Commercial Arbitration: Factors making it lose out against other processes




Shahin Alam

Correspondence:
Shahin Alam Kulliyyah of Laws, International Islamic University Malaysia, Gombak,
Kuala Lumpur-53100,
Malaysia
Email: shahin_eu@yahoo.com

Abstract

Today the problems in litigation processes are well recognized. Arbitration's place in alternative process is also not free from controversy. Arbitration has become one of the principal means of settlement of commercial disputes especially in international trade; however, it is not unreasonable to predict that its original value against other processes is being lost. The principal objective of this article is to find out the various vehicles that are responsible for losing out against other alternative methods. It also attempts to explore how and why do such factors facilitate it to lose its credit. The parties of disputes especially commercial disputes will increasingly turn to arbitration for resolution, if arbitration can act with positive results including less adversarial relationships, faster decisions and lower dispute resolution costs. The paper is mostly analytical in nature and largely based on secondary materials of law like books, articles, theses, and several online writings. Primary sources of law are also used in this study. The paper mainly focuses on certain issues of arbitration dealing with commercial disputes rather than arbitration conducted in other fields, but electronic commerce issues will not come under ambit of it.

Keywords: commercial arbitration, commercial disputes




1. Background
There are numerous unavoidable problems attached in the justice system. A distinguished American Legal scholar Pound (1912-13) found delay and excessive cost in suits as the obstacles to enter into administration of justice. He also identified existence of contingency fees which do not guarantee civil justice or even access to the courts rather it may increase the tendency for corruption or unethical practices in legal proceedings due to the fact that payment is made only in the event of a successful or satisfactory outcome. An American Lawyer Olson (1991) identified in his book that enmity is being made between parties as win-lose situations exist in the court process as they fight to establish their legal rights, as well as people spending excessive time and money to such fight. Hence, various factors were responsible for the emergence of alternative dispute resolution as an alternative access to justice in the modern world. One of those factors is that the judicial system is fundamentally incapable of living up to the ideal of 'access to justice' for all (Rashid, 2006, p. 6). Due to dissatisfaction with the administration of justice, alternative processes have emerged. The main purpose of emergence of alternative process to litigation is to ensure access to justice through avoiding rigidity of procedure, unnecessary delay, and excessive costs that are in existing traditional litigation process.

Arbitration is a traditional alternative to litigation process where a third party is appointed as arbitrator who controls the outcome of the process. Arbitration process is mostly regulated by legal authority. Final decision is imposed on the contending parties which is called an 'award', based on the merits of the case, and such award usually is binding and not appealable except under certain circumstances. A good definition of arbitration is given by Fiadjoe (1999, p. 203) as "a consensual system of judicature directed to the resolution of commercial disputes in private" (as cited in Fiadjoe, 2004).

Commercial arbitration is in fact not a recent concept of dispute resolution for commercial transactions. Lord Mustill (1989) has stated that "commercial arbitration must have existed since the dawn of commerce. All trade potentially involves disputes, and successful trade must have a means of dispute resolution other than force. From the start, it must have involved a neutral determination, and an agreement, tacit or otherwise, to abide by the result, backed by some kind of sanction. It must have taken many forms, with mediation merging no doubt into adjudication. The story is now lost forever. Even for historical times, it is impossible to piece together the details, as will readily be understood by anyone who nowadays attempts to obtain reliable statistics on the current incidence and varieties of arbitrations. Private dispute resolution has always been resolutely private (p. 43)". Over the years, however, reputation of arbitration in resolving commercial disputes has suffered. Hence, due to various causes the parties of disputes are being discouraged to come before arbitration, mainly because it has become increasingly costly and proceedings have extended as much as court timetables (Mackie, Miles, and Marsh, 1995).

The paper has been categorized into two broad chapters: to begin with, it tends to enumerate in very short the governing laws of arbitration dealing with commercial disputes including domestic and international, and their administration. The second one as the most crucial and main part of this writing attempts to evaluate and analyze certain problems, in the form of issues and challenges, faced in the arbitration proceeding. And in the closing remarks, this article tries to address briefly the findings on the issues and to provide certain possible recommendations to overcome identified obstacles in arbitral process in settling commercial disputes.

2. Legal Framework & Administration of Arbitration

2.1. Governing Instruments
The UNCITRAL Model Law on International Commercial Arbitration (1985), at international level, provides a sophisticated and modern framework of international commercial arbitration within which global business disputes can be resolved. Actually, national laws of different jurisdictions governing international trade created obstacles to the flow of trade; hence, the UNCITRAL was formed as a vehicle by the General Assembly in 1966 through a Resolution 2205(XXI) for the purposes of modernization, harmonization and making uniform shape of rules on international trade or business of various jurisdictions (http://www.uncitral.org). Although the model law is considered as soft law i.e. it doesn't have binding force, it is being successfully used as a model of international arbitration law especially in commercial matters. Based on provisions of the model law, various countries enacted laws regarding arbitration. Moreover, the UNCITRAL Arbitration Rules 1976 (as revised in 2010) is also adopted for international arbitration to supplement the UNCITRAL Model Law. In addition, in order to recognize and enforce foreign arbitral awards, Convention on the Recognition and Enforcement of Foreign Arbitral Awards was adopted in 1958 which is popularly known as the New York Convention. The New York Convention seeks to provide common legislative standards for the recognition of arbitration agreements, court recognition and enforcement of foreign and non-domestic arbitral awards. It has been pointed out that The UNCITRAL Model Law on International Commercial Arbitration is the part of a clear international movement, starting with the New York Convention of 1958, towards harmonization of the law and practice of commercial arbitration (Smith, 1994).
Han & Poon (2010) suggested to adopt these types of laws for other non-arbitral alternatives to ensure legal enforceability of such alternatives. Authors also commented that the Model Law on Arbitration and the New York Convention have enabled rapid development of established principles governing the enforceability of arbitration agreements and these international laws are the basis for many national arbitration legislations which, in turn, are keys to the enforceability of arbitration agreements (Han & Poon, 2010). Legal enforceability of alternative dispute resolution agreement means whether it is binding on the parties and whether it is enforceable in the court of law or not. The Model law lays down as to enforceability that "a court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed" (art. 8(1)). Based on the Model law, most of the countries enacted the law containing the same provisions of enforceability of arbitration clause. In the light of article 8 of Model Law, for example, Malaysia sets out rules about binding arbitration agreement in its Arbitration law as "a court before which proceedings are brought in respect of a matter which is the subject of an arbitration agreement shall, where a party makes an application before taking any other steps in the proceedings, stay those proceedings and refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed" (Arbitration Act, 2005, s.10(1)).

Under the above authority, if there is any arbitration clause in any agreement, arbitration procedure must be followed first, and then the court proceedings will be continued. Before conducting arbitration process agreed in clause if any action is brought, the court will not allow to continue proceeding rather will stay such, and will refer the parties to arbitration. The provisions of stay proceeding, but not dismissal, were inserted to avoid unnecessary delay as when a newly come new case has to be filled if it was dismissed. There is a reference to arbitration because a result in the form of award will come as there is a certainty.

2.2. Arbitration in Different Jurisdictions
Arbitration proceedings including international commercial arbitration in different territories are being administered by various arbitral institutions either regional or international. For example, International Council for Commercial Arbitration (ICCA) dedicates to promoting and improving the use, and the processes of arbitration, conciliation and other forms of international commercial disputes resolution. Moreover, Permanent Court of Arbitration (PCA) established by treaty in 1899, International Chamber of Commerce (ICC) International Court of Arbitration, ICC Paris, The London Court of International Arbitration, London Court of International Arbitration(LCIA), Canadian Commercial Arbitration Center (CCAC), and British Columbia International Commercial Arbitration Centre (BCICAC) are examples of well known arbitral organizations providing international commercial dispute resolution services through arbitration proceedings conducted by their own enacted Rules, such as ICC Rules of Arbitration 2012 which is now widely used, and every institution providing dispute resolution services through arbitration has their own rules to conduct the arbitration process.

Besides those international arbitration institutions, there are some Regional Centres or Regional Arbitration Institutions for international commercial arbitration in Asia and Africa established under the auspices of Asian-African Legal Consultative Organization (AALCO), in order to fulfill its demand as international commercial disputes are increasing and arbitrations of Europe were very busy with the disputes. Under the auspices of the AALCO, the Kuala Lumpur Regional Centre for Arbitration (KLRCA), the Cairo Regional Centre for International Commercial Arbitration (CRCICA), and the Lagos (Nigeria) Regional Centre for International Commercial Arbitration (Lagos Centre) were established respectively in 1978, 1979 and 1989. Moreover, the Hong Kong International Arbitration Centre (HKIAC) the foremost venue for alternative dispute resolution in Asia, was established in 1985 by a group of leading business people and professionals in an effort to meet the growing need for arbitral services in Asia.

3. Issues & Challenges in Commercial Arbitration

3.1. Unnecessary Delay, Excessive Costs and Complexity of Procedure
Due to various problems in the litigation process including delay, cost, complexity, and bias; the alternatives to litigation were instituted as mentioned earlier. It was expected that alternatives will be able to avoid the obstacles to get justice. However, arbitration, as an alternative, especially commercial arbitration is suffering the same diseases as were suffered by the litigation process. Mustill (1989) agreed that arbitration particularly commercial arbitration is excessively costly as in his words that "it is to my mind undeniable that international commercial arbitration faces some serious problems. At least in its larger manifestations it can be too slow, too formalized and too expensive. It also lacks the procedural teeth which are the prime advantage of the courts"(p.56). The same problems were identified in arbitration process as "these may be controversial, but it is true, in some special arbitration e.g. trade, commodity, and maritime disputes that arbitration fees are very high, and the parties have to pay for the hotel accommodation and the physical facilities of arbitration"(Fiadjoe, 2004). It is against the interest of parties as they have to pay, even sometimes costs of arbitration may be higher than litigation process. Dispute usually is not referred to arbitration process unless the monetary amount is higher because if it is for a claim of a lower amount, arbitration process cost may not be sufficient. Can it be imagined how much money arbitrators are taking? Their fees are charged to about RM 5000 at domestic level and $ 5000 at international level for conducting arbitration in each day; even fees are being increased day by day. Additionally, accommodation cost of arbitrator is to be paid by disputed parties. The whole amount was spent for one arbitration process earlier; such an amount is being spent in a day of arbitration now (referred by Rashid, S.K., a Prof. of Law, IIUM). Due to dissatisfaction with higher fees and accommodation costs, arbitration is losing its ground, and parties of business disputes are being discouraged to proceed with arbitration.

The arbitration process is not fast and it may not be inexpensive particularly when there is a panel of arbitrators. Arbitration delays to resolve disputes like court process as taking too much time. One of the legal maxims is justice delayed is justice denied. As litigation takes excessive time to resolve a case for several years that's why people prefer the arbitration process as an alternative to get speedy remedy. But unfortunately the court is competing with arbitration as arbitration is also too slow like the court process in some cases. Malaysian Arbitration Act 2005 states that any question of law arising out of an award may be referred to the High Court either by arbitrator or the parties (s.42). The law prescribes any question of law, but doesn't define it. It also does not state time limit of determination and how many times it can be referred. In this case, the court is not being blamed for delay as it has to deal not only with the present referred case, but with many other cases. Moreover, other proceedings are also followed by court when it deals with the case i.e. cross examination, adjournment of hearing through time petition etc. Hence it takes a long time to decide such question of law referred to it. Indian Supreme Court decided that Indian Arbitration Act 1940 contributed to the excessive delays and high costs as "…..the way in which the proceedings under the Act are conducted and without an exception challenged in Courts, has made lawyers laugh and legal philosophers weep. Experience shows and law reports bear ample testimony that the proceedings under the Act have become highly technical accompanied by unending prolixity, at every stage providing a legal trap to the unwary. Informal forum chosen by the parties for expeditious disposal of their disputes has by the decisions of the Courts been clothed with 'legalese' of unforeseeable complexity" (According to Desai, D. A. J., Guru Nanak Foundation v. Rattan Singh & Sons).

3.2. Existence of Bias
The racial and/or ethnic bias or discrimination exist in the court systems, and people are being deprived from justice (Neely, 2004). The same issue, either cultural or ethnic bias, exists in the arbitration proceeding, as such arbitrator sometimes does not play a neutral role. For instance, when an arbitrator is appointed from West, and if dispute raised between East and West, he will favour west as being influenced by cultural bias. If there is a possibility of bias, how can it be ensured to get justice from the arbitration process? What is happening in the arbitration process, particularly in the Arab area? Those arbitration proceedings are witnessing that when a western arbitrator is appointed to solve a dispute between Arab and West, many biased decisions are awarded by such arbitrators.

ICC Rules of Arbitration 2012 states that the arbitrator should not be appointed from the disputed parties' countries (rule 13(4)). It indirectly means that there is a chance of miscarriage of justice in arbitration through bias. It is mentioned in ICC (Paris) books on corruption and misconduct in international commercial arbitration that they appointed a committee to find out corruption etc in international arbitration, and the committee found that corruption exists. The appointment of arbitrator from disputed parties may be prevented, but how can we stop monetary bias, that is to say, bribery or other corruptions. Recently, in the case of ST Microelectronics N. V. v. Credit Suisse Securities (USA) LLC (STMicroelectronics), where a party argued that an arbitrator had failed to disclose prior experience that rendered the arbitrator potentially biased, the United States Court of Appeals for the Second Circuit refused to vacate an arbitral award under the US Federal Arbitration Act (FAA). That is to say, the American court rejected arbitrator bias challenges during enforcement proceedings. In this case, the attitude of the USA court regarding bias of arbitrator is negative.

Arbitration is a confidential proceeding. Private arbitration i.e. arbitration between two parties, is being converted into public arbitration to avoid bias in arbitration proceeding. When it is public, State is involved with the proceeding; as such, the possibility of bias will be reduced (Lipman & Smithberg, 1996/1997). Similar trends can be adopted in the business arbitration process in order to facilitate the traders to come before arbitration for dispute resolution.

3.3. Application of Amiable Composition and of Equity
Whether amiable composition is allowed in arbitration proceedings, it is debatable. The stance of civil law and Islamic law are almost same as the reason may be civil law countries had been controlled by Muslim rulers for long time. Amiable composition is very often defined synonymously with arbitration in equity or ex aequo et bono (Herboczkova, 2008). An arbitrator acting as amiable compositeur is deciding the dispute before him according to law and legal principles, nevertheless is authorized to modify the effect of certain non-mandatory legal provisions, but ex aequo et bono is a dispute settlement out of law, according to moral principles (Dumisci, 2009). An arbitrator deciding as ex aequo et bono is allowed to disregard not only the non-mandatory rules, but also the mandatory provisions of law, as long as they respect international public policy (Dumisci, 2009). Most notable authors define amiable composition as a mission where an arbitrator decides a dispute before him according to law and legal principles, but nevertheless is authorized to modify the effect of certain non-mandatory legal provisions (Herboczkova, 2008).

Islam recognizes the distress a trial can cause and therefore encourages alternatives whenever it is possible. It also encourages people to solve their matters amicably rather than in an enmity creating manner. Amiable composition is the concept of arbitration in Islam. Throughout the Prophet Muhammad's life there are numerous examples of his settling disputes in an amicable and equitable manner. The Quran encourages settling disputes amicably as such actions are ennobling. Allah states in the Quran: "O you who believe! Stand out firmly for Allah as witnesses to fair dealings and let not the hatred of others to you make you swerve to wrong and depart from justice. Be just, that is next to piety. Fear Allah, indeed Allah is well-acquainted with all that you do" (The Holy Qur'an, 5:8).

Unlike Islamic law and continental law, classical common law completely rejected this concept on the ground that the arbitrator will decide dispute according to laws, case laws, customary laws, or legal norms or principles, without taking its own equity (Yu, 2000). In other words, under common law the arbitrator must apply laws relating to arbitration during proceeding, but not according to his own conscience as arbitrators cannot make laws. If an arbitrator does it, he will be removed on the ground of misconduct. On the other hand, under Islamic arbitration process, the arbitrator will resolve the dispute not only according to black letter law, but also the spirit of such laws, that is to say, arbitrators can exercise their own conscience and equity as they understand, in order to ensure fairness and justice. Not only Islamic law but also continental law (civil law system) recognizes amiable composition. They argue that the contract entered into one situation, such condition may be changed at any time; therefore, the own conscience of the arbitrator can be used for the sake of justice. All forms of arbitration based on equity as the only legal source were rejected for a long time. This was a consequence of differences between common law and civil law.

In making a comparison with both, amiable composition is preferable as through application of strict law, people may not get justice always. In the UK, the trend has been changed as they accepted amiable composition with modification. It is decided that if parties give written consent, only then can the arbitrator use his own conscience in the arbitration process. By contrast, by virtue of natural jurisdiction (no consent is required), the arbitrator under continental and Islamic law is allowed to make amiable composition through exercising his good conscience. In Malaysia, there is no provision or restriction of amiable composition in law, but it is open to parties to give written consent to arbitrator to use equity and good conscience. The term misconduct is no more in Malaysian Arbitration law, so judges can be an arbitrator.

After the 2nd World War, the number of contracts increased as trade increased, and dispute on various issues of trade is arose. So, the UN Commission on International Trade Law (UNCITRAL) formed to harmonise or to make uniformity of laws of various jurisdictions, which is making model law on international trade. In commission, all blocks joined. Islamic law and civil law countries agreed and proposed above the concept of Islamic arbitration for international arbitration, but all disagreed on that (Mustill, 1989, pp. 53-54). Finally, all blocks agreed that if there is any written agreement which authorized arbitration proceeding to arbitrators, then it is allowed (UNCITRAL Rules, art. 33(2)). The UNCITRAL Model Law on Arbitration provides that the arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the parties have expressly authorized it to do so (UNCITRAL Rules, art. 28(3)). A similar provision is found in article 17(3) of the International Chamber of Commerce arbitration Rules 1998. All of the arbitration rules allow the arbitrator to decide a dispute as amiable compositeur if duly authorized by the parties prior to or during the arbitration. In Islamic law, written agreement is not compulsory. Ultimately such Islamic concept of arbitration is barred in international regimes.

To some extent amiable composition and equity are not same, but they overlap each other. It is now established that the UNCITRAL model law allows use of amiable composition in arbitration proceedings if written consent to apply that is given by the parties. Based on model law, amiable composition is allowed upon written authorization. But, they don't allow use of equity for settlement through arbitration proceeding as the settlement is not considered as a part of arbitration. Lachs (n.d.) stated that it would be wrong to consider equity solely as a product of contemporary courts or arbitral tribunals, or contemporary law (p. 130). Author quoted a suggestion from Grotius writings that " law includes everything, which it is more proper to do that to omit, even beyond what is required by the express rules of justice"(pp. 130-132), and thus equity had ancestors in the remote past. Equity is acquiring an ever greater role in both arbitration and judicial settlement as covering increasing domains of international relations and deciding issues of major importance; as such equity enriches international law and in many domains of life, makes it respond effectively to the needs of the international community in the interest of peaceful cooperation (Lachs, p.131). History of equity in the English system is witnessing how equity was introduced in the system, and it is also known that arbitration is conducted not only by arbitration law but also by other relevant laws. Hence, if equity is strictly prohibited in arbitration proceedings, how will history of common law sustain it? Unlike common law, continental law allows arbitrator to use equity in arbitration proceedings. Similarly, Islamic law always encourages the arbitrator to use equity for the purpose of fairness and justice in any settlement process. Apart from many authorities, in one verse Allah states in the Quran: "If you judge, judge in equity between them, for Allah loves those who judge in equity" (The Holy Qur'an, 5: 42).

Unlike continental law as well as Islamic law, common law particularly in the United Kingdom does not allow the use of equity in arbitration proceedings. What is the reason behind this; to some extent it is still undiscovered. I think the reason is only to maintain their political stance as what you do shouldn't be irrespective of its quality or standard.

3.4. Combination of Different Forms of Alternatives
The issue is whether an arbitrator can refer disputes to mediation. In common law, especially in the UK, a combination of various alternative processes to resolve a dispute were not allowed (Yu, 2000). They argued that there should not be any mixture of two processes as there are some technical difficulties in combining arbitration with other forms of ADR process. Under this system, if an arbitrator allows or facilitates to conciliate during the arbitration process, he or she may be removed from his post on the ground of misconduct.

However, the mixture should be allowed irrespective of forms as objectively both alternative processes (arbitration & mediation) are to settle disputes as it is good for the interest of dispute settlement. This view of combination i.e. conciliation comes with arbitration is supported by Houzhi as it is mentioned that the idea of combining arbitration with conciliation, even with other ADR forms in existence and is expanding (1996, pp. 101-108). It is also corroborated that conciliation is a part of arbitration as many countries including some common law countries have allowed both together recently. The evidence is shown that nineteen countries and WIPO countries encourage combining arbitration with conciliation, through statutory provisions or directions, in various ways and manners (Houzhi, 1996, pp. 101-108). For example, India enacted the Arbitration and Conciliation Act 1996 containing the provisions of combination (s.80); the USA has also contained this provision in the Alternative Dispute Resolution Act 1998. Moreover, Bangladesh, Nigeria, Singapore, Australia and many other countries incorporate by laws that an arbitrator can facilitate the parties to mediate (Houzhi, 1996). It might be argued that since many courts of law in the world have linked court proceedings with alternative forms in one way or another (court annexed ADR process), why should arbitration proceedings not be linked with ADR procedures in one form or another (Houzhi,1996, p. 109). By quoting the statement of Prof Pieter Sanders, Honorary Chairman of ICCA, made in his 1996 Alexander Lecture that "the general provisions of clause 33 of the English Bill provides that the tribunal shall adopt proceedings suitable to the circumstances of the particular case… it seems to me that it is not excluded that arbitrators would invite the parties to use one of the available means of ADR to settle their dispute….", it is stated that Prof Sanders has told us clearly that the possibility of combining arbitration with conciliation procedures is there. That is to say, although combination is not allowed in the UK, the Bill did not exclude the combination.

However, there are two major concerns about the combination of arbitration with conciliation i.e. 'natural justice' or 'due process' violation, and 'same person acting as mediator as well as arbitrator' (Houzhi, 1996, pp. 110-112, & Peter, 1997, pp. 91-98). People, who are against the combination, may argue that there is a private 'caucusing' or 'shuttle diplomacy' in combining processes, so there is a possibility of violation of natural justice or due process (Houzhi,1996, & Peter, 1997). The mediator privately is caucusing with each side. Private caucus is intended to remain confidential, but a fundamental to our notion of justice is the right to know and be able to answer an opponent's case. Therefore, private caucusing will result in the breach of natural justice (miscarriage of justice) as the question of bias or partiality during process may be raised in the minds of the parties. Moreover, mediation is not bringing any outcome as mediator is not giving the award, hence there is an uncertainty. Secondly, the validity of Med-Arb process might be challenged, because of questions whether the mediation and the arbitration parts of the process can both remain valid while conducted by the same person. When the mediator has the power to decide the dispute, he may coerce the parties into settlement.

In reply to the first concern, Houzhi (1996) suggested the following significant solution in order to avoid a possibility of violation of natural justice or due process (pp. 111-112):

• As private caucusing is not compulsory in the mediation process, therefore, the mediator can avoid it; or
• A contractual provision to override the requirement of natural justice or due process may have between the parties, or
• Private caucusing may be on a fully informed basis.

Moreover, though the mediator is not giving the award, there is a fifty percent chance of settlement in mediation process as it may pass or fail, and there is no harm to the parties, then why not should we take this chance through attempting mediation process. In reply as to the second concern that the key point is that the arbitrator or mediator must be impartial, whether they are same or different it doesn't matter (Houzhi, 1996, p. 113). It is best that the same person arbiter the case just because he knows everything about the case, as such it is easy for him to assist the parties to reach the settlement (Houzhi,1996, p. 113). However, this solution can be denied on the ground that he might be influenced in many ways as he is a human being. Another way out is that it is not required an arbitrator and mediator would be the same person. Hence, if the arbitrator and mediator are different persons in the combination process, this problem can easily be solved.

By contrast with common law, this supporting view is also recognized by Islamic law as well as continental law as the prime objective of any alternative methods is to settle the dispute. This view is corroborated by the Islamic law provisions as any form or its combination which is not inconsistent with Shariah can be used to settle a dispute. The hybrid of both the Sulh and tahkim processes in order to arrive at an amicable resolution of the dispute is allowed as prescribed by the Islamic sources of law. The basis of Med-Arb is given in the following legal text as contained in the Qur'an: "If you fear a breach between them (the man and his wife), appoint (two) arbitrators, one from his family and the other from hers; if they both wish for peace, Allah will cause their reconciliation. Indeed Allah is Ever All Knower, Well Acquainted with all things" (The Holy Qur'an, Surah al-Nisa: 35). Under this authority, conciliation can be considered as a part of arbitration process, and conciliation is permitted during the arbitration process. Shariah has not completely separated sulh and arbitration (Al-Ramahi, 2008). Hence, the disputing parties in sulh, also have the option to use an arbitrator in order to work towards a settlement. The 'Medjella' of the Legal Provisions' (the Medjella), the first codification of Shariah under the Ottoman Empire, confirmed the conciliatory nature of arbitration ((Al-Ramahi, 2008).

The idea of combining Mediation and arbitration is now being universally accepted. In China, Japan, Korea, Vietnam and Malaysia, for example, these processes are combined. According to article 18 of the Rules of the Korean Commercial Arbitration Broad, conciliation may be possible even after the start of arbitration proceedings. If the conciliation fails, arbitration starts; if it succeeds, it is incorporated into the arbitral award. Similarly, article 28 of the Rules of Maritime Arbitration of the Japan Shipping Exchange, revised in 1996, allows mediation at every stage of the arbitration proceedings. Article 35 of the Arbitration Rules of the Vietnam International Arbitration Center allows the parties to arbitration to go to mediation on their own and if they succeed, the settlement is recorded as the arbitration award. Article 34(1) of the (revised) Kuala Lumpur Regional Center for arbitration Rules, 2001 is also to the same effect. Recently, in the UK to some extent hybrid process is allowed that if parties give written consent, only then can the court allow other alternatives during arbitration proceeding.

3.5. Over Legalization
Over legalization or theorization is another factor to lose arbitration proceeding's credit. While everybody is supposed to know law, but they don't know all the laws because there are too many laws involved in an issue. Auerbach (1983) tried to prove that law is not only a forum to get justice, but justice does not always come from laws through courts or lawyer as sometimes case is decided through expert determination, not by court. Arbitration is so instrumentalised or theorized through statutory provisions or case laws, or directive rules. The objective of alternatives is to achieve the goal, either through instrumentalisation or the ideal way (Noce, 2002). It is said that we are not concerned with the form of resolution (with the subject), but with the objective to achieve goal (settlement). Though the author commented regarding mediation matters, arbitration proceedings should be on same footing. In order to avoid formal, legal and complex procedures in litigation process, alternatives to litigation including arbitration have emerged. But laws, case laws, principles are strictly followed in arbitration. It cannot be said only standardization of rules or theory or institutionalization can make arbitration successful. Over or unnecessary theorization or legalization is not good rather it may create complexity. It is not being said that theory is not needed as it is needed for the sake of something understandable and acceptable to the parties, rather attempting to say over theorization which is unnecessary or theorization is only for theorization, is not preferable in arbitration process.

3.6. Over Localization
Another issue is whether arbitration should come under judicial control or intervention. The two concepts or principles need to be understood; one is localization theory and another is delocalization theory, as well as their impacts on arbitration. Arbitration agreement can be entered between parties on any matters or subjects; arbitration law only deals with the procedures of arbitration, but the question is what about other substantive law's provisions on the subject matters of agreement e.g. contract law, business law etc. Under localization principle, all relevant local laws shall be applied unless otherwise agreed, whereas under delocalization concept, no local court under local laws can interfere in arbitration proceedings. The advantages of delocalized arbitration are: it guarantees neutrality of forum with respect to procedure and substance; it limits the role of national courts in the process; it overcomes limitations of the lex fori; it offers state agencies and governments the possibility to enter dispute resolution agreements without submitting themselves to the laws of a foreign state; it eliminates conflict of laws problems; it enables parties to create procedural rules, which best fit the specific features of the transaction and parties' interests (Paulsson, 1983, p. 57, as cited in Janicijevic, 2005). However, demerits also exist in delocalized arbitration. The view may be cleared with the help of example of Malaysia. The KLRCA was established in 1978 to deal with international commercial arbitration in the region in Malaysia. After reviewing, it was seen that no disputes were coming to the centre, and it was found that the localization was the main culprit i.e. application of local laws through interference of local courts. Hence, it was decided that if Malaysia wants to attract the international community to come for international arbitration through the KLRCA, local courts must not interfere in arbitration proceedings, and thereby the Arbitration Act was amended in 1980 and section 34 inserted, which provides that when an arbitration is started under the KLRCA, no local courts under local laws have jurisdiction over arbitration proceedings. It can be said that localization was converted into delocalization in Malaysia through inserting section 34.
Arbitration is always criticized by many lawyers because appeal rights are severely limited. One issue which has to be faced is whether arbitration must be subject to judicial control in Malaysia, in other words, can the parties be restricted from judicial review. New section 34 was tested by the Malaysian courts and held that the present section has forbidden them from applying local laws in arbitration proceedings. The validity of this ouster of the court's jurisdiction has been upheld in two decisions at first instance. The first case was Klockner Industries-Anlagen GmbH v Kien Tat Sdn Bhd. (1990), where the High Court held that section 34(1) meant that it could not exercise its supervisory functions in respect of Regional Centre arbitration. The 'written law' in that case was the Companies Act 1985, but the statutory definition of 'written law' is such as to include all legislation and subordinate legislation. A further challenge was made recently in Soilchem Sdn Bhd v. Standard-Elektrik Lorenz AG (1993), which followed the earlier decision and held that sub-sec (1) excludes the jurisdiction of the court, including any jurisdiction to quash an award by way of certiorari. English courts decided in several cases on award given by delocalized arbitration that an award resulting from delocalized arbitration conducted in any country will be fully respected by its national courts, as the same applies if the award is rendered in a foreign jurisdiction (Walkinshaw v. Diniz, 2000, & Minmetals Germany GMBH v. Fercor Steel Ltd., 1999). In the USA, a court may vacate an award in extremely limited circumstances. That is to say, only on the ground of corruption, fraud, undue means, partiality or bias, or arbitrator exceeded its powers, an award can be vacated (the USA Federal Arbitration Act, s.10).

In the arbitration process, there may be two types of judicial intervention:

a) One is beneficial intervention, e.g. injunction, production of witness: Suppose, if arbitrator issues a notice to bring someone before arbitration as a witness, and if such person refused to come, what will the arbitrator do as he cannot bind to bring him or her. Court can bring him by issuing a notice or arrest warrant. So, without court intervention, the arbitrator can do nothing here. Recently, one question came before the US court and that was can arbitrators compel discovery from non-parties; the court held that arbitrators have no authority to order third parties to produce documents for discovery purposes before the hearing (Life Receivables Trust v. Syndicate). Therefore, it is suggested that there should be a balance between localization and delocalization. If there is no balance between them, i.e. over localized or over delocalized, and if all powers of court are taken by law or policy, international commercial arbitration will not be effective.
b) Another is malignant intervention i.e. over localization.

Although to a large extent Malaysian arbitration has been delocalized by section 34, it is localized to some extent. They amended the law in 2005, but a referable provision to High Court on any question of law is retained there (Arbitration Act, 2005, s.42). Law is silent as to how many times it can be referred; time limit of settlement the question referred. Except Malaysia, every country has dropped this provision as all agreed that maximum cases as to arbitration on the reference of interpretation of question of law were brought before the court. It is actually reopening litigation again. This reference prolongs the time to decide a dispute being conducted through arbitration. However, why did Malaysian legislature do it? Their positive attitude may be that the court is the ultimate authority to interpret laws; if there is any conflict on laws in arbitration what will they do? They fail to decide it, that's why they are sending to court as the court's decision is binding, but before making a final award, the decision of the arbitrator is not binding. Actually, legislatures or drafters of arbitration law may retain it for their own benefits as drafters were lawyers; and they would want to bring case to court.

3.7. Over Lawyering
Over lawyering is also blamed for losing arbitration's credit. Lord Mustill stated in the International Arbitration Conference held in Malaysia that it is one of the defects of international arbitration (referred by Rashid. S. K., Prof. of Law, IIUM). The legal profession is often held responsible, usually by non-lawyers, although lawyers have been known to cite this as explanation to their clients for some of the delays, on the problems of the litigation system. The more cynical claim that lawyers control the system to generate revenue for themselves, in the same way as other businesses seek to generate income from the ventures they control (Mackie, 1995, p. 5). A panel of arbitration includes more than one arbitrator where justice, lawyers, and other legal professionals are involved.

3.8. Problems in the Enforcement of Arbitral Award
On the basis of verse 35, Surah al Nisa, it is observed that the use of word 'reconciliation' in the present verse indicates that an arbitral award in Islamic arbitration is not binding (Rashid, 2006), and Imam Shafie also held that arbitral awards are binding if parties mutually agree to enforce them. However, the trend has been changed from classical view to modern view in Islam; if award is conformed to Shariah, it can be enforced under modern Islamic perspective. On the other hand, in common law, award will be taken by one party to the court and court will record it, then it is binding on parties, whether parties want it or not. There is a convention known as 'New York Convention 1958' on recognition and enforcement of arbitral award given by particularly international commercial arbitration. Based on the international law, Malaysia enacted provision on this that if the high court, with the award given by arbitration, is satisfied, such award will be implemented (Arbitration Act 2005, s.38). The present law prescribed certain grounds when the court may refuse to recognize and enforce such international commercial arbitral award (s.39). Hence, the problem is that if court is not satisfied and refuses to enforce decision given in arbitration, how arbitral award will be implemented. Moreover, as it is known that every international commercial arbitration is governed by their own rules; such a rule may be the factor of losing arbitration credit. For example, under ICC Rules of Arbitration 2012, an original of each award made in accordance with the Rules shall be deposited with the Secretariat (art. 34(4)). Therefore, arbitrator cannot give award directly to the parties. Arbitrator will deposit to ICC who will revise it, and revised version of award will be given to parties. From my understanding, it should not be considered as fair as the parties do not get original award directly from the arbitrator.

4. Concluding Remarks
It is undeniable that alternative processes are rapidly becoming an accepted method to resolve disputes including trade disputes to individuals as well as to the government. The people realize its various advantages against court processes, and government thinks that money is needed to continue court processes, the bulk of litigations are in pending, disputes are being increased day by day, and hence alternatives are able to solve it. However, unfortunately arbitration process covering commercial arbitration as an alternative to court process has been affected by the same diseases as litigation is suffering. Due to various problems of arbitration, people's aim to solve business disputes through arbitration is being affected. The main factors are too much delay, too expensive and too much rigidity, although arbitration is preferred to resolve commercial disputes in order to save time. Moreover, various issues relating to commercial arbitration are still unsettled, for instance, issue on the application of equity in arbitral process. The solution can be the adoption of Islamic arbitration process as the history of Islam is witnessing successful arbitration conducted between the Caliph Ali bin Abi Taleb and Muawya bin Abi Sofian. Every essential which a modern arbitration requires was presented in that arbitration agreement, and there was no question of existence of cost, delay, rigidity and bias. Therefore, although solving political dispute was the objective of such arbitration, such form of arbitration agreement can still be used in modern commercial arbitration. Moreover, to facilitate business people to resolve commercial disputes through arbitration, the issue relating to hybrid process needs to be settled as the world witnesses the combination of various forms of alternatives is working successfully. Alternatively, to overcome the problems raised in commercial arbitration process, adaptation of 'fast track' arbitration in order to solve the business dispute quickly which is suggested in Australia for settlement of construction disputes (Tyrril, 1992), and making a balance between localization and delocalization principles might be the solution. Moreover, amiable arbitration has a great potential impact in all the disputes including commercial disputes where the parties need a rational reasoning and not only a black letter law. It can improve the institution of arbitration and promote equitable results to international commercial disputes (Dumisci, 2009). Arbitration can be a powerful tool against the backcloth of existing litigation process. If the diseases of arbitration are cured properly, arbitration including commercial arbitration would be sustained for future with its original credit, and can also be retained as a quick solver of commercial disputes.

References

Books & Articles
Pound, R. (1912-13). The Administration of Justice in the Modern City. Harvard Law Review, 26(4), 302-328.
Olson, W.K.(1991).The Litigation Explosion: What Happened When America Unleashed the Law Suit. New York: Truman Talley Books.
Rashid, S. K. (2006). Alternative Dispute Resolution in Malaysia. Kuala Lumpur: University Press.
Fiadjoe, A. (1999). Commonwealth Caribbean Public Law (2nd ed.). Great Britain: Cavendish Publishing Limited. p.203. In A. Fiadjoe, (2004), Alternative Dispute Resolution: A Developing World Perspective, Great Britain: Cavendish Publishing Limited.
Mackie, K., Miles, D., & Marsh W. (1995). Commercial Dispute Resolution: An ADR Practice Guide. London: Butterworths.
Smith, V. P. (1994). The Reform of Arbitration Law. Malayan Law Journal, 1, xxviii.
Han, K. & Poon, N. (2010). The Enforceability of Alternative Dispute Resolution Agreements: Emerging Problems and Issues. SAcLJ, 25, 455-479.
Mustill, M. J. (1989). Arbitration: History and Background. Journal of International Arbitration, 6, 43-56.
Fiadjoe A. (2004). Alternative Dispute Resolution: A Developing World Perspective. Great Britain: Cavendish Publishing Limited.
Neely, E. (2004). Racial and Ethnic Bias in the Courts: Impressions from Public Hearing. Court Review: The Journal of the American Judges Association, 40(3-4), 26-32.
Lipman, H. W., & Smithberg, N. (1996/1997, A Special Supplement). Arbitration: the privatization of the judicial process. International Commercial Litigation. In S. K. Rashid (Comp.), Issues in Alternative Disputes Resolution, 3, MCL. IIUM.
Herboczkova, J. (2008). Amiable Composition in the International Commercial Arbitration. Faculty of Law, Masaryk University. Retrieved from https:// www. duo. uio.no/ bitstream/handle/10852/22183/91117.pdf?sequence=1
Dumisci, A. (2009). Advantages of Amicable International Arbitration: Characteristics and Scope of Arbitrator Powers (Master thesis, University of Oslo). Retrieved from https://www.duo.uio.no/bitstream/handle/10852/22183/91117.pdf?sequence=1
Yu, H.-l. (2000). Amiable Composition-A Learning Curve. Journal of International Arbitration. 17 (1),79-98.
Lachs, J. M. (n.d.). Equity in Arbitration and Judicial Settlement of Disputes. In S. Muller, and W. Mijs, (1994), The Flame Rekindled: New Hopes for International Arbitration. Leiden Journal of International Law, Dordrecht: Martinus Nijhoff Publishers.
Houzhi, T. (1996). Is There an Expanding Culture that Favors Combining Arbitration with Conciliation or Other ADR Procedures?. ICCA Seoul Arbitration Conference, 101-119. In S. K. Rashid (Comp.), Issues in Alternative Disputes Resolution, 2, MCL, IIUM.
Peter, J. T. (1997). Med-Arb in International Arbitration. The American Review of International Arbitration, 8, 83-116.
Al-Ramahi, A. (2008). Sulh: A Crucial Part of Islamic Arbitration. Law Society Economy Working Papers, 12, New York Law School.
Auerback, J. S. (1983). Justice without law? London: Oxford University Press. Retrieved from http://books.google.com.my/books?id=X9fUKyu0bv8C&printsec=frontcover &source=gbsge_summary_r&cad=0#v=onepage&q&f=false
Noce, D. J. L. (2002). Mediation Theory and Policy: The Legacy of the Pound Conference. OHIO State Journal on Dispute Resolution, 17(3), 545-558.
Paulsson, J. (1983). Delocalization of Arbitration. Int'l & Comp. L.Q., 32. In D. Janicijevic, (2005), Delocalization in International Commercial Arbitration, Facta Universitatis Series: Law and Politics, 3(1), 63-71.
Tyrril, J. (1992). Construction Industry Dispute Resolution- A Brief Overview. Australian Dispute Resolution Journal, 3, 167-183.

Judicial Precedents
Guru Nanak Foundation v. Rattan Singh & Sons, [1981] A.I.R. 2075 (SC).
Klockner Industries-Anlagen GmbH v. Kien Tat Sdn Bhd., [1990] 3 M.L.J. 183.
Life Receivables Trust v. Syndicate 102 at Lloyds' of London
Minmetals Germany GMBH v. Fercor Steel Ltd., [1999] 1 All E.R. (Comm) 315 (Q.B. 1999).
Soilchem Sdn Bhd v. Standard-Elektrik Lorenz AG, [1993] 3 M.L.J. 68.
ST Microelectronics N. V. v. Credit Suisse Securities (USA) LLC (STMicroelectronics), (10-3847-cv (2d Cir. June 2, 2012)
Walkinshaw v. Diniz, [2000] 2 All E.R. (Comm) 237 (Q.B. 1999).

Legal Instruments
Arbitration Act 1940 (India)
Arbitration Act 2005 (Malaysia)
Arbitration and Conciliation Act 1996 (India)
Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention)
ICC Rules of Arbitration 2012
The Arbitration Act 1952 (Malaysia)
UNCITRAL Arbitration Rules 1976
UNCITRAL Model Law on International Commercial Arbitration 1985
Federal Arbitration Act (USA)