Modern international arbitration: 150 years young

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Douglas Harrison

This summer marks the 150th anniversary of what many consider to be the beginning of modern international arbitration: the publication of the Alabama Claims Arbitration award, held in Geneva in 1872 between the United States and Great -Brittany.

In the aftermath of the American Civil War, many United States called on Britain to compensate for damage to the American Merchant Navy caused by Confederate commerce raiders that had been built in British shipyards despite Great Britain’s declared neutrality Britain during the conflict.

As these ships sailed the high seas, American shipowners were forced to pay higher insurance premiums, lay up ships, or transfer them to foreign flags. CSS Alabama was the most notorious of the raiders. She was built in Liverpool, apparently as a Spanish freighter, but after her launch in 1862 she sailed to the Azores where she was outfitted for war, picked up an English crew and hoisted the Confederate flag. She captured and sank 58 American merchant ships before being sunk by USS Kearsarge off Cherbourg, France in June 1864 (see illustration).

Discussions about British compensation began before the end of the war and were heated. At one point, Massachusetts Senator Charles Sumner, head of the Senate Foreign Relations Committee, said “Canada would be a good start” because that’s the price Britain would have to pay. Demands that Britain cede Canada died down, as many Americans came to believe that Canada would one day seek annexation anyway.

By late 1870, the talks were about some form of dispute resolution. At this time, there were other simmering disputes between the United States and Britain, including the Fenian raids into Canada, access to east coast fisheries, and control of the San Juan Islands. Early in 1871, a joint High Commission, including Sir John A. Macdonald, met to deal with these matters. In May, he concluded the Washington Treatywhich included an agreement to submit US maritime claims to arbitration.

Interstate arbitrations had been conducted on several occasions during the 19th century, including a number between the United States and Great Britain over the demarcation of the Canada-US border. What sets this arbitration apart is that the parties have agreed that neutral arbitrators form the majority in the tribunal and that a quasi-judicial process has been adopted.

The terms of reference for the arbitration stipulated, among other things, that a neutral government must exercise due diligence to prevent the belligerents from using its ports either for the fitting out of warships or as a base of operations, and that he had to diligently prevent any ship destined for war from leaving his jurisdiction. By accepting that these principles of international law were in force at the relevant time, the British effectively acknowledged their liability before the start of the arbitration.

The US chose as party-appointed arbiter Charles Francis Adams, who had served as US minister in London during the construction of CSS Alabama. The British chose Lord Chief Justice Sir Alexander Cockburn. The neutrals were Viscount D’Itajuba, the Brazilian minister in Paris, Jakob Staempfli, a former president of the Swiss Confederation, and Frederico Count Sclopis di Salerno, an Italian senator, who was chosen as president. None of these last three mastered English and had to rely on French translations of the documents. The team of American lawyers was led by two former attorneys general, William M. Evarts and Caleb Cushing, as well as Morrison R. Waite, later Chief Justice of the United States. The main British lawyer was Sir Roundell Palmer, former Attorney General and later Lord Chancellor.

The parties exchanged written observations at the end of 1871. The American submission caused a storm when the British saw that the United States was making a claim not only for direct damage to American shipping, but also for consequential damage , including higher insurance costs, loss of business, barriers to trade and loss of economic growth. These indirect claims were estimated to exceed US$2 billion, or about US$30 trillion today. The terms of the treaty were somewhat vague on this point, but the British asserted that collateral claims should be excluded.

The parties’ reply briefs were filed in April as they continued negotiations on the issue of indirect claims. After much diplomatic maneuvering and trickery among lawyers and arbitrators, the case finally went to court, which ruled (with the implied consent of the parties) that collateral claims were beyond its review.

The tribunal held 32 sessions, 27 of which were with the parties. On July 22, 1872, it ruled 4-1 that Britain was liable for the damage caused by the CSS Florida. In mid-August, he dismissed the US complaint about CSS Georgia but unanimously held Britain responsible for CSS Alabama. and, by 3-2, for the CSS Shenandoah (in the case of the latter, only from the time it had taken on an Australian crew in February 1865).

The United States sought damages of US$24 million. On September 14, 1872, the court, with Lord Justice Cockburn dissenting, awarded the United States $15.5 million in gold (about £225 billion today). Britain paid on time by handing over US bonds of equivalent value.

While Alabama claims arbitration is often cited as the starting point of modern arbitration, it had features that would be unacceptable today: Adams and Cockburn frequently discussed the case and the acceptability of the result with the lawyers of their respective countries; Adams was in a conflict of interest having served as an American minister in London at the time of the events in question and having tried to get the British to prevent these ships from leaving the shipyards; the tribunal lacked the capacity to rule on its own jurisdiction and its deliberations were held mainly in the presence of lawyers.

Whether the Alabama claims arbitration was arbitration in the modern sense, it led to many other interstate arbitrations over the following decades, including three major ones involving the United States and Britain over rights seal in the Bering Sea, the border between British Guiana and Venezuela. , and the Alaska-Canada border. A general treaty of arbitration between the United States and Great Britain was signed in the late 1890s, but ultimately did not gain enough support in the United States Senate to be ratified. However, both countries sent delegations to the Hague Peace Conferences in 1899 and 1907, which paved the way for the eventual creation of the Permanent Court of International Justice in 1920, its successor the International Court of Justice and organizations such as the International Court of Justice. Arbitration of the International Chamber of Commerce and the American Arbitration Association.

Douglas Harrison in an Independent Commercial Arbitrator, Mediator and Attorney and Chairman of the Toronto Commercial Arbitration Society.

The opinions expressed are those of the authors and do not necessarily reflect the views of the author’s firm, its clients, The Lawyer’s Daily, LexisNexis Canada or one of its respective affiliates. This article is for general informational purposes and is not intended to be and should not be considered legal advice.

Photo credit / Christine_Kohler ISTOCKPHOTO.COM

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