HomeOpinion & AnalysisArbitration insights: The origins of commercial arbitration

Arbitration insights: The origins of commercial arbitration

BY JACOB MUTEVEDZI

“It is equitable to be patient under wrong (not to retaliate); to be willing that a difference shall be settled by discussion rather than by force; to agree to arbitration rather than to go to court, for the umpire in an arbitration looks to equity, whereas the juryman sees only the law. Indeed, arbitration was devised to the end that equity might have full sway.” — Aristotle, 320 BC.

Heraldus, in his work, Animadversiones, states that ancient Greeks had recourse to a “court of reconcilement”. According to the Pandex, the Romans were in the habit of “putting an end to litigation” by way of arbitration. In his work, Law of Arbitration, Bell ventures so far as to claim that “this amicable private tribunal is of an earlier date than the public courts.” There can be no doubt, therefore, that arbitration is an ancient phenomenon.

In The City of London Chamber of Arbitration (1893), Manson asserts that arbitration was born of the adjudicative process used to settle disputes between merchants in marketplaces on the European continent, in the Mediterranean and Baltic Sea trade and in England. Merchants developed a practice of submitting their disputes to tribunals constituting of fellow merchants. Judgment was given on the basis of customary commercial practices. Although these dispute settlement methods were devoid of formal legal procedures, they were embraced as legitimate sources of mercantile justice.

Redfern and Hunter, in Law and Practice of International Commercial Arbitration (2004), claim evidence of primordial arbitration practices in medieval Western Europe and pre-Islamic Arabia. Nations on the Western and Atlantic coasts of Europe were engaged in some primal form of maritime arbitration as far back as 1200. Records of maritime arbitration hearings dating back as far as 1229 have been found in Venice. Wolaver, in his The Historical Background of Commercial Arbitration (1934) ascribes the universal recognition of arbitration as an alternative to court litigation to the fact that merchants considered it to be a system of self-regulation which expeditiously churned out pragmatic decisions at very low cost.

The fashionableness of commercial arbitration as an option to litigation increased after the courts were empowered to enforce arbitration agreements. The first recorded arbitration legislation was enacted in the United Kingdom in 1698. It was succeeded by the English Arbitration Act of 1889, which was later consolidated and amended in 1950. Commercial arbitration in the United Kingdom prospered under this legislative regime.

The majority of countries of the British Commonwealth adopted the English Arbitration Act of 1889. The Americans, not to be outdone, were not too far behind with the arbitration statute of the state of New York in 1920 and the Federal Arbitration Act of 1925.

Arbitration institutions and regulations were initially formalised in the 18th and 19th centuries to foster and facilitate the use of arbitration as a dispute resolution method. However, arbitral institutions only enjoyed better success with the promulgation of arbitration laws which facilitated the enforcement of arbitration agreements and awards. In the United States, for example, arbitration only began to gain traction after the enactment of the United States Arbitration Act in 1925. Yet arbitration institutions had been in existence since 1768. Enabling legislation played a critical role in the development of modern arbitration. Arbitral institutions also served and continue to discharge an important function in the enactment and promotion of enabling laws.

In 1923, the International Court of Arbitration of the International Chamber of Commerce was established to provide an arbitration forum with a sufficiently “global” character for the fledgling international arbitration industry. The International Court of Arbitration played a pivotal role in the conclusion of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). The New York Convention is invariably considered the most important multilateral treaty on international arbitration.

In Zimbabwe, commercial arbitration is governed by the Arbitration Act [Chapter 7:15]. The Arbitration Act is based on the Model Law on International Commercial Arbitration adopted by the United Nations Commission on International Trade Law on the 21st June 1985. It is popularly referred to as “the UNICITRAL Model law” or simply “the Model Law”. Locally, arbitration has gained a foothold as an efficient dispute resolution mechanism. Several arbitral institutions have been established. For instance, the Commercial Arbitration Centre and the Africa Institute of Arbitration and Mediation.

Since time immemorial, arbitration has been utilised to resolve disputes. Along the way, arbitration has enjoyed an uneasy coexistence with the formal courts. It took the formal courts a long time to accept arbitration as a legitimate dispute resolution method. At times the courts were known to exhibit open hostility towards private dispute settlement. This antiquated belligerent attitude of the courts is reflected in the case of Russell v. Pellegrini (1856) 6 E. & B. 1020 where Lord Campbell said:

“Somehow the courts of law had, in former times, acquired a horror of arbitration; and it was even doubted if a clause for a general reference of prospective disputes was legal. I never could imagine for what reason parties should not be permitted to bind themselves to settle their disputes in any manner on which they agreed.”

As recently as 1968 courts were still up in arms against arbitration as demonstrated by the 1968 US federal court decision in American Safety v JP Maguire, (2nd Cir 1968) where the court remarked:

“Just as issues of war and peace are too important to be vested in the generals […], decisions on antitrust regulation of business are too important to be lodged in arbitrators chosen from the business community…”

At the dawn of the 20th century, however, most jurisdictions around the world began to embrace arbitration. Laws were enacted enjoining the courts to enforce arbitration agreements. These pro-arbitration laws also substantially curtailed judicial review of arbitral awards. The past century has seen a rapid increase in the adoption of pro-arbitration policies across the globe. Therefore, arbitration has entrenched itself not only in commerce but even in sporting disputes.

  • Jacob Mutevedzi is a commercial lawyer and partner at Clairwood Chambers Attorneys and writes in his personal capacity. He can be contacted at +263775987784 or at jmutevedzi@gmail.com

Recent Posts

Stories you will enjoy

Recommended reading