UNCITRAL Model Law on International Commercial Conciliation of 2002 - Essay Example

?Part B: Two settlement means which need reform UNCITRAL Model Law on International Commercial Conciliation of 2002 Part A has discussed thoroughly the essential elements of conciliation. In relation to the Model Law, conciliation refers to the proceedings where a person or a group of individuals assists parties as they seek an amicable settlement of their issues1. In enacting this law, Article 14 of the Conciliation Model Law states that “if the parties conclude an agreement settling a dispute, that settlement agreement is binding and enforceable…2”. As indicated in the Guide to Enactment of the Model Law, settlement arising from conciliation can either be enforced as a contract or as an arbitral award3. In this discussion, decisions enacted as arbitral awards will be considered; this award means that settlements are implemented after being recorded in an arbitral proceeding. Different issues present themselves in this situation in instances when the law would allow the “settlement reached in conciliation to be recorded in an enforceable arbitral award” 4. One such issue pertains to form requirements which vary from country to country. An issue in this case is if there is a requirement for clarification for the settlement to be recorded in an award. Should the payment and performance obligations agreed upon be written in much the same way as awards? Or should the tribunals reconceptualize such obligations in the award into others?5 The award based on agreed terms should therefore be clear enough to be enforced without the need for reformulation of interpretation. Recording settlements in an award are based on providing finality and enabling a faster enforcement of the settlement6. In instances when the parties call for an arbitral tribunal to carry out an award based on agreed terms, risks are often seen and problems of clarity can arise when the parties negotiating settlement are focused on the elements of the settlement, not on the need to fulfill the formal requirements of awards7. An issue may also be seen when the settlement of the parties resolves only some of the issues being forwarded8. This situation can sometimes be easily resolved when a partial award would be given and the other issues are left unresolved. A greater issue results when the settlement includes matters “which are not within the jurisdiction of the arbitrators, either because such matters fall outside the arbitration agreement or because they have not been submitted to the arbitrators for determination”9. In instances when the settlement resolves matters which are not included in the arbitration agreement, it is clear that the arbitral tribunal does not have coverage in resolving the issue and rendering awards on the dispute. Another issue which would arise relates to the fact that the settlement gives rights to a party who is not included in the arbitration. This is seen in instances when both or one of the parties belong to a group of corporations where the settled performance must be made or the rights must be exercised by a parent or a sister company10. Awards on the terms agreed upon cannot bind the rights of the third party. The follow-up question in this case is if the arbitral tribunal would still record the settlement in the award. In these instances, the dispute raised before the tribunal is resolved and the arbitration is terminated. If the law allows the tribunal to record the settlement in the award or when the different parties allow the tribunal to record the settlement, the tribunal would now be confused and would be in a dilemma on what to do11. Still another question is if statements shall be possible to record in award forms on terms agreed upon. Motives for settlements recorded in awards on agreed terms may not be successfully captured in declaratory statements. But on the other hand, the res judicata effect may already be sufficient reason12. The right to implement awards on agreed terms can call for requests by both parties. The issue arises on what the tribunal should do if the settlement agreement sets forth that the parties would request an award on agreed terms but one of the parties does not make such request13. In this instance, the question is asked: “Shall the arbitral tribunal this notwithstanding grant a request by only one party on the theory that the settlement agreement itself can constitute the request by the other part? Or shall (may?) the arbitral tribunal give an award at the request of the non-failing party ordering the failing party to request an award on agreed terms?14 Awards can be challenged based on various grounds; most of them typically referring to excess of mandate, errors in procedure, invalid arbitration agreement, and violations of public order. An issue arises to the extent such grounds for challenging awards which have already been agreed upon15. In this case, the fact that the parties have already agreed upon the terms of their dispute and settlement, may already be considered a waiver of the right to challenge the awards based on the above grounds, except on matters which disturb the public order16. The concept behind these grounds being non-waiveable is the fact that the legal system has ruled that cases falling within exceptions cannot be resolved by arbitration and therefore these provisions must not be circumvented. “What cannot be arbitrated cannot be subject to a settlement”17. 2. Confidentiality in International Commercial arbitration Confidentiality is a disadvantage of international commercial arbitration. Arbitral confidentiality indicates specific protection of data revealed in the arbitration proceedings. Such application is based on the private laws of international arbitration18. Even with an implied acceptance of this confidentiality agreement, the parties in the arbitration process may not share the opinions on the extent of the obligation it impresses on the individuals involved. This is mostly due to the fact that there is not enough laws and arbitral jurisprudence on the issue19. The law on International Commercial Arbitration which has been based on the United Nations Commission on International Trade Law Model Law 1985 sets forth no specific provisions on the confidentiality of arbitral processes20. The rules laid out by some territories provides for specific rules on confidentiality which minimizes the duty and excludes the parties in the list of individuals bound by it. Article 12 of the International Commercial Arbitration Court Rules indicates that the “arbitrators and the…secretariat shall refrain from disclosing information about disputes under consideration by the court of which they become aware”21. The absence of specific rules on confidentiality or arbitrational proceedings may cause substantial damage to any of the party’s interests. In the current global economic crisis, the tolerance for a damaging breach of confidentiality may not be that high22. Therefore, if a party willfully reveals information related to international arbitration processes, along with the subject matter and the amount being claimed to a financial institution which has transactions with the other party to the arbitration, such revelation may negatively affect the other party’s business reputation. This may also be a factor in the institution seeking to change the other party’s credit rating or having such party’s request for loan rejected23. A breach of confidentiality can therefore damage one of the main advantages of international arbitration and consequently undermine its value of establishing a means of settling disputes. The confidentiality of international arbitration proceedings is an area which needs much reform. Traditionally, participants assumed that they were not allowed to reveal the matters discussed in the arbitral proceedings; this assumption is however not anymore a prudent move because the coverage of confidentiality is not a settled issue24. Confidentiality may not be a major issue if the contractual arbitration clause being discussed includes confidentiality provisions; however, pre-dispute terms often do not include settlements on the issue of confidentiality. More often than not, the parties do not think that far ahead and if they do, they are not sure what their position is in the issue25. Parties involved often end up conceptualizing an all-encompassing arbitration clause recommended by arbitration institutions, which do not actually specify terms on confidentiality. When disputes manifest, the parties often end up having trouble agreeing on the important issues, including aspects of confidentiality which should govern the proceedings. Different countries deal with confidentiality in various ways. A decision by the Swedish Supreme Court in Bulgarian Foreign Trade Bank v. Al Trade Finance held that there is no implied duty of confidentiality in private arbitration26. In the arbitration against the Bulgarian bank, the bank set forth that it was not restricted by the arbitration clause in a contract in which it was not a party27. This ruling was published in Mealey’s International Arbitration Report. When the finance company learned of the publication, the company claimed that the award was no longer in effect because the bank violated the confidentiality duty incumbent upon the parties involved in the arbitral proceedings. The courts ruled that the UN-ECE rules do not prohibit the revelation of the outcome of the proceedings; moreover, Swedish law does not make arbitral proceedings confidential, unless the parties opt for secrecy28. The US rejects implied duties of confidentiality and in its ruling in United States v. Panhandle Corp, the federal government ruled that there is no inherent duty of confidentiality unless the parties specify it in their agreement29. This trend is more or less the same in different territories in the world. It is therefore important for Galactic to be more prudent in securing provisions of confidentiality in its agreements and contracts. A solution to the issue of confidentiality is not one which is readily available – not in the courts, not in the arbitral institutions, and certainly not among the disputing parties. A solution to this issue would not likely come from the courts because they are sometimes bound by previous decisions; moreover, they often face various competing interests30. On the other hand, securing an implied obligation of confidentiality may draw in arbitrations and business for the host country. However, the courts may see confidentiality of arbitral proceedings as those which interfere with the establishment of truth in judicial processes. Furthermore, the courts cannot easily carry out confidentiality duties because damages are sometimes non-existent31. And the national governments cannot actually step in to resolve the differences on the issue. Based on the difficulties in securing much needed consensus for modest treaties, amending the current arbitration enforcement treaties or entering into new treaties is far from possible32. A solution likely to come from the arbitration institutions themselves would also be unlikely because the differences indicate competition in lucrative businesses33. Nor is the solution in the hands of the parties themselves because the very subject of contention is causing them to be in conflict with each other. In effect, confidentiality in the proceedings needs major reform in the current international commercial dispute resolution. Bibliography Aguilar, G., & Reisman, W. (2008). The reasons requirement in international investment arbitration: critical case studies. New York: BRILL American Cent. E. Tex. Gas Co. v. Union Pac. Res. Group, 2000. Article 12 of the International Commercial Arbitration Court Rules Bulgarian Foreign Trade Bank v. Al Trade Finance Chernykh, Y. & Astapov, Y. (2009). Ukraine: Problems Of Confidentiality In International Commercial Arbitration. Litigation, Mediation, and Arbitration. Retrieved 08 April 2011 from http://www.mondaq.com/article.asp?articleid=90902 Conciliation Model Law, Art. 14. Dore, I. (1986). Arbitration and conciliation under the UNCITRAL rules: a textual analysis. New York: Martinus Nijhoff Publishers, p. 77. Drahozal, C. (2000). Commercial Norms, Commercial Codes, and International Commercial Arbitration, 33 VAND. J. TRANSNAT’L L. 79, 107 Fulvio Fracassi (2001). Confidentiality and NAFTA Chapter 11 Arbitrations, 2 CHI. J. INT’L L. 213, 213. Kroll, S. (2005). Selected Problems concerning the CISG’s scope of application. UNCITRAL. Retrieved 08 April 2011 from http://www.uncitral.org/pdf/english/CISG25/Kroll.pdf , p. 41. Paulsson, J. & Rawding, N. (1995). The Trouble with Confidentiality, 11 ARB. INT’L 303, 312 Wiwen-Nilsson, T. (2007). Congress to celebrate the fortieth annual session of UNCITRAL Vienna, 9-12 July 2007: Commercial dispute settlement: issues for the future Conciliation: Enforcement of settlement agreements. Retrieved 08 April 2011 from http://www.uncitral.org/pdf/english/congress/Wiwen-Nilsson.pdf, pp. 1, 8 - 10 Sarles, J. (Solving the arbitral confidentiality conundrum in international arbitration. Retrieved 08 April 2011 from http://www.appellate.net/articles/Confidentiality.pdf, pp. 2-3 Schruer, C. & International Centre for Settlement of Investment Disputes. (2001). The ICSID Convention: a commentary : a commentary on the Convention on the Settlement of Investment Disputes between States and Nationals of Other States. New York: Cambridge University Press, p. 438. Swedish Sup. Ct. 27, 2000. Read More