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CHAP.
XXIV

Basis of the arbitral decision

case submitted to them. If the arbitrators be chosen by others than the parties to the dispute, or even by the parties themselves in advance of the dispute, or if they be chosen by lot from an indiscriminate group, the decision rendered by them would seem to be not strictly arbitral, although often popularly described as such. The procedure of international arbitration should therefore not be confused with the varieties of informal judicial process known as "arbitration" in municipal law,1 in respect to which the parties have either no option or a limited option as to the choice of the arbitrators.2

A further characteristic of arbitration is that the settlement sought to be reached by that procedure must be on the basis of accepted principles or rules known beforehand to the contending parties. A settlement by the arbitrators reached without reference to some accepted standards of conduct, and based wholly upon their own sense of what was demanded in point of equity or expediency, would seem to partake of the nature of friendly mediation rather than of arbitration. In cases where the dispute involves a question of fact rather than of principle, as in the controversy between the United States and Great Britain in 1794 with reference to the St. Croix River boundary, and in general in cases relating to the interpretation of treaties, the task of the arbitrators is limited to the decision of concrete issues and need have no reference to general principles of law other than those bearing upon the interpretation and obligation of treaties. When, however, the dispute involves claims based upon the violation of alleged rights, the validity of which is disputed by the party defendant, the arbitral tribunal may be called upon first to determine what rules of law were in force at the time and then to apply them to the facts presented by the controversy.

Owing to the indefinite character of many of the rules of international law, the contending parties have frequently stipulated in the agreement, or compromis, under which the dispute is submitted to arbitration that the decision of the arbitrators must be in accordance with certain defined principles, whether these be rules of law alleged to have been in existence at the time the controversy started, or the general principles of equity, or special rules intended

'Such as, for example, the procedure of "arbitration" before the United States Railway Labor Board under the Transportation Act of 1920.

For a discussion of arbitration as distinct from judicial process, see Baty, International Law, Chap. I.

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XXIV

to hold good only in the particular case. The Treaty of Washing- CHAP. ton of 1871 between Great Britain and the United States provided that the decision of the arbitral tribunal set up for the settlement of the Alabama Claims should be governed by three rules agreed upon by the parties as applicable to the case, and by such principles of international law, not inconsistent with those rules, as the arbitrators might determine to have been applicable. While Great Britain was unwilling to assent to the three rules as principles of international law in force at the time the claims arose, it accepted them as a satisfactory basis for the existing case and for future cases.2

The procedure described in the preceding paragraphs represents merely the voluntary practice of a number of states during the course of the nineteenth century, and therefore contains no element of international obligation. It would appear, however, that then as now international law intervened at the conclusion of the procedure to the extent of prescribing in a vague way the obligation of the parties to abide by the award of the arbitral tribunal. The terms of the submission and the personnel of the tribunal might be freely determined by the two states; but once the machinery was set in motion the rule of good faith demanded that the award be loyally carried out. Exceptions are to be noted, as in the application of the rule of good faith to other treaty agreements. If the decision of the arbitral tribunal were clearly in excess of the terms of the compromis under which the dispute was submitted to arbitration, the party unfavorably affected was not regarded as bound by it. On this ground the award rendered in 1831 by the king of Holland in the Northeastern Boundary Dispute between Great Britain and the United States was set aside by both parties. The same held true in cases where the arbitral tribunal was proved to have been guilty of fraud or corruption in reaching its award. As a point of legal theory, it has been argued that the award must not be contrary to the principles of fundamental justice or the accepted rules of international law; but as a prac

'Art. VI. Malloy, Treaties, I, 700. See below, p. 564.

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"In order to evince its desire of strengthening the friendly relations between the two countries and of making satisfactory provision for the future, the British Government agreed that in deciding the questions arising out of the said claims "the Arbitrators should assume that Her Majesty's Government had undertaken to act upon the principles set forth in these rules." Ibid. Compare the arbitral provisions of the Jay Treaty of 1794, where existing principles of law were adequate. Ibid., I, 590.

a

* See Moore, Digest, VII, § 1082; Ínternational Arbitrations, I, 81-161.

Legal oblisubmit to

gation to

the award

^

CHAP.
XXIV

e. Develop

ment of the obligation to arbi

trate

tical matter the urgency of the need of manifesting good faith has generally taken precedence over the contentions of the losing party.1 The Hague Convention for the Pacific Settlement of International Disputes merely repeats the rule of customary law in prescribing that "recourse to arbitration implies an engagement to submit loyally to the award." 2

The growth of the practice of arbitration as an amicable means of settling disputes between states constitutes one of the most conspicuous features of the history of international relations during the nineteenth century. Decade by decade, beginning with the Jay Treaty of 1794, an increasingly large number of cases was submitted to arbitration. In most instances the disputes were submitted in accordance with an agreement, or compromis, drawn up at the time the question at issue became acute. The obligation to arbitrate was thus assumed after the outbreak of the controversy which it was intended to settle. On occasion, when treaties were concluded creating a state of affairs which it was thought might give rise to future controversy, a clause was inserted among the provisions stipulating that if disputes should arise with respect to the subject-matter of the treaty they should be submitted to arbitration. This practice became frequent during the latter part of the nineteenth century, and marked a limited recognition of the principle of obligatory arbitration as between the contracting parties. On other and rarer occasions the conclusion of a treaty was marked by the insertion of a clause expressing the desirability of a resort to arbitration for all disputes to which its application might be feasible, as in the case of the Treaty of GuadalupeHidalgo between the United States and Mexico in 1848,5 or, again, a clause stipulating an express obligation to arbitrate disputes in general, exclusive of certain issues, as in the treaty between Holland and Portugal in 1894.6

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During the last quarter of the nineteenth century a number of 1 See Hall, International Law, § 119.

Art. 37, convention of 1907.

The literature of the history and practice of arbitration is bulky. For select references see Potter, Introduction to International Organization, Appendix B, 14-16. For a brief historical sketch see Moore, International Arbitrations, V, 4821 ff. For the practice of the United States, see ibid., Vols. I-V. For the practice of states generally, see Darby, International Tribunals, 4th ed., 1904; La Fontaine, Pasicrisie Internationale.

As, for example, in the treaty of 1796 between the United States and Tripoli, Art. XII. Malloy, Treaties, II, 1785.

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Art. XXI. Malloy, Treaties, I, 1107.

Martens, Nouveau Recueil Général, 2e Ser. XXII, 590; cited by Oppenheim, International Law, II, 17.

XXIV

arbitration

treaties were entered into, particularly by the South American CHAP.
states, having as their primary object the settlement by arbitration
of possible future disputes. These so-called "general arbitration General
treaties” as a rule made exception. of disputes involving the inde- treaties
pendence, the honor, or the vital interests of the contracting parties.
They increased greatly in number as a result of the influence of
the first and second Hague Peace Conferences, and by the close of
the first decade of the twentieth century they existed, in bilateral
form, between practically all of the important states of the
world.

The chief point of legal interest in connection with them is the Exceptions
and qualifi.
form in which the exception from the obligation to arbitrate was cations
entered. The Root treaties of 1908, concluded between the United
States and a dozen other powers singly,' were typical in providing
for the arbitration of "differences which may arise of a legal
nature or relating to the interpretation of treaties. . . provided,

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nevertheless, that they do not affect the vital interests, the inde- Nakers,

pendence, or the honor of the two contracting states, and do not concern the interests of third parties." The defect of these treaties was soon seen to lie in the obvious fact that the cases covered by the proviso were the very ones which experience had shown were likely to lead to serious controversy.2

In 1911 an effort was made by the United States to draw a more logical distinction between disputes which might and others which might not be submitted to arbitration, and treaties, known as the Taft-Knox Treaties, were negotiated in which the phrase "differences of a legal nature" in the treaties of 1908 was replaced by "differences... which are justiciable in their nature," these being defined to be differences "susceptible of decision by the application of the principles of law or equity." At the same time the proviso of the treaties of 1908 was omitted. Moreover, the obligation to arbitrate was greatly strengthened by a provision to the effect that, should the parties disagree as to whether a particular difference was justiciable within the terms of the treaty, the question should be submitted to the impartial deci

3

'See, for example, the treaty between the United States and Great Britain, Malloy, Treaties, I, 814.

For example, the United States Government would apparently not have considered the dispute with Colombia over the Isthmus of Panama as coming within the terms of the treaty had there been one with Colombia, and did not in fact consider the dispute with Great Britain over the question of tolls at the Canal as within the terms of the actual treaty.

'For the text of the treaty with Great Britain, see Charles, Treaties, 38

CHAP.
XXIV

Limited

international obligation to arbitrate

sion of a joint high commission of inquiry. This paragraph was stricken out by the United States Senate, and the treaties were amended in other respects; with the result that the President refused ratification on his part. In the meantime, beginning with the treaty between Chile and Argentina in 1902, several states had entered into treaties in which the obligation to arbitrate future differences was assumed without qualifications of any kind.2

It is important to observe that in all of these bilateral arbitration treaties the obligation assumed, whether limited or unrestricted, is a voluntary contractual obligation between the parties to the treaty. International law enters into the agreement only to the extent of prescribing the rule of good faith in respect to the fulfilment of the conditions of the treaty. Not until the Hague Conference of 1899 did the obligation to arbitrate begin to take on an inchoate legal character in respect to the community of nations as a body. The Convention for the Pacific Settlement of International Disputes announced that "in questions of a legal nature, and especially in the interpretation or application of international conventions," arbitration was recognized as the most effective and equitable means of settling disputes which diplomacy had failed to settle.3 This statement of general principle was repeated at the Second Hague Conference, and was followed by a clause proclaiming the desirability of a recourse to arbitration in so far as circumstances might permit. At the same time, in its final act the conference went on record as being "unanimous, 1. In admitting the principle of compulsory arbitration, 2. In declaring that certain disputes, in particular those relating to the interpretation and application of the provisions of international agreements, may be submitted to compulsory arbitration without any restriction." The adoption of this mere expression of opinion registered the failure of the efforts made by a number of powers to have an agreement adopted providing for obligatory arbitration of an "exclusive" character, similar to the bilateral obligation contained in the Root treaties of 1908.

5

The Root treaties required that, in advance of an actual resort to arbitration, a separate treaty, known by the French designation compromis, should be entered into stipulating the conditions under which the dispute should be arbitrated. Thus the decision whether a given dispute came within the terms of the general treaty was taken by each state separately.

For the text of the treaty between Chile and Argentina, see Am. Journal, I (1907), Supp., 292.

Art. 38. Ibid.

Art. 16. Hague Conventions, 55.
"Ibid., 27.
For a discussion of the attitude of the leading powers at the Second
Hague Conference in respect to the question of restricted obligatory arbitration,

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