the connecting factor is the place of arbitration, the parties are often said to be authorized to choose a foreign arbitration law to govem the proceedings.2 Howcver, unlike the situation when the connecting factor is the intent, such a choice remains within the hrnits of the mandatory rules of the place of arbitration, the application of which is

1. We will prlmarily assume that the applicable law is a national one; on a possible transnational foundation, see below Section Jl.6 in fine.

2. E.g., Pierre LALIVE, Jean-François POUDRET and Claude REYMOND, Le droit de l'arbitrage interne et international en Suisse (Lausanne I 989) p. 350.

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WORKING GROUP li: ACHIEYING EFFICIENCY WITHOUT SACRIFICING DUE PROCESS

subject to the control of the courts at the same place. It is no different in this respect from a mere reference to institutional mies.

2. The Solution: Predominantly, the Law of the Place of Arbitration

Bearing in mind this opposition between the place of arbitration and the parties' intent, a traveller engaging today on a world tour of international commercial arbitration is likely to observe that a majority ofrecently enacted statutcs adopts the principle ofterritoriality, i.e., gives the preference to the connecting factor of the place of arbitration. Among the more recent arbitration texts, the UNCITRAL Mode! Law on International Commercial Arbitration (the Mode[ Law) is an inescapable first stop on this tour. lt has adopted the territoriality principle as the sole connecting factor in its Art. 1(2), which reads as follows:

"The prov1s10ns of this Law, cxcept Arts. 8, 9, 35 and 36 [none of which introduces the connecting factor of the parties' intent], apply only if the place of arbitration is in the territory of this State".

Not surprisingly, the issue of the Mode! Law's territorial scope arose in the course of the discussion on the jurisdiction of the courts in aid and control of arbitration. Should the parties be entitled to opt out of the Mode! Law being the law of the place of arbitration by agrceing on a foreign procedural law? The main reason for deciding against this possibility was the risk of conflicts between the jurisdiction of the courts of the State whose law had becn chosen and that of the courts at the place of arbitration. Moreover, most national laws on arbitration did not contain this possibility and, where it was provided, it was seldom uscd. Finally, allowing such a choice would not have served much of a purpose, sincc the Mode! Law grants the parties broad procedural autonomy in any event.3

The Mode! Law has been a successful undertaking. With changes and adjustments which range from practically none4 to very important ones,5 legislation has been enacted on the basis of the Mode! Law in man y countries, including Australia, Bahrain, Bermuda, Bulgaria, Brazil, Canada (by the Federal Parliament and the Legislatures of ail Provinces

3. On the scope of the Mode! Law, see primarily Howard M. HOLTZMANN and Joseph E. NEUHAUS, A Guide to the UNCITRAL Mode/ Law 011 International Commercial Arbi1ratio11: Legislative 1-!istory and Commentmy (Deventer/Boston 1989) pp. 26-39; Aron BROCHES, "Commentary on the UNCITRAL Model Law'', P. SANDERS and A.J. van den BERG, eds., ICCA lmernationa/ Handbook on Commercial Arbitrntion, vol. IV, supplcment 11, p. 5 at p. 24 (hereinaftcr llandbook); Gabriele l IUSSLEIN-STICH, Das UNCJTRAL-Mode//gese/z über die inlemalionale Hmulelsclriedsgericlrts- barkeit (Cologne/Berlin 1990) p. 19 et seq.; Gerold HERRMANN, "UNCITRAL Adopts Model Law on International Commercial Arbitration'', Arbitration International (1986) p. 3 et seq.

4. E.g., the Canadian (Federal) Commercial Arbitration Act, R.C.S. (1985), C-34.6, which was the first piece of legislation enacted on the basis of the Mode! Law, only dclctcd the reference to

"international" arbitration.

5. E.g., Brazilian Law No. 9.307 of 23 September 1996.

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THE LAW GOVERNTNG THE ARBITRATJON PROCEDURE: G. KAUFMANN-KOHLER

and Territories), Cyprus, Egypt, Finland, Germany, Guatemala, Hong Kong, Hungary, lndia, Iran, Kenya, Lithuania, Malta, Mexico, New Zealand, Oman, Nigeria, Peru, the Russian Federation, Scotland, Singapore, Sri Lanka, Tunisia, Ukraine, several states within the United States including Califomia, Connecticut, Oregon and Texas, and

Zimbabwe. 6 .

Does this mean that all these States now share the territoriality principle as the exclu- sive connecting factor? If the great majority does,7 some have made adjustments to allow for a mixed approach combining the tests of the place of arbitration with that of the parties' intent. So, for instance, the 1994 Egyptian Arbitration Act applies "when such an arbitration is conducted in Egypt, or when an international commercial arbitration is conducted abroad and its parties agree to submit it to the provisions of this Law",8 the Cairo Court of Appeal having jurisdiction to vacate ail awards, whether rendered in the country or abroad.9

The parties are th us authorized to opt into the law and the related jurisdiction of local courts, no provision being made for their opting out. In other words, while the parties' intent may serve to extend the reach of the law to cover arbitrations conducted beyond the national border, it cannot restrict its application and remove from its scope arbitrations conducted locally. Sorne other countries bave adopted similar solutions, e.g., Tunisia,io Oman, 11 Romania.12

6. Information found in major part on UNCITRAL's website at http://www.un.or.at/uncitral, updated on 16 March 1998.

7. E.g., Sect. 2(2) lndian Arbitration and Conciliation Act, 1996 (No. 26 of 1996); Art. 1 (1) Law of the Russian Federation on International Commercial Arbitration of 14 August 1993; Sect. 3(1) Inter- national Arbitration Act 1994, Republic of Singapore, No. 23 of 1994; Sect. 34C Hong Kong Arbitration (Amendment) Ordinance 1996 (No. 75 of 1996); Sect. 1 Hungarian Act LXXJ of 1994 on Arbitration; Art. 1 ( 1) Bulgarian Law on International Commercial Arbitration of 5 August 1988, as amended on 2 November 1993; Art. 1 (1) Uk:rainian Law on International Commercial Arbitration of 24 February 1994.

8. Art. 1 Law No. 27 of 1994, Conceming Arbitration in Civil and Commercial Matters.

9. Art. 9(2) of the Law referred to in fn. 8.

1 O. Art. 47(2) Arbitration Code promulgated by Law No. 93-42 of 26 April 1993, jurisdiction for setting as ide awards being vested in the Tunis Court of Appeal (Art. 78(2)); see also Kalthoum MEZIOU and Ali MEZGHANI, "Le code tunisien de l'arbitrage", Rev. arb. (1993) p. 540 et seq.

11. Arbitration Act of 27 July 1997, which follows closely the Egyptian Act; see Abdul Hamid EL- AHDAB, "The New Arbitration Act of the Sultanate of Oman", 12 Mealey's International Arbitration Report (1997, no. 12) p. 19.

12. Art. 369(1) Code of Civil Procedure, as amended by Law No. 59 of 23 July 1993, provides that an international arbitration may "take place in Romania or in another country". However, it is unclear which court in Remania would have jurisdiction over a setting aside action, if at ail. Arts. 365 and 342 provide for the court immediately above the one which would have jurisdiction on the merits in the absence of an arbitration agreement. ln an international setting, there may be none. See Victor 13ABIUC and Octavian CAPA TINA, "L'arbitrage commercial international en Roumanie", Bulletin de la Cour internationale d'arbitrage de la CCI, Special Supplement "L'arbitrage commercial international en Europe" (November 1994) p. 119, who state that the action must be brought at the place of arbitration, which is of no help either.

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\VORKING GROUP If: ACI-IlEVING EFFJCIENCY WJTHOUT SACRIFICTNG DUE PROCESS Among the 1nany countries that have taken over the Model Law with the sole territorial conncction, the cvolution in India and Gennany is particularly telling. Pursuant to its Sect. 2(2), the provisions of the Indian Arbitration Act of l 996 dealing with arbitration proceedings (as opposed to en forcement offoreign awards) only apply "where the place of arbitration is in India".13 Those provisions includc rulcs on actions for setting aside avvards and rclatcd court jurisdiction.14 In othcr vvords, Indian courts will have jurisdiction to set asidc avvards made in procccdings taking place in India. This rcpresents a significant change from earlier case \aw.

ln a 1nuch criticized15 case, National Thermal Power Corporation v. The Singer c:on1pany, handcd down in 1992,16 the Indian Suprcmc Court hcld that Indian courts had jurisdiction ovcr an action to set asidc an award rendered in an TCC arbitration in London, which was not deemed a forcign award, on the ground that the arbitration agreement was subject to lndian law.17 Under the ne\v Act, the outcome would now be diffcrcnt, which shows the shift to the exclusive territoriality principle.

An even more radical change can be witncsscd in Gcnnany. Under the so-called procedural doctrine or Verfahrenstheorie of the old Book 10 of the ZPO, the parties were entitlcd to choose an arbitration \aw other than that of the situs. So for instance, thcy could agree to conduct an arbitration in German y undcr French arbitration law. By doing so, they ruled out the application of all Gcnnan arbitration rulcs, including mandatory or ordre public ru les, with the award being considered foreign for en forcement purposes in Gem1any. rn They could also do the reverse, which is the reason why Gerrnany ratified

13. See fn. 7.

14. Sects. 34 and 2(1)(e). This latter provision vests jurisdiction in the courts which would have jurisdiction on the merits in the absence of an arbitration agreement, which may not always exist in

lnteniational matters.

15. E.g., Jan PAULSSON, "The New York Convention's Misadventures in lndia'', 7 Mcaley's Intcn1ational Arbitration Report (1992, no. 6) p. 18; R.S. PA THAK, "\.Vhen and Where Do National Courts Rcflectan International Culture When Deciding Issues Relating to International Arbitration?", A..l. van den BERG, cd., International Dispute Resolution: Towards an International Arbitration Culture, ICCA Congress Series No. 8 (1998) p. 183.

16. Albert Jan van den BERG, ed., ICCA Yearbook Commercial Arbitration XVIII (1993) p. 403 (hcreinafter Yearbook).

17. As a result of a contractual choice of substantive lndian law. l-lere is a quotation of the main passage of the decision:

the oveJTiding principlc is that the courts of the country whose substantive laws govern the arbitration agreement arc the con1petcnt courts in respect of all mattcrs arising under the arbitration agreement, and the jurisdiction exercised by the courts of the seat of arbitration is merely concurrent and not exclusive and strictly limitcd to matters of procedurc. All othcr n1attcrs in respect of the arbitration agreement fa!! within the exclusive competence of the courts of the country whose laws govern the arbitration agreement"

Yearbook XVIII (1993) p. 407.

18. Peter SC! lLOSSER, Das Recht derprivaten inlernalionalen ,\'chiedsgerichtsbarkeil, 2nd ed. (Tubingen 1989) p. 569; Karl-Heinz BÔCKSTIEGEL, "Zu den Thcsen von cincr 'dclokalisicrten' internationalen Schicdsgerichtsbarkeit", Festschrift Oppenhof(Munich 1985) p. 4 et scq.; Richard H. KREINDLER

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THE LAW GOVERNJNG THE ARBlTRATlON PROCEDURE: G. KAUFMANN-KOHLER the New York Convention wlth the reservation that awards rendered abroad undcr German procedural law would be considered Geî111an and be subject to setting aside proceedings in Germany.

The procedural doctrine no longer stands.19 Pursuant to the new Sect. 1025, Book 1 O wi11 apply if "the place of arbitration ... is situated in Germany". As a consequence, parties are no longer cntitled to split between place and law.2

°

For reasons of "legal clarity",21 Geî111an law has thus switched from a pure intent-baséd connecting factor to a strictly territorial connection.

Numerous other recent statutes, whlch are not shaped after the Model Law, also follow the territoriality principle. So, for instance, the provisions of Chapter 12 of the Swiss Private International Law Act of 1987 app1y "if the scat of the arbitral tribunal is in Switzerland".22 Wording of similar import is found in the Dutch,23 the Enghsh,24 the Italian,25 the Portuguese,26 the Austrian Arbitration Acts,27 as well as the Swedish Draft Act28 Further a\.vay, China's first arbitratîon statute enacted in 1994 shows a particularly strong inclination to tenitorîality.29

Comparcd to thesc statutes, French and Belgian Jaw are often said to be exceptions.

This is true only ln part_ Let us first look to France. Art. 1494(1) of the New French Code of Civil Procedure provides that the parties may "define the procedure to be followed in the arbitral proceedings", including by submitting it "to a givcn procedural la\v". This rule is a restatement of well-settled case law, which acceptcd that an

and Thomas MAHLICH, "A Foreign Perspective on the New German Arbitration Act", Arbitration International (1998) p. 72 et seq. and German Supreme Court cases referred to therein; Herbert ICRONKE, "Internationale Schiedsvertàhren nach der Reform", Recht der Intemationa!en Wirtschaft (1998, no. 4) p. 260.

19. BÔCKSTIEGEL, KREINDLER and MAHLICH, KRONKE, !oc. cil., fn. 18.

20. KREINDLER and MAHLICH, op. cil., fn. 18, pp. 82-84; Karl Heinz BÔCKSTIEGEL, "An Introduction to the New German Arbitration Act based on the UNCITRAL Mode] Law", Arbitration International (1998) p. 23.

21. Comments accompanying the draftact, Gesetzesentwurfder Bundesregierung, Drucksachc 13/5274 31, quotcd by KREINDLER and MAHLICH, op. cil., fn. 18, p. 83.

22. Art. 176(1).

23. Art. 1073(1) Arbitration Act 1986.

24. Sects. 2(1) and 3 Arbitration Act 1996.

25. Art. 832 Code of Civil Procedure, as amended by La\v No. 25 of January 1994, does not require it expressly, but such requirement is inferred from the genera\ system of the new rules, including in particular Art. 816, see Gabriele MECARELLI, "La spécificité de la réforme italienne de l'arbitrage international", Laurent GOUJFFÈS, Pascale GIRARD, Petri TAIVALKOSKI and Gabriele MECARELLI, Recherches sur l'arbitrage en droit international et comparé (Paris 1997) p. 224.

26. Art. 37 Law No. 31/86 of 29 August 1986 on Voluntary Arbitration.

27. Art. 582 Code of Civil Procedure, as amended by Ferlerai Law of 2 February 1983.

28. Art. 47 and to somc extcnt also Art. 48, published in particular in Arbitration International (1994) p.

429 with commcnts by Gillis WETTER, and in Bulletin ASA (1994) p. 261.

29. Arbitration Law of the People's Republic of China of 31 August 1994. The principle of territoriality seems implied because of the connection to local arbitration bodies, specifically for international arbitratîon to CIETAC and CMAC; see in particular TANG HOUZHI and WANG SHENG CHANG,

"The People's Republic of China", Handbook, vol. J, supplement 25, p. 4.

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WORKING GROUP II: ACHIEVJNG EFFICIENCY W!THOUT SACRIFICING DUE PROCESS arbitration held in France be submitted to a foreign law and vice versa.30 This court practice culminated when the Paris Court of Appeal decided in GNMTC v. Gotaverken handed down in 198031 that an ICC award in an arbitration held in France was not subject to setting aside proceedings in France, because the arbitration was not govemed by French arbitration law, neither the parties nor the arbitrators having expressed such an intention. .

Although this solution was a consistent implementation of the connecting factor based on the parties' intent, the drafters of the new arbitration provisions enacted the following year did not adopt it. On the contrary, they provided for the jurisdiction of the French courts over setting aside actions, whenever the award was rendered in France.32 This implies that, whatever the foreign law goveming the proceedings, the parties and the arbitrators must comply with mandatory French rules of procedure as they are reflected in the grounds for setting aside awards.33 In other words, even in France, the law of the place of arbitration submits the procedure before the arbitrators to certain minimum requirements: a situation in which the end result is identical to the one found in many jurisdictions applying the territorial principle.34

The same does not hold true in connection with Belgian law. Art. 1717 of the Judicial Code -35 the future of which is at present uncertain -36 rules out any action for setting aside awards in Belgian courts, unless at least one of the parties is "either a physical person having Belgian nationality or residing in Belgium, or a legal persan formed in Belgium or having a branch or other seat of operation there".

As a consequence, an arbitral tribunal sitting in Belgium does not need to take into account even the minimum procedural requirements embodied in the local grounds for annulling awards. The arbitration here is truly unbound.37 This does not mean that the arbitrators' whims are equally so. A party still has the right to resist en forcement of the

30. For a description of, and citations to, the cases, Matthieu de BOISSÉSON, Le droit français de /'arbitrage interne et international (Paris 1990) pp. 653-656.

31. JDI (1980) p. 660, comment by Philippe FOUCHARD.

32. Art. 1504(1) New French Code of Civil Procedure.

33, De BOISSÉSON, op. cit., fn. 30, p. 671; Philippe FOUCHARD, Emmanuel GAILLARD and Berthold GOLDMANN, Traité de /'arbitrage commercial international (Paris 1996) p. 661.

34. Art. 458bis(6) and 458bis(25) Algerian Code of Civil Procedure, as amended by Decree No. 93-09 of 25 April 1993, reproduce Art. 1494 and Art. 1504 of the New French Code of Civil Procedure.

35. Art. 1717 was amended by the Law Relating to the Setting Aside of Arbitral Awards of27 March 1985.

36. A draft amendment is pending in Parliament. Among other changes to the existing legislation, it reintroduces the action for setting aside awards in international arbitrations, subject to an exclusion agreement (Art. 13 Draft Act amending the provisions on arbitration of the Judicial Code of 2 April 1998).

Note General Editor. Art. 1717( 4) of the Belgian Judicial Code was amended by the Law of 19 May 1998, published in the Official Gazette on 7 August 1998.

37. Jan PAULSSON, "Arbitration unbound in Belgium", Arbitration Intëmational (1986) p. 68. On this topic, see also Bernadette DEMEULENAERE, "The place of arbitration and the applicable law: The case of Belgium", Marcel STORME and Filip De LY, eds., The Place of Arbitration (Ghent 1992) p. 67.

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THE LAW GOVERNING THE ARBITRATION PROCEDURE: G. KAUFMANN-KOHLER

award.38 lndeed, despite eminent views to the contrary,39 there appears to be no com- pelling reason to remove stateless or anational awards from the scope of the New York Convention. The result is that the arbitral tribunal will have to comply with the minimum requirements under the Convention (which in certain cases will in tum be measured by the standards of the country of origin!).40

A similar situation is found in Malaysia. Pursuant to its Art. 34(1 ), the Arbitration Act does not apply to arbitrations held under the ICSID and the UNCITRAL Arbitration Rules.41 In reliance on this provision, Malaysian courts have declined to entertain setting aside actions and held that their jurisdiction is limited to enforcement if it is sought in the country.42

3. What !s the Place of Arbitration?

So arbitrations are generally govemed by the law of the place where they are held. But is the place a legal connection or a physical, geographical location? How is it selected?

Can part or even ail procedural steps be carried out elsewhere?

Pursuant to Art. 20(1) of the Mode! Law, the parties are free to select the place of arbitration. They may do so directly or by delegation to an institution.43 In the absence of an agreement by the parties, the arbitrators have the power to choose the place, which they must do taking into account "the circumstances of the case, including the conve- nience of the parties". This latter phrase refers to the /ega/ convenience as well, especially to the suitability of the applicable procedural law.44 Indeed, in addition to its factual significance (the arbitration is in principle expected to be held there), the choice of the place has legal consequences under the Mode) Law: it determines the applicability of the Mode] Law and the place of origin of the award for enforcement purposes.45

According to the second paragraph of Art. 20, subject to the parties' contrary agree- ment, the arbitral tribunal may meet at any place it considers appropriate "for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of

38. PAULSSON, op. cil., fn. 37, p. 69 and p. 72 etseq.; FOUCHARD, GAILLARD and GOLDMANN, op. cil., fn. 33, p. 656.

39. Yearbook VI (1981 ), Consolidated Commentary, p. 205; Albert Jan van den BERG, The New York Arbitration Convention of 1958-Towards a Uniform Judicial lnterpretation, (Deventer/Boston 1981) p. 34 et seq., whose view has, however, changed, as he indicated in his introductory presentation at the ICCA 1998 Paris Congress; Peter NYGH, "Choice of Forum and Law in International Arbi- tration", 24 Forum Internationale (1997) p. 23.

40. Under Art. V(I )(d) when, failing an agreement of the parties with respect to the procedure, the arbitral procedure was not in accordance with the law of the country where the arbitration took place.

41. Arbitration Act 1952, amended by the Arbitration (Amendment) Act 1979.

42. Cases cited by Jan PAULSSON, "Contrats en Asie: Kuala Lumpur comme lieu d'arbitrage'', RDA Ill BU (1994) p. 248 et seq.

43. Art. 2(e).

44. Commission Report, A/40/17 (21 August 1985), quoted in HOLTZMANN and NEUHAUS, op. cit., fn. 3, p. 607 et seq.

45. Seventh Secretariat Note, Analytical Commentary on Draft Text, A/CN.9/264 (25 March 1984), quoted in HOL TZMANN and NEUHAUS, op. cit., fn. 3, p. 603 et seq.

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WORKING GROUP II: ACHIEVTNG EFFICIENCY WITHOUT SACRIFICING DUE PROCESS goods, other property or documents". As opposed to this, early drafts followed the UNCITRAL Arbitration Rules, whlch limit the meetings held e1sewhere to hearing witnesses, inspecting goods, and consulting among arbitrators. 46 To meet practical needs, the drafters later broadened the formula to add hearing experts and parties,47 with the result that all stages of the arbitration are covered in the final version. Therefore, an arbitration may take place in its entirety outside the place of arbltration, which is reduced to "nothing but a fiction".48

Recognizîng that the Model Law attached legal consequences to the "constructive"

place of arbitration determined pursuant to Art. 20(1) and that no "genuine hnk" was required between that place and the actual location of the proceedings, Norway made a proposal during drafting, pursuant to which the "constructive" place of the arbitration would lack at least part of its legal consequences, if "there is no genuine link between that place and the actual arbitral proceedings".49 The proposai was not followed up and the provision was adopted without a requirement for any kind of link between the

"constructive" and the actual place of arbitration. This makes sen se: the constructive place is often chosen for its neutrality, i.e., for its absence of.connection to either party, while the actual place may be chosen precisely for the opposite reason, because it shows a link to a party due, for instance, to the presence of witnesses.

There was general agreement about the contents of Art. 20 when it was drafted.50 Hence, the countries adopting the Model Law enacted it without significant changes.51 Germany, as a ncwcomer to the Model Law club, deserves a special mention. Its Sect.

1043 ZPO is almost identical to Art. 20. Schlosser views the second paragraph (allowing that procedural steps be taken abroad) as a hidden way out of the rigldity of the territorial

46. Art. 16(2) and (3).

47. First Draft, A/CN.9/WG.II/WP.37 (15 July 1982), quoted in HOLTZMANN and NEUHAUS, op. cit., fn. 3, p. 599; Fourth Working Group Report, A/CN.9/245 (22 September 1983), quoted in HOLTZMANN and NEUHAUS, ibid., p. 601; see also p. 596.

48. BROCHES, op. cil., fn. 3, p. 106, which "was not fully admitted at the time"; see also p. 104.

49. Sixth Secretariat Note, Analytical Compilation of Govemment Comments, A/CN.9/263 (19 March 1985), quoted in HOLTZMANN and NEUHAUS, op. cil., fn. 3, p. 602.

50. HOLTZMANN and NEUHAUS, op. cit., fn. 3, p. 593.

51. E.g., Art. 25 Bulgmian Law, see fn. 7; Art. 31 Hungarian Act, see fn. 7; Art. 20 Russian Federation Law, see fn. 7; Art. 21 Kenyan Arbitration Act (1995) No. 4of1995; Sect. 16 Nigerian Arbitration and Conciliation Decree No. l l of 1986; Art. 28 Egyptian Law, see fn. 8; Art. 65 Tunisian Arbitration Code, see fn. 10, which however contains no languagé on the possibility of holding meetings abroad; Art. 20 Indian Act, see fn. 7; Art. 20 Fîrst Schedule to the New Zealand Arbitration Act (1996); Art. 1436 Mexican Decree of 22 July 1993 amending the Commercial Code, Title IV (of Book V).

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THE LAW GOVERNING THE ARBITRATION PROCEDURE: G. KAUFMANN-KOHLER connection newly adopted by German arbitration .Jaw,52 slnce the entire proceedings can be conducted abroad.53

Recent non-Model Law legislations provide the same rules.54 Among these, English Jaw calls for a particular comment. Sect. 3 of the English Arbitration Act 1996 expressly states that the seat in the meaning of the Act is a legal, juridical connection. In Naviera Amazonica Peruana SA v. Compa-fiia Internacional de Seguros del Peru, Lord Justice Kerr for the English Court of Appeal had emphasized the "distinction between the legal localisation of an arbitration on the one hand and the appropriate or convenient geo- graphical locahty for hearings of arbitration on the other hand".55 This distinction is confirmed by Sects. 43 and 2(3)(a) of the Act, which permit a court to secure attendance of witnesses present in the United Kingdom, provided the hearing takes place there, even though the seat of the arbitration is located abroad. 56

Similarly, the Swlss Supreme Court has recently stressed the same distinction, as well as the legal nature of the place or seat:

"By choosing a Swiss legal domicile [ein schweizerischesRechtsdomizi[j for the arbitral tribunal, the parties manifestly intended to submit their dispute to Swiss arbitratlon law, not to provide for an exclusive location for meetings among arbitrators at the place of arbitration .... [T]he determination of a given place of arbitratîon is of significance to the extent that the award is deemed to be rendered

52. Peter SCHLOSSER, "Die aktuelle Rechtslage und -praxis der intemationalen Schiedsgerichtsbarkeit in der Bundesrepublik Deutschland", Karl-Heinz BÔCKSTIEGEL, ed., Recht und Praxis der internationalen Schiedsgerichtsbarkeit in Staaten Zentral- und Ost-Europas (Cologne 1998) p. 17, whose comparison with the Mode! Law is, however, inaccurate and applies to the UNCITRAL Arbitration Rules.

53. Loc. cit. This is how I understand the statement that it is not necessary for parties and arbitrators ever to meet in Germany for the arbitration to be German. See also F.A. MANN, "Where is an Award Made?", Arbitration International (1985) p. 107 et seq. (the award is made at the arbitral seat, which is "by no means necessarily identical with the place or places where hearings are being held" or, further, which is "independentofthe place of meetings of the arbitrators, hearings with the parties").

54. On French law, see FOUCHARD, GAILLARD and GOLDMANN, op. cît., fn. 33, pp. 690-692 with citations to case law; Art. 1037(1) and (3) Dutch Code of Civil Procedure; Art. 816 Italian Civil Code, which however do es not expressly provide for the possibility of holding meetings and hearings in other places; Sect. 22 Draft Swedish Act, see fn. 28, provides expressly that hearings and other meetings may be held abroad; Art. 24(1) Spanish Law 36/1988 on Arbitratîon of 5 December 1988.

55. Decision of IO November 1987, Yearbook XIII (1988) p. 157. The same decision confirms that English law does not recognize delocalized or "floating" arbitrations and that, failing an express choice, there is a presumption that the \aw of the place where the arbitration is held has the strongest connectîon and should thus govern and vice versa (i.e., a choice of a given procedural law implies a choîce of a place). See further Bank Mellat v. Helliniki Techniki SA (1984) QB, p. 291 at p. 301 (no arbitrations "floating in the transnational firmament, unconnected with any municipal system of law").

56. See also Robert MERKIN, Arbitration Act 1996, An Annotated Guide (London 1996) p. 18.

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WORKING GROUP IT: ACHIEVING EFFICIENCY WITHOUT SACRIFICING DUE PROCESS

at such place. It is irrelevant that a hearing was effectively held or that the award was effectively issued there".57

Indeed, although there is no statutory provision to this effect, it is generally accepted that hearings and meetings in a Swiss arbitration may take place outs ide of Switzerland. 58 Most major arbitration rules confirm the parties' freedom to choose the place of arbitration and the possibility to hold meetings and hearings elsewhere.59 Even where certain arbitral rules provide that the arbitration must be held at the offices of the arbitral institution, the parties have indirectly selected the place by referring to that specific set of institutional rules.60 Interestingly, the 1998 ICC Rules contain new provisions on this very subject. Pursuant to Art. 14(2) and (3), the arbitral tribunal may "after consultation with the parties, conduct hearings and meetings at any location it considers appropriate, unless otherwise agreed by the parties" and "deliberate at any location it considers appropriate". This codifies existing practice61 and confirms the broad consensus found in recent legislations.

57. 24 March 1997, Bulletin ASA (1997) p. 316 at pp. 329-330, writer's translation; Art. 176(3) provides that the parties, the institution chosen by them or, failing both, the arbitrators may fix the seat.

58. LALIVE, POUDRET and REYMOND, op. cit., fn. 2, p. 297; Felix E. EHRAT, "Art. 176 fPRG", H. HONSELL, N.P. VOGT and A.K. SCHNYDER, eds., Internationales Privatrechl (Basel 1996) p. 1417; Andreas BUCHER and Pierre TSCHANZ, International Arbilration in Switzerland (Basel 1988) p. 29; Andreas BUCHER, "Zur Lokalisierung intemationaler Schiedsgerichte in der Schweiz", Feslschrift Keller (Zurich 1989) p. 566; Marc BLESSlNG, "The New International Arbitration Law in Switzerland - A Significant Step Towards Liberalism", Journal of International Arbitration (1988) p. 22.

59. Art. 14 1998 !CC Ru les; Art. 16 1998 LClA Ru les; Art. 16 UNC!TRAL Arbitration Ru!es, but, as mentioned above, without an express provision authorizing to hear the parties and experts at a location other than the place of arbitration; Art. 13 AAA International Arbitration Rules; Art. 18 Singapore Arbitration Rules; Rule 1 Rules for Arbitration of the Kuala Lumpur Regional Centre for Arbitration referring to the UNCITRAL Arbitration Rules; Art. VI Rules of the Cairo Regional Centre for Commercial Arbitration; Art. 1 (3) Ru les of Arbitration and Conciliation of the International Arbitral Centr<'. of the Federal Economie Chamber Vienna; Art. 22 Rules of the Netherlands Arbitration lnstitute.

60. Art. 12 CIETAC Arbitration Rules, where the parties' only choice is between the Commission in Beijing and the two Sub-Commissions in Shanghai and Shenzhen; Art. 6 lntemati.onal Arbitration Ru les of the Zurich Chamber of Commerce, pursuant to which, subject to exceptions which may be granted on request of a party, the place of arbitration is always Zurich, but meetings/hearings may be conducted elsewhere; Sect. 7(1) Ru les of the Court of International Commercial Arbitration al the Chamber of Commerce and Industry of the Russian Federation, according to which the seat of the arbitration and the place of the hearing is Moscow (although hearings may also be conducted elsewhere in Russia under certain conditions).

61. Herman VERBIST and Christophe IMHOOS, "The New 1998 !CC Rules of Arbitration", RDAVIBLJ (1997) p. 1007.

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THE LAW GOVERNING THE ARBITRATION PROCEDURE: G. KAUFMANN-KOHLER

4. Sports Arbitration

Before our traveller brings his sightseeing memories home, he will make two additional stops: one at the Olympie Garnes and one in cyberspace. Let us start with the Olympics.

The Court of Arbitration for Sport (CAS) is an arbitration institution dealing with the resolution of international disputes related to sports.62 It operates under the rules of the Code of Sports-related Arbitration (the Code). Two main types of disputes are brought before CAS:63 disputes arising out of commercial contracts linked to sports, such as sponsorship agreements, and challenges of decisions of sports organizations.64

CAS has its main office in Lausanne and local offices in the USA and in Australia, which provide the logistics for proceedings held Jocally and managed in consultation with the main office. In addition, CAS sets up a special arbitration body for the duration of the Olympie Games,65 which resolves ail disputes arising during the Garnes on site, as a rule within 24 hours.66 This body, named CAS ad hoc Division, was in operation for the first time in 1996 in Atlanta67 and again in 1998 in Nagano. It is govemed by the Rules for the Resolution of Disputes Arising during the Olympie Garnes, which are part of the Code.

62. On arbitration of sports-related disputes, see in particular Court of Arbilralion for Spor/, Guide to Arbilra/ion (Lausanne 1996); Gérald SIMON, "L'arbitrage des conflits sportifs", Rev. arb. (1995) p.

185.

63. Recently, an additional category of disputes has been the subject of CAS proceedings - disputes between different sport bodies about the scope of their respective powers and disputes between members of the same body about newly adopted bylaws or internai regulations (COURT OF ARBITRATION FOR SPORT, Compila/ion of Awards 1987-1997, publication forthcoming).

64. Two examples of such challenges: first, the appeal brought by the Canadian snowboarder Rebagliati from the decision of the International Olympie Committee stripping him of his gold medal because he tested positive to marijuana at the Nagano Garnes (CAS Award Rebagliati v. !OC of 12 February 1998, 13 Mealey's International Arbitration Report (1998, no. 6) p. B-1). Second, the appeal brought by the National Hockey League player Samuelsson and others from the decision of the International Ice Hockey Federation disqualifying him from the Nagano Olympie tournament, but holding that the games in which he had taken part were not forfeited (CAS Award Samuelsson et al. v. IIHF of 18 February 1998, 13 Mealey's International Arbitration Report (1998, no. 6) p. B-4).

65. Chaired in Atlanta and Nagano by this author, who only discusses here matters which are not confidential.

66. In 1995, the Olympie Charter was amended accordingly to provide that any dispute arising on the occasion or in connection with the Garnes would be submitted exclusively to CAS in accordance with the Code (Art. 74). The Olympie Charter is said to be binding on ail members of the Olympie movement, i.e., ·in particular, in addition to the International Olympie Committee, the national olympic committees, the international federations, the organizing comrnittees of the games "and ail persans belonging to them" (Art. 1 (2) and Art. 3(1) Olympie Charter). The entry form for the Olympie Garnes, which is signed by ail participants, including athletes, judges, referees, coaches and other sports technicians, medical staff, journalists, etc. also provides for CAS arbitration pursuant to the Code.

67. See in particular, Gabrielle KAUFMANN-KOHLER, "Arbitration and the Garnes or the first experience of the Olympie Division of the Court of Arbitration for Sport", 12 Mealey's International Arbitration Report (1997, no. 2) p. 20 and "Atlanta et l'arbitrage ou les premières expériences de la Division olympique du Tribunal arbitral du sport", Bulletin ASA (1996) p. 433.

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\VORK1NG GROUP II: ACHIEVING EFFICIENCY WITHOUT SACRIFICING DUE PROCESS Wherever a CAS arhitration takes place physically, 1t always has its lega] place or seat 1n Lausanne. This applies to ail CAS arbitrations, wherever the hearings take place, whether they are managed by the Lausanne office excluslvely or in conjunction with a decentrahzed office,68 and it includes arbltrations handled on the site of the Olymplc Garnes.

There are three main reasons for the choice of a sole seat, regardless of the actual place of arbitration.69 First, that choice provides a uniform procedural regime for all CAS arbitrations, not only in terms of applicable rules under the Code, but also with respect to the arbîtration law goveming the proceedings. The Garnes move around, but the legal framework is stable.

Second, conducting the arbitration at the site of the Garnes is intended to make arbitration as convenient as possible for the parties and to resolve disputes as expedi- tiously as possible. It is not meant to have any legal significance.

Third, the equa1 treatment so achieved is consistent with the equal standards that govem the activlties giving tise to disputes, i.e., sports competition. A time on a stopwatch is the sarne \.vherever the race takes place. It is further consistent- which may be of even greater significance here - with the choice of substantive law governing sports disputes. According to Art. 17 of the CAS ad hoc Rules, the arbitral tribunal must resolve the dispute "pursuant to the Olympie Charter, the applicable regulations, general princîples of law and the ru]es of law, the application of which 1t deems appropriate".

All these sets of rules ( except possibly for the last one, which in practlce never cornes to bear) are transnational, universal, global. Their application is not dependent on a territorial nexus, nor is 1t restricted tenitorially.70 This global substantive law is rnatched by a uniform procedural law thanks to the choice of a sole seat for all CAS arbitrations.

68. Art. R 28 Code fixes the seat of CAS itself and of ail CAS arbitration panels sitting on ordinary and appeals arbitrations in Lausanne. This rule also applies to decentralized arbitrations as these are subject to the same rules. Art. 28 specifies that hearings can be held in other places. Art. 7 of the Rules for the Resolution of Disputes Arising During the XVIII Olympie Winter Garnes in Nagano fixes the seat of the ad hoc Division and its panels in the following terms:

"The seatofthe ad hoc Division and ofeach Panel is in Lausanne, Switzerland. However, the ad hoc Division and each Panel may carry out ail actions which fall within their mission in Nagano or in every other place they deern appropriate."

69. An additional reason is that, pursuant to Art. 20 CAS ad hoc Rules, the arbitrators may either render a final decision during the Garnes (as a rule, within 24 hours after the request was filed) or refer the dispute to regular CAS arbitration after the Garnes (in the event that the dispute is too complex to be solved immediately or requires no urgent resolution), the seat of whieh will neeessarily be in Lausanne under Art. R 28 Code.

70. 'The Olympie Charter applies to all members of the Olympie movement, wherever they are established or domieiled and irrespective oftheirnationality. The applicable regulations are mainly the regulations of the international sports federations, which organize the competitions. They apply to ail ath\etes competing in a given sports discipline, whatever their domicile or citizenship. And the general principles of law are obviously of universa\ application.

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THE LA\.V GOVERNING THE ARBITRATION PROCEDURE: G. KAUFM.ANN-KOHLER So far, this delocahzation mechanism bas not been tested in court. In this context, potentlal problems all relate to the ancillary functions of the courts. Because they are beyond our topic, we "\>vi11 not address the issues of court jurisdiction in aid of arbi- tratlon 71 and of the nationahty of the award for purposes of en forcement. 72 We will hmit the inquiry to the jurisdiction for setting aside proceedings as it impacts on the rules governing the conduct of the arbitration.73

In setting aside proceedings, two questions may arise. Flrst, will the Swiss Supreme Court which has jurisdictlon over setting aside proceedings entertain an action despîte the fact that the arbitral process took place abroad? Second, will the courts at the physîca1 place of arbltration dechne jurisdlction? Depending on the answers, a positive or negative conflict of jurisdlction rnay arise. A negative conflict is of concern because the parties wou1d be deprived of the opportunity to challenge the award, except at the enforcement stage. A positive conflict is worrying because it may give rise to conflicting decisions.

Switzerland applies the tenitoriality principle74 and regards the place or seat of the arbitration as a legal connection between the arbitrators and the parties, on the one hand, and a national law, încluding the rules on anclllary court jurisdiction, on the other.75 Hearings and meetings need not be held in Switzerland.76 As a consequence, the Swiss Supreme Court would have to accept jurisdiction over a setting aside action.

What about the court at the place of the Garnes? Wou]d 1t entertain an action? This wiU obviously depend on that court's national law. On the one hand, lf it rehes on the tenitorial connection and views the seat as a legal concept, then it should dismiss the action for lack of jurisdiction. Indèed, the selection of the seat then operates as a choice of the law goveming the arbltration.77 Another way ofputting it is to say that, although the territorial link is genera11y stipulated in a unilateral conflict rule (an arbitration having its legal seat in this country is subject to local law), it is likely that courts wou1d give it multilateral meaning (an arbitration is govemed by the law of its legal seat, whatever it is).78 On the other band, if the law at the physical location of the arbitration has adopted

71. As a practical matter, court assistance during the arbitral process is unlikely to become necessary and would not be feasible in most cases because of time constraints.

72. Leaving aside awards resolving disputes arising out of commercial contracts linked to sport, by the nature of the other awards, enforcement proceedings wi\1 seldom be necessary. Enforcement will be either voluntary or imposed by the sports body having the power to take the action ordered in the award, for instance the retum of a medal or the exclusion from the Garnes.

73. See above Section U.2.

74. See above Sections JI.1 and 3.

75. See above Section II.3 with citations in fns. 57 and 58; see also André PANCHAUD, "Le siège de l'arbitrage international de droit privé", Rev. arb. (1966) p. 2.

76. See above Section II.3 with citations, in particular fn. 58.

77. BUCHER, op. cit., fn. 58, p. 573. See further, reaching the same result: EHRAT, op. cit., fn. 58, p.

1416; LALlVE, POUDRET and REYMOND, op. cit., fn. 2, p. 298.

78. With respect to the new German Act, Otto SANDROCK, "Procedural Aspects of the New German Arbitration Act'', Arbitration International (1998) p. 36; SCHLOSSER, op. cit., fn. 52, p. 17.

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WORKING GROUP II: ACHIEVING EFFICIENCY WITHOUT SACRIFICING DUE PROCESS

the intent-based connection, then it should also decline to exercise jurisdiction in consid- eration of the foreign seat.79

But maybe more than for these considerations on court jurisdiction, the example of sports arbitration is striking because it demonstrates that the legal place of an arbitration can become pure fiction for perfectly legitimate reasons.

5. Online Arbitration

Leaving the Olympics, the traveller now takes the leap into cyberspace to observe that online arbitration is just another illustration of a purely fictional (or fictitious?) place of arbitration.

Imagine an arbitration where the request and later written pleadings80 are filed, procedural orders issued, and ail other communications sent by electronic mail, where procedural hearings take the form of so-called "chats" ( even if the term is not really flattering ... ),81 and witnesses are heard by videoconference.82

An unreal, imaginary world? No. Although still very limited in scope, several dispute resolution mechanisms of this kind already exist.83 So for instance the experimental Virtual Magistrate Project,84 run by the Cyberspace Law Institute85 and the AAA, provides arbitration services for disputes between systems operators and users of online services who claim to be harmed by wrongful messages.86 The Virtual Magistrate

79. Could constitutional or human rights considerations with respect to fair trial, which implies the availability of accessible courts, lead to a different conclusion? For instance, when (i) the party challenging the award disputes the enforceability of the arbitration agreement which contains the selection of the place, and (ii) that party is a domiciliary of the country where the arbitration was physically held, and (iii) the legal place is far away? The answer would require another paper.

80. With the exception of original documentary evidence.

8 J. Chat software a11ows each connected participant to type messages instantaneously conveyed to ail others and to read the others' messages on the screen.

82. On the topic, see in particular, Jasna ARSIC, "International Commercial Arbitration on the Internet - Has the Future Come Too Early?", Journal of International Arbitration (1997, no. 3) p. 209;

Michael SCHNEIDER and Christopher KUNER, "Dispute Resolution in International Electronic Commerce", Journal of International Arbitration (l 997, no. 3) p. 5.

83. ln addition to the resolution methods discussed below, one rnay mention the Cybertribunal launched by the University of Montreal, at http:l/www.cybertribunal.org; the Online Ombuds Office, at http://www.ombuds.org (see Athan KA TSH, The Online Ombuds Office. Adapting Dispute Resolution to Cyberspace, at http://www.law.vill.edu/ncair/disres/katsh.htrn); GAMA, The Global Arbitration Mediation Association Inc., at http://www.gama.com.

84. Information on the Virtual Magistrate's website maintained by the Center for Information Law and Policy of Villanova University available at http:l/vmag.law.vill.edu:8080/; on this project, see in particular GOLDSMITH and LESSIG, "Grounding the Virtual Magistrate'', Contribution to NCAIR Conference, 22 May 1996, available at http://www.law.vill.edu/ncair/groundvm.htm.

85. Information on CL! available at http://www.ll.georgetown.edu/lc/cli.htrnl.

86. Defined as messages "involving copyright or trademark infringement, misappropriation of trade secrets, defamation, fraud, deceptive trade practices, inappropriate ... materials, invasion of privacy, and other wrongful contents" (Basic Rules of 24 July 1996).

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