International dispute resolution through arbitration

On July 17, 2010, the Philippine ambassador to Netherlands deposited the country’s Act of Accession to the 1907 Convention on the Pacific Settlement of International Disputes at the Dutch Ministry Foreign Affairs.

The event passed unnoticed except perhaps for a brief statement posted at the website of the Philippine Department of Foreign Affairs.

With that singular act, however, a major step - if not a big leap - was taken in moving the frontiers of public international law in the country, particularly in the field of international dispute settlements.

A registry, not a court. The Peace Palace at The Hague, The Netherlands has been a Mecca for lawyers around the world. At its center is a majestic edifice with ornate spires which serves as the seat of the International Court of Justice (ICJ), arguably the court of first and last resort for disputes between and among states.

While the ICJ is relatively well-known even to high school students, a sister institution of equal significance headquartered in the same building is not. Most Philippine international law textbooks pay scant attention to it. This institution is the Permanent Court of Arbitration, and the Philippines became its 111th member starting September 11.

The PCA is an inter-governmental organization established in 1899 that provides a range of dispute resolution services to the international community. Despite its name, the PCA is not a court, but a mechanism for the creation of ad hoc arbitral tribunals to resolve disputes that states wish to arbitrate. Its has a permanent administrative council and an international bureau (or secretariat) that provides support to the tribunals set up. The basis of the ‘Court’ is a panel of arbitrators to which parties may nominate a maximum of four persons. When parties agree to submit a dispute, each appoints two arbitrators to the panel, and the four arbitrators select an umpire.

Trend toward alternative dispute resolution. A nation-state is sovereign, or has full sway, within its borders. It is generally reluctant to bring disputes to outside bodies. But it interacts and has to co-exist with other equally sovereign countries, and more so in a globalized world. Thus, conflicts with other states, in varying degrees, are inevitable.

Under the UN Charter, the use of force by individual states as a means of settling dispute is impermissible. Peaceful settlement is the only available means. While parties have the duty to settle disputes peacefully, they are left to their free choice of means.

The now-classic techniques for settling disputes are negotiations, enquiry (neutral fact-funding by a third party), mediation (third-party efforts to bridge differences with its own proposals and possible incentives), conciliation (a combination of enquiry and mediation), arbitration (a binding solution devised by a third party), and judicial settlement (a binding solution by an international court). 

There has been a trend in domestic jurisdictions, including the Philippines, towards the use of alternative dispute resolution. The latter allows a less formal and less contentious way of settling disputes and helps in reducing the backlogs in court cases. The Katarungang Pambarangay conferences and court-annexed mediation are prime examples.

There is a parallel trend in the international realm towards arbitral proceedings, particularly in commercial disputes of an international character. In addition to the PCA, the other prominent arbitral tribunals are the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID), the WTO’s Dispute Settlement Board, the International Court of Arbitration of the International Chamber of Commerce, and the International Tribunal for the Law of the Sea.

 While the PCA’s original concept was to resolve disputes submitted by disputing states, it now accepts disputes between states and private parties. The PCA can hear disputes involving ‘territorial, treaty, and human rights disputes between States; private claims against an inter-governmental organization; and commercial disputes arising under bilateral investment treaties.”

In arbitration, the parties to a dispute enter into an agreement called compromise where they submit the resolution of their dispute to a tribunal to be composed of arbitrators of their choice, according to the procedure and law determined by the parties themselves on the basis of the issues they defined.

Just like in ICJ judicial settlement, consent of the disputing states to submit to arbitration is required, either made at the time of submission or through an earlier agreement. There is more flexibility though in the arbitral process, as private investor or other non-state actors may become a party, the proceedings are confidential unless the parties agree otherwise, and both sides can define the issues to be resolved and the law and procedure to be observed. The arbitrators may even be authorized to apply not only law but also equitable consideration in efforts to reach a just solution.    

Expanding avenues for dispute settlement. There has been increasing resort to international dispute mechanism in the Southeast Asia region. Malaysia and Indonesia brought their dispute over Pulau Ligitan and Pulau Sipadan before the ICJ, which the latter resolved in 2002 in Malaysia’s favor on the basis of effectivites or sovereign activities on the islands. The ICJ resolved in 2008 the dispute between Singapore and Malaysia over Pedra Blanca in the Straits of Malacca in the island-state’s favor. The maritime boundary delimitation dispute between Myanmar and Bangladesh in the Bay of Bengal is awaiting resolution by the International Tribunal for the Law of the Sea.

The Philippines has also been engaged in international dispute settlements. It has been both a complainant and a respondent in trade disputes before WTO panels in Geneva. The country is a complainant against Thailand on the latter’s customs and fiscal measures on Philippine cigarettes, while a respondent in a suit brought by the US and EU over tariffs on imported distilled spirits. The government has been brought before an ICSID arbitral panel in Washington, D.C. and a panel of the International Chamber of Commerce in Singapore over the unresolved Piatco-NAIA Terminal 3 case.

The Philippines also has a number of outstanding issues with other countries, including knotty territorial ones with certain neighbors.

When possible resolution of these and other disputes are discussed, there are now additional avenues for settling them, notably arbitration, in addition to bilateral or multilateral negotiations, referral of the matter to the UN Security Council ICJ or its submission to the ICJ. 

When PCA Secretary General Christiaan M.J. Kroner visited Manila in March 2010, DFA officials requested him to send an expert to assist in efforts to raise awareness of PCA facilities.

As part of the activities to commemorate the centennial of the U.P. College of Law and in partnership with the Philippine Judicial Academy, a forum on the PCA with an expert from The Hague will be held at the college’s Malcolm Theater on March 2.

(Malaya is a career foreign service officer and a lawyer.)