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International Commercial Arbitration and Privity of Contract - Essay Example

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International Commercial Arbitration and Privity of Contract Introduction The formation and development of international commercial arbitration has grown in importance as the world of business progresses on a global level. Contracts are increasingly formed on a worldwide basis between different countries…
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International Commercial Arbitration and Privity of Contract
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Download file to see previous pages What is international commercial arbitration? International commercial arbitration is a way in which parties can use an alternative method of dispute resolution on an international level. International law however does not clearly and concisely define what it is in reality. Alternatively, the UNCITRAL contains a Model Law which governs and defines more clearly international commercial arbitration as “any arbitration whether or not administered by a permanent arbitral institution”.1 David also provides a definition which states that ICA is a tool by which parties can settle a question by decisions of third parties “who derive their powers from a private agreement, not from the authorities of a State, and who are to decide the case on the basis of such an agreement”.2 Indeed, arbitration clauses are often specifically contained in contracts, which are specified as binding on the parties outside of court: ICA is binding privately according to the agreement of the parties.3 The purpose of the UNCITRAL Model Law is to aid states in reforming and brining up to date their national laws and regulations on the process of arbitration and it was adopted and implemented globally some 26 years ago.4 The Model Law is comprehensive and applies to all signatory states in many areas of ICA, including the recognition and enforcement of orders and awards, though states are not obliged to directly apply the law in their domain. Such countries prefer to use the Model Law as a framework which they adapt to coincide with their own national laws, economic systems, and public policy norms. Privity of Contract in International Commercial Arbitration Privity of contract requires that all parties to an agreement must voluntarily commit to the agreement for it to be enforceable; this is otherwise termed as mutual consent. In an ICA context, it can thus be applied to state that the parties to a contractual arbitration clause must voluntarily agree to the content of the clause before it can be deemed binding upon the parties. Essentially, it is stated that arbitration without privity is not enforceable; particularly if “coercion, fraud,...[and]... lack of identity of the parties” is evident.5 Privity of contract thus aims to provide an equal playing field for both parties who come from different counties, as it allows them to rely on arbitration clauses in order “to be free of national procedural and substantive law”.6 ICA thus allows disputes which may arise between parties to become subject to regulations which are on a different level to the national laws of the parties so that claims concerning international privity of contract may be avoided. By agreeing on an alternative method of arbitration, both parties are able to be defined as autonomously agreeing to settle their disputes in a value-free manner. However, this again is differently viewed in practice, as many express concern in relation to privity of contract because parties to a contract may not be said to be parties to the international regulations on ICA. This claim is further aggravated by the fact that the UNCITRAL in particular is often altered or adjusted to fit in with national law, and its content is thus ...Download file to see next pagesRead More
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