International Commercial Arbitration - Essay Example

INTERNATIONAL COMMERCIAL ARBITRATION STUDENT NAME COURSE TUTOR NAME DATE PART 1: Question 1 (30 marks) An arbitration agreement can be considered by many as being a legal document made binding by a parties based on a pact that when a dispute does arise on an underlying contract, then the dispute shall be settled through arbitration (Lew, 2003). The formal requirements for any legal arbitration agreement are; the agreement needs to be in writing, based on mutual consent as well as a defined legal relationship. An arbitration agreement needs to provide expressly and tacitly that in case of a dispute arbitration should be the means of settling the dispute. It is crucial to state that an arbitration agreement at the outset is what gives the arbitral tribunal as well as the arbitral award declared validity, as it also governs the validity of the arbitration proceedings. Article 7(1) of the UNICTRAL Model Law defines an arbitration agreement as an agreement by parties to submit all or certain disputes that have arisen or which might arise based on a defined legal relationship in contract or not to be solved by arbitration. It is usually considered as providing the main basis of applying arbitration, distinguished from an arbitration clause which is usually included in an underlying contract. However the form of an arbitration agreement can be created by an arbitration clause embedded within a contract or as a single and separate document (Nigel & Constantine, 2009). The subject matter in an agreement to arbitrate must be on an arbitrable issue. The relevance and the arbitrability of the matter of the arbitration agreement is what make it valid as well as enforceable. Moreover where the parties do agree to settle their disputes through arbitration, they do give up the right to settle it in the national courts unless there is an absolute requirement in an underlying contract (Redfern & Hunter, 2004). The separability of the arbitration agreement is necessary that is its enforcement should not be dependent on other matter such as provided in another contract. The Model Law at Article 16 provides for; “The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause” This has also been considered in Heyman v Darwins (1942) 72 L1 L Rep 65 (HL) where Lord Wright stated that an arbitration agreement is collateral to the substantial stipulations of the contract and is only incorporated into the general contract (Semple, 1990). Majorly an arbitration agreement is in two forms either; an arbitration clause created within a contract or it can exist as a separate agreement (Born,). To be valid, an arbitration agreement should conform to; be in writing and as a result of a meeting of the minds, it must clearly state the intention of parties to submit to arbitration as a result of mediation, parties must have the requisite legal capacity, made by persons of authority, be in writing, define a relationship as well as be on arbitrable subject matter. In any arbitration agreement it is usually critical to identify the number of arbitrators either one or three who are to sit to determine the issues before it. The number of arbitrators is usually an issue and respondents usually challenge the arbitral award if the arbitrators chosen are as not provided for in the agreement (Herbert, et. Al, 2010). However where the arbitration agreement does not provide for the number to make up the arbitral tribunal or a sole arbitrator, then the arbitral institution chosen has the jurisdiction to determine the number of arbitrators to sit in the proceedings. The arbitration agreement also sets out the arbitration seat for instance as decided in Abuja International Hotels Ltd v Meridien SAS [2012] EWHC 87 Comm where in this case Abuja challenged the ICC Arbitration award in which Meridien had been awarded $ 7.2 M as a consequence of breach. The arbitration clause stated that the arbitration proceedings shall be taking place in London and in English Language. Arbitration rules generally determine how the arbitration should be conducted and it can either be “ad hoc” rules or that under “institutional” rules. Ad Hoc arbitration can be specified by parties forming the arbitration agreement that they should not include any arbitral institution, with the parties creating the rules themselves or adopt rules explicitly created for ad hoc arbitration such as the UNCITRAL Rules (Georgios 2004). In choosing institutional arbitration, parties usually include in the arbitration agreement the rules of the selected institution into their arbitration clause by reference. Parties in drafting agreement must ensure that the ruled cater for specific needs, the reputation of institution, the number of arbitrators should there be a default in agreement and the cost. It has been considered that most institutional rules do not specifically address questions of law applicable to the parties’ arbitration agreement. However there is a view that any arbitration agreement shall be regarded as operational if it complies with the necessities of the law chosen by the parties or that of the seat of arbitration (Andrew & Jeff 2005) It is usually considered that where the arbitration agreement fails to mention or is silent on the procedural laws then an arbitrator would be bound to use the conflict of law system where the seat of arbitration was. The seat of the arbitration can also determine the kind of law to be used in the general arbitration agreement. The choice of law is usually a critical issue in international commercial arbitration since the law determines the existence, validity as well as the interpretation of the general arbitration agreement as well as giving certainty to the intention of parties. It has been advocated that there can be a separation between the laws that does govern the arbitration agreement with a different regime of law that governs the underlying contract, hence contracting parties need to be aware of this (Born). Party autonomy in the choice of law is accorded however most parties do not include it in the arbitration agreement or designate it. Specific provisions are however usually provided especially in complex contracts relating to different projects It is usually crucial for any parties to the agreement to agree on the choice of law applicable both substantive and procedural aspects as well as when they seek for it to be applied as was held in Yugraneft Corporation v. Rexx Management Corporation (2010). In drafting the choice of law agreement, the choice of law clause can only be drafted to apply to the arbitration agreement however the underlying contract would contain the choice of law clause generally but without giving a specific reference to the arbitration clause that is associated with the contract. In determining legistlation one considers the law applicable in the contract however the law can be different if there is a separate arbitration agreement (Sutton, John & Kendall 1997). Another aspect is to apply the procedural law applicable to the arbitration, which is where there is no arbitration agreement the procedural law is in principle the place of arbitration, however parties still have the right to choose the law that is applicable to them. Jurisdiction of an arbitral tribunal can also be challenged when it is inconsistent with the law of a country. For instance if an award has been given, it can be challenged on the grounds that the arbitration agreement is invalid due to its inconsistency. An arbitration agreement is therefore crucial and parties should choose the law that is consistent with those of the country where enforcement would be sought (Coulson 1999). In general the arbitration agreement can be regarded as the document from which an arbitral tribunal derives its jurisdiction as well as determines whether the issues that are addressed are valid. The arbitration agreement is what determines whether or not the dispute in question has been resolved. In this regards it defines; the nature or subject matter of dispute, the means of dispute resolution, the number of arbitrators, the language to be used, the seat of arbitration, the place as well as the law that it is to be used. It also discusses the procedures as well as where an appeal lies if parties dispute the outcome. Part 2: Condesign v Statinvest Question 2 The Futurocity Project Agreement defined Mediation and arbitration as the means of dispute resolution in the dispute resolution clause at Article 47. In this regard the choice of the Arbitration Rules as the ICC Rules is not in conformity with the kind of contract the parties had entered into. The Futurocity Project can be regarded as an investment, hence it would have instituted the dispute under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID Convention). Any of the arbitral awards rendered by ICISID are investment disputes. Under the Convention any award rendered, under Article 54 (1) must be enforced by the contracting party as was held in Benvenuti & Bonfant v Republic of the Congo (1981). The ICSID only deals with investment disputes and also considers all international law treaties and convention in the resolution of any investment dispute subject to having an arbitration agreement. Moreover since it specializes on State – Company contracts, it would have been the appropriate set up for the parties to have determined the dispute. Question 3 Draft Design Agreement: Arbitration Clause “In the event of any controversy or claim arising out of or relating to the Futurocity Project Agreement or a breach thereof, the parties hereto agree to try and settle the dispute by mediation, administered by the International Centre for Dispute Resolution under it mediation Rules. If settlement is not reached within 30 days after service of a written demand for mediation, any unresolved controversy or claim arising out of or relating to this contract shall be settled by arbitration in accordance with the International Arbitration Rules of the International Centre for Dispute Resolution.” The parties would choose; 1. The number of arbitrators (one or three) 2. The place of arbitration shall be (Melbourne) 3. The language of the arbitration shall be (English) Question 4 In determining whether or not an arbitrator is suitable for any dispute, the first thing to be considered is their usability and knowledge, their interest in the dispute, independence, impartiality as well as their competency. Article 5 of the UNICTRAL Arbitration Rules provides that where parties had previously agreed on the number of arbitrators for instance 3 or one. If within fifteen days after the receipt by the respondent of the notice of arbitration parties have not agreed that there shall only be one arbitrator, three arbitrators shall be appointed. Further Article 6 (4) provides that in making the appointment of an arbitrator, the appointing authority needs to secure an independent and an impartial arbitrator as well as taking account of the advisability of appointing an arbitrator of a nationality other than the nationalities of the parties. Article 13 (1) ICC Rules provides that in confirming or appointing arbitrators the court is to consider the arbitrators nationality, residence and other relationships with the countries of which the parties or the other arbitrators are nationals and the prospective arbitrators availability and ability to conduct the arbitration in accordance with the rules. In this case Dr. Sundakey would be the most appropriate since he has knowledge of the issues of dispute resolution; he is not a national to any of the states. Question 5 Pursuant to any arbitration agreement the parties are usually required to determine the language to be used by the arbitration tribunal. Where parties do fail to provide the arbitral tribunal determines it through the language in the underlying contract. The UNICTRAL Arbitration Rules at Article 17(1) provides that subject to the parties having made an agreement to arbitrate, the arbitral tribunal shall after its appointment determine the language to be used during the proceedings. The language will apply to the statement of claim, the defence and written statements. The arbitration tribunal can also order any document annexed under Article 17(2) to be delivered in the original language to be accompanied by the translation into the language that is agreed on by the parties. Further Article 20 of ICC Rules provides that in absence of the language being provided for under the contract, then the arbitral tribunal is to determine the language of to be used in arbitration, giving regard to all or any relevant circumstances as well considering the language used by parties in the agreement. In this regard, the language that would be used would be English since they have chosen the New York Law to govern as well as the language of their contract and communications and surrounding considerations taken into account English would be highly appropriate. Question 6 Article 3 of the ICC Arbitration Rules provides that the president is to be elected by the ICC World Council as well as also appointing Vice –presidents.. In this regard therefore the parties had failed to determine the number of arbitrators in the dispute and therefore as per the ICC Rules at Article 11(6) which states that; “Insofar as the parties have not provided otherwise, the arbitral tribunal shall be constituted in accordance with the provisions of Article 12 and 13.” Further ICC Rules at Article 12 (4) provides for three arbitrators and where it is provided that they be appointed one of the arbitrators would be regarded as the president and appointed by the court. However if the parties want to appoint their own president then it would follow the provisions of Article 13. The Secretary General at Article 13 (2) would appoint the President as long as they meet the requirements of being impartial as well as independent. However if a direct appointment is made necessary under Article 13(4) (c) then the President shall be appointed directly by the Court. The ICC Rules Article 13(5) gives provisions that the president of the arbitral tribunal to be from a nationality that is other than that of the parties, however the parties can accept one from their own nationality subject to their acceptance. Question 7 The parties in this case had agreed that the place of arbitration (seat) is Melbourne Australia, with the dispute resolution clause stipulating that “New York law is to govern”. The issue to be decided is what law would be applied as well as how the arbitral tribunal would determine the question of jurisdiction. The ICC Arbitration Rules Article 21 provides that the parties themselves are free to determine the rules of law to be applied by tribunal to the merits of the disagreement. In this regard the arbitration clause provides that the law to be applied is the New York law. There is discretion given to the tribunal of determining the rules appropriate for the case and this can be on the basis of the provisions within underlying contract or in considering aspects trade usages. In the conflict of law system, it is usually stated that where the procedural laws have not been given, while in this case the substantive laws have been provided, then the choice of law would be based on the one applicable where the seat of arbitration is held. In this case the procedural law would be those of Melbourne Australia, in the application of the New York Law. In this regard, the dispute provided is an international commercial dispute by use of general principles of law, lex mercatoria, or any non-national law standard. In this case, the issue to be considered would be whether Australia has ratified the New York Convention. This means that for the arbitral award to be effectively recognized it must conform to the New York Convention. Moreover the arbitral tribunal can be given the authority of amiable composituer or to decide ex aequo et bono subject the parties agreeing to determine jurisdiction in relation to Article 19 as well as Article 21 on the applicable law. Question 8 The main issues that the arbitral tribunal ought to consider in determining the case are; I. That there is a lack of capacity or authority under UNIDROIT Principles of International Commercial Contracts 1994 at Article 3.1. II. The issue of whether there was performance of duty created under the agreement, based on the fixed period as well as reasonable conclusion of the contract III. Whether the parties acted according to the precise obligations, good faith and fair dealing. IV. Who are the parties to the contract, Statinvest or SS Corp who are entitled to make payments under the contract V. Issues of payment including currency transfer, payment by checque or other instrument or by funds transfer VI. Issues of hardship in terms of the performance of the contract and whether renegotiations can be requested. VII. The performance of monetary obligation in breach of Design Contract by their failure to pay. VIII. The right to damages, full compensation, interest, and in which currency for the non-performance of the parties’ obligation under the contract, as well as the party entitled to pay cost under the agreement. Question 9 The security as to cost orders is usually important in safeguarding the effectiveness of arbitration justice .The criteria that is to be used is that the company’s finances are or potentially are in an uncertain state such as the company account as well as the amount of costs, actual or future that the company may be allowed to pay. On the other hand it would be important to take into consideration and preserve the rights of the respondent and that of the claimant, and the right of the claimant to present his claim. The possibility of acquiring interim measures under ICC Rules Article 23 (1) or under the Model Law at Article 17 is dependent on the circumstances of the parties as well as on the merits of the case. The ideal factors to be considered under the traditional view would be the claimant’s nationality or place of residence as long as it is not discriminatory. However this would not be applicable since the parties as company as well as the dispute involve a state organ. The claimants claim inability to cover the respondent’s arbitration costs, this being a necessary and sufficient factor since it lacks structural asset that is imminent insolvency or impecunious situation. In this regard therefore considering the circumstances, one can say that the failure of the respondent paying the money due is sufficient factor to grant a security as to cost order. Further the claimant’s situation is a direct result of the respondent’s action which is the cause and nature of the claim. It would be inappropriate to punish claimant for the creation of the respondent hence the security of cost order would be essential. There has been a deterioration of the claimant’s ability to pay, a fundamental change in circumstance since the conclusion of the agreement to arbitrate. The conduct of the claimant, as well as the role of the claimant in his inability to pay is not a malicious intention to divest itself from its assets so as to be an empty shell if it does lose arbitration. So far the claimant has not acted in a way that is malicious or attempting to pay for the cost of arbitration. Moreover in consideration of the merits of the case, it is not of a frivolous nature based on the factual issues and the broad identity of the case in general. The order as to security of cost is granted to the Claimants based on the character and conduct of the respondent. The reason for my decision would be to allow for the order as to security of cost based on the fact that the claim is not frivolous, the claimant was put in this situation by the action of the respondent as well as the respondent conduct is unconscionable. The denial of the order as to security of costs would deny them the access to justice as well as the subject matter of the disputes and the subject matter giving rise to the request for an order would be unfair to the claimants. Question 10 An injunction is a relief that is granted by determining whether; there is harm, whether the harm is likely to harm the opposing party, the probability or chance of success on merits as well as the demonstration that the applicant would suffer irreparable injury if a preliminary injunction is not granted. The injunction in this case would be highly essential to preserve the status quo of the parties as well as prevent any injury due to the disposal of the letters of credit. Interim orders are usually given on the basis that the tribunal ought to maintain the status quo of the subject matter of the tribunal. The interim orders being sought by the claimant involves the Letter of Credit from Big Bank & Trust which was provide by the claimant as a performance guarantee for the second stage of the Futurity Project’s successful construction and completion. Question 11 The principles of natural justice require that parties to arbitration are to be given the right to affair hearing and that the arbitrator upon being notified must inform the other parties. In this case the issue is the claimants wife has little time to live and the respondent even thus acknowledges that Paris is convenient but refuses to change seat of arbitration. Firstly, it is agreed by both parties that Paris would be a convenient place. This is not a contentious issue, the other thing to be determined is whether they can postpone or agree to change the seat of arbitration. In this regard, the most probable option is to postpone the hearing since both parties would be around. However according to the ICC Arbitration Rules Article 22(1) provides that the process needs to be expeditious and cost-effective manner having regard to the complexity as well as the value of the dispute. I would rule on the basis that Paris be a suitable place since it would ensure that the arbitration proceedings are expeditious as well as convenient for both parties. Question 12 The issue to be determined here is whether the “star witness” statement should be struck off under IBA Rules or considers the issue of dealing with the witness’s aviophobia (terror of flying). Article 25 (5) of the UNICTRAL Arbitration rules provides that the evidence of a witness may be presented in the form of written statements signed by the witnesses. The rules therefore provide that a witness need not be present and give oral statements, but as long as the statements can be attested and verified as his, then the tribunal will admit statements as evidence. The IBA Rules defines a witness statement to mean a written statement of testimony of a witness. It is crucial to note that under IBA rules Article 7 provides that it is discretionary and left to the tribunal to decide whether or not to admit any witness statement related to the evidentiary hearing by that witness. The issue therefore is whether the refusal to admit the “star witness evidence” would be detrimental to the case of the claimant as well as the relevancy of the statements that are to be tendered within the hearing. Article 9 (1) of the IBA rules provides that the principles to determine the admissibility , relevance , materiality and the weight of the evidence is by considering the sufficient relevance to the case, and outcome, legal impediment or privilege as well as considerations of procedural economy, fairness or equality of the Parties. In this case I would admit the written statement of the witness as long as it is relevant to the tribunal to determine whether certain facts are in existence. Question 13 The main issue to be determined is what action will the arbitrator take on an issue not addressed under the arbitration proceeding after it has been closed under ICC Article 27. In this regard, if the arbitrator rules on the matter not in dispute and the parties had not given their opinions, it would be considered as an ‘ultra vires’ award and unenforceable. Article 29 (2) of the UNICTRAL provides that the arbitral tribunal may consider due to exceptional circumstances, decide on its own motion or upon an application to reopen the hearings at any time before the award is made. In this regard, the award has not been made final hence the arbitral tribunal can consider reopening the issue to determine the question not answered by the parties. Question 14 The issue to be analysed is whether an arbitrator is authorized to discuss the outcomes of an arbitral award even though it is innocent. It is known that an arbitrator should be impartial, independent, competent, diligent as well as discreet. In any discussion, an arbitrator should not discuss the merits of the case, especially if he is a sole arbitrator as well as the arbitrator is not supposed to discuss any issue without the consent of the other party. In any case any disclosure is given, then as an arbitrator the action to be taken is to inform the other parties not present at the arbitration of the initial conversation. Article 5.3 of the IBA Ethics for Arbitrators provides that throughout the entire arbitral proceedings the arbitrator should avoid any unilateral communications regarding the case with any party or the representatives. Further it is provided at Article 9 of the IBA Ethics for Arbitrators that the deliberations of the arbitral tribunal are to remain confidential in perpetuity unless the parties release the arbitrators from any obligations. List of References Andrew, B. & Jeff, W. 2005. Mandatory Rules of International Law in International Commercial Arbitration. Melbourne Journal of International Law 6 Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958(The New York Convention) Convention on the Settlement of Investment Disputes between States and Nationals of other States (the ICSID Convention) Coulson, R. 1999. The Future of International Commercial Arbitration. Canada United States Law Journal, Vol 17 Georgios P. 2004. Procedural Law in International Arbitration. Oxford: Oxford University Press. Herbert K., Patricia, N. & Dirk, O. 2010. Recognition and Enforcement of Foreign Arbitral Awards: A Global Commentary on the New York Convention. London: Kulwer Law International Gary Born International Commercial Arbitration Vol 1 Kulwer Law International IBA Rules- Ethics For Arbitrators IBA Rules Taking of Evidence 2010 ICC Arbitration Rules 2012 Lew, J. 2003. Comparative International Commercial Arbitration. London : Kulwer Law International 237 Nigel, B. & Constantine, P. 2009. with Allan Redfern & Martin Hunter, Redfern and Hunter on International Arbitration, 5th edn. Oxford: Oxford University Press. Redfern, A. & Hunter, M. 2004. Law and Practice of International Commercial Arbitration. 4th ed. London: Sweet & Maxwell Semple, W. 1990. The UNICTRAL Model Law and the United Kingdom. Arbitration International. (24) Sutton , D., Kendall, J. & Gill, J. Russel on Arbitration. 25th ed. London: Sweet & Maxwell, London, 1997, p. 71 UNICTRAL Arbitration Rules 2010 United Nations Commission on International Trade Law (UNICTRAL) The Model Law 1995 Read More