Arbitration Practice Procedure - Topic 8 International Considerations

Arbitration Practice & Procedure
Topic 8: International Considerations

Topic Preview
This Topic discusses the pivotal international documents relating to arbitration with sections on: History & Timeline The League of Nations & the United Nations New York Convention 1958 &c Procedural laws The main applicable laws in arbitration
Topic Content 1. History & Timeline
In England, arbitration is older than the common law system. England used arbitration as a common means of commercial dispute resolution as far back as 1224. 1 In ancient Rome arbitration was one of the preferred methods of settling disputes and it continued as the preferred method of settling commercial disputes into the Middle Ages. Long before the discovery of the Americas, early Native American tribes used arbitration as not only a means to resolve disputes within the tribe but also as a means to resolve disputes between different tribes. George Washington, the first president of the United States, had an arbitration clause in his will stating that, if any dispute should arise over the wording of the document, a panel of three arbitrators would be empowered to render a final and binding decision to resolve the dispute. The 19th Century Commissions consisting of members drawn from both disputant countries (known as mixed arbitral commissions) were often used in the 19th century to settle commercial claims for compensation for injuries to aliens for which justice could not be obtained in foreign courts. It was for this purpose that, for example, in 1868 the United States and Mexico signed a convention which permitted claims by citizens of either country (arising from the Civil War) to be settled.
Hill, Marvin F., Sinicropi, Anthony V., Improving the Arbitration Process: A Primer for Advocates. 1991.
2012 WB McLaughlin, Training & Education Officer, SICA-FICA for The Robert Gordon University
sica-fica.org
The modern history of international arbitration can be said to date from the so-called Jay Treaty of 1794 between the United States of America and Great Britain. This Treaty of Amity, Commerce and Navigation provided for the creation of three mixed commissions, composed of American and British nationals in equal numbers, whose task it was to settle a number of outstanding questions between the two countries which had not been possible to resolve by negotiation. These mixed commissions were not strictly speaking organs of third-party adjudication but they were intended to function to some extent as tribunals. They reawakened interest in the process of arbitration as, throughout the nineteenth century, the United States and the United Kingdom had recourse to them, as did other States in Europe and the Americas. The Alabama Claims arbitration in 1872 between the United Kingdom and the United States marked the start of a second, and still more decisive, phase. Under the Treaty of Washington of 1871, the United States and the United Kingdom agreed to submit to arbitration claims by the former for alleged breaches of neutrality by the latter during the American Civil War. The two countries stated certain rules governing the duties of neutral governments that were to be applied by the tribunal, which they agreed should consist of five members, to be appointed respectively by the Heads of State of the United States, the United Kingdom, Brazil, Italy and Switzerland, the last three States not being parties to the case. The arbitral tribunals award ordered the United Kingdom to pay compensation and it was duly complied with.
In the Presidential campaign of 1868 the Republican party nominated General Grant and Schuyler Colfax for President and Vice-President, who were elected by a large majority. Of the events that occurred during this administration two were of the highest importance; the Chicago fire, and the settlement of the Alabama claims. These claims arose from the ravages on American commerce committed during the Civil War by the Alabama and other Confederate cruisers, which had been fitted out in English ports, and permitted to sail in disregard to the earnest protests of the United States minister to England. This default in international obligations produced such bitter feeling in the US that war might have resulted had not a peaceful means of settlement been found. The dispute was finally adjusted by arbitration; the result was in favour of the United States and it was awarded about $15,700,000, which sum Great Britain promptly paid. This event is of the highest interest, as being among the first settlements of a great international difficulty by the peaceful and economical method of arbitration instead of the costly and destructive one of war. Another question between the United States and England, that concerning the northwest boundary, was similarly adjusted, being submitted to the Emperor of Germany, who decided it in favour of the United States.
These proceedings served as a demonstration of the effectiveness of arbitration in the settlement of a major dispute and they led during the latter years of the nineteenth century to developments in various directions, namely:
sharp growth in the practice of inserting in treaties clauses providing for recourse to arbitration in the event of a dispute between the parties; the conclusion of general treaties of arbitration for the settlement of specified classes of inter-State disputes;
sica-fica.org
efforts to construct a general law of arbitration, so that countries wishing to have recourse to this means of settling disputes would not be obliged to agree each time on the procedure to be adopted, the composition of the tribunal, the rules to be followed and the factors to be taken into consideration in making the award; proposals for the creation of a permanent international arbitral tribunal in order to obviate the need to set up a special ad hoc tribunal to decide each arbitrable dispute.
The Hague Conferences International arbitration was given a more permanent basis by the Hague Conference of 1899, adopting a Convention on the Pacific Settlement of International Disputes and setting up a Permanent Court of Arbitration from which the disputing governments could select their arbitrators. This Court was composed of a panel of jurists appointed by the member governments.
The Hague Peace Conference of 1899 was convened at the initiative of the Russian Czar Nicholas II. It marked the beginning of a third phase in the modern history of international arbitration. The chief object of the Conference, in which the smaller States of Europe, some Asian States and Mexico also participated, was to discuss peace and disarmament. Its resulting Convention dealt not only with arbitration but also with other methods of pacific settlement, such as good offices and mediation. With respect to arbitration, the 1899 Convention made provision for the creation of permanent machinery which would enable arbitral tribunals to be set up as desired and would facilitate their work: the PCA. Each country acceding to the Convention was entitled to designate up to four members of this institutions panel of jurists from which the members of each arbitral tribunal was chosen. The Convention further created a permanent Bureau at The Hague with functions corresponding to those of a secretariat, with a set of rules of procedure to govern the conduct of arbitrations. The title Permanent Court of Arbitration is not a wholly accurate description of the machinery set up by the Convention, which really only represented a method for facilitating the creation of arbitral tribunals as and when necessary. Nonetheless, the system so established was permanent and the Convention institutionalised the law and practice of arbitration, placing it on a more definite and generally accepted footing internationally.
The PCA was established in 1900 and began operating in 1902. The original 1899 convention was revised by another Hague conference in 1907, stating that: International arbitration has for its object the settlement of disputes between States by judges of their own choice and on the basis of respect for law. Recourse to arbitration implies an engagement to submit in good faith to the award.
At this second Hague Peace Conference, the States of Central and South America were also invited. It revised the Convention and improved the rules governing arbitral proceedings. The United States, the United Kingdom and Germany submitted a joint proposal for a permanent court but the Conference was unable to reach agreement on it. There was a major difficulty in finding an acceptable way of choosing the judges for such a court; none of the proposals received general support. The Conference confined itself to recommending that States should adopt a draft convention for the creation of a court of arbitral justice as soon as agreement was reached respecting the selection of the judges and the constitution of the court. Although this court never arose, the draft convention enshrined certain fundamental ideas that some years later were to serve as a source for the drafting of the Statute of the Permanent Court of International Justice (PCIJ).
sica-fica.org
IN 1913, the PCA took up residence in the Peace Palace that had been built for it thanks to a gift from Andrew Carnegie.
There were twenty arbitration cases between 1902 and 1932, but only five more in the following 40 years since the Permanent Court of Justice (established in 1922) and its successor, the International Court of Justice took over this liability between states. Among the cases that have been decided through the PCA are the Carthage and Manouba cases (1913) concerning the seizure of vessels, and the Timor Frontiers (1914) and Sovereignty over the Island of Palmas (1928) cases. The International Bureau of the Permanent Court has inter alia acted as Registry in some important international arbitrations, including that between Eritrea and Yemen (regarding territorial sovereignty and maritime delimitation in 1998 and 1999); between Eritrea and Ethiopia (the delimitation of their boundary in 2002), and between Ireland and the United Kingdom under the 1992 Convention for the Protection of the Marine Environment of the North-East Atlantic (OSPAR).
The PCA has recently diversified the services it offers, alongside those stated in the Conventions. In 1960, the court, which was originally devised for the settlement of disputes between states, began offering its services for the arbitration of disputes between states and individuals or corporations. In 1993, the PCA adopted new Optional Rules for Arbitrating Disputes between Two Parties of which only one is a State and, in 2001, Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment.
2.
The League of Nations & the United Nations
The Treaty of Versailles was one of the peace treaties at the end of the Great War World War I and it ended the state of war between Germany and the Allied Powers. Part 1 of the treaty was the Covenant of the League of Nations which provided for the creation of the League of Nations, an organisation intended to arbitrate international disputes and so avoid future wars. The League of Nations adopted the Geneva General Act for the Settlement of Disputes of 1928 and this was confirmed and continued by the General Assembly of the United Nations in 1949. This Act provided for the pacific settlement of international disputes by arbitration by an arbitral tribunal of five members, once attempted conciliation had failed. [Other, similar treaties include the General Treaty of Inter-American Arbitration, signed in Washington in 1929, and the American Treaty on Pacific Settlement of Disputes, signed in Bogot in 1948. More recently the Council of Europe adopted the European Convention for the Peaceful Settlement of Disputes in 1957.] Arbitration is still mentioned as a proper method of settling disputes between countries in the Charter of the United Nations, as it was in the Covenant of the League of Nations.
sica-fica.org
3.
The New York Convention &c
The development of international commercial arbitration has been furthered by uniform arbitration legislation prepared by the United Nations Conference on International Commercial Arbitration in 1958 and by the Council of Europe and the Inter-American Juridical Committee of the Organization of American States. One particularly difficult problem in international commercial arbitration is the enforcement of awards in a country other than the one in which they are made. Statutory municipal laws do not usually contain provisions for the enforcement of foreign awards, and parties are faced with uncertainty about the law and practice of enforcement procedure in a country other than their own. This is where the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards comes in as the foundation stone of today's flourishing international arbitration scene. It is a brief but succinct document, whose concept and language have been the greatest influence in all subsequent documents relating to international commercial arbitration. The concept of this Convention is that enforcement of foreign awards be such that no further action is required in the country in which the award is made, and it is for the opposing party to establish that the award has been set aside or that its effects have been suspended by a competent authority. In this way, the party opposing enforcement has the burden of proof of the non-binding character of the award. International commercial arbitration between traders of different countries has long been recognised by the business community and the legal profession as a suitable means of settling trade disputes. In order to establish more uniformity in procedure and to make access to arbitration facilities more easily available, the United Nations economic commissions in 1966 published new rules applying to international arbitration. Those for Europe are contained in the Arbitration Rules of the United Nations Economic Commission for Europe and for Asia and the Far East in the Economic Commission for Asia and the Far East Rules for International Commercial Arbitration. UNCITRAL At the end of 1966, the United Nations Commission on International Trade Law was set up, with the aim of promoting the harmonisation and unification of laws in the field of international commercial arbitration. One of its first fruits was the UNCITRAL Arbitration Rules which were adopted in 1976. These were produced to satisfy the need for a unified approach to basic arbitration procedure where there werent procedural rules as would apply, for example, in an institutional arbitration such as the ICC. The aim was to set up a procedural framework which would ensure acceptance of a resulting Award, particularly under the New York Convention. The great
2012 WB McLaughlin, Training & Education Officer, SICA-FICA for The Robert Gordon University sica-fica.org
achievement and practical success of this Convention was continued with these Rules which have achieved their stated aim, including the severest test as the Rules for the Iran-US Claims Tribunal. The Conciliation Rules followed in 1980, with Guidelines for Administering Arbitration under the UNCITRAL Arbitration Rules in 1982. In response mainly to Asian and African states, who wished to use these arbitration rules but whose arbitration legislative background was inadequate, the task of drafting a Model Law for international arbitration began. This was not only another great undertaking but a totally new concept: to produce a model with no validity in itself unless and until it might be enacted in some form or other by a state. And this success story has continued with this unique document for it has not only been enacted in 40 countries to date but other countries with different arbitral laws permit arbitrations to be carried out under the Model Arbitration Law, if the parties so choose.
While the New York Convention remains unaltered from its original, despite some fairly serious criticisms and much interpretation, the Model Arbitration Law has undergone a considerable revision in 2006, mainly to include provisions for temporary measures that werent in the original version.
The latest original document in this remarkable series regardiong arbitration is the Notes on Organizing Arbitral Proceedings which were finally adopted in 1996, three years after they were commissioned. This may seem a long time but all these documents are the result of long and careful debate and discussion. THE UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION As noted above, the Model Arbitration Law properly the United Nations Commission on Trade Law (UNCITRAL) Model Law on International Commercial Arbitration was produced in 1985 following a request from African and Asian states for a legal framework in which the earlier UNCITRAL Arbitration Rules could operate. The UNCITRAL Arbitration Rules were a follow-on to the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards, 1958, that most important modern statement in the field of international commercial disputes. Thus the Model Arbitration Law came about and has been adopted in many countries with different legal systems. It is a remarkable document for it has already stood the test of time and is, in itself, to date relatively unamended though with additional provisions. It is, of course, open to alteration by any country adopting it. For instance, while it was clearly drafted for international disputes, it has been adopted for all commercial arbitrations in states such as Kenya and Zimbabwe and, with certain extra provisions for domestic arbitrations, in New Zealand where it effectively replaced the English 1889 Act. It can be adopted by, for example, being placed in its entirely in a schedule with such enabling clauses preceding it, as was done in Ireland, or it can be written through much as was done for Scotland.
sica-fica.org
It should be noted that while it was the first Model Law there are now a number of other Model Laws, for different purposes, and this one should be specifically quoted as that for international commercial arbitration. OTHER INTERNATIONAL BODIES CONCERNING COMMERCIAL ARBITRATION ICSID is an autonomous international institution established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Washington Convention) which was opened for signature in 1965 and entered into force in 1966. The Convention is a multilateral treaty formulated by the Executive Directors of the International Bank for Reconstruction and Development the World Bank and has more than 140 member states. Its primary purpose is to provide an impartial international forum for conciliation and arbitration of international investment disputes for which there are no other special international provisions. Recourse to the ICSID facilities is always subject to the parties consent. ICSID plays an important role in the field of international investment and economic development and, in 2009, it is the leading international arbitration institution devoted to investor-State dispute settlement. The World Trade Organization (WTO) is an international organisation designed to supervise and liberalise international trade. The WTO came into being on 1 January 1995, and is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947 and continued to operate for almost 50 years as a de facto international organisation. The WTO deals with the rules of trade between nations on a global level; it is responsible for negotiating and implementing new trade agreements and polices member states adherence to all the WTO agreements, as signed by the majority of the worlds trading nations and ratified in their legislatures. Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round. The organisation is currently working with its members on a new trade negotiation called the Doha Development Agenda (Doha round) which was begun in 2001. The WTO has 153 members, representing over 95% of total world trade. The WTO is governed by a Ministerial Conference, which meets every two years; a General Council, which implements the conferences policy decisions and is responsible for day-to-day administration; and a directorgeneral who is appointed by the Ministerial Conference. The WTO has its headquarters in Geneva, Switzerland. In 1994 the WTO members agreed on the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) annexed to the Final Act signed in Morocco in 1994. Dispute settlement is regarded by the WTO as the central pillar of the multilateral trading system and as a unique contribution to the stability of the global economy. WTO members
have agreed that, if they believe fellow-members are violating trade rules, they will use the multilateral system of settling disputes instead of taking action unilaterally. The operation of the WTO dispute settlement process involves its Dispute Settlement Board panels, its Appellate Body, the WTO Secretariat, arbitrators, independent experts and several specialised institutions. The World Intellectual Property Organisation (WIPO) is one of 16 specialised agencies of the United Nations. WIPO was created in 1967 to encourage creative activity, to promote the protection of intellectual property throughout the world. It currently has 184 member states, administers 24 international treaties and, like so many other similar bodies, is headquartered in Geneva, Switzerland where the League of Nations was originally located. WIPOs predecessor was BIRPI (Bureaux Internationaux Runis pour la Protection de la Proprit Intellectuelle United International Bureaux for the Protection of Intellectual Property) which was set up in 1893 to administer the Berne Convention for the Protection of Literary and Artistic Works and the Paris Convention for the Protection of Industrial Property. WIPO was formally created by the Convention Establishing the World Intellectual Property Organisation in 1970 and became a specialised agency of the UN in 1974. Under Article 3 of this Convention, WIPO seeks to promote the protection of intellectual property throughout the world, mainly through its Arbitration and Mediation Center, a unit of the International Bureau of WIPO which oversees its arbitral rgime under its Arbitration Rules which are specially drafted to take account of the sensitive nature of the disputes referred to it. COMPARISON BETWEEN THE MODEL ARBITRATION LAW AND THE ENGLISH ARBITRATION ACT 1996 The English Arbitration Act 1996 arguably the most developed arbitration code in the common law legal family today states in its preamble that it is An Act to restate and improve the law relating to arbitration and it certainly does that. Section 1 gives three general principles: to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense (a three-pointed principle); party autonomy; and that the courts should not intervene except as provided. There are two omissions that might have been included. One is regarding the privacy and confidentiality of the process a complicated matter but one that incorporates important principles that should be confirmed and that there is no reference to an arbitrators independence, though there is to his impartiality; these are not the same, nor even similar, and they are both in the Model Arbitration Law.
There are a number of similar contrasting points between the Model Arbitration Law and the new English Act and, as the Acts Explanatory Memorandum (prefacing the Bill as presented in the House of Lords, which subsequently became the Act) stated that It reflects as far as possible the format and provisions of the UNCITRAL Model Law on International Commercial Arbitration, the two are discussed here comparatively. First, the Model Arbitration Law was not drafted with domestic arbitration in mind; the 1996 Act covers both domestic and international arbitrations without distinction (except for specific references to eg consumer arbitrations).
This is anomalous. Domestic arbitrations generally require the ready availability of court support and supervision while international arbitrations do not. Domestic arbitrations are effectively scaled-down variations of a States litigation process while international arbitrations are, if anything, the reverse, hoping to satisfy the main procedural expectations of parties from States with different litigation procedures. The two cannot be properly catered for by the same provisions.
Second, the Model Arbitration Law comprises 36 Articles, grouped in 8 Chapters and amounting to 10 pages, while the 1996 Act has 98 Sections in 2 Parts (that is, the whole Act excluding Parts 3 & 4) in 32 pages. Third, there are a number of important definitions in the Model Arbitration Law which are excluded in the 1996 Act, the first being consequent on the first point noted above: there is no definition of international in the 1996 Act while it has a useful, full definition in Article 1(3) of the Model Law. The word commercial is not defined in either document but the Model Arbitration Law states, in a note to Article 1(1), that The term commercial should be given a wide interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a commercial nature include, but are not limited to, the following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business cooperation; carriage of goods or passengers by air, sea, rail or road. There are no references in the 1996 Act to ex quo et bono or amiable composition but both are named in the Model Arbitration Law (Article 28) though neither is defined; the comparable text in the Act is Section 46.
sica-fica.org
The most commonly noted alternatives to strict law are: equitable principles (the term most commonly used by lawyers for this is ex quo et bono or ex bono et quo - the phrase probably derives from Cicero: ex quo et bono, non ex callido versutoque jure rem judicari oportere a matter is properly decided according to what is right (just) and good, and not according to subtle (literally: wily and deceitful) law); international trade custom (this is what is meant in this context by the phrase lex mercatoria, literally the law of merchants in Roman times); and the use of friendly settlement (this is usually referred to as amiable composition, sometimes translated as friendly composition, generally a form of mediation or conciliation).
These terms are all defined differently, if only slightly, in different countries. A useful introduction to these alternatives is Amiable compositeur (Joint mandate to settle) and ex bono et quo (discretional authority to mitigate strict law) apparent synonyms revisited by Mauro Rubino-Sammartano in the Journal of International Arbitration, Vol 9 No 1, March 1992, though some of the references to English cases are misleading and, in a few instances, inaccurate.
Next, and probably most significantly, the available involvement of the courts is much less in the Model Arbitration Law than in the 1996 Act. The thrust of this requirement in the Model Arbitration Law is to provide that minimum assistance to a party or a tribunal that an arbitration reference can proceed as it should, and that a resulting award will have been made to the satisfaction of a court in any State that has adopted the New York Convention. The UNCITRAL commentary refers to its stance on this point as delimitation of court assistance and supervision. The court or courts are largely instrumental in the 1996 Act in no less than 39 Sections with a further 4 Sections underlining the necessity to abide by the rules of court &c. This constitutes court involvement in the arbitral process in over 50% of the 84 Sections in the operative part of this Act as opposed to 25% (9 Articles) in the Model Arbitration Law, and this simple statistic doesnt include for the fact that the Model Arbitration Laws references to the court are hedged with conditions (frequently at the behest of the tribunal) that contrast starkly with the 1996 Acts relatively heavy-handed court interest. The Model Arbitration Laws clear support of the principle that an arbitral tribunal should be able to rule on its own competence is reflected in the 1996 Act. However, the Model Arbitration Law includes power for a tribunal to order (but, obviously, not to enforce) interim measures at the request of a party (a matter that is mostly left with the courts in the 1996 Act) and the provisions in the Model Arbitration Law for attacking an award are simple, being limited to setting aside only. This recourse against an award, and its recognition and enforcement, are dealt with in the Model Arbitration Law very much as in the New York Convention, the only differences being minor, relating to updating and the improvement of some local slight misunderstandings of the language of the Convention. The Model Arbitration Law contains an exclusive list of limited grounds on which an award may be set aside: lack of legal capacity of parties to conclude an arbitration agreement or lack of a valid arbitration agreement; lack of notice of appointment of an arbitrator or of the arbitral proceedings or inability of a party to present his case;
10
where an award deals with matters not covered by the submission to arbitration; where the composition of the arbitral tribunal or conduct of the arbitral proceedings is contrary to the effective agreement of the parties or, failing agreement, to the Model Arbitration Law; and non-arbitrability of the subject-matter of the dispute and violation of public policy (which would include serious departures from fundamental notions of procedural justice). Other notable, specific provisions in the Model Arbitration Law are: the default tribunal is 3 arbitrators (Article 10); challenges to an arbitrator are decided by the tribunal and, if rejected, either party may then take its challenge to the court (Article 13); parties submit claims and defences to them but there is no automatic right of reply to a defence, though amendments are generally permitted (unless considered inappropriate by the tribunal) (Article 23); the tribunal decides whether to hold a hearing but must do so if a party requests one (Article 24); and a claim not delivered in time without good reason terminates the proceedings (Article 25). The great selling point for the Model Arbitration Law has been its harmonisation (of the legal procedural background for international arbitrations) which, coupled with the general perception that it has achieved its stated aim of favouring no legal system (over and above any other) yet fitting into all of them, has made it a bigger success than was anticipated; hence the further Model Laws, all relating to commercial matters. Its lineage, sourced in the United Nations, and its stabling in that organisations Commission on Trade Law, accentuates the worlds majority opinion that arbitration is primarily a commercial matter. 2 It has also been the means of sweeping aside the disparity between international arbitral rgimes world-wide. Since the New York Convention now boasts over 130 States as its adopters, arbitration awards are readily transportable from jurisdiction to jurisdiction with every expectation of being enforced. With the Model Arbitration Law either in place, or at least understood, appreciated and accepted as valid in itself, the means of producing satisfactory awards in many more places has come about. The practice of forum shopping in international arbitration has diminished in importance and the whole tenor of international commercial policing has been improved, refined,
This is another point of variance with the English legal attitude, though very recently it can be said that here, the contractual and therefore commercial basis of the arbitral process has gained ground in arbitration (and most legal) circles where heretofore the jurisdictional or legalistic basis has held near-total supremacy.
2
sica-fica.org
11
simplified and enhanced. Not only has this given the arbitral process back to its users, the worlds merchants, but it is now uniform and even more practical and useful than litigation (for international disputes), spawning many new specific arbitral rgimes, such as those in WIPO and WTO which, with those of older bodies such as GAFTA and LME, now amount to a very substantial arbitral lex mercatoria.
4.
Procedural Laws
Jurisdictions make separate provisions for substantive and procedural matters. The first category generally relates to rights and duties/obligations of all types of legal persons, including corporations. The second generally deals with how any dispute or difference is to be deliberated by what process and according to which rules. There are, of course, other divisions of law, such as those classifying crimes and detailing their penalties, but, generally, arbitration is not concerned with these other categories. What is substantive and what is procedural can vary from one jurisdiction to another, the commoner examples being statutory interest and matters of evidence. A procedural law is substantially a set of rules defined by the legislature of a jurisdiction and related to a specific process or processes. The prime procedural laws are those directed at proceedings in court and these are generally different for criminal and civil cases; they also tend to be very detailed and therefore not subject to any amendment, addition or tailoring to individual cases. In some jurisdictions, there are further divisions as, for example, between civil cases and mercantile cases; and for conciliation processes carried out by the court. Most jurisdictions provide a different class of law for the procedure of noncourt processes, primarily for arbitration. The differences are considerable. First, they tend to be much less prescriptive, allowing a large amount of choice that can make each arbitration unique if appropriately tailored to the dispute in question. Most arbitration codes permit parties to agree (or not to disagree in the case of default provisions) that their arbitration be conducted without, for example, the application of the strict rules of evidence, with virtually total freedom of representation (by the party itself, or friend, or expert not necessarily a qualified lawyer) or even by documents only. Second, their requirements are frequently split between mandatory provisions (such as those commanding natural justice principles) and non-mandatory provisions which, in turn, can have default stipulations,
12
that is, provisions that will apply when the disputing parties do not exercise their right to choose otherwise. Third, given the conceptual or principled nature of most arbitration procedural codes, they can be further detailed by supplementing them with Rules bodies of further, more detailed provisions that are often related to specific types of dispute as, for example, those in commodity arbitrations (GAFTA, RSA &c). Rules need not be specific; they can be just what the parties agree upon ad hoc or as their tribunal proposes and the parties agree to accept. Fourth, most jurisdictions acknowledge and enforce the consent nature of arbitration: that the parties have agreed to choose this method to resolve their dispute to the extent that they include in that agreement that any one of them can insist on arbitration even if all the other parties wish, for example, to employ another method. This acknowledgment of the consent nature of arbitration extends to most jurisdictions considering parties agreement to arbitrate as a wholly separate agreement from any contract within which it may be expressed. Fifth, most arbitration codes permit parties to agree that the merits of their dispute be decided in accordance with equitable principles rather than according to a strict application of the law. While this may in the main refer to a substantive provision, it can also be procedural.
5.
The main applicable laws in arbitration
In international arbitrations the distinction between what is SUBSTANTIVE and what is PROCEDURAL is prime: SUBSTANTIVE is the designation given to whatever relates to the actual dispute its merits which are essentially the claims and counterclaims (of whatever type) involved; The substantive law is therefore that benchmark or area of law chosen by the parties that governs the contract (sometimes called the proper law). As with all except one such designation, this need not be the law of a particular jurisdiction (such as Scotland, or England & Wales, or France, or Massachusetts), though more often than not a specific jurisdiction is chosen. It is valid to have, for example, international trade law or lex mercatoria or Unidroit Principles of International Contracts as the substantive law, instead of a municipal (national) law.
13
PROCEDURAL relates to how the arbitration is performed what particular requirements apply as to how the claims and defences (and any other ancillary interlocutory matters) are presented and argued &c. The procedural law is therefore that chosen by the parties to govern the proceedings in their arbitration. Again, this need not be that of a specific jurisdiction (Jersey, California, Ecuador, Russia) though it usually is of a specified jurisdiction. It is valid is most countries (see later re seat) for parties to choose amiable composition or ex quo et bono or in accordance with equitable principles instead, though what each of these mean varies appreciably from country to country. When one jurisdiction alone is involved when both the substantive and procedural laws are from the same jurisdiction there will be no problem working with them, as they should present no gaps or overlaps (as may vary between jurisdictions in areas such as non-contractual interest or evidence). However, if this is not the case, then care is required to ensure the proper priority which is generally that a substantive provision takes precedence over a procedural one (when the matter concerned is provided for in both) and, when there is a gap, recourse to an adequate supplementary provision (such as in a set of Rules) may be had. The exception (referred to above) refers to the seat or the juridical seat though these titles are NOT generally found historically or in internationally recognised documents when this particular is being discussed. Reference to seat is a late citation, not only in English, and (in English) to be found for the first time in the England & Wales Arbitration Act 1996, s.3. This pivotal particular is generally described as the place of arbitration or where the award is made both common in E&W before the 1996 Act or versions of these, such as in the following extracts from the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) and the Model Arbitration Law (both versions: 1985 and 2006). These phrases are, of course, recognised as being references to the juridical seat which must be a recognised jurisdiction if recourse for enforcement of an award is not where it was made (or even also where it was made in some cases the E&W Arbitration Act requires that every award states its seat).
sica-fica.org
14
Article V [New York Convention 1958] 1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforcement is sought, proof that: (a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or (b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or (c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbitration may be recognized and enforced; or (d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or (e) The award has not yet become binding, on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
[UNCITRAL Model Law on International Commercial Arbitration] Article 20. Place of arbitration (1) The parties are free to agree on the place of arbitration. Failing such agreement, the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties. (2) Notwithstanding the provisions of paragraph (1) of this article, the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of goods, other property or documents. Article 31. Form and contents of award (1) The award shall be made in writing and shall be signed by the arbitrator or arbitrators. In arbitral proceedings with more than one arbitrator, the signatures of the majority of all members of the arbitral tribunal shall suffice, provided that the reason for any omitted signature is stated. (2) The award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms under article 30. (3) The award shall state its date and the place of arbitration as determined in accordance with article 20(1). The award shall be deemed to have been made at that place. (4) After the award is made, a copy signed by the arbitrators in accordance with paragraph (1) of this article shall be delivered to each party.
Problems arise when one or more of these is not designated The commonest apparent problem is where the seat is designated in other terms as, for example, in phrases like those in the New York Convention: Then the place of arbitration (the most likely variant) or similar phrase defines the seat, following the New York Convention and traditional usage. When a seat is designated and a separate designation of the procedural benchmark is made, there can be problems if the latter includes a provision contrary to the procedural law of the seat
sica-fica.org
15
This is resolved by the law of the seat taking precedence so that the offending provision in the designated procedural benchmark, be it the procedural law of another jurisdiction or otherwise, is invalid. Example: seat Russia. procedural law England with the parties choosing amiable composition but this is prohibited by Russian procedural law and so is invalid: the arbitration must proceed in accordance with law and not amiable composition. When a procedural law of a jurisdiction is chosen with no reference to the seat (or place of arbitration &c), then that is taken as also defining the seat. When there is no reference to any jurisdictions procedural law (that is, either no reference to procedure or place at all, or with just a reference to amiable composition or ex quo et bono &c) this does not give an indication of where the seat might be. The situation might be saved by reference to a set of Rules chosen by the parties Article 16 of the UNCITRAL Arbitration Rules 1976 state:
1. Unless the parties have agreed upon the place where the arbitration is to be held, such place shall be determined by the arbitral tribunal, having regard to the circumstances of the arbitration. 2. The arbitral tribunal may determine the locale of the arbitration within the country agreed upon by the parties. It may hear witnesses and hold meetings for consultation among its members at any place it deems appropriate, having regard to the circumstances of the arbitration. 3. The arbitral tribunal may meet at any place it deems appropriate for the inspection of goods, other property or documents. The parties shall be given sufficient notice to enable them to be present at such inspection. 4. The award shall be made at the place of arbitration.
Recourse is otherwise made to Private International Law (or International Private Law or Conflicts of Law) [PIL] to decide the juridical seat; or It may be that the designated substantive law (which is generally that whose PIL rules are used as a starting point in 2.D.i above) can be taken as directly indicating also the seat though, noting the example in 2.B.i.a, this may contravene the parties wishes should amiable composition &c have been chosen and so this direct approach would be invalid. When no substantive benchmark is designated, this too requires recourse to PIL rules which, if a jurisdictions procedural law has been designated, will generally refer to the PIL of that jurisdiction, since the seat will then be defined as that jurisdiction. If there is no indication of any of these requirements substantive, procedural or seat all is not quite lost, though an arbitral tribunal has quite a lot of extra work to do to decide these one after another, starting with the contract, its location(s), the jurisdiction giving capacity to the parties &c.
16
NB. As noted in the UNCITRAL Arbitration Rules (Art.16(2) and Model Arbitration Law Art. 22 (2), quoted above, designation of the place of arbitration does NOT in almost all jurisdictions prevent hearings or meetings &c from being held outside it; place of arbitration has, in the context of arbitration, a formal meaning over and above its mere words.
Further Reading
There are many documents noted in the text of this Topic. While at this stage it may be unnecessary to read all of them, the major ones are essential:

The New York Convention of 1958 UNCITRAL Model Law on International commercial Arbitration 1985 & 2006 UNCITRAL Arbitration Rules 1976 & 2010 UNCITRAL Notes on Organizing Arbitral Proceedings 1996
Topic Activities
Activity 1- Suggest 1 hour The Model Law and the Arbitration Rules were both amended in recent years. Identify the changes and compare them; are they consistent with each other? Activity 2- Suggest hour Reference is made in these Notes to Private International Law to which you were introduced in the Arbitration Law Course. Look at the arbitration Rules of the ICC (International Chamber of Commerce) and consider how they might assist in defining the following applicable laws in an international arbitration where none has been agreed by the disputants:

The law governing the contract The juridical seat The procedural law
sica-fica.org
17

Arbitration Practice Procedure - Topic 8 International Considerations

Загружено:

Сведения о документе

Исходное описание:

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Arbitration Practice Procedure - Topic 8 International Considerations

Загружено:

Авторское право:

Доступные форматы

Arbitration Practice & Procedure

Topic 8: International Considerations

Topic 8: International Considerations

Topic Content 1. History & Timeline