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Other Alternative Dispute Resolution Methods
United Nations Commission on International Trade Law (UNCITRAL)
Model Law on International Commercial Arbitration
Explanatory Note by the UNCITRAL Secretariat on the Model Law on International Commercial Arbitration*
* This note has been prepared by the secretariat of the United Nations Commission on International Trade Law (UNCITRAL) for informational purposes only; it is not an official commentary on the Model Law. A commentary prepared by the Secretariat on an earlier draft of the Model Law appears in document A/CN.9/264 (reproduced in UNCITRAL Yearbook, vol. XVI - 1985)(United Nations publication, Sales No. E.87.V.4).
A. BACKGROUND TO THE MODEL LAW
4. The Model Law is designed to meet concerns relating to the current state of national laws on arbitration. The need for improvement and harmonization is based on findings that domestic laws are often inappropriate for international cases and that considerable disparity exists between them.
5. A global survey of national laws on
arbitration revealed considerable disparities not only as regards individual provisions and
solutions but also in terms of development and refinement. Some laws may be regarded as
outdated, sometimes going back to the nineteenth century and often equating the arbitral
process with court litigation. Other laws may be said to be fragmentary in that
they do not address all relevant issues. Even most of those laws which appear to
be up-to-date and comprehensive were drafted with domestic arbitration
primarily, if not exclusively, in mind. While this approach is understandable in
view of the fact that even today the bulk of cases governed by a general
arbitration law would be of a purely domestic nature, the unfortunate
consequence is that traditional local concepts are imposed on international
cases and the needs of modern practice are often not met.
7. Problems and undesired consequences,
whether emanating from mandatory or non-mandatory provisions or from a lack of pertinent
provisions, are aggravated by the fact that national laws on arbitral procedure differ widely.
The differences are a frequent source of concern in international arbitration, where
at least one of the parties is, and often both parties are, confronted with
foreign and unfamiliar provisions and procedures. For such a party it may be
expensive, impractical or impossible to obtain a full and precise account of the
law applicable to the arbitration.
9. The principles and individual solutions adopted in the Model Law aim at reducing or eliminating the above concerns and difficulties. As a response to the inadequacies and disparities of national laws, the Model Law presents a special legal regime geared to international commercial arbitration, without affecting any relevant treaty in force in the State adopting the Model Law. While the need for uniformity exists only in respect of international cases, the desire of updating and improving the arbitration law may be felt by a State also in respect of non-international cases and could be met by enacting modern legislation based on the Model Law for both categories of cases.a. Substantive and territorial scope of application
10. The Model Law defines an arbitration as international if "the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different States" (article 1(3)). The vast majority of situations commonly regarded as international will fall under this criterion. In addition, an arbitration is international if the place of arbitration, the place of contract performance, or the place of the subject-matter of the dispute is situated in a State other than where the parties have their place of business, or if the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country.
11. As regards the term "commercial", no
hard and fast definition could be provided. Article 1 contains a note calling for "a wide
interpretation so as to cover matters arising from all relationships of a commercial nature,
whether contractual or not". The footnote to article 1 then provides an illustrative
list of relationships that are to be considered commercial, thus emphasizing the
width of the suggested interpretation and indicating that the determinative test
is not based on what the national law may regard as "commercial".
14. As evidenced by recent amendments to
arbitration laws, there exists a trend in favour of limiting court involvement in international
commercial arbitration. This seems justified in view of the fact that the parties to an
arbitration agreement make a conscious decision to exclude court jurisdiction
and, in particular in commercial cases, prefer expediency and finality to
protracted battles in court.
17. Chapter II of the Model Law deals with the
arbitration agreement, including its recognition by courts. The provisions follow closely article
II of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards
(New York, 1958) (hereafter referred to as "1958 New York Convention"), with a
number of useful clarifications added.
18. Article 7(1) recognizes the validity and effect
of a commitment by the parties to submit to arbitration an existing dispute ("compromis") or a
future dispute ("clause compromissoire"). The latter type of agreement is
presently not given full effect under certain national laws.
20. Articles 8 and 9 deal with two important
aspects of the complex issue of the relationship between the arbitration agreement and resort
to courts. Modelled on article II(3) of the 1958 New York Convention, article 8(1) of the
Model Law obliges any court to refer the parties to arbitration if seized with a
claim on the same subject-matter unless it finds that the arbitration agreement
is null and void, inoperative or incapable of being performed. The referral is
dependent on a request which a party may make not later than when submitting his
first statement on the substance of the dispute. While this provision, where
adopted by a State when it adopts the Model Law, by its nature binds merely the
courts of that State, it is not restricted to agreements providing for
arbitration in that State and, thus, helps to give universal recognition and
effect to international commercial arbitration agreements.
22. Chapter III contains a number of detailed
provisions on appointment, challenge, termination of mandate and replacement of an arbitrator.
The chapter illustrates the approach of the Model Law in eliminating difficulties arising
from inappropriate or fragmentary laws or rules. The approach consists, first,
of recognizing the freedom of the parties to determine, by reference to an
existing set of arbitration rules or by an ad hoc agreement, the procedure to be
followed, subject to fundamental requirements of fairness and justice. Secondly,
where the parties have not used their freedom to lay down the rules of procedure
or a particular issue has not been covered, the Model Law ensures, by providing
a set of suppletive rules, that the arbitration may commence and proceed
effectively to the resolution of the dispute.
24. Article 16(1) adopts the two important (not
yet generally recognized) principles of "Kompetenz-Kompetenz" and of separability or autonomy
of the arbitration clause. The arbitral tribunal may rule on its own jurisdiction,
including any objections with respect to the existence or validity of the
arbitration agreement. For that purpose, an arbitration clause shall be treated
as an agreement independent of the other terms of the contract, and a decision
by the arbitral tribunal that the contract is null and void shall not entail
ipso jure the invalidity of the arbitration clause. Detailed provisions
in paragraph (2) require that any objections relating to the arbitrators'
jurisdiction be made at the earliest possible time.
26. Unlike some national laws, the Model Law empowers
the arbitral tribunal, unless otherwise agreed by the parties, to order any party to take an interim
measure of protection in respect of the subject-matter of the dispute, if so
requested by a party (article 17). It may be noted that the article does not
deal with enforcement of such measures; any State adopting the Model Law would
be free to provide court assistance in this regard.
27. Chapter V provides the legal framework for a fair and effective conduct of the arbitral proceedings. It opens with two provisions expressing basic principles that permeate the arbitral procedure governed by the Model Law. Article 18 lays down fundamental requirements of procedural justice and article 19 the rights and powers to determine the rules of procedure.a. Fundamental procedural rights of a party
28. Article 18 embodies the basic principle that the
parties shall be treated with equality and each party shall be given a full opportunity of presenting
his case. Other provisions implement and specify the basic principle in respect of
certain fundamental rights of a party. Article 24(1) provides that, unless the
parties have validly agreed that no oral hearings for the presentation of
evidence or for oral argument be held, the arbitral tribunal shall hold such
hearings at an appropriate stage of the proceedings, if so requested by a party.
It should be noted that article 24(1) deals only with the general right of a
party to oral hearings (as an alternative to conducting the proceedings on the
basis of documents and other materials) and not with the procedural aspects such
as the length, number or timing of hearings.
30. Article 19 guarantees the parties' freedom to agree
on the procedure to be followed by the arbitral tribunal in conducting the proceedings, subject to a
few mandatory provisions on procedure, and empowers the arbitral tribunal,
failing agreement by the parties, to conduct the arbitration in such a manner as
it considers appropriate. The power conferred upon the arbitral tribunal
includes the power to determine the admissibility, relevance, materiality and
weight of any evidence.
33. Only if due notice was given, may the arbitral
proceedings be continued in the absence of a party. This applies, in particular, to the failure of a
party to appear at a hearing or to produce documentary evidence without showing
sufficient cause for the failure (article 25(c)). The arbitral tribunal may also
continue the proceedings where the respondent fails to communicate his statement
of defence, while there is no need for continuing the proceedings if the
claimant fails to submit his statement of claim (article 25(a), (b)).
a. Rules applicable to substance of dispute
35. Article 28 deals with the substantive law aspects of
arbitration. Under paragraph (1), the arbitral tribunal decides the dispute in accordance with such
rules of law as may be agreed by the parties. This provision is significant in
two respects. It grants the parties the freedom to choose the applicable
substantive law, which is important in view of the fact that a number of
national laws do not clearly or fully recognize that right. In addition, by
referring to the choice of "rules of law" instead of "law", the Model Law gives
the parties a wider range of options as regards the designation of the law
applicable to the substance of the dispute in that they may, for example, agree
on rules of law that have been elaborated by an international forum but have not
yet been incorporated into any national legal system. The power of the arbitral
tribunal, on the other hand, follows more traditional lines. When the parties
have not designated the applicable law, the arbitral tribunal shall apply the
law, i.e. the national law, determined by the conflict of laws rules which it
37. In its rules on the making of the award (articles
29-31), the Model Law pays special attention to the rather common case that the arbitral tribunal
consists of a plurality of arbitrators (in particular, three). It provides that,
in such case, any award and other decision shall be made by a majority of the
arbitrators, except on questions of procedure, which may be left to a presiding
arbitrator. The majority principle applies also to the signing of the award,
provided that the reason for any omitted signature is stated.
40. National laws on arbitration, often equating awards with court decisions, provide a variety of means of recourse against arbitral awards, with varying and often long time-periods and with extensive lists of grounds that differ widely in the various legal systems. The Model Law attempts to ameliorate this situation, which is of considerable concern to those involved in international commercial arbitration.a. Application for setting aside as exclusive recourse
41. The first measure of improvement is to allow only one type of recourse, to the exclusion of any other means of recourse regulated in another procedural law of the State in question. An application for setting aside under article 34 must be made within three months of receipt of the award. It should be noted that "recourse" means actively "attacking" the award; a party is, of course, not precluded from seeking court control by way of defence in enforcement proceedings (article 36). Furthermore, "recourse" means resort to a court, i.e. an organ of the judicial system of a State; a party is not precluded from resorting to an arbitral tribunal of second instance if such a possibility has been agreed upon by the parties (as is common in certain commodity trades).b. Grounds for setting aside
42. As a further measure of improvement, the Model Law contains an exclusive list of limited grounds on which an award may be set aside. This list is essentially the same as the one in article 36(1), taken from article V of the 1958 New York Convention: lack of capacity of parties to conclude arbitration agreement or lack of valid arbitration agreement; lack of notice of appointment of an arbitrator or of the arbitral proceedings or inability of a party to present his case; award deals with matters not covered by submission to arbitration; composition of arbitral tribunal or conduct of arbitral proceedings contrary to effective agreement of parties or, failing agreement, to the Model Law; non-arbitrability of subject-matter of dispute and violation of public policy, which would include serious departures from fundamental notions of procedural justice.
43. Such a parallelism of the grounds for setting aside with those provided in article V of the 1958 New York Convention for refusal of recognition and enforcement was already adopted in the European Convention on International Commercial Arbitration (Geneva, 1961). Under its article IX, the decision of a foreign court setting aside an award for a reason other than the ones listed in article V of the 1958 New York Convention does not constitute a ground for refusing enforcement. The Model Law takes this philosophy one step further by directly limiting the reasons for setting aside.
44. Although the grounds for setting aside are almost
identical to those for refusing recognition or enforcement, two practical differences should be noted.
Firstly, the grounds relating to public policy, including non-arbitrability, may
be different in substance, depending on the State in question (i.e. State of
setting aside or State of enforcement). Secondly, and more importantly, the
grounds for refusal of recognition or enforcement are valid and effective only
in the State (or States) where the winning party seeks recognition and
enforcement, while the grounds for setting aside have a different impact: The
setting aside of an award at the place of origin prevents enforcement of that
award in all other countries by virtue of article V(1)(e) of the 1958 New York
Convention and article 36(1)(a)(v) of the Model Law.
45. The eighth and last chapter of the Model Law deals with recognition and enforcement of awards. Its provisions reflect the significant policy decision that the same rules should apply to arbitral awards whether made in the country of enforcement or abroad, and that those rules should follow closely the 1958 New York Convention.a. Towards uniform treatment of all awards irrespective of country of origin
46. By treating awards rendered in international commercial arbitration in a uniform manner irrespective of where they were made, the Model Law draws a new demarcation line between "international" and "non-international" awards instead of the traditional line between "foreign" and "domestic" awards. This new line is based on substantive grounds rather than territorial borders, which are inappropriate in view of the limited importance of the place of arbitration in international cases. The place of arbitration is often chosen for reasons of convenience of the parties and the dispute may have little or no connection with the State where the arbitration takes place. Consequently, the recognition and enforcement of "international" awards, whether "foreign" or "domestic", should be governed by the same provisions.
47. By modelling the recognition and enforcement rules on the relevant provisions of the 1958 New York Convention, the Model Law supplements, without conflicting with, the regime of recognition and enforcement created by that successful Convention.b. Procedural conditions of recognition and enforcement
48. Under article 35(1) any arbitral award, irrespective of the country in which it was made, shall be recognized as binding and enforceable, subject to the provisions of article 35(2) and of article 36 (which sets forth the grounds on which recognition or enforcement may be refused). Based on the above consideration of the limited importance of the place of arbitration in international cases and the desire of overcoming territorial restrictions, reciprocity is not included as a condition for recognition and enforcement.
49. The Model Law does not lay down procedural details of
recognition and enforcement since there is no practical need for unifying them, and since they
form an intrinsic part of the national procedural law and practice. The Model
Law merely sets certain conditions for obtaining enforcement: application in
writing, accompanied by the award and the arbitration agreement (article 35(2)).
50. As noted earlier, the grounds on which recognition or enforcement may be refused under the Model Law are identical to those listed in article V of the New York Convention. Only, under the Model Law, they are relevant not merely to foreign awards but to all awards rendered in international commercial arbitration. While some provisions of that Convention, in particular as regards their drafting, may have called for improvement, only the first ground on the list (i.e. "the parties to the arbitration agreement were, under the law applicable to them, under some incapacity") was modified since it was viewed as containing an incomplete and potentially misleading conflicts rule. Generally, it was deemed desirable to adopt, for the sake of harmony, the same approach and wording as this important Convention.