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Capital Construction Contract - Essay Example

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The paper "Capital Construction Contract" highlights that report is an effort to draft the agreement clause relating to the dispute resolution that may arise by virtue of the commercial relationship agreement between the organization in Dubai and the other party based in Yemen…
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Capital Construction Contract
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?CAPITAL CONSTRUCTION Capital Construction Contract The Agreement Leena Table of contents Introduction 3 2. Purpose of report 3 3. Commercial arbitration 4 a. The New York convention 4 b. UNCITRAL arbitration rules 5 4. Structure of the guiding law 6 5. Conclusion 9 6. References 10 1. Introduction As I have been asked to review the following draft clause in the capacity of a Contract Manager and Arbitration Specialist, it is my privilege to submit this report to the esteemed office with my study, views and opinions that draws on the International conventions on arbitration. The draft that needs to be reviewed is as below: “Any dispute or whatever nature arising out of or in any way relating to the Agreement or to its construction or fulfilments can be referred to arbitration. Such arbitration shall take place in Dubai or Sana’a, or any other place as the parties may agree, and shall proceed in accordance with the Rules of Arbitration of the LCIA-DIFC in Dubai. Both parties hereby agree that, at least, one arbitrator should be Dr Karim Akram.” Many factors influence the path chosen to resolve expected and unexpected disputes that may arise during the course of the agreement between the parties and may depend on the identities of the parties, the courts and their jurisdiction in play and location of assets among others. And without a clear clause for dispute resolution, any dispute arising may be tossed at some court which may not be the first choice of either or both the parties (International Arbitration – An Overview, 2012). 2. Purpose of report Firstly, it is observed that there is a general ambiguity between going for arbitration or a litigation when there is a conflict of interest between two parties in agreement, which calls for a thorough consideration of the advantages of both and choosing the best course in the interest of both the companies and the general public at large. Being the Contract Manager and Arbitration Specialist at the company, I am entrusted with this job of reviewing the best course of action to enable the smooth conduct of the agreement between the company and the other company based in Yemen. Secondly, as the other party is based in another country with many of the International conventions applicable to it, it becomes necessary to draft an agreement that takes into consideration these different angles to the parties’ interests while also drafting the relevant clauses for arbitration proceedings in case of dispute resolution. 3. Commercial arbitration Arbitrations arise out of commercial relationships between different entities or parties, where there may be a dispute or scope for dispute(s) on interests or choice of interests. Commercial relations and the disputes arising out of these relationships are recognized and arbitrated with relevant clauses in the relationship or trade agreement. Exclusive mention of the relevant rules of dispute resolution help parties have set direction for dispute resolution as arbitration proceedings are the choice when there can be a resolution to the dispute. Arbitration rules are clearly stated in the different conventions or rules of the statutory requirements that tend to satisfy the myriad interests of almost all of the stakeholders of the commercial relationship. Several rules or conventions exist that consider the interests of the International stakeholders or entities in such dispute resolution through arbitration. The New York Convention (NYC) and UNCITRAL (United Nations Commission on International Trade Law) rules are the most referred rules for arbitration when considering dispute resolution between commercial entities that are in a commercial relationship and which hail from different International regions or countries. Apart from these, there are several national and civil jurisdictions that are also applicable to such arbitrations and may also be the chosen rules over or alongside the different International convention rules. These two International conventions and the other national conventions of Dubai and Yemen that pertain to the private commercial relationships and the disputes arising thereof shall be considered in further sections below. a. The New York convention The New York Convention is a successful treaty in commercial law with over 117 states being party to it and many new models like UNCITRAL being based on it. It is also considered to be a main pillar of the United Nation’s global mission. International Chamber of Commerce (ICC) in 1953 was the first draft before New York Convention was finally drafted in 1958. This convention is normally recommended where national arbitration laws fall back to create a gap in arbitration procedures for International private or government entities in a commercial relationship. However, the national arbitration law is the basis for using this convention as it tends to heavily draw or fall back on national arbitration laws while still recognizing and enforcing the New York Convention rules to settle the disputes of private commercial agreements (Enforcing Arbitration Awards under the New York Convention: Experience and Prospects, 1999, p 4). There have been attempts to fully harmonize national arbitration laws and procedures with the New York Convention laws to serve the International trade community but there are reservations of its success. The Convention is normally applied for recognition and enforcement of arbitral awards where the agreement seeks such awards to resolve disputes arising out of domestic or non-domestic trade relations. Article I of this convention is applicable in situations where a) when the award is made in the territory of another State, or b) when it is not considered a domestic award in the State where recognition and enforcement is sought and Article I(1) defines the scope of the convention as: “This Convention applies to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.” (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, p 11; Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 2008). The obligation of contractual entities to recognize such awards as binding is in article III and article IV lays the arbitration agreement while article V (para 1) can be used to object to the request for arbitration enforcement and para 3 entitles the foreign court to refuse enforcement with article VI serving for the purpose of adjourning the decision by the country of origin or where the arbitration has been proceeded with, by the foreign court (Den Berg, 2008, p 1). b. UNCITRAL arbitration rules UNCITRAL model law is based on the New York Convention laws but is a modified or adapted version of the convention that is aimed to suit the unique needs of modern commercial trade agreements with particular reference to electronic commerce. UNCITRAL model law has successfully contributed to the harmonization of the national laws as it takes into consideration the applicability of NYC and the respective national laws with smooth enforcement being enabled for arbitration of private commercial agreements and the disputes arising thereof (Den Berg, 2008, p 1). It is seen that national rules of arbitration regulate UNCITRAL laws to some extent, making the laws or rules of UNCITRAL find more favour among the disputing or trading entities. It has come to be become an alternative means of establishing NYC although it depends on the award-debtor agreement as it has the capacity to supersede the decision by national court where the arbitration has been proceeded (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, pp 9-25). 4. Structure of the guiding law NYC is probably the most preferred method for arbitration by the International trading community with its powerful UNCITRAL being at the centre. Some of the guiding principles of the convention are as follows: Article I- set the scope of recognition and enforcement foreign arbitral awards under NYC. This article is particularly important when commercial and non-commercial trade relations are distinguished by the national law of the enforcing state (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, pp 7-10). These are the introductory rules of the convention that relate to the defined relationship of the parties to arbitration agreement and direct the arbitration except when there are special clauses by the arbitration parties to include other parties to the arbitration procedure (UNCITRAL Arbitration Rules, 2011, p 3). Article II- this article sets out the limit on the scope of application of NYC by requiring that an agreement be in place that recognizes the need for enforcing NYC in the arbitration procedure. It purely recognizes the need for a clause or a separate agreement to be made to this effect for NYC to be applicable (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, pp 11-12). This article refers to the notice for arbitration and the address for communication regarding all matters arising out of the agreement (UNCITRAL Arbitration Rules, 2011, p 3). Article II (1) and (2) are as follows: “1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration. 2. The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.” (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, p 11). Paragraph 3 of Article II sets out the conditions for arbitration as follows: “3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.” (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, p 17). Article III and IV- these articles deal with the enforcement of the convention as the former sets the general obligations of the contracting states to recognize and enforce the arbitral awards and the latter sets the conditions for enforcements where the arbitrating party or parties are required to submit a copy of the agreement based on which the parties may enter into an arbitration (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, pp 21-25). Article IV also includes the response to a notice of arbitration by the invoking party and the responding party respectively (UNCITRAL Arbitration Rules, 2011, pp 4,5). Article III is as follows: “Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.” (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, p 21). Article IV is as follows: “1. To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply: (a) the duly authenticated original award or a duly certified copy thereof; (b) the original agreement referred to in article II or a duly certified copy thereof. 2. If the said award or agreement is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award shall produce a translation of these documents into such language. The translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.” (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, p 25) Article V- this article sets out the conditions or rules relating to the representation and assistance for each party where it is clearly mentioned if the name and address mentioned in the agreement is for the purpose of representation or assistance respectively (UNCITRAL Arbitration Rules, 2011, p 6). This article is divided into two: one is invoked by the parties to arbitration (as per para 1) and the other is invoked by the court (as para 2) (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, p 29). Article V is as follows: “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..” (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, p 29). Article VI- it provides the adjournment of the decision on enforcement on the award in relation to setting aside or suspension of the award (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, p 41). This article also recognizes the designating and appointing authorities who are involved in the process of reviewing and responding to arbitration communication (UNCITRAL Arbitration Rules, 2011, p 7). Article VI is as follows: “If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V(1)(e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.” (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, p 41). Article VII- this is an important law as it refers to the rules that may applicable to an arbitration agreement in commercial trade between parties. It sets out the applicability of the national or International or other treaty in case of an arbitration relating to the commercial relationship (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, p 43). It sets out the number of arbitrators involved with the agreement (UNCITRAL Arbitration Rules, 2011, p 8). Article VII is as follows: “1. The provisions of the present Convention shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforcement of arbitral awards entered into by the Contracting States nor deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon. 2. The Geneva rotocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign rbitral Awards of 1927 shall cease to have effect between Contracting States on their becoming bound and to the extent that they become bound, by this Convention.” (Recognition and Enforcement of Arbitral Awards: The New York Convention, 2003, p 43). Articles VIII to X- these relate to the appointment of arbitrators under various conditions (UNCITRAL Arbitration Rules, 2011, pp 8,9). 5. Conclusion This report is an effort to draft the agreement clause relating to the dispute resolution that may arise by virtue of the commercial relationship agreement between the organization in Dubai and the other party based in Yemen. After reviewing the articles in NYC, it is observed that NYC, particularly UNCITRAL is the preferred choice of law for International private trade establishments that try to draft detailed agreements to clearly set out the composition of the agreements of trade between the parties. It is seen that the organization, in an attempt to draft a clear agreement for its efforts in commercial trade with the company in Yemen can benefit from taking into consideration the various clauses set out by NYC for the same. In this regard, the draft communicated by the CEO of the company can be improvised to reflect the dominant law, either national or international (NYC) and also the appointing authority and the representative or assisting authority. The proposed draft is as follows: “Any dispute or whatever nature arising out of or in any way relating to the Agreement or to its construction or fulfilments can be referred to arbitration. Such arbitration shall take place in Dubai or Sana’a, or any other place as the parties may agree, and shall proceed in accordance with the Rules of Arbitration of the LCIA-DIFC in Dubai with superseding authority of UNCITRAL laws as and when needed. Both parties hereby agree that, at least, one arbitrator should be Dr Karim Akram as the representative for the company in times of an arbitration that may be necessary.” 6. References Convention on the Recognition and Enforcement of Foreign Arbitral Awards. 2008. United Nations. Den Berg, VJA. 2008. CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN ARBITRAL AWARDS. United Nations Audiovisual Library of International Law. United Nations. P 1. Enforcing Arbitration Awards under the New York Convention: Experience and Prospects, 1999. United Nations. Ed.99, v2. pp 4. International Arbitration – An Overview. 2012. CMS Guide to Arbitration, Vol I. Recognition and Enforcement of Arbitral Awards: The New York Convention. 2003. UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT. Pp 7-43. UNCITRAL Arbitration Rules. 2011. United Nations. pp 3-9. Read More
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