Enforcement Of Virtual Arbitral Awards Under The New York Convention

IS THE ENFORCEMENT OF VIRTUAL ARBITRAL AWARDS FEASIBLE WITHIN THE LEGAL FRAMEWORK OF THE NEW YORK CONVENTION? Wanne M. Pemmelaar1

1. Introduction The internet has currently moved past its scarcity. In fact, as Kevin Kelly, internet visionary, puts it: “the only scarcity regarding the web is attention”.2 The possibilities regarding modern communication technologies are ready to hand. One issue that will ask for more attention is the use of modern communication technology during alternative dispute resolution (ADR) proceedings. One possibility is the use of the so-called “Virtual Arbitration” (in this article abbreviated as: VA) as one form of Online Dispute Resolution (ODR).3 This type of arbitration proceedings will form the centrepiece of this article. ODR is quite often defended as a solution to a dual dissatisfaction with, what is called, “traditional dispute resolution systems” in the international arena.4 The first dissatisfaction entails a discontent with the working of the competent court system. It is believed that the courts are often located too far away, are too expensive for small cases, and work too slow for business needs. This dissatisfaction formed a ground for the introduction of ADR, including arbitration, mediation, med-arb, assisted negotiation et cetera. However, the second dissatisfaction in a rapidly globalising world even ADR might be ill equipped to provide an effective remedy for conflicts. Probably as a result of the developments in the field of e-commerce, consumers as well as small and medium sized corporation can now easily conclude a contract with any other enterprise or private person on the other side of the globe.5 Nevertheless, when conflicts arise between or including “smaller” parties the same problems remain as was mentioned under the first dissatisfaction, namely, a geographical distance disincentive, high costs and inefficient (slow) proceedings.6 It is, therefore, believed that ODR in general and VA could contribute to swift, efficient and, above all, inexpensive communication between the parties and the arbitrators, and thus remove the disincentives of geographical distance and high costs. However, as in other developments in the field of Information Technologies and law,7 new questions arise how Virtual Arbitration could exist in the traditional legal framework of arbitration and whether there is a need if the existing law should be amended to foresee in new provisions governing those new developments. This article will revolve around the question whether the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards is applicable in case of awards rendered through means of virtual arbitration. The second section will give a more detailed description of VA and its assumed advantages and disadvantages. The dilemma’s regarding VA and the application will be covered in the third

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Wanne M. Pemmelaar is currently doing his LLM Dutch Private Law at Utrecht University in the Netherlands. Spoken on the Nextweb convention in 2006. See http://www.brickmeetsbyte.com/berichten/the_only_scarcity_on_the_web_is_attention/ 3 ODR could be considered as the offspring of ADR and added a new dimension to dispute resolution. In fact, due to developments in Information Technology, new forms of dispute resolution have arisen, such as “automated negotiation” or “facilitated negotiation”. ADR and ODR also have been coined respectively “Old world of Arbitration” and “New world of Arbitration”. See Morek, R. „Regulation of Online Dispute Resolution.” The National Center for Technology and Dispute Resolution. August 2005. www.odr.info/Re%20greetings1.doc (opened June 15, 2008), p. 8 and see Alford, R.P. „The Virtual World and the Arbitration World.” Journal of International Arbitration, 2001 p. 450 4 Kaufmann-Kohler, G., en T. Schultz. Online Dispute Resolution: Challenges for Contemporary Justice. The Hague: Kluwer Law International, 2004, p. 1 5 Usually regarding “small transactions” as Perritt puts it. See: Perritt, H.H. „Dispute Resolution in Cyberspace: Demand for New Forms of ADR.” Ohio State Journal on Dispute Resolution, 1999-2000, p. 675 6 Kaufmann-Kohler, G., en T. Schultz. Online Dispute Resolution: Challenges for Contemporary Justice. The Hague: Kluwer Law International, 2004, p. 1 7 For example: the Virtual Shareholder Meeting, see Van der Krans, A. „The Virtual Shareholders Meeting: How to make it work?” Journal of International Commercial Law and Technology 2, nr. 1 (2007): pp. 32-37. 2

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section, including a discussion of favourable and non-favourable arguments. To arrive at balanced conclusions, the fourth section will entail an evaluation in the light of legal certainty.8 2. Virtual Arbitration Virtual Arbitration belongs to a wide family of ODR procedures.9 Some authors do not regard ODR as a distinction from the traditional ADR but refer to it as ODR techniques.10 Arbitration is in this respect also referred to as e-ADR, since it does not involve a total new classification.11 However, as some writers also make a distinction between e-ADR (traditional ADR with the adjunct use of some electronic mean of communication) or ODR (entirely online/virtually held dispute resolution), this article will commence from the definition as set by UNCTAD: “ADR that takes place using computer-mediated communications in the online environment, and thus use the term ODR.12 After the elementary stage (until 1995) and the experimental stage (1995-1999), ODR as well as VA are presently deemed to have arrived at the entrepreneurial stage in which commercial began to show interest and undertake in ODR and VA. 13 Kaufmann-Kohler and Schultz reported over 25 enterprises that offered VA-services.14 VA is considered as one of the most promising ODR forms since it would be more effective than other non-adjudicative online dispute resolution mechanisms.15 The reason for this could be that VA would need less complex technology and software than, say mediation.16 VA is believed to bring quite some advantages compared to traditional arbitration. First, it is considered to be time saving, since parties do not need to travel long geographical distances to encounter each other and hold the proceedings. Secondly and closely related to the first advantage, is the assumption that VA would also be cost saving, since the costs of travel and stay would be non-existent and parties would therefore have less foregone income. Thirdly, Manevy suggests that VA would be very convenient for those who have internet access.17 This would contribute to a level playing field as parties would not have to face each other and the transaction costs would be decreased. Lower transaction costs could in its turn render it possible for the parties to turn to higher qualified or established experts.18 However, quite some legal and practical disadvantages or problems of the VA can be identified on the other hand. First, one could think about the validity of electronically concluded VA-agreements. This may have an effect on applicability of certain legal regulations, such as the New York Convention (this will be subject to further deliberation in §3). Secondly, it would be difficult to determine a physical location where the VA procedure is held, since it will be held in “cyberspace” or on the “Internet”. This could pose questions with regard to procedural and applicable law to VA. Thirdly, the main focus of this article, namely the enforceability of virtually rendered arbitration awards is to be considered as problem which will need further discussion (see §3). This is of no issue if both parties voluntarily respect the award, however, a lack of clear legal provisions could leave space for debate after an award is rendered. Fourthly, a practical disadvantage could be considered security threats, since it could be quite easy for hackers to intercept all data traffic between the parties and the arbitrators.19 Fifthly, the lack of face-to-face encounters could also be considered a disadvantage, since parties would not have the richness of quickly, spontaneous and non-verbal face-to-face interactions. The VA procedure could become quite emotionless which would go against the nature of ADR, 8

This evaluation criterion sees to the simplicity and uniformity of the working, limits and enforcement of rules which are invoked by litigious parties. Legal certainty is an essential principle that contributes to the credibility of positive law. A party has to be able to base his decision of undertaking legal steps against another party on the expectation of a certain result that could be reasonably be expected or anticipated on. Stewart, K., and J. Matthews. „Online Arbitration of Cross-Border, Business to Consumer Disputes.” University of Miami Law Review, 2001-2002, p. 1130 9 I.e. dispute prevention, ombudsman programs, blind binding, automated negotiation, early neutral evaluation and assessment, mediation/conciliation, mediationarbitration (binding and/or non-binding), arbitration, expert determination, “executive tribunals” and “virtual juries”. Morek, R. „Regulation of Online Dispute Resolution.” The National Center for Technology and Dispute Resolution. August 2005. www.odr.info/Re%20greetings1.doc (opened June 15, 2008), p. 5 10 Hörnle, J. „Online Dispute Resolution - The Empreror's New Clothes? Benefits and Pitfalls of Online Dispute Resolution and its Application to Commercial Arbitration.” Bileta.ac.uk. 5 April 2002. http://www.bileta.ac.uk/Document%20Library/Forms/DispForm.aspx?ID=170&Source=http%3A%2F%2F www.bileta.ac.uk%2Fpages%2FConference%2520Papers.aspx&RootFolder=%2FDocument%20Library%2F1 (geopend June 15, 2008). 11 Schiavetta, S. „The Relationship between e-ADR and Article 6 of the European Convention of Human Rights pursuant to the Case Law of the European Court of Human Rights.” Journal of Information, Law, and Technology, 2004. 12

A suitable definition for VA is deemed by the replacement of “ADR” by “VA” in the UNCTAD definition, see United Nations Conference on Trade and Development, “E-Commerce and Developments Report 2003” 13 Morek, R. „Regulation of Online Dispute Resolution.” The National Center for Technology and Dispute Resolution. August 2005. www.odr.info/Re%20greetings1.doc (opened June 15, 2008), p. 9 14 Kaufmann-Kohler, G., en T. Schultz. Online Dispute Resolution: Challenges for Contemporary Justice. The Hague: Kluwer Law International, 2004, p. 34, footnote 109 15 Ibidem, p. 27 16 Manevy, I. „Online dispute resolution: what future?” Juriscom. June 2001. http://www.juriscom.net/uni/mem/17/odr01.pdf (geopend June 15, 2008), p. 15 17 Ibidem, p. 47 18 Ibidem, p. 49 19 Ibidem, p. 30

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namely the freedom to actively give shape and contribute to the proceedings based on consent and personal preferences.20 Sixthly and finally, a disadvantage that is posed is the inappropriateness of the Internet medium in multiparty cases or in cases in which parties are likely to conclude a settlement.21 However, although the possible advantages and disadvantages, enumerated by academics such as Manevy and Morek are quite plausible it remains unclear what criteria and methods were used to establish a causal relation between the VA and these dependent effects. Despite this observation, one more possible disadvantage or problem could be proposed, namely the probability of non-recognition or non-enforcement as a result of insecurity about the permissibility of VA-awards within the existing legal framework. This insecurity might lead to higher risk costs for the parties involved. Some remarks can be made on VA in practice. Providers usually offer binding as well as non-binding arbitration services, however, some providers such as the Uniform Domain Name Dispute Resolution Policy (UDRP) by the Internet Corporation for Assigned Names and Numbers (ICANN) only provide for non-binding arbitration. This means that the awards rendered in these procedures will definitely not be enforceable through court proceedings.22 Despite the fact that most awards are rendered through UDRP, it is not to be considered as real arbitration, as was also held in Dhulos v. Strasberg.23 The US Court of Appeals of the Third Circuit held that UDRP does not constitute arbitration under the US Federal Arbitration Act, since it allows parallel court proceedings.

3. New York Convention 1958 and VA The New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards (in this article abbreviated as: NYC) was called by Wetter “the single most important pillar on which the edifice of international arbitration rests”.24 He also deemed it to be the most effective piece of international commercial legislation. The convention guarantees the enforceability of arbitral awards worldwide and given the wide acceptance of the NYC, it puts arbitral awards in a more favourable position than court decisions.25 The question whether VA arbitration could fit within the legal framework of the NYC or whether amendments or different interpretation should be used, has been partly answered with the adoptation of the United Nations Convention on the Use of Electronic Communications in International Contracts (in this article abbreviated as: CUEC) by the General Assembly on 23 November 2005.26 This convention conceptualises and installs an interpretive amendment to the NYC in article 20 (1) CUEC, which states that the provisions of the CUEC are also applicable on the NYC (the provisions of the CUEC will be assessed at a later stage). The explanatory notes to the treaty state that: “Article 20 intends to offer a possible common solution for some of the legal obstacles to electronic commerce under existing international instruments in a manner that obviates the need for amending individual international conventions.”27 However, the debate surrounding the application of the NYC has not yet come to an end for several reasons. First, the CUEC has not yet been ratified or entered into force in any of the member states. Up till now only 18 states have signed the convention. Secondly, the interpretive amendments that the CUEC poses onto the NYC do not apply for a member state until it has ratified the CUEC and it has come into force. This means that one has to assess whether one could interpret the NYC in the light of the CUEC. Thirdly, it is possible for Contracting States to declare that it will not apply article 20 (1) CUEC on the basis of article 20 (4). Fourthly, according to article 1 CUEC, the CUEC only applies to parties whose places of business are in different States. This means that domestically rendered VA-awards (parties share the same place of business) that are sought to be enforced in a different state, VA-awards in business-to-consumer and consumer-to-consumer disputes do not fall under the scope of the CUEC provisions. To determine whether the NYC gives enough room for the recognition and enforceability of VAawards, it would be wise to first assess the applicability and most important provisions of the convention in conjunction with the articles of the CUEC as well as to evaluate other arguments in case the CUEC would not be applicable. 20

With the exception of “forced-ADR” or court ordered ADR of course. Manevy, I. „Online dispute resolution: what future?” Juriscom. June 2001. http://www.juriscom.net/uni/mem/17/odr01.pdf (geopend June 15, 2008), p. 34 Kaufmann-Kohler, G., en T. Schultz. Online Dispute Resolution: Challenges for Contemporary Justice. The Hague: Kluwer Law International, 2004, p. 33-34 23 Dhulos v. Strasberg, 321 F.3d 365 (3rd Cir. 2003) 24 United Nations Conference on Trade and Development, “E-Commerce and Developments Report 2003” 25 However, this might be different within the EU, Sanders, P. Arbitration. Vol. XVI, hoofdst. 12 in International Encyclopedia of Comparative Law, door M. (ed) Cappelletti, pp.3-177. Dordrecht: Martinus Nijhoff Publishers, 1996, p. 144 26 For the full text with explanatory notes see: http://www.uncitral.org/pdf/english/texts/electcom/06-57452_Ebook.pdf 27 Ibidem 21 22

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Article I.1 states that the NYC shall apply to arbitral awards made in the territory of a State other than the State where recognition is sought. This should not pose too much problems as to the question whether VA should be considered not as “an award made on the territory of a State”, but as “an award made in cyberspace”, as some authors might claim.28 However, this could be regarded as a non-issue if a seat of arbitration could be determined. Then the NYC will also apply to arbitral awards that are not considered as a domestic award. It would, therefore, be obvious to assume that VA-awards on cases that have no international elements other than the fact that the award is rendered online would be considered as a domestic award. With regard to the territory principle, article I.1 would apply in the same way for VA-awards as it does for traditional awards. However, another problem could arise. Since there is no need for face-toface meetings in VA, arbitrators could be appointed from all over the world making it extremely difficult to determine the seat of arbitration.29 This issue falls within a wider debate on the territorial factor and the existence of “international” commercial arbitration. Proponents of the territorial factor argue that international arbitration cannot be discussed other than against the background of a lex arbitri.30 The problem of the lack of territoriality could be solved by letting parties choose a judicial seat of VA. This could be a valid solution as parties are already free to determine the seat of arbitration in traditional arbitration. Without such a choice of a judicial seat of arbitration one could argue that the NYC is in fact not applicable.31 Another issue arises from article I.1 NYC, namely the question whether an online award should be considered as an arbitral award. The NYC does not define the concept of an award, nevertheless, it is an autonomous concept of the convention.32 The VA-award is also not directly defined in the CUEC, although in the light of the definitions of article 1 in conjunction with article 4 (a)(b)(c) CUEC it could be assumed that a VA-award could be seen as “electronic communication in connection with the performance of a contract”. However, in cases in which the CUEC does not apply, the argument could be used that the notion of arbitral award ex article I does not require any specific (written) form.33 With regard to the application of the NYC much depends on the validity of the arbitration agreement ex article II (in conjunction with article V.1(a)) NYC. Article II.1 NYC requires each Contracting State to “[...] recognise an agreement in writing under which the parties undertake to submit to arbitration [...].” “Agreement in writing” is made further explicit in article II.2 NYC as “an arbitral clause in a contract or an arbitration agreement, signed by the parties or in an exchange of letters or telegrams”. It is clear that NYC, drafted in 1958, could not have contemplated on arbitration through means of electronic communication.34 VA-agreements do not necessarily have to be problematic in this sense, since they can also be made in writing, as provisioned in article II NYC. However, in case VA-agreements have been made through the use of email or other electronic means of communication the dilemma arises whether these means of communication fall within the scope of article II NYC. This is an important issue since a party that would seek to prevent enforcement of the VA-award could argue that the VA-agreement was not valid under article V.1 (a) NYC. This article namely states that the recognition or enforcement of an award may be refused if the arbitration agreement is not valid under article II NYC and the law to which the parties have subjected it, or the law of the country where the award was made. It does not become clear from the text of the NYC whether the law of the seat of arbitration or the law at the place of enforcement determines whether the written agreement is met. Article V NYC allows for the courts at the seat of arbitration to set aside the award, while it also allows the courts at the place of enforcement to refuse enforcement of the award for the same reason.35 It would, therefore, be wise to adopt a uniform interpretation (or unification of provision), to prevent diverging application of article II and V.1(a) NYC by different states. Article 8 CUEC (legal recognition of electronic communications) in conjunction with Article 9 CUEC (form requirements) and article 5 CUEC (uniform interpretation) foresees in this need. Article 8 CUEC states that “a communication or a contract shall not be denied validity or enforceability on the sole ground that it is in the form of an electronic communication”. A party does not have to accept electronic communication, however, his acceptance would be inferred from his conduct (i.e. to participate in VA procedure, see article 28

Manevy, I. „Online dispute resolution: what future?” Juriscom. June 2001. http://www.juriscom.net/uni/mem/17/odr01.pdf (geopend June 15, 2008), p. 24 Yu, H.L., en M. Nasir. „Can Online Arbitration Exist Within the Traditional Arbitration Framework?” Journal of International Arbitration, 2003, p. 462 Mann, E.A. „State Contracts and International Arbitration.” British Yearbook of International Law, 1967: pp. 1-6. 31 Yu, H.L., en M. Nasir. „Can Online Arbitration Exist Within the Traditional Arbitration Framework?” Journal of International Arbitration, 2003, pp. 463-464 32 Kaufmann-Kohler, G., and T. Schultz. Online Dispute Resolution: Challenges for Contemporary Justice. The Hague: Kluwer Law International, 2004, p. 217 33 Ibidem, p. 217, the requirements for enforcement and/or recognition is another issue, that will be dealt with under discussion on article IV.1(a) NYC. 34 Stewart, K., and J. Matthews. „Online Arbitration of Cross-Border, Business to Consumer Disputes.” University of Miami Law Review, 2001-2002, p. 1131 35 Ibidem, p. 1134, For example: the USA has given effect to electronic agreements: Electronic Signatures in Global and National Commerce Act, Pub. L. No. 106-229 §101. 29 30

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8(2) CUEC). Article 9 CUEC states that communication or contracts do not need to be evidenced in any particular form. Article 9(2) CUEC directly relates to the discussion of article II and V.1(a) NYC, stating that “written agreement requirements” are “met by an electronic communication if the information contained therein is accessible so as to be usable for subsequent reference”. Article 9(3) CUEC explicates the signature requirement of article II.2 NYC, conditioning that a reliable and appropriate method is used to identify the party and indicate the party’s intention regarding the information in the electronic communication. The aim of the CUEC is not to be tied too much to conclusive electronic means of communication as technological developments proceed rapidly.36 However, as long as the CUEC has not entered into force the question remains if VA-agreements will be valid within the existing legal framework of the NYC. However, some arguments in favour can be posed. First, telegram and letters were the (only) means of written communication known in 1958. The NYC did, consequently, not exclude electronic means of communication but adopted the most modern means of written communication of its time.37 Secondly, the aim of article II NYC is to assure a certain level of consent and tangible form of evidence. A functional interpretation of article II.2 NYC could lead to the conclusion that if the electronic mean of communication would fulfil the same requirements it would be able to fit in with article II NYC. An important provision to be taken into account in this respect is article 31 of the Vienna Convention on the law of Treaties that provides a general rule on interpretation.38 This means that the NYC needs to be interpreted in good faith and in their context (including subsequent agreements and practices) in the light of its object and purpose. Thirdly, connected with article 31 of the Vienna Convention is the fact that it will be for the laws of the Contracting States (law of seat of arbitration as well as law of the country in which enforcement is sought) to govern the interpretation of articles II and V.1(a) NYC. Legislation which could be used to interpret these provisions and favour the use of electronic means of communication are i.e. the CUEC, the UNCITRAL Model Law on International Commercial Arbitration,39 the UNCITRAL Model Law on Electronic Commerce,40 the EU Directive on Electronic Commerce,41 and the U.S. Electronic Signatures in Global and National Commerce Act. As a result of these harmonising and unifying legislation, an increasing number of national arbitration laws allow for the recognition of e- and VA-contracts.42 It will, therefore, be interesting to see whether the EU and the U.S. will feel the need to ratify the CUEC as it might entail a slightly different regime than their existing legal frameworks. Another issue with a close connection to the interpretive problems of article II and V.1(a) NYC, is the requirement of article IV NYC that the party applying for recognition and enforcement shall supply the authenticated original or certified copy of the award as referred to in article II NYC. The question is, therefore, whether the VA-award and the VA-agreement meet the requirements of authentication and certification.43 Strictly speaking, one can doubt if electronic documents could be considered original or certified copies. Again, the CUEC provides an answer to this issue, namely in article 8 CUEC in conjunction with article 9(1)-(3) and especially (4) CUEC. As article 8 and 9(1)-(3) have already been discussed before, only 9(4) CUEC will be discussed. The article states that “where the law requires that a communication or a contract should be made available or retained in its original form, or provides consequences for the absence of an original”. The requirement is met if there is reliable assurance to the integrity of the information from the time it was finalized and the information can be displayed. Article 9(5) CUEC deliberates further on these requirements. In cases where the CUEC does not apply, one could refer to the same arguments posed in the previous paragraph regarding functional interpretation, uniform interpretation, and national law. The last issue to be addressed is the VA-award under the regime of article V.1(e) NYC. Based on this article, a party could oppose the enforcement of a VA-award on the ground that the award is not binding because of electronic notification and on the ground that the award was set aside because of its electronic form.44 These two grounds could be regarded as a non-argument in the light of articles 4, 8 and 9 CUEC, since such a notification would be regarded as “electronic communication” that shall not be denied validity or 36

http://www.uncitral.org/pdf/english/texts/electcom/06-57452_Ebook.pdf, p. 52 From a technical point of view it is even difficult to see why telegrams, telex and email would be different from each other. Wahab, M. „The Global Information Society and Online Dispute Resolution: A New Dawn for Dispute Resolution.” Journal of International Arbitration, 2004, p. 154 38 In conjunction with article 5 UNCT that renders the Vienna Convention applicable to any treaty. 39 Wahab, M. „The Global Information Society and Online Dispute Resolution: A New Dawn for Dispute Resolution.” Journal of International Arbitration, 2004, p. 155 on U.N. Doc. A/40/17 40 U.N. Doc. A/51/49 41 Directive 2000/31/EC on certain legal aspects of information society services, in particular electronic commerce, in the internal market 42 Wahab, M. „The Global Information Society and Online Dispute Resolution: A New Dawn for Dispute Resolution.” Journal of International Arbitration, 2004, p. 155 43 Kaufmann-Kohler, G., en T. Schultz. Online Dispute Resolution: Challenges for Contemporary Justice. The Hague: Kluwer Law International, 2004, p. 220 44 Ibidem, p.218 37

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enforceability because of its electronic form. However, in the absence of the CUEC, additional arguments have to be considered. Regarding the first ground, “not binding due to electronic notification”, it must be noted that the NYC nowhere requires such a notification. One could argue that this issue is to be governed by the applicable national laws governing the awards. A more convincing argument than the mere fact that the notification was done electronically, is that the notification did not arrive and that as a result the award is not binding. On a practical level it is difficult to prove whether an electronic message has arrived, however, this could easily be remedied on a practical level.45 The second ground for refusing enforcement, setting aside because of electronic form of the VA-award, should not be a ground for refusing enforcement. One could, on the basis of the “more favourable law” provision of article VII NYC argue that in case the law of the place of arbitration does not accept VA-agreements to be validly concluded or set aside a VA-award because of its electronic form, but the law of the place of enforcement does accept this, the country of enforcement would be required to enforce the VA-award and disregard article V.1(a) and (e) NYC.46 This issue is not specific to VA, but forms just another implication in the debate on the relationship between article V.1(e) and article VII NYC.47

4. Evaluation: legal certainty Even though, the CUEC clarifies many questions regarding the applicability of the NYC on VA there is still enough room for disputes on the scope and applicability of the NYC. This could make it difficult for parties to reasonably foresee and anticipate to what the competent authority will decide when confronted with a request for recognition and enforcement of a VA-award. There are some issues that are still not resolved in commercial VA. First, the scope of the CUEC does not entirely fit the scope of the NYC, since CUEC does not apply to situations in which parties that share the same state as their place of business seek enforcement of a VA-award in another state. Secondly, the CUEC does not foresee in the territoriality debate on the scope of the NYC, making it difficult to assess whether the NYC is applicable in cases where arbitrators operate from different countries and the parties did not determine a seat of arbitration. Thirdly, the CUEC has not entered into force yet in any NYC Contracting State. This means that despite the fact that it is a useful source for interpretation it cannot bind states. Parties will thus be referred to the national laws and interpretations of place of arbitration and the place of enforcement. In some cases it can even fall in the trap of the problems surrounding articles V.1(e) and VII NYC. From a theoretical point of view there are many arguments in favour to apply NYC to VA-agreements and VA-awards, but as long as there are no uniform provisions there might be marginal legal certainty. Another important issue is that ODR and VA have given rise to another type of party in international dispute resolution, namely the consumer. The CUEC does not apply with regard to consumer-to-consumer and business-to-consumer arbitration and the NYC gives Contracting States an option for a commercial reservation (article I.3 and X NYC).48 However, this problem is not specific to ODR but forms a part of a wider debate on the commercial reservation of the NYC. Even if a Contracting State did submit a declaration of a commercial reservation, the CUEC will not apply to VA including consumers. This would also lead the consumer back to the old discussion on the scope of the NYC with regard to VA. Again, also this issue could be captured by the academic dispute on the “more favourable law” versus “refusal to enforce award that have been set aside” of articles V.1(e) and VII NYC. One could say that if the law at the place of enforcement allows for consumer arbitration and VA, while the law at the place of arbitration does not, the court at the place of enforcement should be required ex article VII NYC to enforce the (VA-)award.49 However, given the fact that there is no security that different courts in different Contracting States will apply this principle similarly and given the fact that domestic arbitration acts are likely to be quite differing per state, this would not lead to a great deal of legal certainty for awards rendered in consumer-to-consumer and business-to-consumer arbitration.50

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Ibidem, p. 218 Stewart, K., and J. Matthews. „Online Arbitration of Cross-Border, Business to Consumer Disputes.” University of Miami Law Review, 2001-2002, p. 1137 Ibidem, p. 219 48 Stewart, K., and J. Matthews. „Online Arbitration of Cross-Border, Business to Consumer Disputes.” University of Miami Law Review, 2001-2002, p. 1137 49 Ibidem, 1137 50 Vahrenwald, A. „Out-of-court dispute settlement systems Report on legal issues, Part IV: Arbitration.” Vahrenwald.com. 1 October 2000. http://www.vahrenwald.com/doc/part4.pdf (geopend June 15, 2008). 46 47

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5. Conclusions It is believed that VA could contribute to swift, efficient and, above all, inexpensive communication between the parties and the arbitrators, and thus remove the disincentives of geographical distance and high costs. However, new questions arise whether the recognition and enforcement of VA-awards could fit within the traditional legal framework of the NYC. It is, nonetheless, not necessary to see whether this enforcement of VA-awards is probable from a legal theoretical point of view, but also to see whether the existing legal framework of the NYC would entail enough legal certainty for parties that engage in VA. It could be considered that the enforceability of awards is the backbone of arbitration and a guide for legal certainty. The adoption of the Convention on the Use of Electronic Communications in International Contracts (CUEC) has shed new light on the applicability of the NYC to VA. However, there are some limitations to the CUEC. First, the scope of the CUEC does not entirely fit the scope of the NYC, giving a different meaning to “foreign awards”. Secondly, the CUEC does not foresee in the territoriality debate on the scope of the NYC. Thirdly, the CUEC has not entered into force yet in any NYC Contracting State. Fourthly, the CUEC does not apply to VA including consumers. This means that despite the fact that the CUEC is a useful source for interpretation it cannot bind states. Parties will thus be referred to the national laws and interpretations of place of arbitration and the place of enforcement. There are quite some arguments in favour to apply NYC to VA-agreements and VA-awards, but as long as there are no uniform provisions there might be marginal legal certainty. An amendment of the NYC is, therefore, still desirable.

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