International Commercial Arbitration - Assignment Example

International Commercial Arbitration Student Name Tutor Course Date International commercial arbitration Part 1 Question 1 Parties to international commercial disputes normally choose arbitration since through arbitration the parties have the dispute heard within a forum they deem more neutral, the arbitral award can be enforced easily, they can choose the arbitrators and can choose the language and the place the arbitration will take place. The parties choose arbitration as a dispute resolution mechanism and the choice can be incorporated within an arbitration clause describing the underlying commercial agreement regarding dispute resolution. When drafting an arbitration clause, the parties should take into consideration the nature and value of likely claims and the complexity of probable claims, the location of the parties, the language to be utilized during the arbitration process, if the resolution of the dispute will need oral or written evidence and such issues (United Nations 2003). Some of these matters result to separate drafting points in their own rights and others influence decisions to be taken. For instance, the arbitral rules that should be selected. Regularly, the parties cannot precisely envisage the forms of disputes that can emerge and how their adversaries may react to them. The parties might just have a vague ides, however, through taking into consideration the likely threats; parties can formulate the arbitration means to the probable forms of disputes. For instance, one’s counter-party is a state-owned corporation from a country where state-owned corporations have an inclination of doing everything to setback proceedings; an arbitration governed by a well-established arbitration institution can be preferred to an ad hoc arbitration (Wolfrum &Frowein 2000). When drafting an arbitration clause, the rules to be used should be addressed and this is because generally the rules affect the arbitration procedure. Basically, all arbitrations should be conducted under arbitral rules. The arbitrators can choose the arbitral rules but it is preferable for the parties to stipulate the rules to be used. A fundamental choice is between arbitration under “ad hoc” rules and arbitration under “institutional” rules (Wolfrum &Frowein 2000). Ad hoc arbitration is performed according to the rules adopted in a particular arbitration without involving an arbitral institution. In such a case, the parties design their rules. Nevertheless, because this can take a lot of time and is also costly, the parties leave the rules to the judgment of the arbitrators or the parties can adopt rules particularly written for ad hoc arbitration, for instance UNCITRAL Rules. For the institutional arbitration, a specialist institution administers the arbitration process. Parties are supposed to integrate the rules of their preferred institution in their arbitration clause by specifying the institutional rules they would prefer. Such rules are specifically prepared for arbitration carried according to the administration of the pertinent institution (Wolfrum &Frowein 2000). Choosing institutional arbitration by the parties has been perceived as advantageous since institutional rules are devised to regulate the proceeding extensively from the start to the end and thus the institutional rules are more effective for disputes that may emerge, even in case where the respondent fails or does not want to cooperate which occurs at times. Additionally, when the parties choose institutional arbitration, they are save time and the costs of drafting an appropriate ad hoc clause; the costs of the arbitration are, with different level of certainty regulated; and some arbitral institutions autonomously scrutinize awards. Nonetheless, choosing institutional rules comes with bureaucracy and can result to delay of arbitration process. Basically, there are several arbitration institutions that parties choose from and the parties are mostly influenced by variations in rules, familiarity and at times the parties’ opinion of the international recognition or reputation of a certain arbitral institution. It is also important to specify the arbitration place during the drafting of the clause. This is because choosing the arbitration location can affect aspects such as; if the court of seat will get involved during arbitration, if any other rules are enforced, along with the arbitration rules selected by the parties, if the arbitration of the given dispute is possible in that country, the probability of challenging or appealing the arbitral award and also it affect the enforceability of the arbitral award. The parties are supposed to take into account the legislation enacted within the specific jurisdiction regarding arbitration, as well as the general attitude of the national courts towards arbitration within the given jurisdiction (United Nations 2003). Most countries have legislation that govern arbitrations occurring within their territory although this does not substitute the arbitral rules that the parties choose but offers a framework in which the rules will operate. The UNCITRAL Model evens out the differences between the national laws and puts forward a common standard. The goal of UNICITRAL Model is to give comfort to parties that invest in nations that have adopted the model because the Model hinders avoidable intervention of courts. In general, arbitration parties can depend on a country’s legislation whose basis is Model law. In case the basis of the local legislation is not Model law, parties are not supposed to choose the jurisdiction without carrying out an investigation of the potential effect of its legislation on any arbitration. For instance, local law might necessitate obligatory processes to be enforced; the courts can be in a position to intervene unnecessary during arbitration and there could be hindrance to the arbitral ward enforcement, which consists of permitting numerous avenues for appeal (Julian 2008). The parties can indicate the number of arbitrators within the arbitration clause or can decide to leave it to the applicable rules after a dispute occurs. A sole arbitrator is selected by a third party other than the parties in an event where parties fail to agree. In case of three arbitrators, each party nominates one arbitrator and this ensures that one of the three arbitrators knows the national or legal culture of the country where the pertinent party comes from. Some parties deem that three parties have a higher likelihood of arriving at the correct decision as compared to a sole arbitrator; this is extremely crucial because normally there are limited grounds of appealing or challenging the arbitral award (Martin 2006). Choice of law also affects the entire arbitration process. Choice of law clauses identify the law that will regulate the rights and responsibilities of the parties, through which substantive will be judged. Parties are advised to be very careful when choosing the appropriate governing law of the contract because the contract governing law is very important to the formation and validity of the contract as well as if the disputes resulting from the contract can be resolved through arbitration and the remedial award. As a result, it is worthwhile for the parties to stipulate the law that will govern their contract during contract drafting. If parties do not choose a governing law, arbitrators choose the law during arbitration (Julian 2008). The procedural law is the law that arbitration operates. Even though it is possible, practically it is uncommon for parties to stipulate within the arbitration clause the procedural law that will be used during arbitration in case of a dispute. If the parties do not specify, the procedural law is usually presumed to be the law that relate to arbitration within the arbitration seat. Actually, it is advisable for the parties not to stipulate a different procedural law from the procedural law in the arbitration seat within the arbitration clause because this normally results to conflicts that the local courts will have to resolve. Under the widely accepted doctrine of “seperability”, an arbitration clause is perceived to be a separate entity from the contract where it resides. Therefore, the arbitration survives contract termination and hence enables parties to lay out any claims that result from contract termination specified to arbitration. Additionally, it implies that exceptionally, parties can select a governing law for the arbitration clause which is different from the law governing the key contract (Martin 2006). For the arbitral award by the tribunal, the agreement in the arbitration clause agrees the type of award that the arbitrators will awards basing on the applicable law. The agreement also specifies the currency for paying the award and if the award has been recognized and it will be done, the agreement is obligated to state the reasons as well as the legal grounds of the award recognition and enforcement (Martin 2006). Part B Question 2 Rules the Claimant should have instituted arbitration proceedings The claimant should have instituted arbitration proceedings under the ICC Rules of Conciliation, in Melbourne Australia and not Hong Kong Rules and to be governed by New York law. This is because the parties specified in their clause that any arising dispute was to be governed by New York law and the Rules to be used during arbitration were to be ICC rules of Conciliation in Melbourne, Australia. However, the arbitration clause is imperfect because it specified that the rules to be used were ICC Rules, Melbourne and yet the parties chose the New York law to govern the arbitration. This is because the clause indicates that the governing law (New York Law) is different from the law in the arbitration seat (ICC Rules, Melbourne, Australia) and therefore this can result to conflicts that local courts will have to resolve. Additionally, the parties are supposed to choose a governing law that does not favor any party and in this case, the New York law favors the claimant because the claimant’s firm is located in New York. The arbitration clause is supposed to have a neutral governing law (Yuval 2004). Question 3 Sample arbitration clause Any dispute resulting from the contract will first be resolved through negotiations and in case it is not possible to resolve the dispute through negotiations, the dispute will be referred to arbitration. Arbitration If negotiations do not resolve the dispute arising from the contract, any dispute, controversy or claim resulting from the contract will be finally resolved under the Rules of Arbitration of the International Chamber of Commerce (ICC) by the arbitrators appointed according to the ICC Rules. Specifically: The appointing authority will be ICC The number of arbitrators will be three, where each party will choose one arbitrator and the other one will be appointed by the ICC The language to be used within the arbitral proceedings shall be English The place of arbitration will be Melbourne, Australia The governing law of the contract will be the substantive law of Melbourne, Australia. Question 4 Appointing a sole arbitrator The ICC will not choose either Dr.Sunderkay or Dona Ms. Ixtapa but will appoint another arbitrator. The reason for this is that according to the ICC Rules, during an appointment of a sole arbitrator each party is allowed to recommend to the other party the names of the people they would wish to be their arbitrator. Here, the Respondent recommended Ms. Ixtapa to be the arbitrator whereas the Claimant recommended Dr.Sunderkay to be the arbitrator. Evidently the parties did not agree on who should be the arbitrator and thus this leaves the ICC the option of appointing another arbitrator. According to the ICC Rules if the parties fails to agree on who should be their arbitrator the ICC can appoint the arbitrator (Gary 2005). In addition, the sole arbitrator is supposed to be neutral and thus the ICC should ensure that the arbitration proceedings are conducted by a neutral arbitrator. It is therefore advisable that the arbitrator should not be a nationality of either party involved in the dispute to ensure that the arbitrator is independent as well as not biased to either party (Nigel 2006). As a result, the ICC cannot choose any of the two since choosing one of them gives the opinion that the party whose arbitrator was chosen will favor that party and thus insinuation of likely bias during the arbitration proceedings. Dr.Sunderkay is an Asian American working as a law Ruritanian University and thus choosing him would seem to favor the claimant whose firm is in America. This adds to the fact that the parties failed to agree on whom among Dr.Sunderkay and Dona Ms. Ixtapa should be their arbitrator and therefore neither of them can be chosen. A sole arbitrator is appointed by a third party if the parties fail to agree and in this case the third party is the ICC which should appoint an arbitrator who is independent of any party. Therefore, the ICC is likely to choose another arbitrator but not any of the two (Martin 2006). Question 5 Language to be used In the arbitration clause, the parties had specified that the language to be used is English. Usually the parties agree on the language that will be used during the arbitration proceedings and in this case they had agreed on the arbitration clause that the language would be English. However, seemingly the parties later disagreed on the language to be used and this leaves the arbitral tribunal with the obligation of choosing the language to be used. The arbitral tribunal will consider all applicable circumstances and this includes the language that the parties had earlier agreed to use in the arbitration clause as well as to the language used in the contract (Kaplan 2010). The Claimant wants the language to be used during arbitration to be English because it is the language of the contract and also it is the language that the parties had agreed on in the arbitration clause. On the contrary, the Respondent want the language to be either Ruritanian or both English and Ruritanian. This clearly indicates that the parties have not agreed on the language to be used and hence the arbitral tribunal has to choose the language to be used. Basically, the arbitral tribunal will choose English as the language to be used because the arbitration clause specified the language and also because it is the language of the contract. Besides, both parties can understand English and thus it is appropriate to use the language. Any other documents that are written in Ruritanian and the witnesses’ statements will be translated into English during arbitration since English is the language that will be used during the arbitral proceedings (Kaplan 2010). Question 6 Choosing the president of the tribunal According to ICC Rules, Article 13, since in this case there is a sole arbitrator, the sole arbitrator will act as the president of the arbitral tribunal. The Court will have to confirm the appointment of the sole arbitrator and thus the court will take into account the nationality of the potential arbitrator as well as other relationships with the countries where the parties are nationals and also take into consideration the availability of the potential arbitrator and his capacity to carry out arbitration according to the rules. Therefore, the Court will make the appointment of the president of the arbitral tribunal after the proposal of the ICC if the court considers the arbitrator suitable (Nigel 2006). Question 7 Procedural Law to be used The procedural law to be used in this case will be the ICC rules. This is because ICC is the arbitral institution that will be conducting the entire arbitration process and this the arbitral proceeding will be governed by the ICC rules and in circumstances where the ICC rules are silent the arbitral tribunal will settle on the references made to the rules of a national law applicable to the arbitration (Julian 2008). Question 8 Issues Procedural timetable If the second contract should be terminated owing to the breach of the Respondent and if the claimant has any further obligations to fulfill the second contract with respect to the Futurocity Project The tribunal will find out 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 If 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 to return the Letter of Credit The appropriate language to be used during the arbitral proceedings The party that should pay the costs of the arbitration and this include the cost of the tribunal and of ICC’s administration, and the fees and expenses of the parties’ lawyers and all the witnesses If the Respondent should be excused from carrying out its obligations under the Design Agreement on ground of legal impracticality Determining and enforcing the arbitral award and the party responsible for paying the arbitral award Establishing facts of both the claimant and the respondent. Question 9 Security costs According to Article 26 of ICC Rules, I will refer this issue to conservatory and interim measures. Basically, unless the parties had agreed otherwise, the arbitral tribunal on being requested by either party can order any interim or conservatory measure that is appropriate. In deciding the order, specifically, I will make the awarding of any measure subject to suitable security being provided by the requesting party. Any measure shall take the form of an order and reasons are provided. I will advice the party to make the application to a judicial authority and the judicial authority should inform the Secretariat immediately. The secretariat will notify the arbitral tribunal thereof (Kaplan 2010). My decision will be that I will not order the claimant to make any security measure. The reasons for this are that it is the request is being made by the respondent and not the claimant. The respondent is the one who failed to honor the contract agreement by defaulting the payment and not the claimant. There are several factors that I will consider and they consist of the actual cost sustained by the respondent to comply to the measures and also the probable damages in case the measure is found out not to be suitable. Additionally, the financial capacity of the claimant to post the security will be considered. Since the respondent is arguing that the claimant lacks the capacity to cater for the arbitral process in case the outcome favors the respondent, it indicates that ordering the claimant to post the security would be inappropriate since the claimant lacks the financial ability to do so (Kaplan 2010). Question 10 Big Bank & Trust Letter of Credit Just like the request made by the respondent regarding security measures, the application of the claimant to have the respondent return the letter from the Big Bank & Trust Letter of Credit will be handled like an interim or conservatory measure. Article 20 of the ICC Rules stipulates that the arbitral tribunal has the power to order an interim or conservatory measure following the request of the party. Therefore, as the sole arbitrator I will order the respondent to facilitate the return of the letter of credit application to the claimant. Basically, the application will be issued to the respondent and not the Big Bank because the Bank is not in any way involved and related to the arbitration process because involving a third party that is not involved in the process is not appropriate as per the ICC rules that are governing the arbitral process (United Nations 2005). Question 11 Shifting of jurisdiction/ Hearing postponement The hearing will not be shifted from Melbourne, Australia to Paris since the arbitration clause clearly indicates that the place of jurisdiction should be at Melbourne Australia. In order for the hearing venue to be moved to Paris, both parties should agree to that but in this case the respondent does not agree to it and thus the hearing will be carried as stipulated in the arbitration clause. According to the ICC Rules Article 18, the court fixes the location of the arbitration only if the parties do not agree on that. The article further provides that the arbitral tribunal can, after consulting the parties, carry out hearing at any place it deems suitable, unless otherwise agreed by the parties. In this case, the tribunal or the court cannot choose the location of arbitration because both parties had agreed earlier that the arbitration proceedings should take place in Australia, Melbourne (Michael 2004). On the other hand, the application to have the hearing postponed for six months will be granted after considering the grounds that the claimant is applying for postponement. Article 26 of the ICC rules provides that all parties are entitled to be present during the hearing. Article 22 further stipulates that the arbitral tribunal is supposed to act fairly and without bias and make sure that every party has a reasonable chance to present its case. Here, the wife of the Condesign’s CEO has a terminal illness and she is not expected to live more than two months. This situation may make the claimant not to have enough time to prepare for the hearing and thus this would deny the claimant reasonable opportunity to prepare and present its case (Michael 2004). In addition, the claimant might not be present during the hearing due to his wife’s hearing. Therefore, the application to have the hearing postponed will be granted to the claimant although the arbitral tribunal can consider postponing the hearing for less than six months. Question 12 Star witness The IBA Rules of Evidence provides that if a witness fails to appear to give his/her testimony during hearing without a legitimate reason, the witness’ statement should be discounted. But here the witness has a legitimate reason as to why he will not manage to be present during hearing and thus his statement will not be disregarded. It will be advisable for the lawyer to ensure that the witness provides a written witness statement to be put forward to the tribunal as the testimony (International Bar Association 2010). Question 13 Closed Procedure as per ICC Article 27 ICC Article 27 stipulates that after the concluding hearing, the arbitral proceedings should be declared closed and the secretariat should be informed as well as the parties the date when it is likely to submit the award draft to the court to be approved pursuant to Article 33. This means that after the last hearing the whole procedure should be considered closed. However, Article 33 further provides that after closure of the proceedings, the arbitral tribunal can request or authorize further submissions, have arguments made or have some more evidence provided. In this case, there is an important question that both parties have not addressed in its argument and it is very important to have the question addressed to make a logical and a fair decision (International Chamber of Commerce 2011). Consequently, I will request the parties to avail themselves and have the question addressed, pursuant ICC Article 27 (b). Question 14 Counsel and the Award Draft I will inform the counsel regarding the required way of notification, deposit and enforceability of the award in accordance with the article 34 of ICC Rules. As a result, I will inform the counsel that after the ward has been made the secretariat will inform the parties as long as the parties have paid to the ICC the arbitration costs. Only the parties can obtain copies of certified authentic copies from the secretary general upon request by the parties. Following the notification as per ICC Rules Article 34(1), the parties relinquish any other kind of notification from the arbitral tribunal. Bibliography International Bar Association, 2010, IBA Rules on the Taking of Evidence in International Arbitration, International Bar Association. Kaplan, N., 2010, Provisions on the Role of Chairman, UNICITRAL Model Law. King, R., 2008, International Arbitration Clause, Ashurt Quick Guides, Broadwalk Housem London. International Chamber of Commerce (ICC), 2011, Arbitration and ADR Rules.38, Paris, France. Gary, B., 2005, International Commercial Arbitration, Transnational Publishers, Sydney. Julian, D., 2008, Applicable Law in International Commercial Arbitration, Oceana, London. Martin, O., 2006, International commercial arbitration: developing rules for the new millennium, Jordan’s, Sydney. Michael, J., 2004, Commercial Arbitration, Butterworths, London. Nigel, M., 2006, Law and Practice of International Arbitration, Sweet & Maxwell, New York. United Nations, 2005, International Commercial Arbitration, United Nations, New York. United Nations, 2003, Dispute Settlement, United Nations, Geneva. United Nations, 2003, International Commercial Arbitration, United Nations. United Nations, 2011, UNCITRAL Arbitration Rules, United Nations Commission on International Trade Law, Vienna. Wolfrum, R, &Frowein, J., 2000, Max Plank Yearbook of United Nations Law, Kluwer Law International, Netherlands. Yuval, S., 2004, The competing jurisdictions of international courts and tribunals International courts and tribunals series, Oxford University Press, London. IBA Rules of Evidence ICC Arbitration Rules UNCITRAL Rules Read More