Thought leadership from our experts

Romania: New Horizons in Commercial Arbitration

In 2010 a lecture1 in which Professor Jan Paulsson suggested that it would be useful "to forbid or, at least, rigorously police, the practice of unilateral appointments" provoked a large debate among arbitration practitioners. The main reason for such a proposal was related to Paulsson's assessment that the arbitrators appointed by the parties are far from being neutral and that the only possibility for ensuring an impartial dispute resolution would be through the appointment of the arbitral tribunal by a neutral body. That proposal faced a large criticism2, most of the arbitration practitioners expressing their view in the sense that the possibility to appoint an arbitrator constitutes an essential right of the parties that cannot be removed.

A study3 conducted in 2012 by Queen Mary University of London and White & Case reached the same conclusion as the one expressed in most of the reactions to Paulsson's proposal: 76% of the respondents preferred a unilateral appointment of the two arbitrators while only 7% expressed their view in favor of an appointment by an arbitral institution or appointing authority.

Both reactions to the proposal of Jan Paulsson and the above mentioned study are sound evidence that the unilateral appointment of the two arbitrators enjoys a wide popularity among practitioners, being one of the reasons for which arbitration is chosen.

In general lines, the perspective on this matter is quite similar in Romania, although there are certain features with a greater significance in the view of a local practitioner. Thus, the possibility of appointing the two arbitrators is perceived as a fundamental right, the "keystone" of international arbitration and the main reason for choosing arbitration as a method for resolving the disputes. Considering the tremendous importance of the parties' possibility to unilaterally appoint the arbitrators among local practitioners, it is not surprising that the changes imposed by the Rules of Arbitration issued by the Court of International Commercial Arbitration ("CICA") attached to the Chamber of Commerce and Industry of Romania in 2012 were highly unpopular. In fact, the changes of the Rules of Arbitration in 2012 (the greatest change being the appointment of the arbitrators by the Appointing Authority) are seen as one of the main causes that led to a massive decrease of the number of the arbitrations administered by CICA.

Without the fundamental possibility of appointing an arbitrator and a certain degree of control on the appointment of the decisive person, namely the president of the arbitral tribunal, local practitioners have sought alternative means of solving their disputes, including by resorting to other Courts of Arbitration (such as ICC Paris), whose rules were unlikely to suffer such dramatic changes.

The Rules enacted in 2012 had a very short life span, being completely changed in 2014. That change represented basically a comeback to the classic formula of appointing arbitrator, the one without which the arbitration had not been considered an option anymore (there were also other important changes aimed to increase the confidence in this arbitral institution, but these changes are not subject of the present article).

Although the 2012 CICA Rules were in force only for a short period, their enforcement has raised difficult problems such as the one concerning the contradiction between the real will of the parties and the provisions of the Rules. As most of the Rules establish, the 2012 CICA Rules provided that by choosing the arbitration institution the parties shall be deemed to submit to the Rules in force on the date of commencement of the arbitration. However, that provision, together with the one regarding the appointment of the arbitrators by the appointing authority, clashed with the real will of the parties from the moment when the arbitration clause was signed, according to which the two arbitrators were to be appointed by the parties.

Considering the local perspective concerning arbitration and the fact that the appointment of the arbitrator had been considered the most distinctive feature of the arbitration, nobody even conceived that such a possibility could be removed from the Arbitration Rules of CICA. Thus, although not expressly mentioned in the arbitration agreement, the parties have chosen CICA to administer their litigation in consideration of the future possibility to appoint the arbitrators. Facing with a change of the rules of the game while the game was on, the affected parties had a different approach: a part of them decided to change the arbitration clause, indicating ad-hoc arbitration or another arbitral institution instead of CICA, another part decided to agree on the rules in force, while others decided to oppose to the application of such rules that contradicted their expectation about the method of solving the litigation.

The conflict between the provisions of the Rules of Arbitration and the real intention of the parties received different solutions from the Courts of Law, which were requested to set aside the awards rendered by arbitrators appointed by the Appointing Authority. However, although there were several decisions in which a rather formal approach was adopted (to upheld the arbitral awards considering that by choosing the arbitral institution the parties automatically submitted to the rules of arbitration in force at the date of initiation of the arbitration), there were certain decisions4 in which, following a thorough analysis of the real intention of the parties and its predominance over the Rules of Arbitration, the Court decided to set aside the decisions issued by the arbitrators that were not appointed in accordance with the parties' will.

This approach of the courts directed toward discovering the real intention of the parties and giving the due importance to such intention is encouraging and adds certain confidence in terms of correcting any deviation such as the one occurred in 2012 at the CICA.

  1. Jan Paulsson – Moral Hazard in International Dispute Resolution, Inaugural Lecture as Holder of the Michael R. Klein Distinguished Scholar Chair, University of Miami School of Law, 29 April 2010
  2. See in this respect, for example Alexis Moure – Are unilateral appointments defensible? On Jan Paulsson's Moral Hazard in International Arbitration,, October, 2010; Charles N. Brower and Charles B Rosenberg, The Death of the Two-Headed Nightingale: Why the Paulsson–van den Berg Presumption that Party-Appointed Arbitrators are Untrustworthy is Wrongheaded, Arbitration International, Vol. 29 (2013
  4. For example, Decision no. 3808/02.12.2014 issued by the High Court of Cassation and Justice issued in file no. 1082/2/2014, unpublished