International Commercial Arbitration - Assignment Example

International commercial arbitration Student Name Tutor Course Date Word Count 4671 International commercial arbitration Part A Question 1 When parties are getting into an international business agreement, they might consider arbitration as a way of resolving the disputes. This starts by drafting an arbitration clause that sets out the arbitral organisation that the parties will use, types of disputes the parties will arbitrate and how the arbitrators will be selected, and finally the law to be applied to the arbitration (Alan, 2007, pg 2-5). The arbitration clause is an important part of a contractual document since it represents the agreement of both parties in that: in case of any dispute in regard to the obligations whereby one party has undertaken to the other, such disputes are solved by the tribunal of their own constitution. Normally, arbitration clause does not enforce on one of the parties an obligation in favor of the other party. Accordingly, parties are supposed to consult with their arbitrators in order to draft a clear and binding arbitration clause that can solve a dispute efficiently in case of a disagreement. The parties agree on an international arbitral bodies like ICC to govern the arbitration process. The arbitral bodies have a standard arbitration clause and engrained procedures that parties may adopt to increase the predictability of their dispute resolution (Born, G., 2006 pg, 8). Additionally, the arbitral bodies administer the arbitration to ensure that the resolution of disputes is done promptly and orderly. Different arbitral bodies have different rules. Some arbitration rules particularly address issues of interim relief which means if the parties can make applications to the court for a preliminary injunction or any other reason. Normally, the most arbitration rules stipulate that resorting to court in such situation is compatible with their rules and most rules permit the arbitrators to order such relief. The scope of the Arbitration Clause is one of the things that is considered and includes the types of disputes that the parties want to arbitrate. This involves whether the contracting parties will arbitrate on any or all disputes resulting from the business agreement or whether the parties want to restrict arbitration to just some kinds of disputes. Generally, the standard arbitration clauses are extremely wide and are meant to cover all disputes that result from the business agreement as well as the arbitration clause. If the arbitration clause is not adequately broad, it may result to litigation over the disputes the parties agreed to arbitrate. The most effective way of achieving clarity in an arbitration clause is adoption of an arbitration clause from the governing arbitral body. This is because the standard clauses have an understandable language. These clauses can be integrated into a business agreement or the contracting parties can use the clauses as a beginning point of drafting a clause that is tailored to the requirements of the parties and to the particular business agreement (Campbell 2007, pg 20-22). In countries like China, arbitral awards cannot be reviewed by courts while in other countries courts are allowed to review an arbitral award for mistakes in law (Commerce 2011, pg 5). If the contracting parties are not willing to allow courts to interfere with the arbitral award, the parties should draft the clause clearly emphasizing that. Doing this reduces the probability of one party trying to re-litigate disputes that have already been resolved during the arbitration. The parties should concur that the award of the arbitrators shall be the only remedy between them concerning any claims, or accountings presented to the arbitrators (Commerce 2011, pg 6). The international arbitration clause is supposed to cover a provision for choice of law. If such a clause is not there, various law bodies can be applied to various phases of the arbitration proceeding. For instance, English law can apply to the enforceability of the award while Argentine law can apply to the legitimacy of the arbitration clause. To avoid such long-winded outcomes, the parties are supposed to take into consideration a variety of law bodies that can be applied to the arbitration and agree on the one to be applied during the whole proceeding. The parties can agree the number as well as the appointment.Therefore, the parties are supposed to agree on the law that will be applied during arbitration and as a result they can choose a procedural law (Martin 2006, pg 2). In case they fail to do so, the procedural law of the location where the arbitration is talking place is applied. Choice of arbitrator(s) is another important aspect of the arbitration process. The parties should agree on the selection process of the arbitrators and if not the statutes and rules are applied. In case institutional rules are applied to select the arbitrators, no additional reference to section is required. Normally, according to the standards of international commercial arbitrations, there should be three arbitrators whereby each party should select one arbitrator each and the two arbitrators should choose the third arbitrator. In some situations, an appointing authority can select any missing members, for example when one of the parties does not choose an arbitrator. Normally, a sole arbitrator is preferred in smaller disputes and if an arbitrator should have some specific skills, it is supposed to be specified within the arbitration agreement (Martin 2006, pg 2-3). Jurisdiction of the arbitration is also an important consideration. The parties have to consider the jurisdiction of the arbitration and in many cases each party does not like arbitrating where the other party is located, because of the unusualness with foreign law as well as procedures and fear of unfairness. As a result, the parties normally agree on a neutral location where both contracting parties can expect to get an impartial and fair outcome. Prior to selecting an arbitration location, the parties familiarize themselves with the law of that location and how it may interact with the parties’ arbitration clause, procedural rules along with arbitration awards. The jurisdiction of the arbitration determines the level of potential assistance and also interference by national courts during an arbitral proceeding and can even have an effect on enforcement of the arbitral award. In addition, parties ate supposed to choose one language as the official language to be used during arbitration as this allows simultaneous interpretation of another language (Campbell 2007, pg 24-25). The parties are supposed to specify the rules of the procedure that will govern their arbitration procedure. According to arbitration rules, the arbitration should proceed effectively and should also offer an enhanced guidance to the parties and the tribunal as well. For instance, article 2.3 of the rules affirms that “by choosing the Rules the parties do not aim at leaving out the operation of the UNICITRAL Model Law on international Commercial Arbitration (Campbell 2007, pg 6). In case the parties are choosing institutional rules to govern their arbitration, they are supposed to take into account if the rules provide for the: Selection of the arbitration venue in case the arbitration clause does not specify this Evaluation of costs and this consists of allocation between parties Choosing the arbitrator Powers conferred to the arbitrator The language that will be used during arbitration proceedings The substantive law to be applied Usage of professionals The time given to the arbitrators to enforce awards The authority of any administering authority regarding the awards The efficacy of arbitration in providing final and binding resolve of international business disputes is dependent on the capability of obtaining court acknowledgment and enforcement in case a party fails to satisfy an arbitral award. When getting into an international commercial contract, parties are supposed to take into account if the country where they prospect enforcing an award, normally the location of the losing party has a well established domestic legal structure for enforcing of the arbitral awards and if the country is a signatory member to a treaty that requires the country to impose arbitral awards. Regarding the award of tribunal, the agreement is supposed to specify that majority of the arbitrators should agree on an award and that is should be based on applicable law. The agreement is also supposed to stipulate the currency for payment of the award. In case the recognition and enforcement is to be done internationally, the agreement may be required to state reasons and legal grounds and this includes reference to the procedure through which the legal basis was chosen (Martin 2006, pg 8-10). Part B Question 2 The resolution clause is imperfect because it has mixed two laws that should govern the proceedings namely, ICC rules, in Melbourne Australia as well as New York law to govern. Generally, the claimant is likely to have instituted arbitration proceedings under the ICC rules in Melbourne Australia. This is because Australia is the place of arbitration proceedings and thus as much as ICC rules will be used as the institutional rules, the laws of the place where the proceedings are taking place should be applied too. Additionally, New York laws favors the Claimant, which is a famous architectural firm based in New York, while it does not favor the Respondent which is an agency of the Ruritanian State which administers state investments, including the construction of infrastructure projects in Ruritanian. Basically, the resolution clause should have chosen a country’s laws that do not seem to favor any party (Wolfrum & Frowein 2000, pg 15). Question 3 Sample Arbitration Clause Negotiations The parties will try in good faith to resolve any disagreement emerging out of or regarding this Agreement through negotiations between the head of every Party with the authority to resolve the pertinent dispute. In case it is not possible to resolve the dispute agreeably in 21 days from the date where either contracting Party has served a written notice to the other Party of the dispute, then the other provisions of this Clause will be applied. Arbitration All disputes arising out of this agreement encompassing any controversy about its breach or the business relationship established under this agreement shall be referred and eventually resolved through arbitration: 1. Under Arbitration of the ICC Arbitration Rules of Conciliation, in Melbourne Australia. 2. By three arbitrators, whereby each Party will choose one arbitrator while the third arbitrator will be the Chairman and will be chosen by the two appointed arbitrators and failing Agreements. 3. The language to be used during the arbitration process shall be English. 4. The venue of arbitration shall be Melbourne, Australia (National Library Australia 2007, pg1-5). Referral to a professional Below provisions shall apply between parties regarding any issue or disagreement which this Agreement provides should be referred to a professional: 1. Where any matter is referred to a professional according to this Clause, the appointment of the professional will be done by the Parties, or in default of agreement, such appointment in ten (10) days of a Party informing the other Party of its resolution to refer the issue to a professional. A professional will be appointed by: The President of the Institute of Chartered Accountants in Australia The Professional shall settle such dispute according to what he/she see fit. The professional will be asked to make a decision in 30 days of the issue being referred to him. The decision that the professional makes shall be final and binding on the Parties. The cost of the professional in resolving such dispute shall be catered for equally by the Parties unless the professional determines otherwise (National Library Australia 2007. Pg 6). Question 4 Appointing a sole arbitrator The ICC is likely to choose another arbitrator, other than Dr.Sunderkay or MsIxtapa. This is because when appointment of a sole arbitrator is being done, each party can recommend to the other party the names of one or more individuals, one who will eventually serve as the sole arbitrator. In this case, the Respondent has proposed Ms Dona Ixtap to be the arbitrator while the Claimant proposed Dr. Sunderkay to be the arbitrator. Generally, in case in thirty days after receipt of the proposal by formulated according to Article 9.1 the parties in dispute have not agreed who should be the sole arbitrator and given a written agreement regarding their selected sole arbitrator to the ACICA, ACICA appoints the sole arbitrator. While appointing the sole arbitrator, ACICA should take into consideration advisability of engaging an arbitrator of a nationality that does not come from either party. Additionally, ACICA should choose an arbitrator that is likely to be independent and fair to both the parties. Therefore, the ICC cannot choose either MsIxtapa or Dr Sunderkay because choosing one of them to be the arbitrator is likely to appear prejudiced to the party whose proposed arbitrator was not selected. Secondly, the parties did not agree on who should be their arbitrator and thus none of them can be choose. Lastly, the arbitrator should not come from a nationality of both parties, and thus choosing Dr. Sunderkay, who isan American national working as a law professor at Ruritanian University would not be appropriate. Additionally, according to the Model Law Article 10(2), when the dispute is being determined by a sole arbitrator, the parties are not allowed to choose the arbitrator and normally an arbitrator is appointed by a selected appointing authority. As a result, both MsIxtapa and Dr Sunderkay cannot be chosen as the arbitrators and thus the ICC is likely to choose another arbitrator. Question 5 Language Normally, the parties agree on the language to be used but when they do not agree on the language to be used, the arbitral tribunal determines the languages of the arbitration taking into consideration all pertinent circumstance and this includes the contract language. In this case, the Claimant is proposing English to be used which is also the language of the contract. On the other hand, the Respondent is proposing that the language be Ruritanian, or both Ruritanian and English. Accordingly, since both parties have not agreed on the language to be used, the arbitral tribunal is going to determine the language to be used. In this case, the language that will be chosen is English since it is the language of the contract. The documents that are written on Ruritanian will be translated into English and so will be the witnesses’’ evidence (ACICA Arbitration Rules incorporating the Emergency Arbitrator Provisions, pg 1-3) Question 6 Choosing the tribunal president According to the UNCITRAL Rules, Articles 6 and 7, the Secretary-General of the Permanent Court of Arbitration can elect an appointing authority to choose the tribunal president where the parties do not agree on the appointing authority. Additionally,Article 13 of the ICC Rules of Arbitration stipulates that in appointing the president of the arbitral tribunal, the Court takes into account the nationality of the arbitrator and his/her relationship with the parties and his capacity and availability of conducting the arbitration according to the Rules. Therefore, in this case the Court will appoint the tribunal president who has been proposed by the ICC if it finds him/her appropriate. If the Court finds that the proposed tribunal president is not fit, the Court may directly appoint the person it perceives suitable to serve this position. The president of the tribunal will be chosen from a nationality other than the nationality of the parties involved in the dispute. This means that the president of the tribunal should not be an American or a Ruritanian. Eventually, the Secretary General will confirm the president of the tribunal as long as the statements submitted do not indicate any partiality or that a qualified statement concerning impartiality has not resulted to objections (ICC Rules, pg 4). Question 7 Procedural Law to use The parties have already decided the laws that will govern their arbitration, in their dispute resolution clause, which is New York Law. Therefore, the parties will decide the law to be used during arbitration. According to the Article 19 of theICC Rules of Arbitration, the proceeding before the arbitral court can be governed by the Rules chosen by the parties. In addition, Article 21 provides that the parties are free to agree on the rules of law to be used by the arbitral tribunal to the facts of the dispute. Here, the parties had already agreed on the law to be used during arbitration in case of any dispute resolution and thus New York Law is to be used during arbitration according to the parties’ agreement. Question 8 Issues The tribunal has to establish if the Respondent had violated the Design Contract by not paying the amount under the Contract, according to the certification of Respondent’s Chief Engineer on 1st December 2011 Whether the Respondent committed a fundamental breach of the Claimant’s contract payment agreement Whether the second contract is still valid and if the claimant has more obligations to fulfill regarding Futurocity Project If the named Respondent, Statinvest is the correct Respondent in this case If the provision of the Design Agreement had been fulfilled and the request for arbitration is appropriate If the Respondent has the obligation of returning the Letter of Credit The language to be used during arbitration (China Council for the Promotion of International Trade/China Chamber of International Commerce 2011, pg 1-10) Question 9 Requesting an order for security for costs I will make reference to interim and conservatory measure that seems appropriate. Normally, interim and conservatory measures of relief protect the arbitral procedure as well as the enforcement of the arbitral award. Arbitral tribunals have the concurrent jurisdiction to order provisional measures. According to the Rule 28(1) of the 2012 ICC Rules, unless the parties have another agreement, the arbitral tribunal can make any appropriate interim or conservatory measure. In deciding if the order will be granted or not, I will take into consideration two principal factors namely institutional rules and Lex Arbitri. For institutional rules, in spite of them having numerous commonalities, there are still some considerable differences within the interim powers granted to the tribunal. In this case, the ICC are being used during arbitration process and Article 23 of the ICC rules gives the tribunal the power to order any interim or conservatory measure it perceives suitable. However, the ICC Rules do not necessitate that the subject matter should be about the dispute and therefore as long as there is adequate relation with the arbitration, the arbitral tribunal’s power can extend to interim and conservatory issues. Another aspect that will be taken into consideration is Lex Arbitri. Generally, even if institutional rules are used during arbitration, the binding laws of the seat must be applied. These laws normally define powers of the tribunal and the competent court. In many cases, if applications to the required court cannot be avoided, an additional matter to take into account is the domestic pressures exerted on the local courts. For instance, this was seen in the case Himpurna California Energy Ltd. v. PLN (25 Y.B. COM. ARB. 13 (2000) which indicated some of the problems foreign parties can experience when appearing before some local courts. Therefore, the most important factors to be considered include the institutional rules being used, location of arbitration and applicable law on the powers of the tribunal in making the protective measure as well as the level to which the arbitral procedure will be protected from external supervision. The decision will be that I will not order the Claimant to post the security. This is because the respondent is not the claimant and it is not the claimant that had failed to pay the respondent but the other way round. Precisely, the factors that will be taken into consideration include the actual costs that the respondent sustained in complying with the measures as well as the potential damages of the respondent if the measure is successively established to have been unsuitable. Another factor is the financial ability of the claimant to post security. Basically, according to the respondent, the claimant does not have the ability to post the security and thus ordering him to do it would not b appropriate. An example of an ICC Case that posted security is the ICC Case No. 7544. In this case, the claimant was seeking an interim measure obligating provisional payment whereby its claims were that it was entitled to it under the contract agreement (United Nations 2011). The tribunal ruled that it was suitable to obligate the claimant to guarantee repayment of the amount ordered within the interim Award, acknowledging that ultimate decision may not be consistent with the interim Award. Another example is the Case No.3540 which was about a dispute between a French contractor and its Yugoslavian sub-contractor regarding damages for defective performance. The Yugoslavia sub-contractor counterclaimed and claimed interim payment that the French contractor owed it. The decision of the tribunal was that it could enter an interim Award for payment after the application party gave enough security, with damages between the parties being liquidated ultimately in the final Award (Margaret 2008, pg 32-33). Question 10 Big Bank & Trust Letter of Credit This application will be dealt with as an interim or conservatory measure. According to Article 28 of the ICC Rules, the arbitral tribunal after being requested by a party can order an interim or conservatory measure. The application will not be issued to the Big Bank & Trust but to the Respondent. This is because the bank is not a part of the arbitration and should not be involved in the issues involving the arbitration parties. Question 11 Hearing postponement/shifting of jurisdiction The decision will be that the hearing will not be moved from Melbourne to Paris because according to the agreement in the parties’ resolution clause, the place where arbitration should take place is at Melbourne. Additionally, since the Respondent party has refused to have the hearing moved to Paris, it would seem biased to move the hearing as per Claimant’s request since their resolution clause does not give a room for this. In addition, the postponement of the hearing for six months is not necessary and thus the claimant’s request to grant the postponement will not be granted. This is because according to the claimant’s lawyer, the wife of the Condesign’s CEO is terminally ill and is not expected to live more than 2 months. The main reason for postponing is to allow the CEO to have time with his wife during her last days but the hearing has not started yet and it still has about six weeks to start and thus the CEO can use this time to be with the wife. Additionally, according to the Article 26 of the ICC Rules, even though the parties are entitled to be there during the hearing, the party can appear personally or through duly approved representatives and can be helped by advisers. Therefore, any time that the Condesign’s CEO feels that he cannot be present during the hearing he can designate an authorized representative to represent him during the proceedings or can be represented by his legal advisers. Furthermore, if a party gives a valid reason as to why he is not attending the proceeding, the arbitral tribunal can fail to continue with the seating and move it to another day. Consequently, neither postponement of the hearing for 6 months nor shifting of the hearing from Melbourne to Paris will be done. The arbitral tribunal will advise the Condesign’s CEO appropriately on what needs to be done in his situation (International Chamber of Commerce, 2011, pg 8). Question 12 Star witness According to IBA Rules of Evidence, in case a witness does not appear for testimony at Evidentiary Hearing without valid reason, the arbitral tribunal is supposed to disregard such witness’ statement. However, in this case the witness had a valid reason for failing to up and therefore the tribunal cannot disregard his statement of evidence. Article 4 further stipulates that in case a party wishes to present evidence from an individual who will not be appearing during the hearing, the party can within the time stipulated by the tribunal take the necessary steps to get the testimony of such individual. Therefore,in this case I would advise the claimant lawyer to identify the intended witness, make a description of the subjects on which the witness’ testimony is important and make a statement of why such subjects are pertinent to the case and important to the case’s outcome. Accordingly, as the arbitral tribunal I will then decide on the request and authorize the claimant since he is the requesting party to take any required steps in the arbitral tribunal establishes that the testimony of the witness is pertinent and considerable in the case (Arbitration and ADR Rules, pg 1-5 ). Question 13 Ended hearing According to the Article 27, after the last hearing, the tribunal declares the proceeding closed and the Secretariat and the parties are notified of the date that the secretariat is expected to submit award to the Court for approval of the award. After the proceedings have been close, there should be no additional evidence or submissions regarding the matters to be made about the arbitral award. However, the arbitral tribunal has the power to allow such requests. Therefore, in this case, the arbitral tribunal will summon both parties and get the answers from them for there to be a practical and fair decision (United Nations 2003, pg 1). The arbitral tribunal will then correct any error that may have been in making the award accordingly. Article 37 of ICC Rules stipulates that the arbitral tribunal can rectify any form of error as long as the corrections are submitted for approval to the court within thirty days from the time the award was decided. The arbitral tribunal can submit its decision to correct the error in draft form to the court not later than thirty days after receiving the comments from both parties or within the period that Court can decide. Question 14 Award response Regarding the merits of the case, the counsel cannot be informed regarding this because according to Article 11 of the ICC rules, an arbitrator is supposed to be fair and independent of the parties taking part in the arbitration. Informing the counsel of the Respondent regarding the merits of the case would amount to being unfair to the Claimant who would otherwise not be informed of the merits of the case (Martin 2006, pg 4-5). As a result, I will inform the counsel that the parties will be notified by the Secretariat regarding the text signed by the arbitral tribunal as long as the parties have paid the ICC all expenses of the arbitration process. This is according to the Article 34 of the ICC rules. The counsel will further be informed that more certified copies by the Secretary General can be availed at request to the parties but not to anybody else. Moreover, the counsel will be informed that original copies of the awards will be made according to the Rules and be deposited with the Secretariat and that the Awards are binding on the parties. Bibliography Books Alan, R 2007, Law and practice of international commercial arbitration, Sage,Vienna. Born, G 2006, International commercial arbitration: commentary and materials, Kluwer Law International, Sydney. Campbell D 2007, The Comparative Law Yearbook of International Business 2007, New Jersey. Goldman, B 2005, Goldman on international commercial arbitration,Hong Kong, Kluwer Law International, 2005. Martin, O 2006, International commercial arbitration: developing rules for the new millennium, Jordan’s, Sydney. Taylor, A 2009, International commercial arbitration: a transnational perspective, Thomson, Austria. National Library Australia 2007, Australian national bibliography, Volume 1, National Library Australia, Melbourne. Margaret, M 2008, The principles and practice of international commercial arbitration, Cambridge University Press, Cambridge. Steven, M 2004, Fundamentals of international franchising, American Bar Association, New York. Yuval, S 2004, The competing jurisdictions of international courts and tribunals International courts and tribunals series, Oxford University Press, London. International Chamber of Commerce (ICC) 2011, Arbitration and ADR Rules.38, France. United Nation, 2003, Dispute Settlement, United Nations, Geneva. United Nations 2003, International Commercial Arbitration, United Nations. International Bar Association, 2010, IBA Rules on the Taking of Evidence in International Arbitration, International Bar Association. Wolfrum, R, &Frowein, J., 2000, Max Plank Yearbook of United Nations Law, Kluwer Law International, Netherlands. United Nations, 2011, UNCITRAL Arbitration Rules, United Nations Commission on International Trade Law, Vienna. China Council for the Promotion of International Trade/China Chamber of International Commerce, 2011, China International Economic and Trade Arbitration Commission. Hong Kong International Arbitration Centre, Administered Arbitration Rules, Hong Kong International Arbitration Centre. Legislations ICC Arbitration Rules ACICA Arbitration Rules incorporating the Emergency Arbitrator Provisions Article 26 of the ICC Rules Arbitration and ADR Rules Himpurna California Energy Ltd. v. PLN (25 Y.B. COM. ARB. 13 (2000) Model Law Article 10(2) Read More