International Commercial Arbitration - Essay Example

International Commercial Arbitration Customer Inserts His/her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name 19/05/ 2011 Q1. International Commercial Arbitration is the process of resolving business disputes between or among transnational parties through the use of an arbitrator rather than through the court. The parties must agree to arbitration where during contract formation there is inclusion of an arbitration clause. The arbitration process is highly favoured by majority of disputants because of its major advantages. These include: it is less time consuming, uncomplicated and cheap compared to the judicial system through the use of courts. Generally, the reason behind the use of arbitration is because the there may be distrust in one or more of the foreign legal system, or a particular decision is not enforceable in the foreign country. On the other hand, arbitral awards are given a high international recognition than awards made through foreign courts. The parties are also concerned about maintaining their business relationship hence the need to arbitrate since it is more meditative and negotiate. This is also seen in the case study of the Sydney and Singapore business parties. The arbitrators are chosen by the parties and they have specialized competence and knowledge relevant to the field of dispute. Terms of settlement used for the award and the whole arbitration process are usually considered confidential and this makes ICA very difficult to research on. Consequently, arbitral awards are final and binding to the parties. a. The ICA proceedings are conducted under the ICC rules of arbitration and held anywhere in the world as the parties may choose. Usually the parties would have considered a location for arbitration when entering into a business contract. Therefore, in the case study, as the legal advisor, it is important to check on the contract terms that were laid when the two parties were entering into the business. In addition, both parties must agree on the location for the arbitration proceedings. The choice of the location should be communicated to the attorneys of the parties as well as to the jurisdiction body in charge of the location. Since the parties in this case are more concerned with cost savings it is important to settle on the nearest location. b. When conducting an arbitral, there is need to specify the number and qualification of the arbitrators. In this case, the Arbitral tribunal shall comprise of three arbitrators (Tripartite Arbitration). Each of the parties shall appoint an arbitrator, while the third arbitrator shall be appointed by the two appointed arbitrators. Parties should inform each other immediately when they make the appointment. In case the two arbitrators fail to agree on appointment of a third arbitrator within a stipulated period of time, the appointing authority can appoint the third arbitrator. Therefore, the appointing authority has jurisdiction over appointment of arbitrator. The arbitrator tribunal shall consist of persons with knowledge and competence of seller and supplier related issues relevant to this case. The arbitrator tribunal shall comprise of individuals with a minimum experience of three years in conducting arbitration procedures. The Chairman of the tribunal shall be a fully qualified lawyer. The arbitrators must be independent persons, unbiased and impartial. They should not have interest to either of the two parties. The appointed arbitrators must possess knowledge of international law, and more specifically Sydney and Singapore legal system. Most importantly, the arbitral tribunal shall consider whether it has jurisdiction over the dispute. The arbitral tribunal involved in this case shall possess the power to rule on objections that it has no jurisdiction. An arbitrator is entitled to disclose to the parties any information or condition that may render doubts in him being impartial or independent. The arbitrator shall provide his qualifications to the party who has appointed him. An arbitrator may be discharged only if both parties agree to it under certain circumstances. These circumstances include: failure for an arbitrator to fulfill his duties, unjustifiable delays with the proceedings by the arbitrator or on other justifiable conditions. There are two types of arbitration: ad hoc and institutional (sponsored). With the ad hoc arbitration the process is carried independently based on guidelines provided by the parties and their attorneys. With the sponsored arbitration an entrusted organization is entrusted to handle the arbitration process based on its guidelines (Redfern 2004). Examples of arbitration organizations include International Court of Arbitration (ICA), London Court of International Arbitration (LCIA) and International Council for Commercial Arbitration (ICCA) among others. The parties can chose from either an ad hoc or a sponsored arbitration. The sponsored arbitration in addition provides the parties with a choice to make among the many arbitration institutions. The sponsored arbitration is independent and uses set rules in conducting the arbitration process; hence it is less expensive and quite effective. The organization provides quality services since it is competent and specialized. There are many arbitration organizations where some of these organizations can virtually handle any kind of dispute, while others specialize in particular areas of disputes. Based on the facts of the case study, it is advisable for the parties to use the sponsored arbitration which is inexpensive. Both parties are concerned about maintaining a business relationship as well as minimize the costs of seeking regress. Therefore, arbitration is more justifiable in this case. When considering the use of sponsored arbitration, the parties can use either the International Chamber of Commerce (ICC) International Court of Arbitration (ICA) or London Court for International Arbitration (LCIA). Each of these arbitration organizations has its own rules and set out laws and guidelines pertaining to arbitration. The guidelines provide on choice of arbitrators, place of arbitration, rules of the arbitration procedure and language of use. The ICA is based in every member country and administers international commercial disputes. The LCIA is based London although it administers arbitration from every part of the world, for all parties and tackles disputes arising from any kind of commercial transaction. The ICA arbitration process is confidential and provides the parties with choice of arbitrators, place of arbitration, rules of law and language to use during the proceedings; hence there are no restrictions in the ICC system. In addition, there are several disputes resolution mechanisms provided by the ICA. The ICA allows businesses to resolve international disputes without facing the potential risks and biases of foreign courts and foreign laws. The ICA supervises and administers the arbitration process at all stages, while disputes are decided upon by the arbitrators who are either selected by the parties or appointed by the court. c. There are certain arbitrations procedures and specific provision applicable in an arbitration proceeding. When one party decides on arbitration he or she should provide the other party with a written arbitration notice. This party is referred to the ‘claimant’, while the other party in the dispute is referred to as the ‘respondent’ In this case; the claimant is the client, the party from Sydney, while the respondent is the supplier, the party from Singapore. The arbitration notice shall bare: the claimants name and contacts, demand that the dispute be referred to arbitration, a reference to the business contract from where the dispute resulted, a preliminary claim statement with the remedy sought and amount involved, the arbitrator’s (appointed by the claimant) names and contacts and a request to the respondent to appoint an arbitrator within a stipulated period of time. Thereafter, the arbitration proceedings are regarded to begin when the respondent receives the arbitration notice. The Arbitration Tribunal shall conduct the arbitration proceedings impartially and promptly and very party shall be provided with enough time to present his case. On the other hand, the manner of conducting the arbitration proceedings is determined by the arbitral tribunal subject to impartiality and promptness. Since the parties in this case do not want publications of their dispute with an aim of maintaining their business relationship, they can decide to conduct the proceeding through the use of documents and other materials provided by the arbitral tribunal. Consequently, when a party gives back the documents or any other information to the arbitral tribunal, he must notify the other party. The proceedings shall be conducted in English or otherwise agreed on by the parties and the arbitral tribunal. However, the staff member may use the official languages of the LCIA or ICC member countries. The arbitral tribunal may request that the parties be provided with interpretation services from or to official languages. The documents presented for the case may be in one of the official languages of Sydney or Singapore. Consequently, the documents must be provided together with a translation into language used in the proceedings. The arbitration proceedings shall be held in private in attendance of the parties, the arbitrators and other witnesses authorized by the arbitral tribunal. c. There are various ways of correcting and accumulating evidence in a case presented in an arbitral tribunal or a court of law. This include: documentations, witnesses and experts. Examples of documents include: a written business contract, sales and purchases receipts and invoices among others. The arbitral tribunal may appoint an expert to investigate the matter and provide his opinion based on what he has gathered and of which it can be used as a basis for determining the case. Witnesses are used to provide information that they are sure of in relation to the matter. In this case, the use of documentations will be the most appropriate and effective since it will save on costs. In addition, the parties are concerned with maintaining their business relationship and reputation hence the use of documentation will be most effective since witnesses or experts might leak out this case. e. The arbitration tribunal is provided with certain awards that it can present to the claimant based on the facts and outcome of the arbitration proceedings. These arbitration awards include: partial and interim award. Decision on an award is made by a majority of the arbitrators. But in cases where there is no majority, the chairman of the tribunal provides his opinion on the kind of award to be accorded. The parties should understand that the award is final and binding and it should be made in writing. Consequently, the parties cannot appeal and they are expected to execute the award with immediate effect. The arbitrator tribunal shall provide the parties the reasons for such an award and the remedies to be accorded to the winning party. The facts of the case and rules and regulation used and issues of the dispute that were proven or not proven shall also be mentioned in the award. In this case, the arbitral tribunal shall render a partial award since both parties are concerned with equal settlement. This is because there are several claims made in this case. These claims include: supply of low quality raw materials, forcing of major price reductions, prospect of loss of business reputation and change of supplier. The award includes the place and date on which it was accorded. This award must be signed by the three arbitrators. In case one of the arbitrators fails to sign there should be provision as to why he or she failed to sign. Each of the parties shall be given a copy of the award during a session with the arbitral tribunal, or delivered as instructed by the parties. f. There are other conditions that can be utilized in handling this case. One critical condition is to consider the effect of dispute settlement during the arbitral proceedings. This is because, under the facts of this case, the parties are more concerned with overcoming their differences and continue with their business relationship. If such a condition is utilized, the arbitral tribunal may either issue an order of termination of the arbitral proceedings or through a request made by a party, record the settlement in the form of an arbitral award. Another condition concerns the arbitrator’s remuneration as well as expenses and costs of the arbitration. When deciding on this, consideration shall be put on time required to resolve the dispute, the complexity of the issue and the amount in disputes. Both parties are responsible for paying for these costs and expenses and the arbitrator’s remuneration. Another condition that can be utilized is submission of statement of claim by the claimant. A statement of claim provides the claimant’s names and contacts, describes the claim briefly, provides facts supporting the claim, the evidence that the claimant intends to avail and the remedy sought. On the other hand, the respondent submits a statement of defense that stipulates the respondent’s name and contact, extent of acceptance and contest to the claim, facts to be used contest the claim and the amount of evidence and facts that the respondent’s intends to avail for the purposes of the case. Q3 Generally, an arbitral award is final and binding to parties involved in a dispute. Therefore, the grounds for challenging, modifying or reversing an arbitration award are very narrow. There are four circumstances (grounds for vacatur) under which a disputing party can challenge an arbitration award. These include: where the award was attained through corruption, fraud or undue means, where there was partiality or corruption in the arbitrators or either of them, where the arbitrators were guilty of misconduct or where the arbitrators exceeded their power even when providing the arbitral award. One of the greatest obstacles to these grounds is proof or presentation of evidential facts for these grounds. Consequently, this is the reason as to why challenging arbitral award is very difficult. a. According to the provisions on qualifications of arbitral tribunal, one key requirement is that the arbitrator should be a person who is impartial, unbiased and independent. The arbitrator must be free from any interests on any of the disputing parties. Failure to meet this qualification renders an arbitrator as being partial and corrupt. Before engagement, when a party appoints his arbitrator, the arbitrator should disclose any information about him. This information should also be provided to the other party. In the case provided, it can be said that the neutral arbitrator failed to meet this qualifications and this provides one of the narrow grounds (evident partiality) for challenging the arbitration award by L. As provided by the facts of the case, the neutral arbitrator did not disclose, that she had performed some minor consultative services for the Winning party (W). Furthermore, even though this was not deliberate, a reasonable person would not have failed to disclose such information considered important for arbitration proceedings. Consequently, party L uses this as a basis to present his argument. On the other hand, as far as the neutral had done a mistake, W could be held responsible for this. This is because, in arbitration, the parties are required to be very open to each other by disclosing any information or facts relevant to the case. Therefore, in the light of these conditions, they merit the reversal of the award since they concur with the evident partiality ground of challenging an arbitration award. Had the neutral arbitrator or W been more open by disclosing to L that they had interacted before, L might not have concluded that the award was based on evident partiality. In addition, L would have challenged the arbitrator and his interests in engaging in the arbitral proceedings. If the neutral arbitrator feels challenged by L, he may withdraw from the office. This is because an arbitrator is obliged to disclose circumstances that may result to justifiable doubts about his independence and impartiality to the parties and other concerned parties. There are circumstances under which evident partiality dos not warrant a challenge to the award. These circumstances include: trivial or insubstantial prior relationship between the arbitrator and a party. In the case of Positive Software Solutions v. New Century Mortgage Corp., the arbitrator failed to disclose that he was partner to a counsel of one of the parties for a third party before the arbitration. The arbitrator and the other party’s counsel comprised lawyers engaged in litigation but had never met or spoken to each other prior to the arbitration. In ruling, the court held that this was a trivial former relationship and did not warrant a vacatur. b. An arbitration proceeding is highly considered a private and confidential judiciary forum constituting of the disputants, the arbitrators and staff of the arbitration institution, that is, in a sponsored or institutional arbitration. The arbitral tribunal might require the use witness or experts to assert the facts presented by the parties concerning the case. An arbitrator is not required to review any single information pertaining to the arbitration proceedings without the consent of his colleagues and the parties. However, a non-testifying litigation is entitled to produce to the party’s attorney with any information or proceedings of a case. There is a difference between an arbitrator and a non testifying litigator. A non testifying litigator is involved in any court of law while this is not the case with an arbitrator. In this case, L must prove that the arbitrator designated by W was acting like a non- testifying litigator rather than as an arbitrator. A non- testifying litigator can prepare witnesses for his client, disclose to the client’s attorney any information or evidential matter concerning the case and advice the attorney on the most appropriate way of dealing with the case. However, these roles are not applicable to an arbitrator. Hence, based on these it can be concluded that a non testifying litigator has more power than an arbitrator. On the other hand, whether acting as an arbitrator or as a non testifying litigator, neither is expected to exceed his power. Consequently, in the case study W’s designated arbitrator can be said to have exceeded his power because he was conducting acts that were related to the roles of a non testifying litigator. As earlier noted, exceed of power by an arbitrator renders a narrow a ground for challenging, modifying or reversing an arbitral award. The most difficult task to provide proof that the arbitrator exceeded his powers either during the arbitral proceeding or when giving an arbitral award. In determining whether the arbitrator exceeded the authority accorded to him, the courts resolve all doubts that might have been created in regards to the engagement of the arbitrator in the arbitration. On the other hand, the arbitration agreement defines the power and authority of the arbitrator. These power and authority of the arbitrator depends on basis under which the appointed of the arbitrators was done. If the arbitrator’s power and authority is reasonable and accorded by the law, then he did not exceed his power and authority. Therefore, in this case W’s designated arbitrator had exceeded his power and authority accorded to him because it is not reasonable and the law does not accord an arbitral to act in place as a non testifying litigator. Had the arbitrator conducted his duties as per the provisions of power and authority of the arbitrators, L would not have claimed that the arbitrator had exceeded his power and authority. On the other hand, considerations should be made on what the arbitration agreement made prior to the arbitral proceeding provided. Therefore, in challenging an arbitral award on ground of exceeded power by an arbitral consideration is given to the reasonableness, law provisions and arbitration agreement. c. In Australia, Article 51 of Commercial Arbitration Act stipulates matters concerning confidentiality in relation to arbitration proceedings. Generally, an arbitrator, whether a neutral or a mediator is not required to disclose any information, discussions, testimonies, proceeding and settlement and award thereafter to a third party. This is because such disclosure may raise doubts on impartiality of the arbitrator. During arbitration proceeding, the parties can appoint their attorneys who are supposed to be in attendance in every arbitration session. Therein, an arbitrator is not required to disclose any information, more specifically when he focuses or emphasizes more on one of the parties. According to the fact of this case, the Australian substantive law and the arbitration agreement did not expressly provide for confidentiality. In this case though, it is W’s attorney who made disclosure of critical findings made by the neutral arbitrator. Therein, whether an attorney or an arbitrator of any of the parties, confidentiality is to be maintained in accordance to requirements of the law and whether the arbitration agreement made provision for confidentiality or not. However, in this case the Australian substantive law did not make any provision for confidentiality and therefore, the attorney’s disclosure should not raise any criticism whatsoever. On the other hand, had the case between W and L conducted in United Kingdom or United States, the issue of confidentiality would remain the same. This is because when it comes to international law, requirements are uniform for every nation or state under the international legal system, whether through a court of law or arbitration. Hence, Australia, United States and United Kingdom apply the same procedures of maintaining confidentiality in arbitration, unless the attorney or the arbitrator is required to provide any information concerning the arbitration. However, in the United States the Uniform Mediation Act provides many exceptions to the general rule of confidentiality (or inadmissibility). Consequently, attorney’s disclosure should not raise any criticism. Therefore, under the facts of this case and based on provision of confidentiality, L has no grounds on which he can challenge, modify or reverse the arbitral award. This is because the Australian substantive law did not provide for confidentiality in relation to the arbitration nor did the arbitration agreement provide. On the other hand, had there been an alternative conduct when commencing arbitration, the settlement would be otherwise. This is to mean that, had the Australian substantive law and L and W arbitration agreement made provisions concerning confidentiality requirement, by parties, arbitrators and attorney’s, the attorney’s disclosure would have raised criticism. As well, L would have attained ground to challenge, modify or reverse the arbitral award based on misconduct of the attorney. d. The essence of conducting arbitration rather than going through a court of law it is to save on cost and time. This is because through litigation disputants incur great costs and expenses such as attorney’s or legal fee, stamps and duties among others. In addition, litigation takes a long period of time before a settlement is made. Therefore, when the arbitrators L’s request with immediate effect, this was centrally to the requirements of an arbitration. This situation forced L to alter his plans and take some of his witnesses out of turn, who later did not render any positive effect on the proceedings. However, this situation does not present L with a ground to challenge, modify or reverse the arbitral award. The arbitral tribunal has the power to schedule for an appeal made by any of the parties and the party has to adhere to the schedule whether it favors him or not. As discussed earlier, the grounds for challenging an arbitral are fraud, misconduct, exceed of power and corruption. If L can dispute this based on the ground of misconduct or corruption, then he can challenge the arbitral award. However, the most difficult and challenging task presented to L is to provide proof for corruption and misconduct of the arbitral tribunal. Modification of the plans and witnesses becoming less effective in the light of the arbitration may present L with unfavorable circumstances or conditions that can make him win in the arbitration and attain an arbitral award in his favor. As highlighted above, arbitration presents parties, attorneys, arbitrators and other interest groups with rules and regulations that they need to follow in the cause of the arbitration. The most critical requirement is for the involved persons to maintain confidentiality during and even after arbitration. Though there are other circumstances that render confidentiality as being admissible. Information regarding testimonies, settlement and awards should not be disclosed to third parties unless the law provides otherwise. On the other hand, an arbitral award is supposed to be final and binding to the parties unless other stipulated in the arbitration award. This is because of the complexity rendered by challenging an arbitral award. Otherwise, a party can challenge an award on certain grounds. The arbitral tribunal is required to be impartial, independent and fully qualified to engage in arbitration. They should disclose any information regarding their competence and any other that may raise doubts of their impartiality. References Hunter M. & Redfern A. (1994). Law and Practice of International Commercial Arbitration. London: Sweet & Maxwell Margaret L.M. (2008). The Principles and Practice of International Commercial Arbitration. London: Cambridge university press. Redfern, A 2004, Law and Practice of International Commercial Arbitration, 4th Edition, Sweet & Maxwell. Steven C. Bennett, (2002). Arbitration: essential concepts. ALM Publishing, Willem C. Vis International Commercial Arbitration Moot. Retrieved from http://www.cisg.law.pace.edu/cisg/moot/claimant 15-1, on January 02, 2011. Read More