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Initial Third World Skepticism to Arbitration

For several years, the rules and practices of international arbitration were mostly seen as being solely for the protection and businesses of the western industrial world which would lead to severe distrust in developing as well as underdeveloped countries. When individuals or entities from primarily third world countries would be unsuccessful in disputing claims of major multinational corporations, they would express their disappointment at the imposition of a western system, not on the other hand actually with the merit or demerit involved of specific cases that were eventually decided.

In the year 1963, in the middle-east, after the kingdom of Saudi Arabia lost a now-famous international arbitration case, a ministerial decree was subsequently issued by the Saudi government which would prohibit all public corporations in the state from submitting either to foreign law or even to the jurisdiction of foreign courts or even to foreign arbitration.

Distrust of international arbitration was initially not solely confined to the losers. In Egypt and as well as in several parts of North Africa, mistrust of international arbitration had deep roots and continued to cause misgivings. In a memoir that was presented at the Conference of Sovereigns and respective heads of states of OPEC countries, it was consequently recorded that since even in the year as late as 1975 that “western arbitrators” so to say, since they belonged to a certain hemisphere as well as a certain legal as well as the social system, had a conception of law that was a reflection only in turn of their system. They have a tendency, the memoir complained that they only tend to consider the arguments of Third World clients are devoid of any legal standings and subsequently very conveniently hold them to be ineffective once they fail to correspond with their respective conception of the law.

The Riyadh Arab Agreement on Judicial Cooperation, which was a regional convention popularly known as the Riyadh Convention, had to negotiate for many years and ultimately entered into force only by the year 1985. As of now, it is considered to be one of the most commonly used conventions in the Middle East for the recognition as well as enforcement of arbitral awards. Pertinent to the case, however, and very much unlike the New York Convention, the Riyadh convention mandated that to enforce an award which was made in another Arab country would imply leaving to enforce must be obtained beforehand in the country in which the award was made. The Agreement on the Execution of Rulings, requests of legal assistance and judicial notes, which was entered into by the Gulf Cooperation Council in 1995, and was known subsequently as the GCC Convention, had the same requirements. While it didn't specifically allude to arbitral awards, it is still considered as being applicable to them.

Simultaneously, in Latin America as well there was immense traditional hostility towards the very idea of arbitration owing to the bitter memories of arbitral awards which were rendered in the nineteenth century linked to the various border disputes which arose between underdeveloped countries in Latin America and the major western powers. However, things subsequently changed with the adoption of the Inter American Convention on International Commercial Arbitration of 30th January 1975 also known as the Panama Convention which in turn was heavily influenced by the New York Convention,1958. Subsequently, arbitration became a more acceptable and viable way of settling disputes in Latin America with 19 states which included Argentina, Colombia, Mexico and Venezuela subsequently ended up ratifying the New York Convention of the year 1958.

Source: Harmony amidst Disharmony- Fali S Nariman.

  • Saudi Arabia
  • Riyadh Convention
  • Panama Convention

BY : Kabir Dev

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