Arbitration in Europe
From the Middle Ages to the 20th century
An important chapter in the development of arbitration dates back to the Middle Ages. Originally arbitrator tasks were performed by the pope, by emperors or kings, parliaments, and even law faculties. However, arbitration was further developed by the merchants. At the end of the 11th century, the Italian cities had become independent and merchants organized their governance in their unique way and according to their interests and had their unique leadership such as the ‘Consules Mercatorum’ in Genoa and Milan. They had political powers and judicial functions and led the various unions and guilds of merchants. In many Italian cities, the unions and guilds exercised power by adopting regulations to resolve their differences. Initially, these unions were voluntary associations but were finally combined into a federation known as the ‘Mercanzia’. Traders from various cities came together in markets to do business. Very often one party in a transaction would challenge another. The inefficiency of traditional courts to resolve these disputes led to the development of specific procedures for dealing with trade issues and a specific substantive law of merchants, the ‘Lex Mercatoria’. The Council of Federation of the ‘Officium Mercanziae’ referred most cases to arbitration, which was ultimately recognized as an institution, and ordinary courts were forbidden to interfere with the jurisdiction of the arbitrators. The rules, regulations, and decisions of this institution were mandatory for merchants and citizens, even for foreigners.
During the early 10th century, in England, individuals wishing to settle a dispute resorted to juries which consisted of small groups of ‘neighbors’, expressing their grievances and disputes and operating themselves as lawyers. During the 16th century, cases are referred to arbitrators, not only with the agreement of the parties but also by reference from the judicial authority specifically for commercial differences between British and foreigners. The first recorded judicial decision relating to arbitration in England was in 1610, noted by the English legal scholar Sir Edward Coke. The acceptance of arbitration was substantial, something that bothered the judges who considered arbitration competitive and were trying to impede its development. But the institution survived with the Arbitration Act passed in 1698, which encouraged traders and businessmen to submit their disputes to be resolved by the arbitrators and not the courts. In Scotland, the earliest known treatise which refers to arbitration is the ‘Regiam Majestatem’, which dates to the early 14th century. It examines issues, such as who could refer the dispute to arbitration, when it was arbitrable, what could happen if two arbitrators disagreed and how a decision should be issued.
France is one of the homelands of modern alternative resolution. The origin of the concept of arbitration in France dates back to the ancient courts ‘Pie poudre’, established to resolve disputes between traders during market days. Arbitration in France first appeared in the 13th century during trade fairs. Before 1789, the institution of arbitration in France was not used often, although it was allowed for most cases and was mandatory for the resolution of various family disputes under various decrees adopted in the 16th century. After the French Revolution, arbitration was reconceptualized, regarded as ‘natural law’, and the Constitution of 1791 declared the constitutional right of citizens to resort to arbitration. In each canton, there were founded 'tribunaux de la paix', manned by 'juges de la paix' acting more like regular people than like judges, and their main concern was to reconcile the parties and resolve the dispute based on the principle of equity. Family courts were established to adjudicate disputes between spouses and between relatives as well as 'tribunaux de commerce' for commercial disputes. The ‘Napoleonic Code’ and the ‘Code de Procedure Civile’, as well as the Commercial Code, contained regulatory provisions for arbitration cases such as for disputes relating to maritime insurance and disputes between the shareholders of a commercial company. In other areas, the law authorized the submission of existing disputes to arbitration, but arbitration clauses for future disputes were not allowed. After the signing by the France of the ‘Geneva Protocol on Arbitration Clauses’ of 1923, such clauses were allowed in disputes arising from commercial relations. Subsequent laws enacted from 1926 to 1975 dealt mainly with the scope of arbitration in specific sectors without any changes in the procedural rules.