The origin of Arbitration
The early development of Arbitration
From very early, human societies had manifested a spirit of resolution of disputes and essential attempts had been made for the peaceful and amicable settlement of disputes through the process of arbitration. Whether or not arbitration preceded the justice of state institutions is not easy to determine. However, it is argued that the roots go back to ancient Greek law, the “heroic” period, and the epics of Homer, where a scene of the quarrel between Odysseus and Aias Telamonios is described, the resolution of which was performed by arbitrators. Ancient Greek arbitration was divided into private and public and included as a first stage the attempt to reconcile the two defendants. To conduct the arbitration a contractual agreement was required, which had to be in writing, signed by the parties, including the number of arbitrators and determining the number of votes required for the validity of the decision. Arbitrators in each case had to decide in a spirit of fairness and not merely strict observance of the law. Arbitration was favored in most ancient legal systems and historically functioned as an independent adjudicative dispute settlement mechanism. For instance, commercial arbitration agreements were very common among the ancient Greeks and Phoenicians traders.
In ancient Sumeria, one of the most innovative ancient cultures, cities were trading centers with a high number of commercial relations and the corresponding inevitable disputes. Disputes were resolved by the king who was considered God's representative on earth and his legal responsibility was to arbitrate disputes between cities and citizens, give rulings and when necessary enforce decisions. Furthermore, the Code of Hammurabi in Babylon includes confirmed mentions of a duty to administer justice through arbitration.
In India, arbitration has a long history and the arbitration system, which was a feature of Indian life, was very similar to the system of ancient Greece. People voluntarily presented their disputes to a person or a group of wise men of the community, called ‘Panchayath’, who resolved the disputes, and their decisions were binding. Later the ‘Regulation of Bengal’ in 1772 provided for cases involving private disputes to be referred to arbitration. The first Indian Arbitration Act was passed in 1889 and its elements were similar to modern arbitration.
In Egypt, an original papyrus from the 3rd century proves the existence of private arbitration surprisingly similar to modern arbitration and in the Middle East, the concept of arbitration (thakim) was practiced since the early days of Islam as a peaceful means of settling disputes. The arbitration system in Egypt followed the provisions of the Islamic Sharia under the tenet Hanafi. The Koran includes arbitration as a recommended means of settling disputes and the Sharia decides whether an arbitration award is binding on the parties.
In China, the institution of arbitration dates from 1600 B.C. The Chinese believed that if a dispute cannot be avoided, then the parties (alone or with the help of an arbitrator) must take the necessary measures early on to understand the moral significance of the relationship causing the dispute and explore the possibilities offered to overcome the root of the problem and achieve a morally just solution. From the period of Zhou, there were local judges the ‘Tiao Pen’, whose main function was to assist in resolving disputes. Since then arbitration was used extensively in ancient Chinese feudal society, became the main method for resolving disputes, and was an integral part of the legal system and not just an alternative. The conceptual basis for the prevalence of arbitration was the moral and social teachings of Confucius. The Chinese believed that the laws are not the appropriate way to regulate disputes in every day relationships and should be limited to a secondary role, as reflected by the Chinese proverb: “in death avoid hell, in life avoid the law courts”.
In Roman times arbitration was very popular. The Romans called referees ‘arbitri’, ‘recepti arbitri’ or ‘compomissorii’. The Justinian Digest stated that disputes arising should be resolved by a third party, the arbitrator. The arbitrator was usually an elder with significant wisdom, prestige, respect in the community and had no relation to state authority. In the arbitration proceedings, under Roman law, the parties had the opportunity to introduce to their agreement a double condition which would provide that if a party fails to honor the arbitration agreement or the award, would have to pay the other party a kind of penalty. However, in general, arbitration was optional and the decision was not ‘res judicata’. Cicero testifies to the administration of justice in private disputes through arbitration and indicates what criteria the Romans used to choose between the courts or arbitration.