Common-Law and Arbitration in England
Sir William Holdsworth recorded that the intervention by courts in settlement of business disputes was mostly resisted by the commercial community. He remembered a specific instance of a rebuke given to the judges of the courts of the common law who constantly interfered with the government of corporations of merchants by removing cases into their court.
With the advent of people in business in one country entering into trade and investment relationships, with people in business in other countries there was hope although very fickle hope that there would be no future disagreements and issues arising from similar instances. Hence which resulted in the phenomenon that when effective cross border dispute resolution procedures and mechanisms were not correctly available, those in businesses either actively refrained into entering contracts across borders since the risk involved was extraordinarily high or jacked up the transaction price to compensate and remunerate themselves for the additional hazard. In both these circumstances, the free flow of trade amongst nations got severely hampered. Arbitration, worldwide, eventually became a most useful adjunct to the development of international economic relations and collaboration to help in mitigating the risks involved in transactional commerce.
The users of such voluntary arbitration were primarily dependent on the willingness of the parties to wholly abide by the spirit of the arbitration agreement which they had freely previously entered into. Given the spirit of arbitration as an impetus and motivating factor, which was then at the time described as an original and novel legal fiction was formulated and codified into statute in England way back in the year 1698. This was arguably the first English law primarily dedicated to arbitration. This enabled an agreement to arbitrate to be treated as if the very reference to arbitration by a court had already previously been made. Ever since the submission to arbitration was rendered permanent and eventually irreversible and irrevocable when it was made a rule of court the individual who ended up acting in contravention to it or revoking it was held to be severely in the contempt of court. This procedure ended up introducing a kind of statutory fiction that was entirely consensual since the parties ended up choosing their tribunal and it had the ingenuity as well as novelty factor propelling it of being supported adequately by the power of the state through its courts.
In England(as it was known at the time) specifically a partially developed and enhanced system of arbitration had already existed ever since the time of the Romans, both principally during the classical period as well as under Emperor Justinian. Arbitration was considered to be a part of the common law through the work of the ecclesiastical courts at the time. Eventually from the seventh century onwards, arbitration got officially introduced into canon law which at the time governed most of the litigation that was eventually later onwards handled by regular conventional courts. After the Roman period and with the eventual norman conquest in 1066AD, the idea of a resolution of disputes commercial or any other outside the ambit of the King’s courts was looked down upon and was viewed with chagrin and contempt by judges administering the prevailing Anglo Saxon law. Several centuries on, in Scott vs Avery Lord Campbell stated the reason for common law’s hostility towards arbitration which was along the following lines in the contest of the courts in ancient times for extension of jurisdiction virtually all of them collectively almost unanimously in one voice would oppose anything that would end up depriving them of any of sort of jurisdiction.
Source: Harmony Amidst Disharmony: The International Framework- Fali S Nariman