Arbitration, as a mechanism for resolving cross-border and inter-state disputes, stands as a powerful counterargument to the common critique that international law lacks teeth. International arbitration is a crucial tool for enforcing legal norms and upholding the robustness of the international legal order. For New Zealand, whose economic prosperity depends heavily on international trade and adherence to global norms, enforceability is particularly important.
The arbitration framework represents a sophisticated balance between state sovereignty and binding obligation. By consenting to arbitration in advance (whether through an investment treaty or commercial contract) parties transform voluntary compliance into enforceable commitments. For New Zealand businesses engaged in cross-border commerce, this creates a predictable environment where rights can be vindicated even against foreign governments or powerful multinational corporations.
The 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, to which New Zealand is a signatory, creates a remarkably effective global enforcement regime. With over 170 contracting states, the Convention requires national courts to recognise and enforce international arbitral awards, subject only to limited exceptions. It is widely regarded as one of the most important and successful international treaties, especially in international trade. New Zealand’s Arbitration Act 1996 incorporates the UNCITRAL Model Law and the New York Convention, providing a robust legislative framework for enforcement of international arbitral awards.
New Zealand also incorporates the International Centre for Settlement of Investment Disputes (ICSID) Convention into domestic law through the Arbitration (International Investment Disputes) Act 1979. ICSID provides specialised Investor-State Dispute Settlement (ISDS), whereby private investors can claim directly against a state for violating international investment obligations under a relevant treaty. The ability of private actors to hold states accountable for breaches of international law through binding and enforceable arbitration is a significant element of enforcing international law.
New Zealand recognises and enforces arbitral awards, including those against states, as demonstrated by the recent case of Sodexo Pass International SAS v Hungary. New Zealand’s economy depends heavily on international trade, which makes the enforceability of international obligations particularly important for New Zealand businesses and the broader economy.
In the commercial context, cases such as Ironsands Investments Ltd v Cheung Kong Infrastructure Holdings Ltd and Hi-Gene Ltd v Swisher Hygiene Franchise Corporation show that New Zealand entities are active participants in international arbitration. New Zealand companies have been less active in pursuing claims against States under international investment agreements and New Zealand has never been the respondent state in an investment treaty arbitration.
New Zealand is also committed to state-to-state international arbitration as a mechanism to compel adherence to international law. This commitment is illustrated by New Zealand’s active use of treaty-based dispute settlement mechanisms.
An example is the recent enforcement of obligations under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). In 2022, having exhausted diplomatic routes, New Zealand initiated proceedings against Canada under the CPTPP’s dispute settlement chapter, challenging Canada’s administration of dairy tariff rate quotas. The arbitral panel accepted New Zealand’s position that Canada’s measures were inconsistent with CPTPP obligations. This case exemplifies how international law, through arbitration, provides a forum for states to hold each other accountable and seek remedies for treaty breaches.
New Zealand has also used international arbitration in other contexts. The Rainbow Warrior case involved a bespoke form of international arbitration where the United Nations Secretary-General issued an equitable and principled ruling, including a requirement that France pay compensation and detain the agents who had committed the bombing for three years. Following breach of the detention direction, a second arbitration took place in which France was once again held to have breached its international obligations.
The Rainbow Warrior case is considered a leading precedent for state responsibility under international law and an important example of state-to-state arbitration in practice. In parallel, Greenpeace also used international arbitration to successfully bring a claim against France for sinking the Rainbow Warrior, setting a precedent for other international organisations to pursue claims against states under international law. New Zealand’s participation in the Southern Bluefin Tuna arbitration further underscores its commitment to resolving international disputes through arbitral mechanisms.
New Zealand’s experience of international arbitration demonstrates that international law does indeed have “teeth”. International arbitration transforms abstract legal obligations into enforceable commitments through a global network of modern legislation, institutional frameworks, active participation in treaty-based arbitration, and a pro-enforcement judicial culture. For New Zealand, whose prosperity depends on a rules-based international order, arbitration-based enforcement mechanisms provide essential protections for its interests in the global arena.
