In broad terms, international arbitration refers to arbitration involving parties, who are in different States, arbitration held or relating to matters outside the jurisdiction of one or both parties and arbitrations agreed to have an international element. International arbitration is commonly encountered in construction, engineering, energy, transport and shipping. It is also commonly found in disputes involving insurance, banking and financial services.
An attraction of international arbitration is that the parties may choose to have the matter determined by a neutral jurisdiction. Each party may not want the matter to be dealt with by the other party’s jurisdiction. The parties may accordingly, choose a neutral jurisdiction which is mutually satisfactory. They may agree on a neutral system of law. There is no reason in principle why the governing law and the law of the place in which the arbitration is heard should not differ.
There are a number of institutions which are prominent in the field of international arbitration. Two institutional sets of rules which are widely used namely, the ICC Rules of Arbitration and the United Nations Commission on International Trade Law Model Law (UNCITRAL) Model Law. The ICC Rules are applicable to business disputes of an international character. The New York York Convention 1958 has been widely acceded to and facilitates enforcement of arbitration awards in many States which are parties to the Convention.
The UNCITRAL Model Law defines international arbitration as arbitration, where the parties have at the time of the conclusion of the agreement, places of business in different States or one of the following places is situated outside the State in which the parties have their place of business;
- the place of arbitration if determined pursuant to the arbitration agreement;
- the place where a substantial part of the obligations of the commercial relationship is to be performed;
- the place with which the subject matter of the dispute is most closely connected or,
- if the parties have expressly agreed that the subject-matter of the arbitration relates to more than one country.
The relevant place of business is the one with the closest relationship to the arbitration agreement, in the case of a business with more than one place of business. Where there is no place of business, the party\’s place of residence applies for the purpose of the test.
The UNCITRAL Model Law on International Commercial Arbitration 1985 represented an important step in facilitating the arbitration of international disputes. It is a framework which may be adopted by States. It was contemplated that States might revise their arbitration laws in accordance with it. The Irish Arbitration Act has drawn extensively on the Model Law.
There are issues which arise where contracts involve parties in different jurisdictions, which are relevant in the context of international arbitration. See generally the sections on conflict of law. A difference in laws may arise in relation to
- the law of the underlying contract; the proper law;
- the law governing the arbitration agreement itself;
- the law of the forum before which the arbitration is conducted;
- the law relating to any agreement to settle the dispute; and
- the law relating to the place where arbitration awards to be enforced.
The Arbitration Act provides that the arbitration tribunal is to decide disputes in accordance with law chosen by the parties as applicable to the dispute. If there is no such agreement, the tribunal must apply a system of national law determined by the conflict of law rules that the arbitration body considers applicable.
The parties may incorporate laws and rules in international conventions, such as the United Nations Conventions on Contracts for the International Sale of Goods, notwithstanding that they may not be incorporated into the domestic law of a relevant State or may not have the force of law at all.
Choice of Other Principles
Although an arbitration agreement will generally provide that the dispute is to be determined in accordance with the laws of a State, the parties are free to have it determined in accordance with other quasi-legal principles. The parties may agree that the matter shall be determined in accordance with such other rules, principles and considerations as they may agree, subject to basic public policy principles.
The parties may agree that the dispute will be determined in accordance with principles of fairness and justice rather, than principles of law. It must be decided in good faith. The tribunal does not have the freedom to do whatever it wants. However, it has the freedom to determine the dispute in accordance with its determination as to what is just and equitable. This approach may be appropriate where parties wish to obtain a practical and sensible solution in accordance with business expectations and ethics. However, there may be a reasonable dispute as to what is or is not just and equitable.
Law of Arbitration and Law of Contract
The proper law of the contract may be chosen or determined by the relevant contract. Where this is stated, it will be applied. However, where no proper law is stated, the Rome Convention will determine the proper law in EU cases. In non-EU cases, the tribunal will consider the entirety of the circumstances including the proper law of contract, place of performance and the party’s intentions.
Arbitration agreements are excluded from the default choice-of-law rules in the Rome Convention. This may lead to different laws being applicable to the arbitration agreement and to the substantive contract. The parties may later agree to change the applicable law, by mutual consent. The law governing the arbitration agreement may be the applicable law of the place where the dispute is agreed to be heard. However, this need not necessarily be so.
It is presumed that the agreement of the place of arbitration, implies that that country\’s law is the procedural law of the arbitration. The procedural law of the arbitration will cover the tribunal\’s powers and duties, issues in the relation to evidence, the conduct of the arbitration and the final award. It also covers the appointment of the tribunal generally.
The arbitration agreement may make provision for the language to be used. In the absence of agreement on language, it is a matter for the tribunal to determine the language to be used and to determine what translation should be provided. Under the ICC Rules, in the absence of an agreement to the contrary, the tribunal is to determine the language of the arbitration. It is to have due regard to all the relevant circumstances, including the language of the contract. The UNCITRAL Model Law makes similar provision.
The arbitration language shall apply, unless the contrary is provided, to any written statement by a party as well as to the hearing, the award and to other communications to and by the tribunal. The tribunal may order that documentary evidence be accompanied by translations into the languages of the arbitration.
Telephone conferences and video conferencing may be appropriate in order to save costs in international arbitration. The arbitration may take place in a country that is most accessible to those who attend.
The International Chamber of Commerce is based in Paris. It has published internationally recognised rules for arbitration (1998 as amended). It has established the International Court of Arbitration. The Court oversees arbitrations under the ICC rules. It may scrutinise ICC awards. It is not a court of law and its members do not act as arbitrators or counsel in cases submitted to it.
The ICC Secretariat is involved in the arbitration process. Fees are payable to it. It provides guidance and support to parties and arbitrators involved in ICC arbitrations. Documents are provided to the Secretariat as well as to the parties and arbitrators. It has a key role in various aspects of the arbitration.
Arbitral tribunals under ICC will have one or three arbitrators. In the case of three, one is nominated by each, subject to the confirmation by the ICA and the third is nominated by the ICA. Where parties fail to make a nomination, where they are not confirmed by the ICA and where there is a challenge on the basis, for example, of bias, default provisions apply. The seat of the arbitration is fixed by the ICA. Each arbitrator must certify his independence by a statement.
An ICC arbitration commences by submission of a request for arbitration to the ICC Secretariat. This shall include particulars of the parties, description of the relief sought, nature and circumstances of the dispute, copies of contracts, including the arbitration agreement and particulars on the place of arbitration, applicable law and language. The parties undertake to carry out any award without delay.
The request for arbitration is sent to the respondent by the Secretariat. Within 30 days, the respondent must file an answer setting out its comments and reply. The respondent may also file a counterclaim. The copy of the response and counterclaim are sent to the claimant by the Secretariat. The claimant must respond to a counterclaim within a further 30 days of receipt.
Once constituted, the Secretariat provides the tribunal with copies of its files. It defines the terms of reference on the basis of the documents submitted. The terms of reference include particulars of the parties, a summary of the issues and particulars of the claims and relief sought. The terms of reference must be signed by the parties and the tribunal and filed with the ICA within two months of the file being sent to that tribunal.
The tribunal will consult the parties in relation to a timetable for steps in the arbitration. A provisional timetable is prepared. The tribunal must establish the facts in as short a time as possible by appropriate means. There may be discovery of documents, written submissions and hearings with witnesses.
There may or may not be an oral hearing. It must be held if requested. Expert evidence may be required. The tribunal itself may appoint its own experts. The parties may agree where the hearings are to be held. They are held in private. Parties may be legally represented.
After closing of the proceedings, the tribunal gives notice to the Secretariat and a draft award is submitted. This must be done within six months of the signing of the terms of reference. The time limit may be extended by the ICA. The award should give reasons for the decision. It will fix costs. Prior to the award being signed, a draft is submitted to the ICA. The ICA may require modifications. The award is finalised after is approved.
UNCITRAL Model Law
The UNCITRAL Model Law Secretariat is based in Vienna. UNCITRAL is a subsidiary body of the General Assembly of the United Nations. Its particular focus is the harmonisation and modernisation of international trade law. The body has produced model laws in a wide range of areas. The body is not an arbitral body in itself nor does it appoint arbitrators.
The UNCITRAL Model Law on international commercial arbitration has been used as the basis of arbitration law in many countries including the Republic of Ireland. The Secretariat to UNCITRAL has published explanatory notes which assist in the uniform interpretation of the Model Law.
Procedure under UNCITRAL
Unless otherwise agreed, arbitration under the law commences on receipt by the respondent of the request for reference to arbitration. The parties determine the number of arbitrators in the tribunal. The default is three. Each party appoints one arbitrator and the two arbitrators appoint the third.
There is a 30 day limit for the appointment of arbitrators. There is a right to apply to the courts for the necessary orders to make sure the tribunal is constituted if there is default in appointment. Arbitrators are entitled to rule on their own jurisdiction. The arbitration agreement may be separated from the underlying contract.
The parties may agree, or the tribunal may direct, the time frame within which the parties are to provide their statement of case. The statements must set out the facts in dispute, and the reliefs and remedies sought. The respondent prepares a statement of defence which answers the statement of claim. The parties must provide supporting documents.
The parties may agree on the procedure to be followed in the proceeding. In the absence of agreement, the tribunal will determine the procedure. The presiding arbitrator will determine points of procedures. The tribunal may appoint one or more experts to report to it on particular issues. It may direct documents to be provided. It may inspect places and things and may order things to be produced for inspection.
If the tribunal considers it appropriate and there is no objection, it may determine the reference without a hearing. In this case, it will determine the matter on the basis of documents and materials available. Either party may request a hearing. The tribunal determines relevance, admissibility of evidence. Decisions are made in accordance with the proper law of the dispute. The majority determines the award.
Reasons must be given for the award unless the parties agree that there are to be no reasons given. The proceedings terminate on the signing of a final award.
Preliminary orders may be made under the Model Law. They may be made without notice to the other party, in the first instance. They are then followed within 20 days week with a hearing to which both parties are a party. The preliminary order may be modified on hearing. A person seeking interim measures may be required to give security. The person has a continuing obligation to disclose changes in circumstances.
A preliminary order without notice may only be made where there is a risk that the absence of an order would frustrate the purpose of the proceedings. There must be a risk of irreparable harm which damages cannot remedy. The risk of substantial harm must outweigh the loss likely to be suffered if the measure is granted. There must be a reasonable possibility that the party will succeed in the merit.